Semi-endogenous versus Schumpeterian growth models: testing the knowledge production function using international data

Using various indicators of innovative activity and product variety in the OECD countries over the past century, this paper tests first- and second-generation models of economic growth. The estimation results give evidence in favour of Schumpeterian models, while the semi-endogenous growth theories are shown not to be consistent with the data.      

The evolutionary and non-Darwinian economics of Joseph Schumpeter

In a recent paper, Matthias Kelm (1997) accepts that `Schumpeter's definition of evolution does not contain any Darwinian mechanism such as natural selection or any other biological concept' and that Schumpeter `made no such attempt' to apply `Darwinian theory to economic evolution'. However, Kelm goes on to argue that Schumpeter would have been a Darwinian if circumstances were different. It is argued here that this contention is highly implausible because Schumpeter explicitly rejected biological metaphors and analogies in economics. Furthermore, Schumpeter misunderstood Darwinism. In his attempt to `interpret' Schumpeter as a Darwinian, Kelm himself misrepresents the three core principles of Darwinism. In addition Kelm's paper contains several misunderstandings and misrepresentations of the assessment of Schumpeter made by Hodgson (1993). This present response concludes that Schumpeter was indeed one of the greatest economists of the twentieth century and that he may legitimately be described as an `evolutionary economist'. However, he cautioned strongly against the use of biological metaphors in economics and there is no legitimate basis for describing his approach as Darwinian.     

An introduction to evolutionary theories in economics

This paper presents the basic ideas and methodologies of a set of contemporary contributions which are grouped under the general heading of evolutionary economics. Some achievements-especially with regard to the analysis of technological change and economic dynamics-are illustrated, some unresolved issues are discussed and a few promising topics of research are flagged.This article draws on a chapter prepared for the book Market and Organization: The Competitive Firm and its Environment, edited within an EEC/Tempus Programme by LATAPSES, Nice, France, and Iside, Rome.     

Models in evolutionary economics and environmental policy: Towards an evolutionary environmental economics

In this paper we review evolutionary economic modelling in relation to environmental policy. We discuss three areas in which evolutionary economic models have a particularly high added value for environmental policy-making: the double externality problem, technological transitions and consumer demand. We explore the possibilities to apply evolutionary economic models in environmental policy assessment, including the opportunities for making policy-making endogenous to environmental innovation. We end with a critical discussion of the challenges that remain.     

Does modern endogenous growth theory adequately represent Allyn Young?

Endogenous growth theory is now fashionable. It seeks to explainwhy per capita income growth in capital abundant countries isoften faster than in capital poor countries and defies the operationof diminishing returns. This theory, which took off with Romerand Lucas, often makes Allyn Young's concept of increasing returnsand Marshall's distinction between internal and external economiesits starting point but considers their treatment of the subjectas not sufficiently rigorous. The modern endogenous growth theoriststhen claim to explain what they had in mind with greater clarity,rigour and depth. This paper argues that this is not the caseas these theorists actually misrepresent Young in importantways.     

A critical realist interpretation of evolutionary growth theorising

The paper discusses a critical realist interpretation of evolutionarygrowth theorising by focusing on some of its basic characteristics.The evolutionary ontology is complex, differentiated, structured,systemic, open, ever-changing and radically uncertain. Its methodologytends to be increasingly based on ‘appreciative’theorising, retroductive explanations and interdisciplinaryanalysis. After discussing these features, the paper suggeststhat critical realism may indeed constitute an important philosophicaland methodological foundation for the future development ofevolutionary theories of economic growth.     

Rate of profit and interest in a growth theory with endogenous money

This paper attempts to incorporate an endogenous money approachinto post-Keynesian growth theory in order to derive the fullemployment equilibrium rate of interest as well as that of profit.This rate of interest, named the ideal rate of interest, differsfrom the rate of profit in that it is in proportion to a monetaryvariable, not a real variable. Further, the rate of profit alsodiffers from the rate of interest as a premium because it isproductive. The rate of interest could be important in explainingcircumstances in which financial capital has been accumulatedin excess.     

