Growth and Economic Development

Growth and Economic Development

Essays in Honour of A.P. Thirlwall

Edited by Philip Arestis, John S.L. McCombie and Roger Vickerman

This valuable and engaging new book bears eloquent testimony to A.P. Thirlwall’s substantial contribution to economics over the last 40 years. The volume does not attempt to provide a comprehensive review of such a prolific figure, but rather demonstrates the considerable influence that his work on economic theory has had on his contemporaries, and the profession as a whole.

Chapter 6: Modelling Historical Growth: A Contribution to the Debate

Edited by Philip Arestis, John S.L. McCombie and Roger Vickerman

Subjects: development studies, development economics, economics and finance, development economics, post-keynesian economics


1 Mark Roberts 6.1 Introduction In the last decade, a debate has emerged concerning both the extent to which Nicholas Kaldor’s writings on cumulative causation (CC) are consistent with his well-known critique of ‘equilibrium economics’ (see, inter alia, Kaldor, 1972, 1975, 1977) and the extent to which ‘formal’ (i.e. mathematical) modelling is able to capture Kaldor’s resulting vision of growth as a historical process. In particular, whilst Kaldor himself believed CC to provide for a theory of historical growth in keeping with what he called for in his criticisms of ‘equilibrium economics’, Setterfield (1997a; see also 1997b, 2002, p. 230) has argued that this is not so because such causation represents a mechanical process incorporating only positive feedback, with the result that, at best, history only matters insofar as initial conditions matter.2 Consequently, Setterfield has argued that Kaldor’s writings display a tension, a tension best illustrated by the fact that formalisations of his CC schema possess a determinant equilibrium solution as defined by Setterfield (1997b, p. 55).3 That is to say, a solution that is both uniquely defined in terms of exogenous data and that is reached independently of the path taken towards it. To overcome this tension, Setterfield sought to extend one such formalisation of Kaldor’s CC framework, namely the ‘standard’ CC model of Dixon and Thirlwall (1975), to incorporate a source of negative feedback, judging the result to be a ‘more generally hysteretic’ model.4 However, Setterfield has, in turn, been criticised on two grounds by Argyrous (2001)...

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