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Evolutionary Economics Theory

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Title: Evolutionary Economics Theory


1
Evolutionary Economics Theory Innovation System
Framework for Innovating an Integrated
African-National Social-economic System
  • Globelics Academy, Tampere, Finland
  • June 11, 2008
  • Mammo Muchie Coordinator DIIPER Aalborg
    University/ and DST/NRF SARCHI Chair holder,
    South Africa

2
Overview
  • Inspiration
  • Problems of African Economic Development
  • Problems with Theories of Development Economics
  • The Relevance of Friedrich Lists Theory of
    Productive Power to Africa

3
Overview
  • National System of Innovation
  • Towards the creation of an integrated African
    economic system
  • Future research
  • Concluding Remarks

4
The main objective
  • To explore whether traditional development
    economic theory has addressed, overlooked or
    ignored the core issues of African development.
  • And search for a more robust theoretical
    alternative that is open to reinstating in some
    way the core issues of what should be the
    African quest for structural transformation.

5
Inspiration
  • The three principal reactive-reactionary theses,
    which I call the perversity thesis or thesis of
    the perverse effect, the futility thesis, and the
    jeopardy thesis. According to the perversity
    thesis, any purposive action to improve some
    feature of the political, social, or economic
    order only serves to exacerbate the condition one
    wishes to remedy. The futility thesis holds that
    attempts at social transformation will be
    unavailing, that they will simply fail to make a
    dent. Finally, the jeopardy thesis argues that
    the cost of the proposed change or reform is too
    high as it endangers some previous, precious
    accomplishment. ( Hirshman, 1991, p.7)

6
Inspiration
  • I should add to Hirshmans three theses, a
    fourth one and that is what people often say
    when I argue for an integrated African national
    economy, they say it is too unrealistic and even
    illusory. Thus I encapsulate their worries as the
    illusory thesis, which says that the pursuit
    of African integration is too pie in the sky
    dream, fantasy, utopian, unrealistic , which
    distracts from taking realistic incremental
    actions and thus by foreclosing such options
    becomes itself dangerous!

7
inspiration
  • So I plan to do the dangerous thing of arguing
    for innovating an integrated African national
    economic system by engaging with and critiquing
    available theories to develop hopefully original
    new synthesis.
  • The only risk to avoid is not to take risk, even
    if that may lead you to land in ridicule!

8
(No Transcript)
9
2. The problem of African development
  • After half a century of colonial freedomAfrica
    as a continent still has an economic size less
    than the economic size of France!
  • Sub-Saharan Africas economic size is less than
    the economic size of Holland!
  • Yet there are 54 states, 54 policies plus the
    unwelcome imposition of often the one size fits
    all policies from outside that most of these
    states do not seem able to avoid or afford, or
    can reject if harmful!

10
Problems of African Development
  • Politically...formal independence without an
    African agency
  • Economically... Continued fragmentation means
    dependence will still continue, poverty and
    insecurity too!
  • Intellectually knowledge creation and use often
    not geared to bring about structural
    transformation of an integrated African economy
  • Integrating research, training, creativities,
    governing, producing and circulating within an
    Africa wide economic system not in existence yet
  • Creation of an African national system of
    production and consumption a major challenge
  • Linking academy, industry, government and labour
    on an African scale and scope often recognised
    about but hardly implemented.

11
Problems of African Development
  • The need for African Integration- rich in
    rhetoric, but dismal failure in taking even a few
    actions to do actual integration except for the
    natural cross-border ones!
  • Stratergies for and to Africa are growing
    Summits also for and to Africa
  • The EUs 2005 strategy speaks of a one Africa
    framework for its EPA whilst continuing to
    differentiate its policies to different states
    and regions within Africa!

12
Problems of African Development
  • Over 200 integration schemes, but no recognisable
    and substantive integration yet!
  • The central problem of African development is
    linked to whether or not Africa is indeed
    integratable and can be integrated!
  • A recognition of Africas experience and history
    implies locating the core of the development in
    the dynamics of integrating Africa
  • African integration is one of the few things that
    remains to advance Africas independence, agency
    and post-colonial freedom.