The dynamic effects of general purpose technologies on Schumpeterian growth

General purpose technologies (GPTs) are drastic innovations characterized by pervasiveness in use and innovational complementarities. The dynamic effects of a GPT are analyzed within a quality-ladders model of scale-invariant Schumpeterian growth. The diffusion path of a GPT across a continuum of industries is governed by S-curve dynamics. The model generates a unique, saddle-path long-run equilibrium. Along the transition path, the measure of industries that adopt the new GPT increases, consumption per capita falls, and the interest rate rises. The growth rate of the stock market depends negatively on the rate of GPT diffusion and the magnitude of the GPT-ridden R&D productivity gains; and positively on the rate of population growth. It also follows a U-shaped path during the diffusion process of the new GPT. Finally, the model generates transitional growth cycles of per capita GNP.JEL Classification: E3, O3, O4I would like to thank Elias Dinopoulos for encouragement, and for constructive comments and suggestions. I would also like to thank David Figlio, Douglas Waldo, Steven Slutsky and participants in the 9th Biennial Congress of the International Schumpeter Society for useful discussions and suggestions. Any remaining errors are my own responsibility.     

从经济学再到政治经济学:理解包容性增长

胡锦涛主席在亚太经合组织的两次会议上倡导包容性增长,其理论与现实意义深远。经济增长自经济学诞生以来就一直是经济研究的核心问题,经济学史上从政治经济学到经济学,再到最近新政治经济学的兴起实际上反映了人们对经济发展中的繁荣与公正、市场与政府的认知的深入过程。强调机会平等的包容性增长正是当下中国的政治经济学。从经济学发展过程审视政治与经济离合的演变有助于我们深入理解和研究包容性增长。     

Schumpeterian cycles with pro-cyclical R&D

Recent empirical work finds that R&D expenditures are quite pro-cyclical even for firms that are not credit-constrained during downturns. This has been taken as strong evidence against Schumpeterian-style theories of business cycles that emphasize the idea that downturns in production may be good times to allocate labor towards innovative activities. Here we argue that the pro-cyclicality of R&D investment is in fact quite consistent with at least one of these theories. In our analysis we emphasize three key features of R&D investment relative to other types of innovative activity: (1) it uses knowledge intensively, (2) it is a long-term investment with uncertain applications, and (3) it suffers from diminishing returns over time.     

Health and infrastructure in a model of endogenous growth

This paper studies the optimal allocation of government spending between infrastructure and health (which affects labor productivity as well as household utility) in an endogenous growth framework. A key feature of the model is that infrastructure affects not only the production of goods but also the supply of health services. The rate of time preference is also endogenously related to health outcomes. The first part considers the case where health enters as a flow in production and utility, whereas the second focuses on a “stock” approach. Growth- and welfare-maximizing rules for income taxation and the allocation of public spending are derived.     

Critical survey. Endogenous growth theory: a critical assessment

A critical assessment is made of endogenous growth theory fromthe perspective of recent developments within economics as adiscipline. These include its increasing mathematical formalisation,its focus upon microfoundations, the casual use of econometricsto test models, and the incorporation of factors that have traditionallybeen outside mainstream economics. It is found that the theoryfocuses upon market imperfections and technological progressin a variety of ways, and reconstructs their impact upon themacroeconomy as a growth rather than as a level effect. Whilstthe growth rate is endogenised, this leads to the problem ofmultiple equilibria and extremely complex dynamics. The generalisationfrom exogenous growth theory is, however, associated with evenmore extreme assumptions and analytical distance from the socioeconomicprocesses of growth itself.     

马克思就业理论与西方就业理论比较研究

对中国失业的研究已是无法回避的一个问题,而寻求理论支持则是进行研究的一个重要方向。检索就业理论的资料,可以发现最有代表性的就业理论是马克思就业理论和西方就业理论。因此,对这两种就业理论加以比较,理解它们形成的不同背景和分析路径,对比它们不同的内容体系,可以发现它们其实发掘的只是失业的一个方面,遵循的是失业发生、发展的一条路径。因此,在比较中更全面地理解失业,并且可以为研究我国的失业提供某些启示。     

Anticipating Nelson and Winter: Jack Downie's theory of evolutionary economic change

An Evolutionary Theory of Economic Change , by Richard Nelson and Sidney Winter continues to have great influence on evolutionary economic thought. While their modeling techniques and the breadth of their vision for evolutionary theorising must be seen as seminal and effective innovation in economic theory, they were not the first inventors of such a theory. Close examination reveals that much of the economic theory was anticipated by Jack Downie whose book, The Competitive Process, was published in 1958. The extent of anticipation is remarkable, with not merely the two elements of population ecology, selection and mutation, but the way in which they are theorised to work being replicated by Nelson and Winter.     

