Academic journal article Journal of Economic Issues

An Institutional Critique of Recent Attempts to Measure Technological Capabilities across Countries

Academic journal article Journal of Economic Issues

An Institutional Critique of Recent Attempts to Measure Technological Capabilities across Countries

Article excerpt

This paper will be guided by recognition of two points, both of which feature prominently in institutional economics, or, as it is sometimes called, institutionalism. The first point has to do with the centrality of technology to economic growth and development, while the second concerns the inappropriateness of technological and other concepts developed in rich countries for the very different circumstances prevailing in the poorer countries. Let us deal with each of these recognitions in turn.

For two of the best-known early proponents of institutionalism, Clarence Ayres and Thorstein Veblen, the role of technology in the dynamic processes of growth and development was nothing short of overridingly important. "Ayres," for example, "placed more emphasis on technology than on any other factor which contributed to economic development" (Cypher and Dietz 2004, 172). Indeed, "For Ayres, technological progress and economic development were virtually synonymous" (172). Writing at the turn of the century, Veblen was no less insistent on the importance of technology and technological change in the evolutionary process of cumulative change in the economy. He "emphasized the role of technological change, broadly defined to include both hardware and know-how. He stressed industrial arts to a point that bordered on determinism. The adage, necessity is the mother of invention, was reversed; invention had become the mother of necessity" (Clark and Juma 1990, 211). In the more recent "new institutional economics," moreover, some authors continue to emphasize the dominant role of technology in creating the potential for economic growth and development. To Douglass North, for example,

   The second economic revolution which began in the second half of the
   nineteenth century was the systematic application of the modern
   scientific disciplines to technology and more broadly to the
   economic problems of scarcity. For those economies that could
   realize their potential the productivity implications have resulted
   in standards of well-being simply unimagined by prior generations.
   (North 1993, 4)

By now, a large body of empirical evidence has confirmed that economic growth does indeed depend heavily on technological change (Denison 1962), but this evidence also points to wide variations in growth rates across countries. The focus of this paper on technological indices can thus be viewed as an attempt to understand why some countries are able to exploit the benefits of modern technology, while others plainly lack the ability to do so (most notably, but not exclusively, countries in sub-Saharan Africa).

Also heavily undergirding the paper is, as noted above, the recognition that concepts designed for the rich countries may be inappropriate to the conditions prevailing in the majority of poor countries that comprise the Third World. From our particular point of view, this problem has to do with technology concepts that are transferred, as is, from rich to poor countries. Irrespective of the specific concept at issue, however, this second recognition is usually based on a rejection of the claim to a "monoeconomics," an economics, that is to say, which purports to apply with equal relevance to countries at very different stages of development. Among the many development economists who reject this claim to a universally applicable form of economics, two of them warrant special mention for their well-known contributions that were published in the 1960s. In the Asian Drama (1968), Gunnar Myrdal presented a highly detailed and convincing account of the dangers involved in applying a "Western approach" to the development problems in South Asia. "Economic theorists," he argued, "more than other social scientists have long been disposed to arrive at general propositions and then postulate them as valid for every time, place and cultures" (6). Across a wide range of development issues, Myrdal showed how this line of thought can lead to problems of mismeasurement and policy errors in the countries belonging to South Asia. …

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