13
Problems of African development
  • African integration follows logically from
    Africas specific experience and history(past)
    and the project to transform the economy
    structurally from its fragile state into a self-
    sustaining robust state (future)!
  • Any theorising that ignores Africas experience
    and history in its theoretical arsenal is likely
    to be more of a problem than help to bring
    Africas independence and transformation.
  • Let us see how development economic theorising
    dealt with this core issue of African development

14
3. Problems with Development Economics(DE) Its
Rise and Decline
  • Albert Hirschman, one of the founders of
    development economics said
  • Development economics is a comparatively young
    area of inquiry. It was both born just about a
    generation ago, as a subdiscipline of economics,
    with a number of other social sciences looking on
    both sceptically and jealously from a
    distance.(Albert Hirschman,1981)

15
Development Economics-Genesis
  • Over 200 years of Industrial Capitalism
  • Economic development is in reality the analysis
    of the economic progress of nations appears to
    be what economics as a whole is designed to
    address.
  • What else can the discovery of the "nature and
    causes" of economic progress by Adam Smith mean?
  • For modern economists, however, the status of
    economic development is somewhat more unsettling
  • it has always been the diffuse field, not really
    considered "real economics" but rather an amalgam
    of sociology, anthropology, history, politics
    and, even ideology.

16
Development Economics Context for its Evolution
  • War time planning,
  • post-war European reconstruction
  • De-colonisation
  • Competion between capitalist and non-capitalist
    path of development
  • Together, these factors provided the context for
    the emergence of development economics provides
    the context for the intellectual framework

17
The Earlier version of Development Economics
  • Early economic development theory was but merely
    an extension of conventional economic theory
    which equated "development" with growth and
    industrialization.
  • As a result, Latin American, Asian and African
    countries were seen mostly as "underdeveloped"
    countries, i.e. "primitive" versions of European
    nations that could, with time, "develop" the
    institutions and standards of living of Europe
    and North America.

18
Are the Developed Problems to the Developing?
  • Unlike European industrialization, developing
    countries were supposed to undergo
    industrialization under conditions when the
    North has industrilised already
  • Industrialisation of the South was supposed to
    occur while these countries existed along side
    already- industrialized Northern countries and
    were tied to them by trade.
  • This, speculated a few, could give rise to
    distinct structural problems for the development
    of those in the South

19
Distinct experience vs. Linear Stages
  • Kuznets was also one of the earliest workers on
    development economics in particular collecting
    and analyzing the empirical characteristics of
    developing countries (1965, 1966, 1971, 1979).
  • His major thesis, which argued that
    underdeveloped countries of today possess
    characteristics different from those that
    industrialized countries faced before they
    developed, helped put an end to the simplistic
    view that all countries went through the same
    "linear stages" in their history and launched the
    separate field of development economics - which
    now focused on the analysis of modern
    underdeveloped countries' distinct experiences.

20
Development Economics the early Core themes
  • Rural underemployment and disguised unemployment
  • Late industrialisation
  • Utilisation of undermployed manpower
  • Accelerate capital accumulation
  • Deliberate intensification and guided effort
  • New rationality for protection, planning and
    industrialisation

21
The Early Strategies for Economic Development
  • Industralization
  • Rapid capital accumulation
  • Mobilisation of underemployed manpower
  • Planning and an economically active state

22
DEs Contribution
  • Development economists claimed that neo-classical
    economics did not apply to underdeveloped
    countries
  • But this is not a big deal, since neo-classical
    economics cannot be said to apply anywhere!
  • Only a few East Asian economies industralised
  • Different models Balanced growth, big push, dual
    economy and so on
  • Internally the debate raged to write the
    obituary of development economics or find new
    themes to sustain it

