Alternative theories on economic growth and the co

To browse Academia. Skip to main content. Log In Sign Up. Download Free PDF. Journal of Economics Library www. New ideas in the social sciences, naturally including economics, have to fulfill four major conditions. They must be: 1- Logical, 2-Consistent, 3-Explanatory and 4- Testable. There are many economic theories containing all of the above features; and most of them belong to the mainstream ideology, i.

They are no doubt logical, consistent and even explanatory in many ways, but when tested for their relevance to real economic situations, they fail to correctly explain the normal economic transactions. One does not have to be an expert in the field of economics to realize these shortcomings. Introduction T he book that consists of pages including the bibliography and contains the following sections and chapters; The Foreword: This contains a few brief remarks regarding the philosophy of science and philosophy of economics.

Gelibolu Sk. The higher the "quality of labor" human capital becomes, the higher the potential to introduce new technology, given an appropriate cultural, institutional, educational and technological infrastructure.

In addition, functional income distribution, institutions, employment and population growth should be analyzed in conjunction with the growth process. Section-1 introduces some general information on growth. Smith, Ricardo, and Marx. Section-4 deals with more up to date theories in regard to growth. For example, neoclassical models are studied in two periods; pre and post Solow.

alternative theories on economic growth and the co

Section-6 presents a realistic short-run growth analysis. Section-9 How technological progress and growth effects the functional and global income distribution will be the subject of this part. Section presents a proposal for improvement in the global growth and development of nations, which is expected to help the convergence of the global income gap.

Section contains an Epilogue and three suggestions with global impacts. The bibliography shows clearly that the literature concerned has been studied extensively from the time of the Classical economists to the early s, which enables the reader to make a scientific evaluation of all the major theories of growth with their pro's and con's.It was an interesting time for economic speculation considering the dramatic adverse effect of the Great Depression.

At the time, the primary school of economic thought was that of the classical economists which is still a popular school of thought today. The central tenet of the classical argument says that supply can always create demand, and that surpluses will result in price reductions to the point of consumption.

Put simply, people have infinite needs and the market will self-correct to the aggregate demands and available resources. This implies a hands-of public policy where markets are capable of taking care of themselves.

Keynes positioned his argument in contrast to this idea, stating that markets are imperfect and will not always self correct. Keynes theorized that natural inefficiencies in the market will see goods that are not met with demand.

Keynes insisted that markets do need moderate governmental intervention through fiscal policy government investment in infrastructure and monetary policy interest rates. While Keynesian Theory has been expounded upon significantly over the years, the important takeaway here is that aggregate demand and thus the amount of supply consumed is not a perfect system. Instead, demand is affected by various external forces that can create an inefficient market which will in turn affect employment, production, and inflation.

alternative theories on economic growth and the co

The implication is that interest rates affect investment levels, and that these investment levels in turn affect the overall economy. Monetarism focuses on the macroeconomic effects of the supply of money and the role of central banking on an economic system. In the rise of monetarism as an ideology, two specific economists were critical contributors. Clark Warburton, inhas been identified as the first thinker to draft an empirically sound argument in favor of monetarism.

This was taken more mainstream by Milton Friedman in in a restatement of the quantity theory of money. The basic premise these two economists were putting forward is that the supply of money and the role of central banking play a critical role in macroeconomics.

Instead, the amount of money in a given environment should be determined by monetary rules. Theoretically, the idea is actually quite straight-forward. When the money supply is expanded, individuals will be induced to higher spending. In turn, when the money supply retracted, individuals would limit their budgetary spending accordingly.

This would theoretically provide some control over aggregate demand which is one of the primary areas of disagreement between Keynesian and classical economists.

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In for example, Jimmy Carter appointed Paul Volcker as Chief of the Federal Reserve, who in turn utilized the monetarist perspective to control inflation. He eventually created a price stability, providing evidence that the theory was sound. In addition, Milton Friedman and Ann Schwartz analyzed the Great Depression in the context of monetarism as well, identifying a shortage of the money supply as a critical component of the recession. However, unemployment and the rise of the use of credit are quoted as two alternatives to money supply control being the primary influence of the boom that followed Inflation Rates : The inflation rates over time in the U.

As these counter arguments in the s began to arise, critics of monetarism became more mainstream. Of the current monetarism critics, the Austrian school of thought is likely the most well-known. The Austrian school of economic thought perceives monetarism as somewhat narrow-minded, not effectively taking into account the subjectivity involved in valuing capital. That is to say that monetarism seems to assume an objective value of capital in an economy, and the subsequent implications on the supply and demand.

Other criticisms revolve around international investment, trade liberalization, and central bank policy.In discussing theories of growth a distinction must be made between theories designed to explain growth or the lack of growth in countries that are already developed and those concerned with countries trapped in circumstances of poverty. Most of what follows will be confined to the former. As the British economist John Maynard Keynes pointed out in the s, saving and investment are not usually done by the same persons.

The desire to save does not necessarily generate investment. If savers attempt to save a larger share of their income than before thereby consuming less and if this is not matched by an equal increase in the desire of others to invest, total spending will decline.

A natural reaction on the part of business will be to cut back on production, thereby reducing incomes earned in production. The final effect may be a cumulative movement downward as total demand becomes insufficient to employ all of the labour force.

This break in the circular flow of income and expenditure suggests the possibility of a capitalist economy alternately experiencing periods of prolonged and severe unemployment when desired savings at full employment exceed what the economy wishes to invest at full employment and periods of serious inflation when the inequality is reversed. This situation had not been the case historically for developed economies until the early s.

