Thursday, April 03, 2008

Growth Theory: a fable agreed upon?

John Palmer of EclectEcon asks William Polley about the point of teaching the Solow Growth Model (here)
and received a reply (here):

I offered my 2 pence worth below, intended for ElectEcon, but it failed to post on John Palmer’s Blog for ‘technical’ reasons – I couldn’t remember my password:

“I am inclined to agree with you about Solow.

If Solowis a touchstone in the literature for an entire field. One cannot be considered to be educated in that field without an understanding of it’, as asserted by Bill, I think his response begs the question whether the field is worth learning to ‘understand’ it, if the purpose of understanding it is to demonstrate competence in the idealised maths of imaginary growth. Satisfying examiners is not sufficient to gain competence in advising legislators in the economics in real economies (though unfortunately for all concerned the 'proven competence' of neoclassical advisors the world over in matters of growth has a chequered record and also immense real costs in poor performances).

This reminds me of countless Chinese students studying for years to memorise vast amounts of the ancient (‘sacred’) texts to demonstrate their suitability to become Mandarins (civil servants) in ancient (and stagnant) China.

To understand growth problems in developing and ex-communist countries, I would suggest a course in Adam Smith’s growth analysis (Books I and II of Wealth Of Nations) in the context of the historical and institutional approach presented in all of his books, especially his Lectures On Jurisprudence, which combine institutional changes and the economics of productive labour, circulating and fixed capital, savings and prodigality, and his critique of mercantile political economy (in Books IV and V of Wealth Of Nations).”

[You can also read Gabriel’s Economic Investigations (‘It is by invisible hands that we are bent and tortured the worst’) - surely the most evocative of the 20th-century’s corruption of Smithian economics!] HERE.


Blogger EclectEcon said...

Thanks for the support; there's more to come, I guess. Next time, register as "guest" at EclectEcon and you don't need a password. Actually that's what I do, too!

2:51 pm  
Blogger Gavin Kennedy said...


I see the debate is spreading round and no doubt there will be more.

Meanwhile, take a look at my post on the sale of Adam Smith's House above. Your support would be appreciated.

3:10 pm  

Post a Comment

<< Home