A Short Review of Development Thinking and Experiences
The process of sustainable per capita income increase and economic
growth, characterized by continuous technological innovation and industrial
upgrading, is a modern phenomenon. From Adam Smith to the early
twentieth century, most economists believed that laissez-faire was the best
vehicle for achieving sustainable growth in an economy. It was assumed
that in thriving economies all decisions about resource allocation are made
by economic agents interacting in markets free of government intervention.
The price system determines not only what is produced and how but
also for whom. Households and fi rms pursuing their own interests would
be led, “as if by an invisible hand,” to do things that are in the interests
of others and of society as a whole. Although the laissez-faire approach
was challenged by Marxist economists and others, it became the dominant
intellectual framework for the study of growth in all countries and
remained so for a long time. It certainly provided many good insights on
the process of economic development but it missed the importance of the
process of continuous, fundamental technological changes and industrial
upgrading, which distinguishes modern economic growth from premodern
economic growth (Kuznets 1966).
The study of economic development proceeds in two related but separate
tracks: growth theories and development theories. While some of
the key ingredients of modern growth theory such as competitive behavior,
equilibrium dynamics, the importance of physical capital and human
capital, the possibility of diminishing returns, and the impact of technological
progress can be found in the work of classical economists (Ramsey
1928; Schumpeter 1934), systematic modeling only started in the 1940s
when some pioneers used primary factors to build generic models based on
aggregate production functions. Harrod (1939) and Domar (1946) triggered
extensive research along these lines. Following their initial work,
the Solow-Swan model sparked the fi rst major wave of systematic growth
analysis. The objective was to understand the mechanics of growth, identify
its determinants, and develop techniques of growth accounting, which
would help explain changes in the momentum and role of economic policy.
That fi rst generation of growth researchers highlighted the centrality of
capital. One important prediction from these models was the idea of conditional
convergence, derived from the assumption of diminishing returns
to capital—poor economies with lower capital per worker (relative to their
long-run or steady-state capital per worker) will grow faster. While that
assumption allowed the model to maintain its key prediction of conditional
convergence, it also seemed odd: technology, the main determinant of longrun
growth, was kept outside of the model (Lin and Monga 2010).
A new wave of growth modeling had to come up with a convincing
theory of technological change. Endogenous growth theory, as it came to
be known, maintained the assumption of nonrivalry because technology is
indeed a very different type of factor from capital and labor—it can be used
indefi nitely by others, at zero marginal cost (Romer 1987, 1990; Aghion
and Howitt 1992). But it was important to take the next logical step and
to understand better the public good characterization of technology and
think of it as a partially excludable nonrival good. The new wave therefore
reclassifi ed technology not just as a public good but as a good that is
subject to a certain level of private control. However, making it a partially
excludable nonrival good and therefore giving it some degree of excludability
or appropriability was not suffi cient to ensure that incentives for
its production and use were socially optimal. The move away from perfect
competition was therefore necessary. It has yielded high methodological
payoffs. While neoclassical models of growth took technology and factor
accumulation as exogenous, endogenous growth models explain why technology
grows over time through new ideas and provide the microeconomic
underpinnings for models of the technological frontier.
Economic development is a process of continuous technological innovation and structural transformation. Development thinking is inherently tied to the quest for sustainable growth strategies. This book provides a neoclassical approach for studying the determinants of economic structure and its transformation and draws new insights for development policy. The market is the basic mechanism for effective resource allocation at each level of development. However, economic development as a dynamic process entails structural changes, including industrial upgrading and diversification and corresponding improvements in hard and soft infrastructure. Such upgrading and improvements require coordination and go hand in hand with large externalities to firms transaction costs and returns to capital investment. Thus, in addition to an effective market mechanism, the government should play an active role in facilitating structural changes. The book provides empirical evidence in support of this framework as well as concrete advice to development practitioners.
growth, characterized by continuous technological innovation and industrial
upgrading, is a modern phenomenon. From Adam Smith to the early
twentieth century, most economists believed that laissez-faire was the best
vehicle for achieving sustainable growth in an economy. It was assumed
that in thriving economies all decisions about resource allocation are made
by economic agents interacting in markets free of government intervention.
The price system determines not only what is produced and how but
also for whom. Households and fi rms pursuing their own interests would
be led, “as if by an invisible hand,” to do things that are in the interests
of others and of society as a whole. Although the laissez-faire approach
was challenged by Marxist economists and others, it became the dominant
intellectual fr
remained so for a long time. It certainly provided many good insights on
the process of economic development but it missed the importance of the
process of continuous, fundamental technological changes and industrial
upgrading, which distinguishes modern economic growth from premodern
economic growth (Kuznets 1966).
The study of economic development proceeds in two related but separate
tracks: growth theories and development theories. While some of
the key ingredients of modern growth theory such as competitive behavior,
equilibrium dynamics, the importance of physical capital and human
capital, the possibility of diminishing returns, and the impact of technological
progress can be found in the work of classical economists (Ramsey
1928; Schumpeter 1934), systematic modeling only started in the 1940s
when some pioneers used primary factors to build generic models ba
aggregate production functions. Harrod (1939) and Domar (1946) triggered
extensive research along these lines. Following their initial work,
the Solow-Swan model sparked the fi rst major wave of systematic growth
analysis. The ob
its determinants, and develop techniques of growth accounting, which
would help explain changes in the momentum and role of economic policy.
That fi rst generation of growth researchers highlighted the centrality of
capital. One important prediction from these models was the idea of conditional
convergence, derived from the assumption of diminishing returns
to capital—poor economies with lower capital per worker (relative to their
long-run or steady-state capital per worker) will grow faster. While that
assumption allowed the model to maintain its key prediction of conditional
convergence, it also seemed odd: technology, the main determinant of longrun
growth, was kept outside of the model (Lin and Monga 2010).
A new wave of growth modeling had to come up with a convincing
theory of technological change. Endogenous growth theory, as it came to
be known, maintained the assumption of nonrivalry because technology is
indeed a very different type of factor from capital and labor—it can be used
indefi nitely by others, at zero marginal cost (Romer 1987, 1990; Aghion
and Howitt 1992). But it was important to take the next logical step and
to understand better the public good characterization of technology and
think of it as a partially excludable nonrival good. The new wave therefore
reclassifi ed technology not just as a public good but as a good that is
subject to a certain level of private control. However, making it a partially
excludable nonrival good and therefore giving it some degree of excludability
or appropriability was not suffi cient to ensure that incentives for
its production and use were socially optimal. The move away from perfect
competition was therefore necessary. It has yielded high methodological
payoffs. While neoclassical models of growth took technology and factor
accumulation as exogenous, endogenous growth models explain why technology
grows over time through new ideas and provide the microeconomic
underpinnings for models of the technological frontier.
本文摘自《新結構經濟學》
Economic development is a process of continuous technological innovation and structural transformation. Development thinking is inherently tied to the quest for sustainable growth strategies. This book provides a neoclassical approach for studying the determinants of economic structure and its transformation and draws new insights for development policy. The market is the basic mechanism for effective resource allocation at each level of development. However, economic development as a dynamic process entails structural changes, including industrial upgrading and diversification and corresponding improvements in hard and soft infrastructure. Such upgrading and improvements require coordination and go hand in hand with large externalities to firms transaction costs and returns to capital investment. Thus, in addition to an effective market mechanism, the government should play an active role in facilitating structural changes. The book provides empirical evidence in support of this fr