“In the building practices of ancient Rome, when scaffolding was removed from a completed Roman arch, the Roman engineer stood beneath. If the arch came crashing down, he was the first to know. Thus his concern for the quality of the arch was intensely personal, and it is not surprising that so many Roman arches have survived.”

Paul N. Rosenstein-Rodan

I

Paul Narcyz Rosenstein-Rodan was born on April 19, 1902, into a middle-class family in Krakow (now Kraków, Poland), then still part of the Austro-Hungarian Empire. As his parents moved soon thereafter, he spent his childhood and formative school years in the vibrant climate of fin de siècle Vienna. However and despite its splendor, the rumbles of looming wars and revolutions were hard to miss. In early November 1918 he experienced the end of WW I, the tragic collapse of the Habsburg Monarchy and the hastily arranged proclamation of the Republik Deutsch-Österreich on November 12, 1918. After well over 5 million dead or wounded, widespread desertion and starvation, the vast Austro-Hungarian Monarchy was suddenly reduced to the size of a small, land-locked country of barely seven million. This newly created “Republic of German-Austria” was neither politically nor economically able to cope with the post-war problems and could not offer the kind of opportunities to which the hordes of returning but disillusioned soldiers were accustomed. Thus amidst the chaos of crumbling institutions and mass unemployment, these restless and anxious soldiers tried to crowd into the universities. Friedrich A. von Hayek was among them. In the spring of 1919, Rosenstein-Rodan enrolled at the Faculty of Law and Political Science at the University of Vienna.

However, after Eugen von Böhm-Bawerk’s sudden death in August 1914, followed by Eugen von Philippovich’s departure in 1917, the retirement of Friedrich von Wieser in 1922 and the general upheaval, the once glorious faculty found itself in a political and structural crisis. Due to the fact that prominent figures like J.A. Schumpeter (1883-1950), Ludwig von Mises (1881-1973) or Karl Pribram (1877-1973) were blatantly passed over as apparent candidates, the professorships were unwisely filled with less qualified and, in some cases, rather problematic individuals. First, Carl Grünberg (1861-1940) a leading Marxist was appointed and was followed in 1923 by Ferdinand Graf Degenfeld-Schonburg (1882-1952). Somewhat later Othmar Spann (1878-1950) succeeded E.v. Philippovich, and Hans Mayer (1879-1955) assumed the chair of F. von Wieser. Although Ludwig von Mises (1881-1973), Richard Schüller (1870-1972) and Richard Reisch (1866-1938) were infrequently permitted to teach a few hours, the faculty lost its academic significance in comparison to the numerous private seminars, research institutes and intellectual circles thriving in Vienna from the 1920s to the mid 1930s. Among the most prominent gatherings were the Privat-Seminar of Ludwig von Mises, the Geistkreis (founded by F.A. v. Hayek and J.H. v. Fuerth among others), the Austrian Institute for Business Cycle Research (founded by L.v. Mises and F.A.v.Hayek in 1926/27), and the Hans Mayer-Seminar. Academic life in Vienna during the interwar period therefore differed significantly from its European and American counterparts due to its informal, decentralized structure. This unique environment molded the 4 th Generation of the Austrian School by encouraging broader perspectives beyond the narrow confines of their discipline and regional boundaries, while simultaneously freeing itself from restrictive hierarchical and formal structures.

From 1924 onward, Rosenstein-Rodan regularly participated not only in Mayer’s seminar at the university. Almost the youngest member he was also appreciated in Mises’s Privat-Seminar at the Vienna Chamber of Commerce, as well as in the important meetings of the Nationalökonomische Gesellschaft (NOeG). Due to his exceptional talents, Rosenstein-Rodan was mentored by Hans Mayer and in 1925 started to work as his assistant along with his friend Oskar Morgenstern (1902–1977). Later, the left-leaning Alexander Gerschenkron (1904–1978) also joined them. At the age of 25 Rosenstein-Rodan published the internationally acclaimed article on the Grenznutzen for the 4 th edition of the Handwörterbuch der Staatswissenschaften (1927), a piece that set a standard and is definitive to the present day. Influenced by Mayer, in 1929 he published his equally important essay ‘The Time Element in the Mathematical Theory of Economic Equilibrium’ (1929). By demonstrating that the mainstream economic concept of ‘equilibrium’ generally fails to adequately account for the role of time, he sparked a heated international debate and made a significant contribution to the development of the ‘Cobweb Theorem‘. Coined by Nicholas Kaldor (1908-1986,
Hungarian-born British Post-Keynesian), this theorem describes the cyclical supply and demand adjustment in commodity and agriculture markets where the amount produced must be chosen before prices are observed. In 1934 Rosenstein-Rodan published another decisive essay on ‘The Role of Time in Economic Theory’ in the new series of the academic journal Economica.