23
Variation in themes
  • The positions polarised from those that
    originated the field( Colin G. Clark(1939), Paul
    N.Rosenstein-Rodan(1943), Kurt Mandelbaum(1947)
    and others such as Bert F.Hoselitz, Ragnar
    Nurske, Jacob Viner and Hla Myint
  • To those who advocated development, planning and
    economic growth (Arthur Lewis, Jan Tinbergen,
    Nicholas Kaldor, Joan Robinson, Maurice Dobb,
    Hans Singer, Gunnar Myrdal, Simon Kuznets, Hollis
    B. Chenery and Irma Adelman

24
DE-as Social development?
  • And those that stress economic development as
    social development and who inverted and made
    economics a special case of development economics
    (e.g. Dudley Seers), Theodore Shultz(who stressed
    human resources development, skills and
    education) Paul Streeten Mahbub Ul-Haq (human
    development), E.F.Schumacher (Small is
    beautiful))
  • And the structuralists(Raul Prebisch, Ceso
    Furtado,) and neo Marxian theory( Paul Baran,
    Paul Sweezy, Andre Gunder Fran, Samir Amin)

25
Neo-Classical/Neo-liberal DE
  • Anti structuralists and neo-liberal school
    (Alexander Gerschenkron, Walt Rostow, Peter baur,
    Anne Krueger, Ian Little, Harry Johnson, Bela
    Balassa and Deepak Lal)
  • Their thesis was simple government intervention
    did not only not improve development, it in fact
    thwarted it.
  • The emergence of huge bureaucracies and state
    regulations, they argued, suffocated private
    investment and distorted prices making developing
    economies extraordinarily inefficient.
  • In their view, the ills of unbalanced growth,
    dependency, etc. were all ascribed to too much
    government dirigisme, not too little.

26
DE
  • Early DE equated development with growth and
    industralisation
  • Developing countries seen as primitive versions
    of Europe with time to grow into their civilised
    status!
  • Qustionining industralisation unsustainable if
    it comes with human cost(e.g.population,
    inequality, agriculture, urban dev.,education,
    health, unemployment).Treat these issues not
    simply as appendages of underlying growrh thesis!
  • Populist theories questioned growth(e.g.Schumacher
    )
  • Structuralism not primitive versions but with
    distinct structural problems! Country specific
    analyses necessary (Albert Hirschmann(1958)
  • Dirigisme more of a problem to development than
    help
  • (neo- classicals)

27
Dispute still sizzles
  • What is interesting about development economics
    is that the normative stance of the particular
    theorist clearly informs the choices of issues,
    themes and remedies preferred.
  • In recent years, the Neoclassical thesis has
    gained greater adherence, particularly in Latin
    America.
  • However, the evidence of why economic growth or
    failure is still ambivalent and disputed.
  • Both structuralists and counter-structuralists
    point to fast East Asian development and
    disastrous African experience as proofs of their
    directly opposing theses.

28
The Two Directions to reject or overcome
thematic deficiency?
  • In the 80s arguments from the Right stressed the
    neglect of the market and the unacceptable state
    activism in the economy
  • Amartya Sen came up with an argument of taking
    the issue beyond the simple state and market
    dichotomy and opening DE to themes to what may
    prolong the life of development economics

29
Sens Attempted Improvement
  • Sen admitted that traditional development
    economics may not have been as dismissable as
    various trends suggest.
  • Instead he acknowledged what he calls thematic
    deficiency at the core of development economic
    theorising

30
Sens Attempted improvement
  • He argued concentration on national product,
    aggregate income, total supply of public goods,
    capital accumulation, the creation of surplus
    may be necessary but not sufficient to get
    development that includes the least advantaged.
  • He stressed entitlements of people and
    capabilities these entitlements generate is the
    relevant thematic choice for development
    economics.
  • Sen said the process of economic development has
    to be concerned with what people can and cannot
    do or to use his words have reason to value and
    choose to do!

31
Still Development Economics Remains Polarized!
  • Development economics has bifurcated into
    neo-liberal versions (Poverty of Development
    Economics, 1981) and its critiques (The Dilemma
    of Development by John Toye,1987) on the one
    hand, and the Amartya Sen thematic extension from
    national product to entitlement and capability
    leading to human development and inclusions of
    social specific themes such as gender,
    deprivation, hunger , basic needs and
    environment.

