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The theory of economic development is a branch of economic dynamics. Any discussion of the theory must involve dynamics even though not all dynamic problems are necessarily related to economic development. The theory's primary locus is upon the nice paths of economic variables. Stationary states, which have been the main concern of modem economic development theory, are actually special cases of economic dynamics. In this study, we propose an economic development theory within the framework of input-output systems and neoclassical economics. No political problems will be dealt with, although this does not mean that questions such as why Japan had a higher growth rate than China in the past are not important. Similarly, rather than dealing with the psychological and institutional aspects of in economic development processes we only suggest ways (or methods, as Hicks would call them) for analyzing what determines economic development from the point of view of "pure" economics. Our main contribution to economic growth theory is that we investigate various nonlinear dynamic phenomena such as bifurcations and economic cycles. We emphasize that oscillations and structural changes are not rare but universal in a progressive economy. No economic system can be stabilized forever if change is permitted.

Inhaltsverzeichnis

Frontmatter

Introduction

Abstract
The theory of economic development is a branch of economic dynamics. Any discussion of the theory must involve dynamics even though not all dynamic problems are necessarily related to economic development. The theory’s primary locus is upon the nice paths of economic variables. Stationary states, which have been the main concern of modern economic development theory, are actually special cases of economic dynamics.
Wei-Bin Zhang

I. The Economic Development Problem

Abstract
Since World War II, some countries have experienced rapid economic development, while others have suffered from slow economic growth. Why have there been uneven economic growth rates among different countries during the same period? What causes a country’s growth rate to vary during different periods? Obviously, we cannot expect to get definitive answers to these questions since such problems can be analyzed from various points of view, using a number of disciplines such as history, sociology, psychology, and economics.
Wei-Bin Zhang

II. Growth Theory Revised — From Quantitative Aspect

Abstract
There are two types of indicators of economic development. One is related to real variables such as goods, the population and the labour force. The other is related to monetary variables such as prices, money, wages, inflation and interest rates. When we analyse the economic development of any modern industrialized society, both quantitative and monetary variables have to be taken into account, since there are always interactions among these variables. Although we can find variables which are common to a number of different growth models, a particular variable may have to be treated very differently in each model. For instance, with the Keynesian approach the wage rate is fixed during the study period, while in the neoclassical growth approach it is determined endogenously as a function of inputs.
Wei-Bin Zhang

III. A Revision of Real and Monetary Dynamic Models

Abstract
In process of exchange and division of labour, money plays an essential role in any developed economy. Barter — the exchange of goods for goods, or of any nonmoney asset for any other — is important in primitive societies and is never wholly absent even in the most advanced economies. Pure barter has become less important in modern economic analysis. As there may be a cQnsiderable time interval between the receipt of money and its use in exchange, a complex society has need for a stable form of money that will provide a store of value. Although the store of value function may be shared with other liquid assets, there is no substitute for money as a medium of exchange. Things used as money reflect the simplicity or complexity of the economic life of the economic system under consideration. With the progressive increase in the volume and variety of goods and services in a community, the development of a convenient means of payment and the need for a standard to measure their values are very pressing. We will see that money and its role in society, like many other institutions, has become more and more complicated.
Wei-Bin Zhang

IV. Prices, Growth Rates and Interest Rates in the Dynamic Context of Multisector Models

Abstract
This chapter focusses upon interactions which occur among interest, growth and inflation rates, within the framework of multiple sector models. It can be argued that the study of the relations which occur between these variables has been one of the main areas of concern in economics (see, Morishima, 1964, Hicks, 1965, Andersson, 1968).
Wei-Bin Zhang

V. Growth Rate Controlled and Economic Dynamics in a Multisector Model

Abstract
The previous chapter investigated the relations between rates of inflation, interest and growth within the framework of input-output models with neoclassical production functions and von Neumann systems, respectively. The first two rates are related to monetary terms, while the growth rate is related to the quantitative aspect of the system. Although outputs and prices can be endogenously uniquely determined within the system for appropriately given rates of interest, inflation and growth, not all of the rates can be determined endogenously in either of these models. It is necessary to suggest some mechanism to determine them. As mentioned above, different mechanisms can be proposed because the way in which these rates are decided depends on the “type” of economy. In this chapter, we are especially concerned with centralization and decentralization in a “mixed” economy. The central government’s behavior is assumed to be oriented towards the maximization of a social welfare function which depends on the economic growth rate. For detailed results see Andersson and Zhang (1988a).
Wei-Bin Zhang

VI. The Choice of Techniques

Abstract
Until now, we concentrated primarily on the dynamics of quantities and prices and their relations in economic development — within the framework of multiple sector models. Technologies have been described by neoclassical production functions or by assuming constant input coefficients. Little emphasis has been placed upon the way in which techniques can be selected from amongst various alternatives within a given technology, and nothing has been said about the way in which technological change takes place and the impact which it may have upon economic growth. In the remainder of this study, we focus upon the dynamic relations between various forms of technology and economic development. In this chapter we restrict our attention to the problem of the “choice of (exogenously given) alternatives or techniques”. Endogenous forms of technological change will be dealt with in Chapters VII and VIII.
Wei-Bin Zhang

VII. Technological Policy and Economic Development — A Neoclassical Approach

Abstract
Having examined the problem of the choice of techniques in the preceding chapter, we will now deal with the way in which technological changes occur endogenously. Technology is not given to economic systems. There exist dynamic interactions between human knowledge and economic variables. There are numerous theories about the process of knowledge accumulation. A psychological approach may supply a “micro foundation” for an understanding of knowledge accumulation, although macro characteristics are not necessarily derived from any micro world. The interactions appear to be so complicated that we cannot hope to develop a perfect theory to explain all aspects of the actual process. We will employ a model to investigate what happens to human and physical capital accumulation and consumption under certain plausible conditions.
Wei-Bin Zhang

VIII. Technological Policy and Economic Development — Multisector Approach

Abstract
We have introduced knowledge as an endogenous variable into a one-sector growth model. The interactions between knowledge and economic development have been emphasized. It is very natural to wonder how such ideas can be introduced into the framework of multiple sector models.
Wei-Bin Zhang

IX. Conclusion and Prospects for Further Research

Abstract
The development theory proposed in this study emphasizes different aspects of economic development. Various aspects of the theory, including the choice of indicators in economic analysis, fast and slow variables, the time scale of the study period, business cycles, the role of monetary variables in economic evolution, inflation, economic controls and technological change, have been studied. Analytically, in contrast to traditional economic growth theory, we treat nonlinearity and instability as sources of order in economic development. We have argued that complicated economic behavior can be explained by introducing nonlinearity and instability into economic analysis. In what follows, we summarize the results of our study and outline some problems which remain to be solved.
Wei-Bin Zhang

Backmatter

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