A Comparative Analysis of East Asia and Central Asia
PART I: SETTING THE FRAMEWORK
15 2 The state from the perspective of economic theory 2.1 NPE and NIE as extensions of neoclassical economics In economics and political science, the dominating view on the adequate role of the state in the economy has dramatically changed over the last few decades. In the 1950s and 60s, it was common that research in the field of economic policy focused on market failures and ways to correct them through state action, with- out paying much attention to the possibility of state failure (Krueger, 1993, p. 49). The presumed prevalence of market failures lead to an emphasis on infant- industry promotion and the support of physical capital accumulation, whereas possible gains from trade were deemed less important (Rodrik, 1996, p. 12). However, neoclassical economics, which introduced a radically different per- spective on the state, became more dominant in both research and economic pol- icy over the following decades. In contrast to their classical predecessors such as Adam Smith, early neo- classical economists, like William Stanley Jevons or León Walras, developed their economic theories while assuming an essentially institution-free environ- ment (Alesina, 2007, p. 2). Other important contributions to the neoclassical framework follow the same path. Nevertheless, economic policy and, conse- quently, the role of the state have always been a major topic for some econo- mists from both the Neoclassical/Monetarist and the Keynesian schools of thought. For most of the 20th century, however, mainstream economics mainly concentrated on quantitative economic policy and dealt with issues such as the...
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