32
Lists Theory
  • Sens capability-building theme seems to resonate
    with Lists theory of productive power!
  • However Sens capability is built on the premise
    of the economy of the individual and Lists
    productive power is to improve, progress and
    develop a nation!
  • For List economic development is in reality the
    analysis of the economic progress of nations
    in reality that appears to be what economics as a
    whole is designed to be about. Is it?

33
Friedrich Lists Theory
  • The theory of productive power by List can
    provide a fresh thematic extension to both Sens
    capability theme and development economics
  • The merit of his theory is that it starts by
    affirming experience and history of nations
    rather than beginning with abstractions such as
    industrialisation, planning, capital accumulation
    and utilising the underemployed.
  • It contexualises its theory of productive power
    with the idea of the national interest and even
    the national passion

34
Lists Justification of his theory
  • His theory of productive power can be built as
    the core theme of the theory of development
    economics
  • Individuals, nations and humanity are distinct
  • The sum of individual interests is not to be
    equated with the interest of a nation (185674)
  • Social interests diverge from private
    interests(ibid.245)

35
Lists Justification
  • The economy of the individual is different from
    the economy of the nation, and the economy of the
    global human interest is different from both
    (p.vi)
  • Some nations can be concerned more for their
    national welfare than the welfare of humanity!
  • So they can choose expanding productive forces
    through protection than expanding global welfare
    through free trade
  • They preach free trade, but they practice
    protection!
  • Could it be that what was in the interest of
    England is thought to be in the interest of the
    world!

36
Lists Justification
  • The production based economics (List) vs.
    Exchangeable values and allocations through
    international trade (Adam Smith) have different
    development outcomes!
  • Trading in cooked and manufactured vs raw and
    agricultural goods not the same thing!

37
Lists theoretical justification
  • Theory of productive power is more than
    commodities, money and factors of production or
    natural advantages
  • It is above all a realisation that division of
    labour presupposes national unity, national
    independence, a shared project and cooperation of
    productive forces (p.74)
  • List was castigated as a dangerous enemy on
    account of his endeavouring to rescue his country
    completely from the manufacturing monoploy of
    England (ibid.viii- translator of American
    version of Lists tome!)

38
Lists strategies
  • Industralisation and manufacturing to be driven
    by a capable nation and state
  • Incentives to those who take risks of creating
    new industries
  • Building the capital of the mind and training and
    spreading education to cover comprehensively the
    nation as a whole
  • Choice of industries for protection on the basis
    of knowledge, experience and linkages with the
    rest of the national economy (p.69)
  • Development of agriculture necessary to
    industralise

39
Lists strategies
  • Industries of luxury to recieve attention until
    in the last phase(p.392)
  • Trade is an instrument of development, progress
    and independence (ibid.)
  • Protection is also a means to development,
    independence and liberty for free trade (p.64)
  • Improving, developing and preserving the nation
    is the principal purpose of a nation(p.70)
  • Supported regional integration of German cities
    and the union of interest of various states such
    as Belgium, Denmark, Holland and Hungary!

40
  • List is right in his claim that a national
    political economy facing constraints needs to
    find a way to organise transformation from
    agriculture to manufacture!
  • Those that trade in raw materials and agriculture
    remain underdeveloped
  • Those that build productive power have made it
    (e.g.USA, Germany, Japan, East Asian Tigers)
  • The lesson is clear if a nation wants to
    develop, it has to organise its national system
    of political economy with a logic of stimulating
    rapidly and comprehensively productive power.
  • Otherwise it can have very rich minerals and
    agriculture and territorial size, but will remain
    underveloped!