Although the NSDAP did not seize power in Austria before March 1938, the ominous academic climate already started soon after the end of WW I by a rising antisemitism, personal feuds or envy and the difficult economic socio-political situation. Neither Rosenstein-Rodan nor most of his friends or members of Mises’ Privat-Seminar had any factual chance of pursuing a meaningful and paid academic career in Austria. Consequently he left Vienna in the spring of 1930 as the Privat-Seminar’s first participant. Funded by a modest Rockefeller Foundation scholarship he initially ventured to Italy, where he was academically sponsored by Luigi Einaudi (1874-1961), the future Italian president and architect of the Italian ‘economic miracle’. Through Einaudi’s mediation, his several meetings with the liberal philosopher Benedetto Croce (1866-1952) at the university of Naples proved formative and his contacts with Einaudi and Croce, not only shaped his shift towards applied economic policy. These Italian contacts also played a key role years later when he negotiated the first loans for Italy’s WWII reconstruction efforts on behalf of the World Bank in Washington. He used an extension of this scholarship for a stay in London, where he first found a lecturer position at University College London (UCL) and later at the London School of Economics (LSE), where he reunited with his colleague Friedrich A. von Hayek, who had left Vienna in 1931 as the second member of the Mises seminar. London offered an important academic opportunity for the young Viennese scholar because in addition to entertaining contacts with Lionel Robbins, Nicholas Kaldor, John Hicks, or Piero Sraffa, he took the chance to act as a link between the Italian and London based branch of applied economic research.

II

WWII was a watershed in Rosenstein-Rodan’s academic carrier as he transformed himself from a pure theorist to an applied economic policy expert, in particular regarding his work on underdeveloped countries. Accordingly his work can be divided into two very different creative periods. Beginning in 1924 until the late 1930s he centered his research exclusively on the Austrian theories of value and money and the all-important role of time in economic theory. However, from the 1940s onwards, the applied economic and socio-political problems of developing or underdeveloped countries came to the fore of his work. Thus Rosenstein-Rodan is mostly recognized as a leading scholar in ‘Development Economics’, in the main focusing on economic aspects and problems of developing countries.

As a newly naturalized British citizen Rosenstein-Rodan worked during WWII at the Royal Institute of International Affairs on reconstruction plans for Europe. It was here that he wrote his decisive essay on ‘Problems of Industrialization of Eastern and South-Eastern Europe’. This 1943 paper must be considered the beginning of his so-called Big Push Theory and made him a leading pioneer in the field of Development Economics. The basic idea of ​​his Big Push Theory is rather simple and argues only that in underdeveloped countries, a large boost or large investments is all that is needed to achieve sustainable economic progress and break the VCP (Variable Cognitive Phenomenon). In other words, small investments are just a waste of resources, because according to Rosenstein-Rodan by applying a Bit by Bit allocation no economy will ever be able to move on the path of economic development. The investments of industrializing firms in one sector may increase the profitability of other sectors throughout the economy. Simultaneous industrialization of many sectors of the economy could be profitable for them all, even though no sector alone would be profitable industrializing.

In 1947 he left England for Washington (D.C.) and started to work as Assistant Director of the Economics Department and later as Head of the Economic Advisory Staff of the International Bank for Reconstruction, known as the World Bank. After six successful years at the World Bank, Rosenstein-Rodan accepted a position at the Massachusetts Institute of Technology (MIT) and remained there until 1968. Especially as director of projects for Italy, India, and Chile, his research and teaching there focused on problems of economic development and his Big Push Theory. From 1962 to 1966 he served on the Committee for the Alliance for Progress and became increasingly engaged in Latin American countries. With his appointment to the University of Texas at Austin in the fall of 1968, he continued his nomadic life, though he remained there for only four years until 1972. As chair of his small research team at the University of Texas, he focused not only on the important question of why and how low-income or
agrarian regions tend to transition to industrial economies, but also expanded his foundational concept that underdeveloped nations need a massive, coordinated wave of simultaneous investments across multiple sectors (rather than small, isolated steps) to escape poverty and kickstart private-sector growth. In 1969, he published his famous article ‘Criteria for Evaluation of National Development Effort’ there.

III

As his last relocation, in 1972 he left Texas and moved back to Boston, as he frequently joked “a bit closer to Europe”. At Boston University he founded the Center for Latin American Development Studies and directed this important public policy research institute until his unexpected death on April 28, 1985 at the age of 83. Rosenstein-Rodan was a highly educated and humble but charismatic scholar who could also be quite funny, pointed and entertaining. According to his own judgment, his influence rests essentially on his countless lectures, his intense personal contacts and, apart from 2 or 3 famous essays, not much on his many publications. In his final major essay on “Natura non facit saltum: Analysis of the Disequilibrium Growth Process’ (1984), Rosenstein-Rodan described his thinking as natura facit saltum. In other words, he deliberately used the original Latin phrase (nature does not makes jumps) because his life’s work argued the exact opposite for underdeveloped economies: these
countries must make ‘jumps’ in the form of a coordinated ‘Big Push’ to achieve self-sustaining growth.

Rosenstein-Rodan was honored with all kinds of international awards and official decorations, among them from Italy, Venezuela or Chile. In 1961 he was made a Fellow of the American Academy of Arts and Sciences, in 1962 he was made Fellow of the Institute of Social Studies in the Hague and in 1967 the Academia Pontifica Tiberina in Rome awarded him a life fellowship. The primary repository for Paul Rosenstein-Rodan’s collected papers, notes and manuscripts is the Howard Gottlieb Archival Research Center at Boston University.