Efficiency, depth and growth: Quantitative implications of finance and growth theory

We develop a parsimonious finance and endogenous growth model with microeconomic frictions in entrepreneurship and a role for credit constraints. We demonstrate that though an efficiency–growth relation will always exist, the efficiency–depth–growth relation may not. This has implications for the connection between the theory and empirics of finance and growth. We go on to ask whether the model can account for some historical trends in growth, financial depth and financial efficiency for the UK over the period 1850–1913. The best model of finance and growth is one that departs from the standard depth–growth link.     

Stability under learning: The endogenous growth problem

A local dynamic analysis, in the neighborhood of the steady state, is developed for one and two-sector endogenous growth models. The problem differs from the conventionally assumed growth setups because one considers that expectations concerning the next period value of the control variable (consumption) are formed through adaptive learning. In such scenario, the found stability conditions reveal that convergence to the unique steady state point is feasible if a minimum requirement regarding the quality of learning in the long run equilibrium is fulfilled. Therefore, stability of growth under learning is dependent on the efficiency with which expectations are generated.     

Scale effects in endogenous growth theory: an error of aggregation not specification

Modern Schumpeterian growth theory focuses on the product line as the main locus of innovation and exploits endogenous product proliferation to sterilize the scale effect. The empirical core of this theory consists of two claims: (i) growth depends on average employment (i.e., employment per product line); (ii) average employment is scale invariant. We show that data on employment, R&D personnel, and the number of establishments in the US for the period 1964–2001 provide strong support for these claims. While employment and the total number of R&D workers increase with no apparent matching change in the long-run trend of productivity growth, employment and R&D employment per establishment exhibit no long-run trend. We also document that the number of establishments, employment and population exhibit a positive trend, while the ratio employment/establishment does not. Finally, we provide results of time series tests consistent with the predictions of these models.     

Recursive equilibrium in endogenous growth models with incomplete markets

This paper analyzes the existence of recursive equilibria in a class of convex growth models with incomplete markets. Households have identical CRRA-preferences, production displays constant returns to scale with respect to physical and human capital, and all markets are competitive. There are aggregate productivity shocks that affect aggregate returns to physical and human capital investment (stock returns and wages), and there are idiosyncratic shocks to human capital (idiosyncratic depreciation shocks) that only affect individual human capital returns. Aggregate and idiosyncratic shocks follow a joint Markov process. Conditional on the aggregate state, idiosyncratic shocks are independently distributed over time and identically distributed across households. Finally, households have the opportunity to trade assets in zero net supply with payoffs that depend on the aggregate shock, but markets are incomplete in the sense that there are no assets with payoffs depending on idiosyncratic shocks. It is shown that there exists a recursive equilibrium for which equilibrium prices (returns) only depend on the exogenous aggregate shock variable (the wealth distribution is not a relevant state variable). Moreover, the allocation associated with this recursive equilibrium is identical to the equilibrium allocation of an economy in which households live in autarky and face both aggregate and idiosyncratic risk.I would like to thank for helpful comments Peter Howitt, Bob Lucas, Michael Magill, Tomo Nakajima, Herakles Polemarchakis, Martine Quinzii, Kevin Reffett, an anonymous referee, and seminar participants at various universities and conferences.     

An evolutionary theory of the convergence towards low inflation rates

This paper presents an evolutionary interpretation of Barro-Gordons monetary policy game. The model describes a multi-country setup where governments and private agents are boundedly rational players. The behavioral rule of players decisions leads to the imitation of the strategy giving the highest payoff. In this evolutionary monetary policy game, we show how a low inflation state is reached from an international context dominated by inflationary policies. The analysis explains the convergence towards low inflation rates observed during the past twenty years. Moreover, the low inflation state appears to be the long-run equilibrium of the game under some conditions featuring the observed macroeconomic context.JEL Classification: E5, C72, C73 Correspondence to: A. dArtigues     

The use of modeling tools for policy in evolutionary environments

This is a position paper on the possibilities of informing the (economic and environmental) policy debate by using quantitative evolutionary models. I argue that an evolutionary worldview implies that the existing quantitative modeling tools used for policy analysis are problematic. Then I summarize the main elements of an evolutionary way of analysis, and the way in which it can be incorporated into quantitative models. I conclude with an outline of a proposal for how to apply the ideas in the analysis of energy transitions.