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Dependency or Institutions? Economic Geography, Causal Mechanisms, and Logic in the Understanding of Development

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Abstract

What explains the global distribution of growth and economic activity? Proponents of unit-level explanations dismiss systems-level arguments like dependency and world systems theory for logically incorrect reasons. They argue that these system-level arguments lack the precise mechanisms that various unit-level arguments provide. But the absence of precise system-level causal mechanisms in some system-level theories does not logically imply that all system-level theories are wrong. Economic geography provides system-level theories with precise mechanisms that comport with most of the economic predictions offered by dependency theories. This does not mean that unit-level theories are either wrong or useless, but rather that unit-level explanations must (1) claim that the new economic geography is totally wrong, or (2) show how system and unit-level mechanisms interact causally, or (3) argue that unit-level mechanisms are independent of system-level causal mechanisms.

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Notes

  1. I use ASB, Amsden, and Haggard because they represent the best recent statements of each position, not to personalize the debate or my criticisms.

  2. Contrast Valenzuela and Valenzuela’s (1978, p. 552) early survey of DT, which concludes, “much work needs to be done...to clarify its concepts and causal relationships,” with the more recent survey by Christopher Chase Dunn and Peter Grimes (1995, p. 395), which states, “Because these theoretical debates are quite recent, there has been little systematic research intended to support or contest the different hypotheses.”

  3. There are other models. Alfred Weber’s (1929; original, 1909) model for industrial location employs a finer grained analysis of transportation costs, labor costs, and market size than Krugman’s. But if Krugman’s model is convincing with respect to the effects of systems-level mechanisms, then Weber’s should be even more so.

  4. The formula for determining crop location is R = Yp − E − YfK or: Rent = (output per acre × price per unit) minus production expenses per acre minus (output per acre × transport costs per unit × distance).

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Acknowledgement

The author thanks Peter Breiner, Greg Nowell, Louis Pauly, Andrew Schrank, and especially David Waldner for years of discussion and Robert Denemark for extensive comments and criticism; errors remain mine.

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  1. Politics Department, University of Virginia, Charlottesville, VA, USA

    Herman Schwartz

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Schwartz, H. Dependency or Institutions? Economic Geography, Causal Mechanisms, and Logic in the Understanding of Development. St Comp Int Dev 42, 115–135 (2007). https://doi.org/10.1007/s12116-007-9000-x

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