Critically evaluate the theory of critical minimum effort. Also bring out its limitations.

 The theory of critical minimum effort is associated with the name of Harvey Leibenstein. The theory is based on the relationship between the three factors, viz. (i) per capital income, (ii) population growth, and (iii) investment. Leibenstein identified population as an income-depressing factor (or a ‘shock’), whereas investment is and income-generating (or a ‘stimulant’). Growth in an economy is possible when the income-generating factors turnout to be more powerful than the income-depressing factors. A small additional investment may generate a small income. The additional income would be eaten up the additions to the populations which may come in the wake of the additional income, and hence the effort may fail to generals a cumulative process of growth. An initial large volume of investment may outweigh the growth of population problems. The theory is criticized on the following grounds:

(i).Leibenstein assumes that population increases as the income rises above the subsistence level. Beyond a particular level of income, population declines. This assumption implies that rise in income has a direct bearing on the growth of population. But, in reality, this relation is not so simple. Growth of population is influenced by social attitudes, customs traditions of the people and not merely by the per capital income.

(ii) The functional relation between per capital income and income growth rate is not as simple as assumes by Leibenstein. It is complex and has two stages. In the first state, the level of per capita income influences the rate of saving and investment which, in turn, depends on the pattern of income distribution and the effectiveness of financial institutions in mobilizing saving. In the second stage, the relation between investment and resultant output depends upon the economic and social system of the country. The relationship can be improved through innovations. The meaningful innovation is possible when updated technology, skilled labour and necessary infrastructure in the country. However, there are not available in the initial phase of development.

(iii)In underdeveloped countries external forces play an important role in the initial stages of development. This theory does not explain clearly the role of external forces like foreign capital, foreign trade, international economic relations etc. These forces exert a vital impact on development and these factors play an important role in the development process.