Schumpeter and the theory of capitalist economic development

This paper gives a centenary appreciation of the contributions to economic thought of Joseph A. Schumpeter, with special focus on his work, The Theory of Economic Development (TED) it proceeds, first, by providing (in section 1) an overview of Schumpeter's life and works; second, by giving an interpretative exposition of the main themes of TED (in section 2) and Schumpeter's broader ‘economic sociology’ (in section 3) in terms of the place of these ideas in the history of economic thought; third, by examining the reception to TED and the impact of it and Schumpeter's dynamic methodology on the discipline (in section 4).     

The macroeconomics of unbalanced growth and the expanding public sector: Some simple tests of a model of government growth

A now classic model of public sector growth is Baumol's (1967) ‘Macroeconomics of Unbalanced Growth’. That model implies that one cause of public sector expenditure growth is a low or zero rate of productivity growth in the public sector relative to the private sector. Previous studies have tested, and partially confirmed, the Baumol hypothesis by computing productivity indices for various public sector activities. In this paper I attempt to test that model in a more direct manner. The unbalanced growth model is used to predict growth rates of per capita government expenditures, government's share of GNP and the pattern of government expenditure growth. These predictions are compared with observed growth rates of aggregate government expenditures. The model predicts the growth rate aggregate government expenditures, the growth rate of government's share of GNP, and the pattern of government expenditure growth reasonably well, and the data tend to support the Baumol model.     

Empirical evidence on the two-gap hypothesis: A revised analysis

This paper reconsiders the problem, analyzed by Weisskopf (1972a), of empirically classifying a set of low-income countries as having had their growth performance primarily constrained by the availability of foreign exchange or of domestic savings. Ambiguities in Weisskopf's procedure are noted, and an alternative, based on the extension of classical likelihood-ratio methods to the case of regression parameters subject to linear inequality constraints, is suggested. Reclassifying a subset of countries from Weisskopf's sample, we find stronger evidence against the importance of an independent foreign exchange constraint than indicated by Weisskopf's original results.     

The Verdoorn law revisited: A note

In his Fattori che regolano lo sviluppo della produttività del lavoro Verdoorn (1949) presented empirical evidence on the constancy of the ratio of productivity growth to output growth. As a theoretical underpinning he used a neoclassical growth model. The main purpose of this paper is to emphasize that in this model the ratio is constant only in the steady state. If Verdoorn's underpinning of his law is to be correct, the steady-state assumption should be empirically tested. Some available evidence for Verdoorn's sample appears to throw doubt upon this assumption.     

The lag from money to prices

This note accepts Terry Seaks's critique of my earlier method of estimating the lag between monetary growth and inflation by using percent changes over time spans of three or four years. However, Seaks's critique does not impair the main findings of this early work, which have been confirmed by several recent studies that avoid the pitfalls emphasized by him. These findings are that monetary growth has been a major determinant of inflation in a large number of countries since the late 1950s, and that money typically influences prices with lags of a year and a half or more.     

Technology and social change: William Fielding Ogburn revisited

This paper reviews William Fielding Ogburn's work on technology and social change. An overview of his basic theory is presented, as well as later refinements found in such works as Recent Social Trends in the United States, Technological Trends and National Policy, The Social Effects of Aviation, and other books and articles. It is suggested that while Ogburn is most widely remembered for his thesis of cultural lag, some of his later work on technology and social change is actually more important and deserves reconsideration and extension. One kind of extension might follow the lines of a systems approach rather than continuing the technological primacy strategy that Ogburn is normally considered to have used. The paper also surveys Ogburn's important work in the areas of technology, planning, and social policy, including materials on technology assessment. Ogburn's nontechnocratic approach to these questions, as well as his insistence that social scientists have a great deal to offer to the formulation of technological and social policies, are some of his most important contributions. Questions of technology and social change remain important contemporary issues, yet there is a surprising paucity of social science work on these crucial topics. Further study, extension, and reformulation of Ogburn's pioneering ideas offer fruitful means of embarking on new social science analyses of technology and society.     

A comparative dynamic analysis of a growth model under alternate policy regimes

Comparative dynamic analysis is conducted on a growth model with variable price levels and wage rates. A perturbation technique is used to compare the economy's time paths near a balanced growth path in response to alternate policy regimes. Various dynamic policy multipliers are calculated in response to some of the alternate policy regimes such as the balanced-budget fiscal regime, the constant price regime, the full-employment regime, etc., to examine their dynamic implications on the economy's behavior. Temporary deviations in the fiscal variables are found to leave no permanent effects under all but one of the regimes examined.     

On an absolute measure of distributional change

This paper tries to combine Kolm's ideas on the measurement of inequality with the recent work of Cowell on the generalized entropy families of income distribution and change indices. A ‘leftist’ measure of income distributional change is proposed, which is invariant to equal absolute changes in all incomes and which has other interesting properties.     

Protection by international transport charges: Analysis by stage of fabrication

This study employs the effective protection model to evaluate the incidence of ad valorem transport charges (freight factors) on U.S. imports at various stages in the production process, with special emphasis on their impact upon the development of manufacturing activities in LDC's. Freight factors, unlike tariffs, are not found to display a widespread tendency to escalate by fabrication stage, and do not appear to bear more heavily on products of major export interest to LDC's than on U.S. imports from industrial nations. Results suggest forces other than transport charges are primarily responsible for inhibiting the growth of manufacturing export industries in LDC's.     

A sequential stochastic tree problem

We consider here the owner of a plot of land upon which he sequentially plants and harvests trees. The trees' growth paths follow a stochastic process, and the owner must decide when to harvest and replant, given knowledge of the process and each tree's growth history. The results of this analysis are compared with the non-repeated case derived by Brock, Rothschild and Stiglitz (1979) (hereafter B.R.S.) and found to be qualitatively similar.     