In the following discussion, some attention will be paid to the ways in which the various theories of growth account for this important historical fact. Modern growth theory can be said to have started with Joseph A. Unlike most Keynesian or pre-Keynesian theorists, Schumpeter laid primary stress on the role of the entrepreneuror businessman.

It was the quality of his performance that determined whether capital would grow rapidly or slowly and whether this growth would involve innovation and change—i. Differences in growth rates between countries and between different periods in any one country could be traced largely to the quality of entrepreneurship.

alternative theories on economic growth and the co

The latter in turn reflected certain historical and cultural values carried by the business class. Schumpeter also attributed much of the growth of technical progress and of the supply of labour to the entrepreneur. Hansen argued in the late s that capitalism was in trouble in the United States for other reasons. According to Hansen, the closing of the geographic frontier, the decline in the rate of population growth, and the capital-saving character of recent innovations had all worked to increase the likelihood of stagnation by reducing the need for investment.

The savings available in a mature economy would tend to exceed the amount that the economy would want to invest at levels of full employment and by progressively larger amounts as time went on.

This condition naturally would lead to increasing rates of unemployment as the discrepancy between demand and potential output widened. The record of the three decades after World War II did much to overcome the pessimism generated by the Great Depression. This paradox can be understood in terms of a concept also developed in the s, the multiplier. The multiplier was the amount by which a change in investment would be multiplied in achieving its final effect on incomes or expenditures.

This increase, however, is hardly the end of the matter since most of the additional incomes earned will be respent on consumer goods.

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In this case the multiplier is But investment may be a source of instability if it is not maintained at a rate sufficient to stimulate demand for the production it is creating. Is there any guarantee that supply or productive capacity will grow at the same rate as demand so that neither excess capacity nor excess demand results? The British economist R. Harrod and the American economist E.

Domar put this question in a very simple mathematical form. In their equations, the rate of growth of supply i. Through investment this capital stock is augmented. The rate of growth of demand depends upon the rate of growth of investment or, more correctly, upon the rate of growth of nonconsumption expenditures.

Thus investment affects both demand and supply. But the Harrod—Domar analysis still did not answer the question of what kept the system from becoming increasingly unstable. Economic growth. Article Media. Info Print Print. Table Of Contents.

Submit Feedback.Skip to search form Skip to main content You are currently offline. Some features of the site may not work correctly. This paper aims to propose an approach to endogeneous growth considering the relationship between macro-dynamics and technical change. We draw upon two stream of literature: Cumulative causation and its macroscopic view of economic dynamics, and Evo-lutionary economics and its focus on micro-determinants of technical change.

This paper presents a survey of the formal representation of the growth process and identifies the possible bridges between these two approaches. Save to Library. Create Alert. Launch Research Feed. Share This Paper.

Chapter 5: An Alternative Growth Model

Possas, Esther Dweck Fatih Citation Type. Has PDF. Publication Type. More Filters. Research Feed. View 7 excerpts, cites background, methods and results. A Multisectoral Micro-Macrodynamic Model. Firms interaction and industrial development: a simulation model. Which Growth Theory is Good for the Poor? Patterns of industrial development in Costa Rica: empirical validation of a firm-based growth model. Technological innovation and complexity theory. View 2 excerpts, cites background.

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References Publications referenced by this paper. View 2 excerpts, references background. Evolutionary Theorizing on Economic Growth. The dynamics of international differentiation: A multi-country evolutionary model. An evolutionary model of long term cyclical variations of catching up and falling behind. View 3 excerpts, references background. Highly Influential. Uneven growth between interdependent economies : an evolutionary view on technology gaps, trade and growth.

Heterogeneity, competition, and macroeconomic dynamics. Structural Change and Economic Growth.It is well known fact that the relationship between the labor and value-production was a top economic priority in the research conducted by the economists of Classical period. But, in spite of the important role assigned to it in their economic analysis, the Classical economists did not construct any satisfactory growth models which demonstrated the inter-relation between labor effort, technological progress and economic growth.

Nevertheless, they were well aware of the significance and contribution of these to the long-run economic growth. In other words, the economists of the neoclassical heritage according to the models they proposed had no idea at all of the impact of technological progress and how they affected the course of long-run economic growth.

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Advanced Search Help. Show Less Restricted access. Mainstream economic theories today are logical, consistent and even explanatory in many ways, when their relevance is tested in real economic situations, they often fail to correctly explain normal economic transactions. Thus they are only successful in explaining a fictional world and fictional economic relations that are largely based on unrealistic assumptions.

Economic Growth is a study of new and alternative theories and models to replace the parables of these mainstream ideologies and hopes to appeal to open minded economists as a constructive contribution for the further development of new economic ideas. Buy eBook. Currency depends on your shipping address.

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The Sense of Us and Agenda for Development - Ricardo Hausmann

Extract It is well known fact that the relationship between the labor and value-production was a top economic priority in the research conducted by the economists of Classical period.

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alternative theories on economic growth and the co

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FRED data. Registered: Patrick Llerena Andre Lorentz. This paper aims to propose an approach to endogeneous growth considering the relationship between macro-dynamics and technical change. We draw upon two stream of literature: Cumulative causation and its macroscopic view of economic dynamics, and Evo-lutionary economics and its focus on micro-determinants of technical change. This paper presents a survey of the formal representation of the growth process and identifies the possible bridges between these two approaches.

Our claim is that merging these two distinct theories might offer a framework to consider the co-evolution of macro-dynamics and technical change. Corrections All material on this site has been provided by the respective publishers and authors.

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Theories of growth

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