41
The Puzzle for Africa
  • The national system of innovation concept derived
    from the Listian tradition in the context of
    Africa may be a provocation
  • In the context where the national in Africa is
    not well defined!
  • In the context where institutionsdo not
    function with a predictable system and
    rationality
  • Where learning and capability are not mobilised
    to advance African transformation with
    deliberation and focus!
  • Where the misplaced focus on thematic deficiency
    underemphasises framework deficiency that is the
    root of misplaced theorising concerning Africa!

42
The Research Challenge
  • Probing ways for forging an African NSI
  • The national innovation system has to be made in
    Africa!
  • It is not the case of an an already made
    situation
  • It is the case of generating the African national
    economy and production for the economy of
    increasing returns to scale in the process of
    transformation
  • The peculiarties of the African situation
    provides challenges to both economic theory and
    policy

43
National Innovation approach
44
Major Elements of National Innovation System (NIS)
  • Conceptual Framework
  • by designing policies, building institutions and
    applying knowledge
  • Institutions, Technologies, and Knowledge
  • Need strong interaction, linkages, synergies,
    and co-ordination to achieve coherent
    co-evolution leading to an efficient innovation
    system and higher level of technology
    accumulation.

45
Major Elements of National Innovation System
(NIS) .. Contd.
  • Incentives
  • Appropriate incentives to institutions lead to
    achieve co-evolutionary dynamics between
    institution, technology, and knowledge production
    by linking economic and non-economic agents to
    meet stated goals and objectives.
  • Implementation and Learning
  • Implementation of strategies, policies,
    programmes,and projects, and should include
    feedback mechanisms (review, monitoring, and )
    leading to learning outcomes.
  • Ability to learn - self learning and ability to
    take corrective measures are imperative for
    building technological capabilities and imbed
    innovation dynamics in industrial and
    socio-economic development.

46
Linkages for Co-evolution
47
Institutions, Technology, Incentives and their
Linkages in National Innovation System (NIS)
  • Infrastructure
  • Science Technology, Intellectual Property
    Rights, Government Policy, ICT, and Culture.
  • Investment
  • RD Expenditure and Government RD Support,
    Venture Capital, and FDI.
  • Knowledge and Talent
  • Education and Human Resources development, and
    Labour Flexibility.
  • Relations and Linkages
  • University-Industry Linkages, Public RD and
    Industry, Globalisation of MNC RD, Transnational
    Networks.

48
(No Transcript)
49
Unifying the key elements of SI
  • Ideas, policies need to be linked to a conceptual
    framing of how economics and politics are
    co-governed and/or co-evolved
  • Responding to opportunities, and dealing with
    challenges require policies to be rooted in a
    conceptual framework that co-governs the dynamic
    interaction between a nations political and
    economic transformation

50
Unifying IS
  • Conceptual framework or concept-circumfrencing
    has been popularised by what is known as the
    innovation systems
  • Innovation has many sites
  • The one that is space-centered has been described
    by national, city, local, regional and other
    boundaries
  • Other sites are innovation, technology,sector,
    firm and so on
  • A model that captures them follows

51
Unifying model of SI
52
Evolutionary Economics
  • Stimulate and understand inter economic and
    non-economic actor interactions and dynamics,
  • Co-evoution of economic and non-economic
    governing institutions, practices and
    understanding (Richard Nelson)
  • The interaction of policies, knowledge,
    incentives, institutions, practices and the
    understanding involved in the process
  • System building, to identify significant
    interactions and interfacing of parts,
  • Bridge the gap between theory and reality,
  • The sources and organisation for stimulating
    innovation, imagination and creativity, learning
    and comptence building
  • How routines are formed and novelties emerge

53
Evolutionary Economics
  • Integrating Africa or making the Africa nation
    itself is an evolutionary problem of dynamics,
    of creative destruction,requiring evolutionary
    approaches to understanding and creating
    knowledge
  • Evolutionary economic theory has such concepts
    that can be useful to stimulate research in
    making an integrated African economy.

54
Evolutionary Economics
  • It has the concepts that can be appropriated to
    fit with what Africa has to do to survive in a
    difficult world.
  • For example the main development problem is to
    integrate Africa to imagine the Africa nation
    and make it!
  • Evolutionary economic tools can be useful in the
    process!