Identification of technological threats and opportunities by firms

A number of models and approaches are being developed in attempts to anticipate the nature and direction of technological change and its impact on the firm. Under what conditions might we expect firms to use one or more of these models in an organized way and under what conditions might we expect the resulting information to be used in the firm's planning process? The basic hypothesis of this paper is that effective use by firms of models for anticipating technological change can be explained based upon: the nature and extent of uncertainty in the firm's environment,the firm's strategy for growth, and the degree of definition of communication networks (both formal and informal) within the firm and between the firm and its environment. Technology planners and managers of 29 firms in a variety of industries have been interviewed concerning the ways in which technological threats and opportunities are identified and analyzed and the ways in which this information is integrated into the firm's normal planning cycle. A follow-up questionnaire is being designed to be sent to a larger number of respondents.     

The effects of progressive wealth redistribution on an economy's development performance

With the exception of studies concerning the effects of land reform programs on total agricultural output, there has been a lack of studies on how changes in the distribution of wealth may effect an economy's development performance. The objective of this study is to fill this gap and to show that under certain conditions progressive wealth redistribution can lead to an increase in an economy's rate of growth. A model is presented that incorporates portfolio behavior and financial markets into a two-sector input-output model. Model simulations are utilized to show that the major condition under which redistribution is favorable to growth is that the lower wealth group have a smaller marginal propensity to accumulate consumer durables than the upper wealth group.     

Development and distribution: A critique of the cross-country U-hypothesis

This paper questions the validity of a modern paradigm, viz., the U-Hypothesis. It argues that notwithstanding contrary claims, the recent cross-country econometric studies by Ahluwalia and others have little in common from a methodological point of view with Kuznets' earlier intertemporal national studies. Ahluwalia's cross-country U-Curve is found to be based on defective statistics and questionable methodological premises. In specific, the estimation of one U-Curve from observations on both LDCs and DCs is criticised. A sample restricted to the LDC group considerably weakens support for the U-Hypothesis. Further, even marginal variations in the data set lead to the virtual disappearance of Ahluwalia's empirical relationship. The paper concludes that the cross-country U-Hypothesis is more of a hindrance than an aid to our comprehension of the relationship between economic growth and income distribution.     

Monopolistic competition,aggregation of competitive information,and the amount of product differentiation

Consider an industry with a large number of homogeneous firms. Each firm's profits are a function of its own strategy and the strategies the other firms select. Suppose other firms' strategies enter into each firm's profit function only through one or more statistics. For example, average price in the market may parameterize every firm's profit function. We prove that, as a general rule, the industry's firms will in equilibrium follow at most M + 1 distinct strategies, where M is the number of statistics by which competitors' strategies affect each firm's profits.     

The verification of efficient growth: An approach via stojanović's matrix of growth

It is well known that empirically implemented, full capacity, dynamic input-output models may indicate that economies are both highly efficient and causally indeterminate. If such is the case, only extrapolations of observed efficient cases can be interpreted economically in projective studies. We point out that multisector' modelling based on Stojanovic's matrix of growth poses similar problems. In fact, only matrices for observed efficient growth cases are consistent with fixed-coefficient projection models. Because of the flexibility of the approach, however, consequences for applied work seem less serious than in the input-output cases.     

Welfare implications of growth under quotas

Using the standard trade model, it is shown that growth under quotas always improves welfare. This result is contrary to Johnson's (1967) result on the possibilities of immeserizing growth in the presence of tariffs.     

Sensitivity of optimal programs with respect to changes in target stocks: The case of irreversible investment

Consider an aggregative model of economic growth with changing technology and tastes, in which investment is irreversible. It is shown that initial decisions in finite-horizon optimal programs are insensitive to changes in terminal stocks, provided the horizon is long enough. This generalizes Brock's result, which was proved assuming investment to be reversible. The irreversibility constraint does not allow one to follow Brock's method of proof, using the dual (Shadow Price) properties of optimal programs. An alternative method of proof is developed, using a primal approach, and exploiting dynamic programming arguments.     

A comparison of purchasing power parity and consumption levels in Austria and Czechoslovakia

An attempt is made to estimate purchasing-power parity (Par) for a comparison of Czechoslovakia's consumption level with Austria's in 1980. The Par calculation is based on modified official consumer baskets of both countries and the author's own assessment of quality and structural differences. The main conclusion is that economic development in Czechoslovakia was significantly slower than in Austria. A comparison with results of a methodologically similar study of 1964 implies a significant worsening of Czechoslovakia's relative living conditions.     

Social choice and telling the truth

This paper presents a straightforward proof of Gibbard's theorem that any non-manipulable choice rule with at least three outcomes is dictatorial. The proof is similar to proofs of Arrow's impossibility theorem, but does not rely on that theorem. The last part of the paper discusses the relation between Gibbard's and Arrow's theorems. The paper contains no new result, and is intended to make this important area of social choice theory accessible to a wider audience.     

On the differences between the political economy of introducing and implementing tax reforms — Israel 1975–1978

Theorists of public finance consider implementation of tax reforms as a problem of obtaining political agreement on issues involving diverse interests. But, between ideas formulated in laws or policies and their actual implementation separate deeds. Policies must not only be agreed upon but also administered by organizations and complied with by taxpayers. The experience of three years of implementing the reform described by Ben-Porath and Bruno in the July 1977 issue of this Journal, shows that despite broad political support, the Department of Income and Property Tax reached few of the reform's original goals.