2025/08/05 by Erwin Dekker · 1 voice
Social Sciences · #Political Economy and Marxism
paper · pdf · doi:10.23941/ejpe.v18i1.1005
The new book by Verena Halsmayer is both an addition to the mostly appreciate literature of this distinct MIT-style, as well as a more critical treatment.The book takes the Solow-growth model as exemplary of the pragmatic MIT-style and relies on theories and concepts from science studies to develop a broader and at the same time more distant and critical perspective on it.The famous neoclassical growth model was first published by Robert Solow in 1956, it presented a neat visual presentation, and succinct mathematical model, in which the growth in the output per worker is related to the savings and investment rate in society.In Halsmayer's retelling of the construction of the model, the most important insight was that a country's growth path is stable.Another key insight that stimulated much later research is the model's prediction that growth rates of different countries will converge in the long run.But the model is also infamous because the most important source of economic growth is exogenous in the model.This exogenous factor, sometimes known as the Solow residual and often (mistakenly) identified with technological growth, explained most of empirical variation in the growth rate.Yet, the model had to treat this residual as an unexplained source of growth.One of the first things that Halsmayer highlights is that the model is at least as notable for what it includes and represents, as for what it leaves out: no business cycles, not more than one good, no natural environment which can be depleted, no money, no uncertainty, no entrepreneurs, no history and no institutions (4).The model's elegance is a clear part of the explanation for its success, but its absences also present us with a puzzle.Why was Solow's growth model, which failed to explain even the very