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The economics of growth and technical change: Technologies, nations, agents
Book reviews
Technical
change and growth
Rajah Rasiah The Economics of Growth and Technical Change: Technologies, Nations, Agents Gerard Silverberg and Luc Soete (editors) Aldershot, Edward Elgar, 1994, 343 pages, f45.00
The role of technical change in economic growth has been a major preoccupation of economists for some time now. The notion of division of labour and specialization by Adam Smith, and dynamism associated with differentiation and scale effects in manufacturing expounded by Allyn Young, were useful tools pursued by latterday economists. Schumpeter, Abramovith, Kaldor and Pasinetti broadened this field. While dynamic effects, lumpiness and endogeneity associated with technical change evolved from these writers, they were hardly recognized by early neoclassical growth models. From Solow’s first formal growth model until the 19805, technical change remained as an exogenous variable in such models. This book brings together a collection of essays that largely examine technical change and new growth models that have been acculating since the 198Os, and convergence issues in growth between economies. This is a worthy endeavour as it reviews critically state-of-the-art issues in neoclassical growth theory. The book, which presents the views of some of the most famous names in the economics of technology and growth, is a collection of papers compiled from a conference held in 1992. Following the introduction by the editors, Arrow posits, in chapter two, knowledge as a multidimensional concept which is too complex and unpredictable to be forecasted. He assumes the Popperian position that history is hardly useful in
Dr Rajah Rasiah may be contacted at the Economics Faculty, Universiti Kebangsaan Malaysia, 43600 Bangi, Selangor, Malaysia (Fax: +60 3 825 3713).
projecting innovations. Amable argues, in chapter three, that new growth theory is hardly new and, as an anecdote to Arrow’s paper, notes the importance of cumulative mechanisms in growth. Amable also criticizes these models as ahistorical, incoherent in explaining technical change, offering little explanation for complementary innovations that arise around major innovations, and that they are unable to incorporate sociotechnological paradigms to address institutional factors. Day’s fourth chapter provides an economic model to explain complex dynamics and attempts to answer some central questions of economic history. In chapter five, Silverberg and Lehnert construct a model combining innovation processes with stochastic elements of competition and endogenous diffusion. Their results appear to show randomness in innovation processes. Dosi and Fabiani, in chapter six, explore the evolutionary foundations of the different patterns of growth by studying the catching up, forging ahead and falling behind theses of economic historians. Verspagen estimates, in chapter seven, an analytical model on the effects of different technological processes on growth. His results reveal consistent fit between the estimated and predicted values. Wolf, in chapter eight, updates the results of his 1992 book on whether convergence continued through the 198Os, countries invested more on high total factor productivity (TFP) growth-generating industries, and whether interaction between capital investment and TFP growth continued through the 1980s. His results show convergence between labour productivity, TFP and capital-intensity. There is, however, little or no convergence of productivity growth rates between countries. Ziesemer, in chapter nine, using Metcalfe, Batten and Amable’s partial equilibrium model, derives output and price dynamics under behavioural assumptions. Their positive results with dynamic firm behaviour led them to recommend its wider usage. Joosten, Peters and Thujsman,
581
Book reviews
in chapter 10, expounded learning and unlearning effects in continuous two-person games. Dosi and Kaniovski discuss, in chapter 11, some of the conceptual approaches and mathematical tools borrowed from natural sciences to explain technological and economic dynamics, focusing on the structure and interpretation of the generalized urn schemes, arguing that history matters. The book ends with Nelson’s fairly exhaustive review of the evolving literature on technical change and growth. He distinguishes between formal and appreciative theory to explain the latter’s significant lead in explaining sources of technical change. In addition, Nelson notes several aspects and sources of technical change not addressed by new growth models.
582
Except for the introduction and Nelson’s chapter, the book contains incisive criticisms on the remaining chapters so that the reader can assess some of their fundamental weaknesses. In this, the book breaks with tradition by incorporating both neoclassical and critics’ views. This is an excellent effort as it brings the two divergent schools head-on. The discussion, however, seems to degenerate in several areas as the main contributors often avoid responding to negative comments. Nevertheless, given the difficulty associated with bringing together such a diverse literature, the authors should be commended for their efforts. The book should be compulsory reading for both students and academics working on technical change and economic growth.
