Applied Evolutionary Economics and Complex Systems

Applied Evolutionary Economics and Complex Systems

Edited by John Foster and Werner Hölzl

This book takes up the challenge of developing an empirically based foundation for evolutionary economics built upon complex system theory. The authors argue that modern evolutionary economics is at a crossroads. At a theoretical level, modern evolutionary economics is moving away from the traditional focus of the operation of selection mechanisms and towards concepts of ‘complex adaptive systems’ and self-organisation. On an applied level, new and innovative methods of empirical research are being developed and considered. The contributors take up this challenge and examine aspects of complexity and evolution in applied contexts.

Chapter 9: High Growth with ‘Old’ Industries? The Austrian Paradox Revisited

Michael Peneder

Subjects: economics and finance, evolutionary economics


* Michael Peneder 1. MOTIVATION AND OUTLINE Ever since a series of broad investigations into Austria’s economic performance at the end of the 1980s (Aiginger 1987), comparisons with other developed countries have revealed severe and persistent deficits in industrial structure, as measured, for example, by the shares of technologically progressive industries in total exports or production. In combination with consistent findings regarding comparatively low levels of R&D and venture capital as inputs to the innovation process, or patents as one specific form of technological output, the notion of an Austrian ‘technology gap’ (Hutschenreiter and Peneder 1997) became firmly established. However, this negative assessment has been sharply contrasted by Austria’s successful macroeconomic development, which has more or less endured throughout the past decades and has been characterized by high levels of labour productivity and income, above average (or at least average) GDP growth and below average unemployment rates. This ambiguity was subsequently coined the ‘Austrian Paradox’ of ‘old’ industrial structures but high aggregate performance (Peneder 1999, Tichy 2000). The Austrian Paradox has raised much policy debate, which, however, has remained highly inconclusive. The major obstacle to a more successful discussion was the unsettled dispute regarding the general relevance of industrial structures to macroeconomic development. If the mainstream of economic theory does not predict any relationship between industrial structure and economic growth, and, in addition, the particular Austrian experience appears to be a clear case against it, why should we bother with structural reforms as long as macroeconomic growth continues...

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