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Growth: A Mainstream Theory (Which is also Itself) in Crisis

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Confronting Mainstream Economics for Overcoming Capitalism

Part of the book series: Marx, Engels, and Marxisms ((MAENMA))

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Abstract

This chapter is a radical critique of the neoclassical growth theory, justifying ways out of mainstream economics. First, we analyze growth theories from the Classical, neo-Keynesian, and traditional neoclassical representations to the recent models of endogenous growth, or growth with endogenous technical progress. We demonstrate why this “new growth theory” is not a break with Solowian formalization. The neoclassical macro-dynamic framework is deeply criticized, by showing that both exogenous and endogenous neoclassical models prove to be incapable to explain growth in the long period. We concentrate on the ambiguities surrounding the hypothesis of single agent, as well as on the role of the State, in particular when it is considered as a “planner” by the neoclassicals. Endogenous growth models do not correspond to macrodynamization of the Walrasian general equilibrium, nor have microeconomic bases.

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Notes

  1. 1.

    This chapter summarizes some of the results of a series of works by the author over several years. From: Herrera (2000a, b, c, 2006) to Herrera (2010a, b, c, 2011).

  2. 2.

    Let us content ourselves for the moment, and before returning later in detail to these models, with quoting well-known authors such as: Romer (1986, 1990), Lucas (1988), Grossman and Helpman (1989), Barro (1990), Becker et al. (1990), Krugman (1993a, 1995)…

  3. 3.

    For more technical (mathematized) references of the author, see: Herrera (1998, 2010a, 2012).

  4. 4.

    Ricardo (1951 [1817]).

  5. 5.

    For a “modeling” of the Ricardian model, see, for instance: Hicks and Hollander (1977); Samuelson (1978); or also Bhaduri and Harris (1987).

  6. 6.

    Here, respectively, Smith (1937 [1776]); Ricardo (1951 [1817]); Mill (1985 [1848]); Malthus (1986 [1798]); Sismondi (1971 [1815]); and Keynes (1985 [1936]).

  7. 7.

    Smith (1937 [1776], Book V, Chapter 1, Sect. 2, p. 363).

  8. 8.

    Ibidem, p. 319.

  9. 9.

    Ibidem, this time Chapter 11.

  10. 10.

    Keynes (1985 [1936]).

  11. 11.

    See: Harrod (1939, 1948).

  12. 12.

    Domar (1946, 1947).

  13. 13.

    Tobin (1955).

  14. 14.

    For example, Mahalanobis (1953).

  15. 15.

    Rostow (1960).

  16. 16.

    About the “two-gap models:” Chenery and Bruno (1962); McKinnon (1964); Chenery and Strout (1966).

  17. 17.

    Solow (1956).

  18. 18.

    See: Haavelmo (1956). Hence, following it, in a certain way of analyzing migrations: Harris and Todaro (1970).

  19. 19.

    Here, respectively, Robinson (1938, 1964); Kaldor (1956, 1957); and Pasinetti (1960).

  20. 20.

    Solow (2000).

  21. 21.

    Koopmans (1965). Also: Cass (1966).

  22. 22.

    For example: Blanchard and Fischer (1989), Tanzi (1985), Friedman (1976). Also: Becker (1985).

  23. 23.

    Abramowitz (1956).

  24. 24.

    See, for example: Denison (1985).

  25. 25.

    Let us quote, among others: International Country Risk Guide (by the consulting company Frost & Sullivan). For the World Bank: Easterly and Levine (1997).

  26. 26.

    Olson (1996).

  27. 27.

    In the last century, and in another life, the author of these lines demonstrated that endogenous growth can be mathematically proven within an augmented Solowian framework, while maintaining a convexity in the technology, and therefore a concave macroeconomic production function, with constant returns to scale on all the factors—whether they are reproducible or not. See: Herrera (1998).

  28. 28.

    Rebelo (1990).

  29. 29.

    Romer (1983).

  30. 30.

    Romer (1986).

  31. 31.

    In this area, a pioneering model, fundamental for the mainstream, had been that of Arrow (1962).

  32. 32.

    Romer (1986, p. 1020).

  33. 33.

    Romer (1990a, b).

  34. 34.

    Lucas (1988). It was preceded, in optimal growth, by the model given by Uzawa (1965).

  35. 35.

    Let us quote the most famous: Sala-i-martín (1990); rossman and Helpman (1991); Barro and Sala-i-martín (1995); Aghion and Howitt (1998); or also: Aghion and Durlauf (2005).

  36. 36.

    Bastiat (1864 [1855]), Chapter 7, “Capital,” tome 6, p. 204 et s.

  37. 37.

    Read: Kirman (1989 and 1992).

  38. 38.

    Robinson (1953).

  39. 39.

    De La Croix and Michel (2002).

  40. 40.

    Cf. Herrera (2000a).

  41. 41.

    Further details can be found in: Herrera (2006). For a full mathematical exposure: Herrera (2010a).

  42. 42.

    Solow (1988).

  43. 43.

    On the question of the heterogeneity of capital: Zarembka (1975), Brown, Sato and Zarembka (1976).

  44. 44.

    Malinvaud (1994, 1996).

  45. 45.

    For example, Pritchett (1999). For a technical discussion of the properly econometric problems associated with empirical testing of endogenous growth models driven by human capital, see: Herrera (2010a, p. 189–194).

  46. 46.

    Barro, R.J.” (1987, p. 10).

  47. 47.

    For instance: Barro and Sala-i-Martín (1995).

  48. 48.

    Becker (1964). For an endogenous growth model by this author: Becker, Murphy and Tamura (1990).

  49. 49.

    Cf. P.M. Romer’s interview by B. Snowdon and H. Vane, in: Snowdon and Vane (2005, p. 682–683), available on: http://www.ricardopanza.com.ar/files/macro2/Modern_Macroeconomics_Snowdon_Vane_05.pdf.

  50. 50.

    Commentaries by R.E. Lucas, excerpts from: Klamer (1988, p. 83).

  51. 51.

    For an overview of the possible damage read: Rothbard (1973); or a book written by Milton Friedman’s son, David Friedman: Friedman (D.) (1973).

  52. 52.

    Solow (1983, vol. 11, p. 892).

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  1. National Center of Scientific Research, Paris, France

    Rémy Herrera

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Herrera, R. (2022). Growth: A Mainstream Theory (Which is also Itself) in Crisis. In: Confronting Mainstream Economics for Overcoming Capitalism. Marx, Engels, and Marxisms. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-031-05851-6_2

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