As Boeke has put it, it is possible to characterize a society, in the economic sense, by the social spirit, the organizational forms and the technique dominating it. These three aspects are interdependent and in this connection typify a society, in this way that a prevailing social spirit and the prevailing forms of organization and of technique give a society its style, its appearance, so that in their interrelation they may be called the social system, the social style or the social atmosphere of that society. Less developed economies, especially with a history of prolonged colonial rule, often exhibit a simultaneous existence of two (or more) enclaves of socio-economic systems, characteristically and conspicuously different from each other, and each dominating a part of the society, the economy and the polity. These enclaves markedly differ in matters of ownership of resources, production relations, the social spirit, institutions, customs, mores and attitudinal structure, socio-economic and political organization, technological know-how and its application and so on. Of course, between these enclaves there exists a gray zone where distinction may not easily be perceived. This gray zone might be the crucible for integration, but it is equally likely that a colloidal admixture of heterogeneous elements persists for long and camouflages integration process. In any case, the rate of integration is extremely slow such that these enclaves persist for long. The said enclaves often resist the functioning of each other. They function not in harmony but in conflict with each other. Frictional losses are significantly large. Such an economy has been nicknamed as a 'dualistic' or 'pluralistic' (depending on the number of enclaves coexisting) economy.

Traditionally, India is an instance of pluralistic society. Basic loyalties are to families, villages, or groups held together on the basis of religion, language, ethnic origin, or caste rather than to the community as a whole, whether on the local or the national level. A wider loyalty to country, backed by firm rules and punitive measures, is the necessary foundation for modern western and communist mores, by which certain behaviour reactions are kept apart from consideration of personal gain. In India, the stronger loyalty to such smaller groups invites nepotism, in itself a form of corruption, and in general encourages moral laxity. The prevalence of corruption is another aspect of the soft state and generally implies a low level of social discipline.

What makes an economist interested in studying such an economy is that explanation of the issues relating to operation, stability, growth and justice in such economies evade an application of a single theoretical framework. As one knows, much in economics, explicitly or tacitly, has been formulated on the basis of experiences in the Western developed economies. That is why some economists prefer to name such a body of economic theories as the "Establishment Economics". To explain the said issues in a dualistic economy, tools of the Establishment Economics fail. Nor the "economics of primitive societies" succeeds in the said explanation. So, the economics of such economies is in itself dualistic (pluralistic). A hybrid type of economics that one may venture upon to develop has internal contradictions and inconsistencies, and it cannot form a well-integrated body or a system of laws pertaining to the functioning of such an economy. So in the conceptual domain, one finds inconsistencies and in explaining the facts one performs only poorly. This is the challenge that makes the study of such economies interesting.

The challenge that such an economy makes to the planners and policy makers is still more intriguing. In the absence of an understanding of the laws that govern such economies, planners and policy makers can only poorly succeed in controlling the policy instruments to achieve the desired goals. Cumulative experiences of failing in controlling the socio-economic forces for achieving the targets often induce decision makers to indulge in ad-hocism. Experiences of failure, aspirations of economic agents and ad-hocism in decision-making together invite opportunistic elements to operate that further complicates the management of such economies. The uncertainty and risk that brew in such an environment raise social and private cost of economic operation. Expensive production system limits the growth prospective of such an economy and it is caught in the 'low-level equilibrium' characterizing poverty, inefficiency, unemployment of manpower together with under-utilization of available economic resources and so on.

The typology of dualism is primarily based on five basic, though often inter-related, criteria, namely, societal, economic, political, spatial (geographical) and ethnic. Societal criterion comprises value system, inter-familial and intra-familial relations, forms of social organization and so on. Economic criterion covers ownership rules, production relations, forms of economic organization, the spirit of economic activities, etc. Political criterion is mainly concerned with the conventions governing formation and functioning of, and changes in, political organizations. Spatial criteria relates to predominance of the socio-economic system as distributed over space. Ethnic criterion relates to cultural and racial attributes of the population. D. C. North has pointed out that the economy of a particular society is historically shaped by three major factors, the resource base, the infrastructure and the social spirit. The resource base of a region, to begin with, greatly influences the manner in which the society develops its ways and means to livelihood. Economics, which, according to Alfred Marshall, is the study of mankind in the ordinary business of life at the individual and the social levels in acquiring, managing and utilizing the material requisites of well-being, naturally has to refer to resource base on which an economy has grown and subsists. Therefore, the economics of a hilly terrain would, at least in its primary stages of development, be different from the economics of a river valley or a desert for that matter. The infrastructure or the social overhead capital in a region is a result of accumulated investment at the social level in the past. Much of it depends on how much a society has produced, saved and invested over time in building up the social overhead capital. Poor societies endogenously can hardly build up rich social overhead capital and for obvious reasons of meager savings. Moreover, private indigenous investment in social overhead capital goes contrary to the private interest unless an organized effort is made by a body corporate for exploiting the resource base of the region. Development of the social overhead capital in the British India substantiates the point. Next, many complex forces historically shape up the social spirit of a society. Max Weber has elaborated how the Protestant ethic moulded the spirit of capitalism in the West. Galbraith (The Nature of Mass Poverty) discusses how accumulated experiences of failure may give rise to inclination to resignation and accommodation. Veblen has shown as to how the value system of a society is shaped up by the dominant (Leisure) class. M N Srinivas has shown how the forces of sanskritisation overtake a society emulating the dominant social class.

