Theory of Economic Growth

By Michio Morishima | Go to book overview
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In this book I intend to discuss economic growth within the framework of the theory of general equilibrium. In doing so I hope, on the one hand, to resolve much of the controversy on growth which is due to differences of assumptions made by various authors and, on the other, to make a contribution to the theory of dynamic economics.

The general theory of static equilibrium was nearing completion as early as 1874, but, in spite of our keen desire and constant effort, it is taking a long time to obtain its dynamic counterpart. It seems to me that this is mainly due to the lack of an established concept of 'dynamic' or 'moving' equilibrium. It is true that a number of definitions of dynamic equilibrium have been presented. But we have not yet been provided with a generally accepted one which can serve as the core of the theory. Such rigorous and systematic discussions as are usual in demonstrating the existence and optimality of the static equilibrium have seldom been made for a dynamic equilibrium. Moreover, possible motions of the whole system have not been scrutinized in their relation to the path of moving equilibrium; that is to say, no one has solved the problem of stability of motion in the complete, disaggregated system of dynamic equilibrium.

On the other hand, in the aggregative theory of economic growth, there are the concepts of dynamic equilibrium such as the Harrodian, the von Neumann, the balanced-growth, the Pasinetti or the anti-Pasinetti, the Golden equilibrium, and so forth. But unfortunately the theory is fogged with the aggregate concepts such as the aggregate production function, the quantity of capital, and the marginal productivities of labour and capital, all of which have recently been attacked by Joan Robinson and N. Kaldor. We would not be surprised if a seminar attended by both neoclassical and non-neoclassical economists were in a state of disorder five minutes from the start.

In such circumstances one naturally looks for a theory of general equilibrium of capital accumulation, both to avoid further unnecessary controversies and for the development of economic theory itself. The original idea of general equilibrium of capital accumulation is developed in Part V of Léon Walras' Elements d'economie politique pure, but the work has to be regarded as unfinished, particularly because no notion of the growth equilibrium is found in his theory. I graft J. von Neumann on Walras to grow a new kind of the theory of general equilibrium. The von Neumann Revolution thus brought about in dynamic economics might be comparable with the Keynesian Revolution in static economics. It makes a drastic change in the method of analysis and establishes a new norm of assessment of different growth patterns. A number of paths


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Theory of Economic Growth


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