Review Article of Richard G. Lipsey, Kenneth I. Carlaw and Clifford T. Bekar (2005). Economic Transformations: General Purpose Technologies and Long Term Economic Growth (Oxford: Oxford University Press).
Review Article of Richard G. Lipsey, Kenneth I. Carlaw and Clifford T. Bekar (2005). ECONOMIC TRANSFORMATIONS: General Purpose Technologies and Long Term Economic Growth. Oxford: Oxford University Press; Economia Internazionale, February 2007
Posted: 16 Jan 2008 Last revised: 27 Sep 2010
The neoclassical equilibrium economic theory is one view at how an economy operates. An emerging evolutionary economic model challenges that standard view as an economy is in a continuous state of disequilibrium. This is a difficult book to review. Not just because it contains a different look from the generally prevailing neoclassical equilibrium model on how an economy operates (which it does), but because one must try to do justice to the many and various aspects with which the reader may agree, argue or disagree. One of the book's unique features is its use, within one set of covers, of descriptive material, institutional economics, evolutionary approaches, appreciative theory, formal theory, and economic history. The principal topics covered are a comparison of neoclassical and what the authors call `structuralist-evolutionary' (S-E) theories; the anatomy of general purpose technologies (GPT); a tour through the transforming effects of a couple of dozen GPTs that they say were the key ones over the last 10 millennia; an explanation of the emergence of sustained growth of GDP (extensive growth) in the Industrial Revolution that stresses the importance of science and its roots that stretch back into the Middle Ages; an explanation of the emergence of sustained per capita income growth (intensive growth) using a series of mathematical models of population dynamics: a series of formal models of GPT-driven modern economic growth, and two chapters on the policy implications of S-E theory. From that rich menu, this reviewer has selected for detailed consideration the contrast between neoclassical and S-E theory, and the latter's policy implications.
New knowledge creation, learning and its application in the economy, is among the principal `fuels' that power the long-term progress of an economy. However, the evolutionary tradition is that it is never possible to ascertain what might be `correct' economic environment and so an economy is either well or poorly positioned to exploit emerging GPTs. The learning process is not only interactive, but also cumulative as it persists over time. Once something is learned it seldom ceases to exist; experience and discovery build on experience and discovery. Everyone profits from the past improvements and changes, but not everyone benefits immediately from the current ones.
If you accept the pure neoclassical equilibrium economic model, then this book might make you reconsider your choice. If you, however, think that the prevailing neoclassical equilibrium model may not be the only `professionally correct' model in economics, then this book would support your view and offer a number of evolutionary insights. All economists, young and old (regarding predominantly the age of their mindset) ought to read this book and try to see how it fits in the (equilibrium) system of their ideas. In any case, this book would not leave any reader indifferent. The authors won the 2006 Schumpeter prize for the book to no great surprise. However, the best prize would be in the evolutionary alteration in the economic mindset of its readers.
Keywords: knowledge, equilibrium, transformation, technology
JEL Classification: A10, N00, O1, O3
Suggested Citation: Suggested Citation