Academic journal article Journal of Economic Issues

Principle of Circular and Cumulative Causation: Fusing Myrdalian and Kaldorian Growth and Development Dynamics

Academic journal article Journal of Economic Issues

Principle of Circular and Cumulative Causation: Fusing Myrdalian and Kaldorian Growth and Development Dynamics

Article excerpt

Circular and cumulative causation (CCC) has been a critical principle of political economy for over a hundred years. While the roots of the concept go back further (see Humphrey 1990; O'Hara 2000), Thorstein Veblen (1857-1929) utilized the concept in his examination of the evolution of institutions. Gunnar Myrdal (1898-1987) scrutinized the conditions of African Americans and Asian underdevelopment through the lens of CCC; influenced as he was by Knut Wicksell (1851-1926) (Myrdal 1939). Nicholas Kaldor (1908-1986) applied CCC to the role of manufacturing in capitalist growth; influenced by Adam Smith (1723-1790) and Allyn Young (1876-1929). Numerous other scholars have utilized the notion of CCC, often in different ways. There are linkages between Veblen, Myrdal and Kaldor. For instance, Veblen influenced Allyn Young who in turn taught Kaldor; Myrdal got the concept from Knut Wicksell and worked with Kaldor at the United Nations (Economic Commission for Europe); and Kaldor (1970, 142) got the term from Myrdal.

The first main section, studies the similarities and differences between the Myrdalian and Kaldorian CCC frameworks. The second section develops a general system model of integration between the two traditions. There is a large measure of continuity between the two CCC approaches; they complement each other. Myrdalian CCC concentrates on the social provisioning aspect of development, while Kaldorian CCC centers on demand-supply relationships linked to the manufacturing sector. Linking both CCC approaches in an integrative model enhances our understanding of development and growth dynamics, and contributes to the development of institutional-evolutionary political economy.

Comparison of Myrdal and Kaldor on CCC

Myrdalian and Kaldorian CCC traditions have significant commonalities as well as important differences. They have three main things in common. The first is the principle of circular causation, where the variables are interrelated, and the general manner of interaction between variables is complex and manifold. Circular causation is a multi-causal approach where the core variables and their linkages are delineated. CCC eschews single factor theories. Both Myrdalian and Kaldorian CCC examine circular relationships, where the interdependencies between factors are relatively strong, and where variables interlink in the determination of major processes.

The second similarity is cumulative causation, where the variables tend to operate as positive feedback processes, magnifying and multiplying the combined impact of the interactions through historical time. The coefficients of interaction between variables will play some role here, as will the extent of any negative feedback (drawback) effects working in the opposite direction. These cumulative interactions are crucial to Myrdalian and Kaldorian empirical studies of money, growth, demand, development and ethnicity. Both forms of CCC examine cumulative dynamics, where the feedback within and between variables often tend to have a multiplier or amplified impact on the overall outcomes.

The third similarity relates to traverse, path dependence, and hysteresis that move the system through time in a typically non-equilibrium fashion. Both approaches to CCC recognize the importance of history and time, as well as space and geography, since changes to the social and political economy condition the path of evolution and transformation; and there are regional differences to growth and development as well. The acquisition of knowledge, technical skills and economies of scale/scope affect the path of growth and development in complex and multifarious ways. Both theories explain real world processes that impact nations and regions, and which help explain differences in the outcomes between regions and areas.

The fourth similarity is that cumulative processes often have endogenous contradictions embedded in their dynamics. …

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