55
DangerAppropriation or Mimicry
  • We know theoretical and empirical work mainly
    done for developed economies using evolutionary
    economics and the NSI
  • Appropriation is legitimate if what is learned is
    how this has been done, and why it has been done
    the way it has rather than copying what is is
    done well!
  • The problem is how to use evolutionary economics
    and especially the NSI to do a research
    diagnosis on Africas economics now and its
    likely evoutionary trajectories

56
Danger appropriation or mimicry
  • We are not going to use ready made formula but
    explore the evoution of Africas economic system
    as it is in order to find better ways of
    stimulating structural transformation
  • No need not thus to engage in controversy on
    whether to apply evolutionary economics or NSI!
  • Some suggest important revisions may be needed
  • Others say that radical modification not needed.
  • For me this is a non-issueto develop, nations
    need to engage in the dynamics of acquring
    Existing knowledge and make New knowledge
    themselves (Richard Nelson)

57
Acquiring and making
  • In fact to acquire better and better existing
    knowledge they must build their own R D
    capability also.
  • It is not either acquiring the existing or making
    new.. It is making to acquire in order to make
    new and build on a continuous spiral enhancing a
    simulatenous mutuality in the practice and the
    understanding(Ibid.)
  • It is both know how as practice and the learning
    and understanding to create novel practices that
    recreate more and better learning that continues
    in time and space!

58
Why the NSI for Africa?
  • A national system of innovation to promote a
    national system of production
  • To enable a system creation to produce what
    Africa consumes, and to consume what Africa
    produces
  • To create Africa...wide producers and users
    interactions (Lundvall85)
  • To embed knowledge creation,innovation, learning
    in Africas institutions,societies
  • To inject a total learning and innovation culture
    in Africa
  • To retain African resources to stimulate african
    development

59
The Research Orientation to build on
  • The economy of the
  • nation
  • Systems
  • Co-evoutions
  • Interactions
  • Innovation
  • Learning
  • Comptence building
  • The organisation of productive power
  • Africa..nation
  • Integration
  • Structural transformation
  • Relation with the world economy
  • Agency and independence
  • capability accumulation

60
The Research Orientation to Decline
  • Continue to search for solution within the
    existing arbitrary arrangements as they are in
    Africa
  • That continues to engage, interrogate and
    critique them
  • That tinkers with fragmented Africa
  • That does not question dependence,
  • Continues to take the fragmentated status of
    Africa as normal
  • Fashions ideas and policies without questioning
    such fragmentations
  • Blames Africans when conceptual and policy
    results show more poverty creation than wealth
    creation

61
Concluding Remark
  • Not all the states in Africa can catch up as they
    are now!
  • Not sure even if they can catch up even if
    regrouped as regions
  • Important to emerge united to deal with a world
    economy and respond to its many challenges.
  • No alternative to learning and the social
    innovation of uniting, if Africans and Africa are
    to attain full dignity and humanity.

62
Concluding Remark
  • A theory of African economic development that
    confronts the key challenges of integration of
    economy, society, knowledge, forging Pan-African
    unity, stimulating the African Renaissance,
    stregthening the AU/NEPAD, imagining and making
    the Africa-nation and creating a vibrant African
    public sphere of free citizens!
  • This theory of African development is likely to
    emerge with a controversy and debate with the
    available theories.
  • What Africa suffers is not thus from a thematic
    deficiency in diagnosing its development
    problematic.. It is the irrelevance of the
    framework that ignores its specific experience,
    history , project and dream to be free at the
    core of the problem!
  • Can evolutionary econonmics help address this
    framework deficiency.. That is the question.
  • If we are to remain free, if we are to enjoy the
    full benefits of Africa's rich resources, we must
    unite to plan for our total defense and the full
    exploitation of our material and human means in
    the full interest of our people. To go it alone
    will limit our horizon, curtail our expectations
    and threaten our liberty. Kwame Nkrumah
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