Theme III. Change-Growth-Development in Macroeconomic Theories

Diversity of macroeconomic analysis Growth and expansion in economy

The change represents the natural "state" of economy but it is happening in many different ways, resulting in different levels of "depth" of society and, while maintaining a "relative stability" structures. Change and relative stability correlates and influence each other. Where there is change we can capture a reproduction of "basic configuration" the process "away-from-equilibrium" (Prigogine) takes place by generating equilibrium, or even using the state of equilibrium. Moreover, the reproduction of the trends (which generates "continuity in change") is complementary to "the processes of rupture;" Throughout the history of economic thought, a number of theories have emphasized either one aspect or another.

Consider, first, the relationship between growth and economic development. Given the other topics discussed during the differentiation perspective of looking at "economic life of society," we will not be surprised seeing that the definition of those terms is not simple and unequivocal. Throughout the history of economic thought, the defining criteria, fields of reference, assessments differ from one theory to another. Thus, we will not find a single definition of the concepts discussed but different meanings related to them. Often, economic growth and development are localized exclusively in the production, differentiated by the fact that the first would refer to a quantitative view on economic development and the other from a qualitative view. "Economic growth is a purely quantitative notion reflecting increased production in the long term economy. Economic growth is increase sustained over a long period, the production of a country. The notion of expansion is different from that of growth, since it corresponds only ascending phase of the economic cycle. Economic growth is an increase of the production term nature of a country. In conclusion, growth can be composed of successive phases of expansion, stagnation,[1] recession."

Situation refers to short economic cycles (Figure 1).

Fig. 1 "Economic cycle"[2] © Pierre Pascallon

Outside the use of this cycle ("cycle Juglar"), growth is analyzed also in other descriptions. "Kitchin cycle" (Figure 2) also refers to the expansion.

The Kitchin cycle

Fig. 2 The Kitchin cycle[3]

This vision does not involve the actual presence of a crisis but a drag on growth or decline more pronounced during the depression. The treatment only in terms of production growth is most common. F. Perroux considers increasing as the quantifiable notion par excellence, which is measured by the production of goods or corresponding items.[4] During the theme we explore new ways of looking at economic growth, which indicating the main production area as reference area, include other aspects of economic life.

Economic Development

The development refers to the qualitative achievable aspects over a greater period of time. The criteria of development analysis are different: living standards, economic efficiency, technological and organizational modernization, education and professionalism, human needs, etc. Perroux believes that development is a strong interaction between population and production aspect leading to increased "social welfare."[5] Unlike the analysis of economic growth, the study of development proves to be more difficult due to its complexity, interdependence of various factors and predominantly qualitative effects. As a result, theoretical and methodological differences likely will be much higher (compared with growth related research).

It became particularly used the theory of W. W. Rostov (I960)[6] which deals with development by highlighting of five stages.

a) Traditional Society: the predominance of agriculture, the importance of organization based on family, the owned land in the center of power, knowledge based on tradition and routine.

b) Prerequisites of discrepancy:

- extending optimism, creating dynamic objectives;

- developing saving funds, taking momentum investments;

- technical knowledge, lead to increase productivity in the economy,

c) Take off

This time it manages to overcome obstacles and barriers that oppose further growth. It combines the following features: the institutions integrates the growth and anticipates the increase of production, investment rate exceeds 10% of GDP, the new industry plays a motor role, agriculture is modernizing and releases workforce.

d) Walking to maturity is a longer phase which generalizes effects throughout the economy, starting investment rate reached about 20% of GDP.

e) Mass consumer society made the population's basic needs, develop services sector in a new stage, D. Bell[7] presented the development model on three major stages: agricultural societies, industrial and postindustrial.

An overview of theory development synthesizers is given in Table 1.

Table 1. Synthesis of theory development[8]

Synthesis of theory development

  • [1] Longatte J., P. Vanhove (2001), Économie générale. Paris, Dunod, 53 (as emphasized in text).
  • [2] Ibid, 56 (see also J. Bremond, and A. Geledon (1996), Dictionary of Economic and Social Terms. Bucharest: Expert Publishing House, 121.
  • [3] Bremont, J., and A. Geledan, op. cit., 120.
  • [4] Ibid., 276.
  • [5] Poulon, Frederic (1997), Économie genérale. Paris: Dunod, 176.
  • [6] Brémont J., A. Gélédan, op. cit., 372, J. Longatte, and R. Vanhoe, op. cit., 476.
  • [7] Bell, Daniel, The Coming of Post-industrial Society. A Venture in Social Forecasting. New York: Basic Books Inc, op. cit., 479.
  • [8] Longatte J., and P. Vanhove, op. cit., 489.
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