Handbook of Alternative Theories of Economic Growth
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Handbook of Alternative Theories of Economic Growth

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Edited by Mark Setterfield

Comprising specially commissioned essays, the Handbook provides a comprehensive overview of alternative theories of economic growth. It surveys major sub-fields (including classical, Kaleckian, evolutionary, and Kaldorian growth theories) and highlights cutting-edge issues such as the relationship between finance and growth, the interplay of trend and cycle, and the role of aggregate demand in the long run.
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Chapter 12: The Classical-Marxian Evolutionary Model of Technical Change: Application to Historical Tendencies

Gérard Duménil and Dominique Lévy

Extract

12 The classical-Marxian evolutionary model of technical change: application to historical tendencies Gérard Duménil and Dominique Lévy Introduction Central to the classical and Marxian analyses of technical change is the idea that capitalists choose among competing techniques of production, depending on their comparative profitability. A new technique is implemented if it increases the profit rate of the firm. This idea is common to Ricardo and Marx. It is also part of Sraffa’s framework.1 Although capitalists do not “maximize” their profit rate on the basis of a given production function, as within neoclassical models, they seek to obtain the best possible profit rate by choosing the most appropriate technology. The wage rate is an important parameter in this selection (see the reference to Marx below, in the description of section 3). This very simple principle should not be mistaken for a theory of technical change or innovation in general. Why does a firm or an economy generate new and better performing techniques whereas others do not? What determines the pattern of innovation? Why does technical change display favorable features in some periods, and not in others, and so on? All these issues relate to major aspects of the analysis of technical change. The choice of the most profitable techniques of production per se is in no way sufficient to answer these questions. Nonetheless, many properties of technical change can be derived from the mere principle of the selection of the most profitable techniques, provided that it is embedded...

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