chapter 6 - 6 The Causes of Economic Growth: Investment,...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
6 The Causes of Economic Growth: Investment, Trade, Technology, Geography We will quickly become awash in confusion if we simply reproduce by discipline all of the theoretical insights relevant to economic growth. As we saw in chapter 2, a number of distinct causal links can be identified. We will thus organize our dis- cussion around causal links here. The potential drawback of this approach is that many theories address multiple links. Yet we can only hope to compare and con- trast the implications of different theories – which will often address overlapping sets of causal links – if we examine each theory link by link. In practice it is straightforward to do so (see Szostak 2003b). We will address interactions across links as appropriate (and will address emergent properties in chapter 10). Some scholars would see the sheer number of causal links as a drawback. They want a simpler understanding of the growth process. 1 As we have seen, economists emphasize (in their models, but not necessarily their regressions) a small number of variables. Kohli voices a similar predilection from political science: ‘a good explanation of why some developing countries have industrialized more rapidly than others must take account of multiple factors but without sacrificing parsi- mony’(380). While recognizing the importance of such factors as education, entrepreneurship, and work effort, he argues that these all reflect state initiatives, and thus we should focus on what types of government encourage growth. If, though, governments have much of their effect through intermediate variables, then we can only understand the role of government by looking at the particular causal links both from government to education and from education to growth. Kohli implicitly assumes that the same type of government excels along each link. This need not be the case. Nor need all intermediate variables depend equally on government. Thus we must eschew the siren song of oversimplification. De Long wonders if growth processes may be largely stochastic (in Snowdon 291-2): he suggests that there are many positive and negative feedback loops and emphasizes the role that unpredictable complementarities (and disasters or forces beyond the control of a single nation) play in economic growth, and thus the stochastic nature of growth outcomes. He notes that our inability to explain differ- ences in growth performance (though we praise the policies of lucky countries after the fact, and look for mistakes when the success ends) invites such analysis. Such a hypothesis is best evaluated link by link: if many links appear to be highly stochastic then the outcome may indeed be stochastic. Note, though, that very small differences in growth rates can have huge effects if sustained over a long time. And thus we may mistakenly leap to the conclusion that Korea’s success relative
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 50

chapter 6 - 6 The Causes of Economic Growth: Investment,...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online