Perspectives, Measurement and Empirical Investigation
Edited by Robert Stimson, Roger R. Stough and Peter Nijkamp
Chapter 2: The Economist’s Perspective on Regional Endogenous Development
Kenneth Button There must be a purely economic theory of economic change which does not merely rely on external factors propelling the economic system from one equilibrium to another. (J. Schumpeter, Preface to the Japanese edition of Theorie der Wirtschaftlichen Entwicklung, 1911, transl. 1934) Economic progress, in capitalist society, means turmoil. And, . . . in this turmoil competition works in a manner completely different from the way it would work in a stationary process, however perfectly competitive. Possibilities for gains to be reaped by producing old things more cheaply are constantly materializing and calling for new investments. These new products and new methods compete with the old methods not on equal terms but at a decisive advantage that may mean death to the latter. (J. Schumpeter, Capitalism, Socialism, and Democracy, 1942) INTRODUCTION Economists have developed a tool-kit of very powerful techniques for analyzing a wide range of social phenomena but they have, beyond gaining a very general understanding, been singularly unsuccessful in unanimously agreeing on an explanation of why some regions’ or countries’ economies grow faster than others.1 This is an important intrinsic question, but it also raises issues about the roles of institutions that have been established to narrow the gap between the rich and the poor. Those involved in trying to explain economic growth have included the luminaries of their generations, and their political leanings range from the capitalist market orientation of Joseph Schumpeter to the centralism of Karl Marx. Indeed, if one accepts Milton Friedman’s (1953) criteria for a...
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