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Economic Growth and Development

Theories, Criticisms and an Alternative Growth Model

Hasan Gürak

Mainstream economic theories today are logical, consistent and even explanatory in many ways, when their relevance is tested in real economic situations, they often fail to correctly explain normal economic transactions. Thus they are only successful in explaining a fictional world and fictional economic relations that are largely based on unrealistic assumptions. Economic Growth is a study of new and alternative theories and models to replace the parables of these mainstream ideologies and hopes to appeal to open minded economists as a constructive contribution for the further development of new economic ideas.
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Chapter 5: An Alternative Growth Model

Extract

It is well known fact that the relationship between the labor and value-production was a top economic priority in the research conducted by the economists of Classical period. At that time, technological progress used to play an important role in their dynamic analysis and was treated as an “endogenous” factor. But, in spite of the important role assigned to it in their economic analysis, the Classical economists did not construct any satisfactory growth models which demonstrated the inter-relation between labor effort, technological progress and economic growth. Nevertheless, they were well aware of the significance and contribution of these to the long-run economic growth.

After the 1870s, long-run dynamic economic growth analysis began to be replaced by the “static equilibrium” analysis of the Marginalist and succeeding neoclassical doctrines. Inspired by the positive sciences like astronomy and physics, the primary aim of the new doctrines was to find new methods which could bring economies into “steady-state equilibrium” in order to be able to cope with the growing Marxist challenge. Leaving aside the attempts of Schumpeter in the 1930s and 1940s which re-emphasized the importance of technological progress in economic growth, the dominant economic growth models of this neoclassical heritage completely ignored this technological aspect, until the appearance of Solow’s contributions in the 1950s. In other words, the economists of the neoclassical heritage according to the models they proposed had no idea at all of the impact of technological progress and how they affected the course of long-run economic growth.

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