Growth Theories and Convergence Hypothesis

Abstract

In ancient Greek, the word theorein and its connected noun theoría link to observation, consideration and looking more closely at the subject matter; they simply lead to scientific contemplation and seeking truth. Today, in the context of highly specialized fields of science, seeking the eternal truth is not at stake. But still, each field of scientific exploration aims to increase understanding of its subject matter through formulating theories. Above that, theoretical insights do not contribute to interpretation and understanding of a system for its own sake. It is hard to imagine that a system can be modified without understanding its fundamental laws, when only disordered empirical facts are on the table. The everlasting struggle to master conditions that determine human lives therefore lies in theoretical comprehension, which gives possibilities to actively shape researched systems including socioeconomic order. Empirical findings thus refer to the surface, how a phenomenon demonstrate itself to human senses, while theoretical insights, based on logical explanation of the empirical dimension, reveals the underlying ‘nature’ of a phenomenon. In terms of time, purely empiricist approach may refer only to what has already happened, while theoretical insights, which forms the underlying model, furnish our understanding with a certain extrapolating power. In response to empirical findings on inequality, the present chapter focuses on distributional dynamics of mainstream economic theories.