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Invention, Institutional Change, and Economic Development: From Scottish Enlightenment to the IPE

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Science, Technology and Innovation in the History of Economic Thought

Part of the book series: Palgrave Studies in the History of Economic Thought ((PHET))

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Abstract

This chapter relates the work of the pioneers of the study of innovation who were part of the Scottish Enlightenment with current theorists. All of them search for a non-individualistic concept of innovation. The individualistic innovation paradigm is based on the seminal work by the british author Jeremy Bentham, Defence of Usury (1787). Bentham claimed that innovation is the driving force of development and it must go hand in hand with credit. Then, rates of interest must be determined in the free-market. But previous authors from the Scottish Enlightenment had another definition of growth and innovation which was more preventive of uncertainty. David Hume had a historical perspective, making innovation a consequence, not a cause, of growth. Although change is desirable, it should not be at the expense of the past, as this past is the matter and substance for learning by doing. Adam Smith also pointed out limits to innovation advocating for usury laws and claiming that it is not the greatest individual inventiveness what increases the amount of capital, but the skill with which work is customarily done. In the period of the Scottish Enlightenment, other economists put forward a non-individualistic vision of innovation, as is the case with John Rae, who talked about an expansion of capacities. All these elements have entered into the recent developments of institutionalism at the hands of Institutional Political Economy. The idea of institutional innovation rejects the concept of equilibrium in favour of the process and shows that the market and the state are nothing more than the face of the same coin where limitations and skills are intertwined.

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  1. Department of Applied Economics, Structure and History, Complutense University of Madrid, Madrid, Spain

    Estrella Trincado Aznar

  2. Department of Applied Economics, University of Granada, Granada, Spain

    Fernando López Castellano

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    Estrella Trincado Aznar

  2. Department of Applied Economics, University of Granada, Granada, Spain

    Fernando López Castellano

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Trincado Aznar, E., López Castellano, F. (2023). Invention, Institutional Change, and Economic Development: From Scottish Enlightenment to the IPE. In: Trincado Aznar, E., López Castellano, F. (eds) Science, Technology and Innovation in the History of Economic Thought. Palgrave Studies in the History of Economic Thought. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-031-40139-8_3

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