Technical
change and growth
Rajah Rasiah The Economics of Growth and Technical Change: Technologies, Nations, Agents Gerard Silverberg and Luc Soete (editors) Aldershot, Edward Elgar, 1994, 343 pages, f45.00
The role of technical change in economic growth has been a major preoccupation of economists for some time now. The notion of division of labour and specialization by Adam Smith, and dynamism associated with differentiation and scale effects in manufacturing expounded by Allyn Young, were useful tools pursued by latterday economists. Schumpeter, Abramovith, Kaldor and Pasinetti broadened this field. While dynamic effects, lumpiness and endogeneity associated with technical change evolved from these writers, they were hardly recognized by early neoclassical growth models. From Solow’s first formal growth model until the 19805, technical change remained as an exogenous variable in such models. This book brings together a collection of essays that largely examine technical change and new growth models that have been acculating since the 198Os, and convergence issues in growth between economies. This is a worthy endeavour as it reviews critically state-of-the-art issues in neoclassical growth theory. The book, which presents the views of some of the most famous names in the economics of technology and growth, is a collection of papers compiled from a conference held in 1992. Following the introduction by the editors, Arrow posits, in chapter two, knowledge as a multidimensional concept which is too complex and unpredictable to be forecasted. He assumes the Popperian position that history is hardly useful in
Dr Rajah Rasiah may be contacted at the Economics Faculty, Universiti Kebangsaan Malaysia, 43600 Bangi, Selangor, Malaysia (Fax: +60 3 825 3713).
projecting innovations. Amable argues, in chapter three, that new growth theory is hardly new and, as an anecdote to Arrow’s paper, notes the importance of cumulative mechanisms in growth. Amable also criticizes these models as ahistorical, incoherent in explaining technical change, offering little explanation for complementary innovations that arise around major innovations, and that they are unable to incorporate sociotechnological paradigms to address institutional factors. Day’s fourth chapter provides an economic model to explain complex dynamics and attempts to answer some central questions of economic history. In chapter five, Silverberg and Lehnert construct a model combining innovation processes with stochastic elements of competition and endogenous diffusion. Their results appear to show randomness in innovation processes. Dosi and Fabiani, in chapter six, explore the evolutionary foundations of the different patterns of growth by studying the catching up, forging ahead and falling behind theses of economic historians. Verspagen estimates, in chapter seven, an analytical model on the effects of different technological processes on growth. His results reveal consistent fit between the estimated and predicted values. Wolf, in chapter eight, updates the results of his 1992 book on whether convergence continued through the 198Os, countries invested more on high total factor productivity (TFP) growth-generating industries, and whether interaction between capital investment and TFP growth continued through the 1980s. His results show convergence between labour productivity, TFP and capital-intensity. There is, however, little or no convergence of productivity growth rates between countries. Ziesemer, in chapter nine, using Metcalfe, Batten and Amable’s partial equilibrium model, derives output and price dynamics under behavioural assumptions. Their positive results with dynamic firm behaviour led them to recommend its wider usage. Joosten, Peters and Thujsman,
581
Book reviews
in chapter 10, expounded learning and unlearning effects in continuous two-person games. Dosi and Kaniovski discuss, in chapter 11, some of the conceptual approaches and mathematical tools borrowed from natural sciences to explain technological and economic dynamics, focusing on the structure and interpretation of the generalized urn schemes, arguing that history matters. The book ends with Nelson’s fairly exhaustive review of the evolving literature on technical change and growth. He distinguishes between formal and appreciative theory to explain the latter’s significant lead in explaining sources of technical change. In addition, Nelson notes several aspects and sources of technical change not addressed by new growth models.
582
Except for the introduction and Nelson’s chapter, the book contains incisive criticisms on the remaining chapters so that the reader can assess some of their fundamental weaknesses. In this, the book breaks with tradition by incorporating both neoclassical and critics’ views. This is an excellent effort as it brings the two divergent schools head-on. The discussion, however, seems to degenerate in several areas as the main contributors often avoid responding to negative comments. Nevertheless, given the difficulty associated with bringing together such a diverse literature, the authors should be commended for their efforts. The book should be compulsory reading for both students and academics working on technical change and economic growth.