9. Ignorance and Economic Development

Ignorance and Economic Development
Bob Komives
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Despite our ignorance,
we are fair instruments of economic development,
while often not fair to the biosphere which gave us life.
Remove more of our ignorance
and we may become consistent economic developers.

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I see economists shackled to a model of the world based on scarcity —making it difficult for them to approach the plentiful world of economic development. The last time I checked in detail, this was quite evident in text books. For example, Paul A. Samuelson and William D. Nordhaus, in the twelfth edition of Economics, devoted section seven (of seven) to economic growth and international trade, chapter 36 (of 40) to the theory and evidence of economic growth, and only 3.5 pages out of about 900 to "The Sources of Economic Growth." In these pages, they described growth accounting as an attempt to measure the ingredients that contributed to past growth trends —for example, capital, labor, land, education, and technological advancement. They stated frankly that no theory seems to fit reality very well. As for growth accounting, they wrote that it is far from perfect, but it is about as good a guide as any in this imperfect world. I felt that to be a discouraging conclusion to find on page 799 of an introduction to economics.

More encouraging were theories relegated to the appendix. There I found Joseph Schumpeter's model emphasizing innovation, Harrod & Domar's emphasizing productivity, and Von Neumann's emphasizing a logical tie between the growth rate and the interest rate. These models apparently got relegated to the appendix because there is no unifying theory. Samuelson and Nordhaus expressed hope for a future synthesis that will integrate the neoclassical analysis of economic growth with some 300 pages of macroeconomic problems found earlier in their book.

Can economics be a mature science if its theories of economic growth do not mesh with what economists call macroeconomics? Other authors of other texts may organize things differently; I doubt that they improve much on the clarity and honesty of Samuelson and Nordhaus. The problem lies in economics, not Economics.

:: Bob Komives, Fort Collins © 2006 :: Plum Local IV :: 9. Ignorance and Economic Development ::
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