Turning to the resource base and the social spirit as determinant factors of development, it is natural to refer to the population of a region. Population, its composition and structure, its quality and interrelationship among its constituent individuals and communities are perhaps the most important determinants of development of a region. The composition and structure of population has several dimensions - distribution of the total between male and female, among different age groups, among different religious and ethnic groups, among different classes, occupations, skill categories, abilities and so on. Similarly, quality of population, illiterate, literate and educated, unskilled and skilled, pre-modernized and modernized in their attitudes, behaviour and action, is very important. Interrelationship among different individuals at family, class, ethnicity and region levels also are equally important. And this importance is not mainly for sake of classification and presentation in tabular form, but for the fact that it impinges on the contribution of population towards making themselves, the region and the nation progressively better.

Population is perhaps the only socio-economic category that has dual importance, both as an end and as a means to all endeavours. The society and economy is in fact of the people, for the people and by the people. Other things, whether material or mental, real or ideological, tangible or intangible, are meant for the people, and not for themselves. Material resources - the air with its birds, the waters with their vast wealth and fish, the territory with its fields and forests, the various substrata underground with all their mineral wealth, are meant for and worked upon by the people. Similarly, the soft resources, institutions (meaning the collection of settled habits of thought and action at the community level), mores, traditions, customs, beliefs, and all moral sentiments are continuously shaped and used by the people for making their lives better (or worse, for that matter). In this framework, the interest of the mankind is the sole parameter - the rest others are variables - to plan, change, modify and shape up, by the human efforts. Of late, people have become conscious of over-using, misusing and disusing the material resources leading to the so-called environmental problems. However, this concern does not change the parameter, only the denotation of 'people' has changed. Now 'people' means the present and the future generations; earlier it meant only the 'contemporary' generation. That does not imply, however, that the stress on 'resources for the people' has increased. To care for the resources to bequeath to our grand children needs much to be done by the people of the present generation. Similarly, a concern for keeping the social (and ideological) environment clean is growing. People have started thinking on the deteriorating social capital - the soft resources. Disbelief in oneself and in others is on a rise. Hatred seated somewhere deep inside finds the one or the other excuse to erupt out. Trust has given way to betrayal. And this is more of a concern to the people of affairs, the people busy in the ordinary business of life, since it interferes with and speaks on the individual and social interest closely connected to the attainment of material requisites of their well being.

Yet, this holistic importance of people is asserted, reasserted and soon set aside, nay, forgotten. Especially, qualitative aspects of population are singularly neglected, more so when they relate to soft resources or social capital - attitudes and institutions (the settled habit of thought and action at the community level) - that grossly determine how people live, earn their livelihood, use or misuse resources to meet their ends and generate, preserve, and economize the resources and innovate or imitate and so on.

The gross negligence of qualitative aspects of population is determined by the habits of thought of that section of the society, which directly or indirectly determines the means, objectives, methodology and content of social action, planning in particular. The organizations that collect information about population (or any other aspect of the economy and the society for that matter) seek directives from those who are recognized for thinking and acting on behalf of the society and matter when they are right as well as when they are wrong. Evidently, such representatives of the society, even whey are genuinely interested in development, are guided by the one of the two philosophies of planning for development, Standard (meaning largely Anglo-American economics popularly taught in the universities, sometimes referred to as the establishment economics) or the Marxist, or an illegitimate patchwork of the two. In any case, planning for a reform of attitudes and institutions, even collecting information regarding them, is completely out of consideration. The conservative (Standard) judgment that a reform of attitudes and institutions is largely irrelevant or undesirable, and the Marxist judgment that it is either impossible or inevitable, lead to the one and the same conclusion - undermining the need for a conscious policy directed at a radical reform of the so-called non-economic factors in economic development. Textbooks, articles and plans do pay lip service to the need to reform the social framework before economic planning begins. However, these declarations are no sooner forgotten than when the discussion on the conventional concepts of income, employment, savings, investment, etc. begins. The reasons are obvious though unsaid. Reforms of institutions and human attitudes, more painful to implement than financial expenditure programmes, violate vested interests of the power class (and the so-called public representatives are often led to think and act in the interest of this class, whether knowingly or unknowingly, by volition or by compulsion).

