Understanding Economic Development

Understanding Economic Development

A Global Transition from Poverty to Prosperity?

Colin White

This fascinating book considers one of the most important problems in economics: the inception of modern economic development. There is at present no satisfactory explanation of the inception of modern economic development; an excessive focus on either pure theory or on unique histories limits the explanatory power. This book realises the need to integrate the two approaches, moving beyond the proximate causes of economic theory to review the role in an analytic narrative of significant ultimate causes – geography, risk environments, human capital, and institutions.

Chapter 9: Innovation as a Prime Mover

Colin White

Subjects: development studies, development economics, economics and finance, development economics

Extract

The invention . . . of technologies that facilitate or encourage non-zero-sum interaction – is a reliable feature of cultural evolution everywhere. New technologies create new chances for positive sums, and people manoeuvre to seize those sums, and social structure changes as a result. (Wright 2000: 22) This chapter develops a number of important arguments: first, innovation is at the core of modern economic development and technical change at the core of innovation, although for followers imitation is critical; secondly, innovation is linked in a complex manner with the growth of knowledge; thirdly, the rate of innovation is more important than its factor-saving bias; fourthly, that innovation is usually embodied in investment; fifthly, while innovation and the associated investment are jointly determined by the demand and the cost sides of economic activity, the rate of innovation is a function of the size and growth of the market – demand is the active element, cost constraints a passive element; sixthly, that the same opportunity can be viewed differently depending on the risk tolerance of the key decision makers – some societies are more sanguine about positive outcomes arising from innovation than others; and finally, that imitation is subject to a series of powerful constraints so that best-practice technology is not freely available to all. There are four sections in this chapter. The first section discusses the issues raised by the role of technical knowledge in economic development, particularly the role of innovation and the difference between innovation and imitation. It explores the difference between a macro-invention and...

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