An Alternative Perspective
- New Horizons in Institutional and Evolutionary Economics series
Edited by Erik S. Reinert
Chapter 8: Income Inequality in Changing Techno-economic Paradigms
Chris Freeman This chapter discusses the relationships among technical change, economic growth and income distribution. The ﬁrst section of the chapter concentrates on technical change and unemployment; it is fairly clear that the prevalence of mass unemployment will tend to aggravate inequalities in income distribution. The second section of the chapter discusses the eﬀects of technical change on the earnings of those who are employed. Both in relation to unemployment and in relation to the earnings of those who are employed, the chapter argues that waves of technical change have profound long-term eﬀects on income distribution. Formal growth theory and growth models (Romer 1986, Grossman and Helpman 1990) have at last begun to recognize that the combination of technical change and increasing returns to scale, which Antonio Serra ﬁrst explored (Reinert 1996, 1999), are at the heart of the process of economic growth. However, most formal models still ignore the cyclical aspects of growth. This chapter therefore ﬁrst of all argues that the study of long cycles is essential to an understanding of the relationship between technical change, economic growth and income distribution. 1. UNEMPLOYMENT AND TECHNOLOGY At the simplest level, it is obvious that the standard of living for all of us depends on the achievements of science and technology. Since Adam Smith’s Wealth of Nations and Alfred Marshall’s comments on Knowledge as the Chief Engine of Production, the role of technical change in economic growth has been universally accepted by all schools of economists. The socalled...
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