A rather long excerpt from Streeten (1966) will be illuminating. "… attitudes and valuation and social institutions are normally assumed to be given and adapted. We assume that there is a legal framework, that contracts are enforced, that an efficient civil service carries out government orders and an honest judiciary adjudicates; that people are able and willing to work if opportunities arise; that they are literate, skilled and able to cooperate with discipline, appearing on time and carrying out orders; that money spent is efficiently spent and not diverted into the pockets of corrupt officials; that alternatives are considered largely on their pecuniary merits, etc. It follows that none of these matters is considered a suitable area for planning." Alternatively, in the Marxist scheme "what are parameters become dependent variables. Cultural, political and social institutions are the superstructure, which is determined by the methods of production. It reflects these conditions and gives rise to tensions and contradictions in due course. These tensions between the degree of development of the forces of production and the prevailing relations of production (the institutions and attitudes) in turn give rise to revolution. After the revolution the attitudes and institutions reflect the new conditions of production. Hence social, cultural and political attitudes and institutions, the so-called relations of production, though dependent variables, are, after a time-lag, adjusted to the extent required by the dynamic productive forces. Once again, though for fundamentally different reasons, planning the superstructure is not in question. It would be futile before the revolution and unnecessary after it. It was indeed for their attempts to speculate on how social attitudes and institutions could and should be reformed that Marx and Engels ridiculed the Utopian thinkers." Paul Streeten, The Use and Abuse of Models in Development Planning, in Kurt Martin and John Knapp(eds),The Teaching of Development Economics, Frank Cass & Co. 1966. (1966).

Then there are differences in the conceptual categories used in the standard economics and the one applicable to a less developed region. In the 'Standard' economics' , the idea of labour as a factor of production is based on the assumption that the workers are literate and mobile, mostly in employment. They are highly organized. Racial, religious and linguistic differences are not sufficiently important to break up the labour supply. Furthermore, it is assumed that skilled and professional workers are in substantial quantities.

Employment presupposes a fairly homogenous, mobile labour force, willing and able to work and responsive to incentives. In a society of isolated communities, some of them apathetic or with religious prejudices against certain kinds of work, illiterate and unused to cooperation, the notion "labour force" does not make sense. Similarly, "underemployment or disguised unemployment presupposes that if only demand and machines were available, men and women would be able and willing to work. In fact, much more would be required: a breakdown of caste prejudices, of apathy, of lack of interest in money rewards, of resistance to cooperation, discipline and punctuality, etc.

Unfortunately our development models are unwittingly caught in the dichotomy of 'consumption' and 'investment'. Investment is considered productive while consumption is considered not so. Our models have wrongly identified investment with financial outlay and expenditure. As a matter of fact, the distinction between consumption and investment can have various justifications. In the context of development, it is based upon the assumption that investment enables us to produce more later than we would otherwise have done, while consumption is current enjoyment. This notion of investment (or consumption) does not suit the poor economies. The distinction between consumption and investment - if investment is defined as "abstaining for the sake of higher consumption later", the distinction that suits the rich economies of the West - is applied to the poor economy of the NER, we commit a mistake of applying a category to a field of experience to which it is inappropriate. However, if investment is defined as any input which yields higher output later, irrespective of whether it involves "abstaining" or not, we fail to group certain activities under investment which should be classified as consumption. In the case of India in general and NER too, more food and better health now would reduce apathy and raise ability to work - they share in the characteristics of investment - consumption, too, is productive of more output. From this viewpoint expenditure on poverty removal is not in fact a welfare measure, but 'investment' in the human capital.

The standard theory describes the economic process of a society in which the atomistic (uniform and unidentifiable) individuals behave strictly hedonistically, where the entrepreneur seeks to maximize his cash profit, and where any commodity can be exchanged on the market at uniform prices and none exchanged otherwise. On the other hand Marxist theory refers to an economy characterized by class monopoly of the means of production, money-making entrepreneurs, markets with uniform prices and complete independence of economic from demographic factors. In any case, population characteristics are redundant.

Three long quotations from Michio Morishima suggest why the economics of the North Eastern Region is justifiable: