Page 144 - Global Political Economy_Understanding The International Economic Order

SIG NIFIC ANCE O F NEW T HEORI ES
particular nation’s political economy. When one speaks of a major
technological advance or of a technological revolution, much more
than nuts and bolts is involved. Many significant developments in
technology involve a transformation in the organization of produc-
tion and of the broader sociopolitical relationships in an economy. 3
Many important aspects of society must be changed in order to de-
velop or take advantage of new technologies or production possibili-
ties. Indeed, some writers use the term “techno-economic paradigm”
to designate the whole range of economic and institutional transfor-
4
mations associated with a particular technological change. Successive
epochs of technological advance have entailed major transformations
in economic behavior and in industrial organization. In today’s digital
or information age, the world economy is again experiencing a pro-
cess of “creative destruction” from which new economic winners and
losers will emerge, a process aptly described by Joseph Schumpeter as
the dynamics of capitalism.
The new growth theory implies that political, economic, and other
institutions—from governments to universities to corporations—can
either hinder or facilitate technical advance, its adoption, and resul-
tant long-term economic growth. While neoclassical economics main-
tains that free markets in themselves produce efficient outcomes, the
new growth theory suggests that national and international economic
structures and institutions are major determinants of technological
developments and economic growth. In fact, long before Paul Romer
and Robert Lucas set forth the new growth theory, a number of econ-
omists and political economists had conducted pioneering work on
the determinants of innovative activities and the diffusion of technical
knowledge in the production process. Christopher Freeman, Richard
Nelson, and Keith Pavitt are among the most important contributors
to an understanding of the resulting national systems of innovation.
Nathan Rosenberg and L. Birdzell Jr. have emphasized the crucial
importance of the national system of innovation to technological
progress in How the West Grew Rich: The Economic Transformation
5
of the Industrial World. They demonstrate that the economic growth
3
For example, Japan’s innovation of “lean production” was greatly facilitated by
important aspects of the Japanese political economy, such as lifetime employment,
long-term planning by both Japanese corporations and government, and the domina-
tion of the economy by large industrial groupings (keiretsu).
4
Giovanni Dosi, Christopher Freeman, Richard Nelson, Gerald Silverberg, and Luc
Soete, eds., Technical Change and Economic Theory (London: Pinter, 1988).
5
Nathan Rosenberg and L. E. Birdzell Jr., How the West Grew Rich: The Economic
Transformation of the Industrial World (New York: Basic Books, 1986).
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