Embodied Technical Progress in a Dynamic Economic Model: The Self-Organization Paradigm

Abstract

A number of distinguished economists have pointed out that the theoretical approaches dominant today have yet to come to terms with the historical, irreversible, and heterogeneous nature of the industrial societies they purport to deal with.1 Indeed, there seem to be fundamental reasons for this failure. Neoclassical theory, in aggregating capital and presupposing a very special equilibrium process, seems more to obscure than illuminate what is actually going on at the microeconomic level from which its concepts ostensibly are taken. And the post-Keynesian tradition deriving from Sraffa and von Neumann, by working exclusively with so-called long run equilibrium prices, implicitly assumes a single technique over all of history and thereby rules out the analysis of processes of transition (which indeed are the only ones we have known until now in the history of industrial society) involving the appearance and disappearance, the coexistance and differential reproduction (replacement) of distinct capital and consumer goods, natural resources, etc., which in dynamic terms is the ultimate justification for introducing heterogeneity in the first place. The deeper insights of Schumpeter on the disequilibrium process of industrial evolution, and of Keynes, particularly regarding the relationship between expectations and effective demand, have largely failed to find entrance into the mainstream of analytical economics.