Psychology Dictionary of ArgumentsHome
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| Economic growth: Economic growth is the increase in the production of goods and services in an economy over a period of time. It is typically measured as a percentage change in real gross domestic product (GDP), which is the total value of all goods and services produced in a country in a given year, adjusted for inflation. See also Economy, Economic development._____________Annotation: The above characterizations of concepts are neither definitions nor exhausting presentations of problems related to them. Instead, they are intended to give a short introduction to the contributions below. – Lexicon of Arguments. | |||
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Neoclassical Economics on Economic Growth - Dictionary of Arguments
Harcourt I 37 Economic growth/Neoclassical theories/Swan/Harcourt: We find in Swan's appendix(1) perhaps the first and certainly the clearest statement of the notorious malleability assumption which underlies many neoclassical growth models and econometric exercises, for example, Swan [1956](1), Solow [1956b(2), 1957(3)], Meade [1961](4). Capital/measurements: By measuring capital in terms of its own technical unit (and by assuming that the quantity of capital in terms of this unit is uniquely associated with, say, the annual flow of services from it, measured in machine years), it is in the appropriate form for inclusion in a production function viewed as an engineering description of the flow of output which may be expected from the inputs of certain flows of man and machine years: on this, see Bruno, Burmeister and Sheshinski [1968](5). >Production function. Marginal product: The marginal product of capital, so measured, is equal to the rate of profits multiplied by the price of the technical unit of capital in terms of product (p). But if this price does not change when accumulation occurs, as Swan assumes, capital may also be measured in value units, in which case its marginal product equals the rate of profits. Harcourt I 38 Neoclassical approach: The neoclassical procedure can be regarded as an examination of virtual displacements around an equilibrium point, so that any relative price changes may be ignored and capital may be measured in terms of „an equilibrium dollar's worth“. Measurements: With this procedure it is legitimate - and essential - for individual economic actors to take all prices as given (they are, after all, price-takers) and it is market forces - the overall outcome of their individual but, consciously anyway, uncoordinated actions - which are responsible for actual price changes, changes which cease, by definition, at equilibrium. Accumulation: Moreover, any accumulation which is conceived to have taken place is marginal so that any change in the value of meccano sets in terms of product is confined to this marginal addition, and so may be ignored. Comparisons/comparability/problems: The trouble is that when either comparisons are made between different economies with different equilibrium wages, rates of profits and factor endowments - what Swan calls 'structural comparisons in the large' - or, far worse, when accumulation is analysed, these equilibrium points with all their accompanying (instantaneous) rates of change cannot be extended into visible curves associated with the same equilibrium values. >Econometrics/Swan. Change: An enormous revaluation of existing capital stocks occurs whenever an actual change (as opposed to a virtual one), no matter how small, is contemplated. Hence the need either for meccano sets (and the accompanying unacceptable assumption of perfectly timeless and costless malleability) or for resort to Champernowne's chain index which both he and Swan argue also allows an analysis of slow accumulation, in Champernowne's case, without technical progress. >Method/Champernowne. 1. Swan, T. W. [1956] 'Economic Growth and Capital Accumulation', Economic Record, xxxn, pp. 334-61. 2. Solow, R. M. [1956b] 'A Contribution to the Theory of Economic Growth', Quarterly Journal of Economics, LXX, pp. 65-94. 3. Solow, R. M. [1957] 'Technical Change and the Aggregate Production Function', Review of economics and Statistics, xxxix, pp. 312-20. 4. Meade, J. E. [1961] A Neoclassical Theory of Economic Growth (London: Allen and Unwin). 5. Bruno, M., Burmeister, E. and Sheshinski, E. [1966] 'Nature and Implications of the Reswitching of Techniques', Quarterly Journal of Economics, LXXX, pp. 526-53. - - - Kurz I 258 Growth/exogenous growth/Neoclassical economics/Kurz: A theory based on the typical marginalist set of data (M1)-(M3) is hardly able to determine growth endogenously. (M 1) the set of technical alternatives from which cost-minimising producers can choose, (M 2) the preferences of consumers, and (M 3) the initial endowments of the economy and the distribution of property rights among individual agents. (…) the majority of neoclassical authors have been concerned with developing theories that revolved around the concept of an exogenously given long-term rate of economic growth. It sumces to recall the efforts of some of the leading advocates of marginalism. Thus, in Chapter V of Book V of his Principles of Economics, Alfred Marshall first introduced the 'famous fiction of the stationary state' and then tried to weaken the strong assumptions required by it. >Alfred Marshall. The Stationary State has just been taken to be one in which population is stationary. But nearly all its distinctive features may be exhibited in a Place where population and wealth are both growing, provided they are growing at about the same rate, and there is no scarcity of land: and provided also the methods of production and the conditions of trade change but little; and above all, where the character of man himself is a constant quantity. For in such a state by far the most important conditions of production and consumption, of exchange and distribution will remain of the same quality, and in the same general relations to one another, though they are all increasing in volume. (Marshall [1890] 1977: 306)(1) The resulting economic system grows at a constant rate that equals the exogenous rate of growth of population. Income distribution and relative prices are the same as in the stationary economy. In modern parlance: the system expands along a steady-state growth path. 1. Marshall, A. (1977) Principles of Economics, reprint of the 8th edn (1920), Ist edn 1890, London and Basingstoke: Macmillan. Kurz, Heinz D. and Salvadori, Neri. „Endogenous growth in a stylised 'classical' model“.In: Kurz, Heinz; Salvadori, Neri 2015. Revisiting Classical Economics: Studies in Long-Period Analysis (Routledge Studies in the History of Economics). London, UK: Routledge._____________Explanation of symbols: Roman numerals indicate the source, arabic numerals indicate the page number. The corresponding books are indicated on the right hand side. ((s)…): Comment by the sender of the contribution. Translations: Dictionary of Arguments The note [Concept/Author], [Author1]Vs[Author2] or [Author]Vs[term] resp. "problem:"/"solution:", "old:"/"new:" and "thesis:" is an addition from the Dictionary of Arguments. If a German edition is specified, the page numbers refer to this edition. |
Neoclassical Economics Harcourt I Geoffrey C. Harcourt Some Cambridge controversies in the theory of capital Cambridge 1972 Kurz I Heinz D. Kurz Neri Salvadori Revisiting Classical Economics: Studies in Long-Period Analysis (Routledge Studies in the History of Economics). Routledge. London 2015 |
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