Towards An Augmented Understanding Of Economic Growth
Developmental economists often class the world's countries into First, Second and Third Worlds. In the First World, including the United States, Japan, and the Czech Republic, economic growth typically proceeds at a steady, sustained pace over decades. Mexico is an example of the Second World, where wealth is accumulating but the growth pattern is not at all steady. The Third World is trapped in poverty, with little wealth and no sustained growth.
I have stressed in past posts that standard economic growth theory is a "single sector" model of the economy, with capital, labor, human knowledge, savings, investments as major factors in these models. The "Washington Consensus," which has influenced the World Bank and International Monetary Fund since it was laid out in 1989, has held that stable government, stable money, capital, and infrastructure were sufficient for driving economic growth; this theory has not worked.
Previously, I have distinguished at least two types of economies in the world: subcritical and supracritical. The global economy is supracritical, definable as making an increasing diversity of goods, services, and production functions. The U.S. economy also functions in a supracritical manner. Subcritical economies do not make an increasing diversity of goods, services and production technologies.
In the discussion below I shall make the working hypothesis that supracritical growth is necessary for sustained First World style economic growth. The hypothesis may be false.
I first want to think about how the transition from subcritical to supracritical growth may happen.
Let's start with a concept implicit in economics but not, to my knowledge, explicit: collectively auto-technological sets.
We need to think of an economy as a bipartite graph. Nodes in this graph represent goods and services, including production capacities. Arrows run from one or a set of input goods and services to a box representing a production transformation of the input goods to the output goods. Arrows run from the boxes to the output goods. In addition, arrows run from from production technology nodes to the box representing the production transformation that the given production technology enables.
As a simple example, a hammer and a nail are production technologies used together (hence jointly entering a production technology box). Other inputs are two boards that are used up as inputs and ultimately produce the output: two boards nailed together.
I now entirely leave out capital, money supply, educated labor (all needed) and ask a topological question. What must an economy consist in?
First, it must have raw inputs to the economy, say raised from the soil of France each year. Second, all the goods and services which are inputs to some set or subset of production transformation boxes, must also have arrows from one or more sufficient production technologies that run from the nodes representing the production technologies among all goods and services, to the requisite production transformation boxes.
A "collectively auto-technological set" (an awkward but, perhaps, usable term), consists in a set of input goods and production technologies and a CLOSED SET of input and output goods. The input and output goods are flowing into and out of production technology boxes, and all needed boxes have production technology arrows entering them from the production technology set of goods and services.
I suspect that any functioning economy is a simple or complex collectively autotechnological set.
With this beginning definition, I hope in future posts to begin to explore how such sets form, expand and (possibly) become supracritical. These efforts are only a beginning and will be inadequate to the large task. Copyright 2011 National Public Radio. To see more, visit http://www.npr.org/.