To counteract under-development stagnation, discuss Leibenstein’s critical minimum efforttheory

Leibenstein's Critical Minimum Effort Theory is an economic development theory that suggests that a country must reach a certain level of investment to achieve growth and development. If the investment is below this critical minimum level, the country will remain in a state of underdevelopment or stagnation.

Here are the steps to discuss this theory:

1. Introduction to the Theory: The Critical Minimum Effort Theory was proposed by Harvey Leibenstein. According to this theory, there is a minimum level of resources that must be devoted to economic development. If this level is not reached, the economy will remain stagnant or even decline.

2. Explanation of the Theory: The theory suggests that if a country is very underdeveloped, a small amount of investment will not lead to growth but will be absorbed in meeting the basic needs of the population. Only when investment reaches a certain critical level, the economy will start to grow. This is because the investment will be large enough to not only meet the basic needs but also to create surplus for reinvestment and growth.

3. Implications of the Theory: The theory implies that underdeveloped countries need a large initial investment to kick-start their economic growth. This could be in the form of foreign aid, loans, or domestic savings.

4. Criticism of the Theory: Critics argue that the theory is too simplistic and does not take into account other factors that can affect economic growth, such as political stability, quality of institutions, human capital, and technological progress.

5. Application of the Theory: Despite its criticisms, the theory has been used to justify large-scale investment projects in developing countries, often funded by international financial institutions like the World Bank and the International Monetary Fund.

6. Conclusion: While Leibenstein's theory provides a useful framework for understanding the need for a certain level of investment in economic development, it should not be the only factor considered when planning development strategies. Other factors, such as institutional quality and human capital, are also crucial for sustainable growth and development.