Technology, Institutions, and Economic Growth, by Richard R. Nelson. Cambridge, MA and London: Harvard University Press. 2005. Hardcover: ISBN 0 674 01916 4, $49.95. 312 pages.
Richard R. Nelson's general theory is similar to that of Clarence Ayres in The Theory of Economic Progress (1962). Nelson's purpose is to review, interpret, and draw conclusions about the economics literature that deals with the topics in the title plus economic evolution as those topics have developed in the last 50 years. The general theory is that advancing technology is the main ingredient responsible for economic growth. Necessary connections and viable consequences evolve when institutions are both conducive to innovation and flexible to change to accommodate the needs of the new technology. Nelson's literature review is not a derivative account. The selection is made to present the theories needed to understand the conceptual integration of technology, institutions, and economic growth; to judge the applicability and relevance of the theories to the real-world economic process; and to draw conclusions about where the literature, including his own past writings, leaves us with regard to policymaking. The concepts presented and conclusions reached are numerous, interesting, and relevant.
Except for a few concepts from Veblen, the original scholars who dealt with economic growth in the tradition of institutional economics--Clarence Ayres, Gunnar Myrdal, Marc Tool, Walter Neale, Wendell Gordon, James Street, Seymour Melman, as examples--are ignored. However, the book is important for those who work in that tradition for the following reasons: (1) The subjects of the book, and their integration, are fundamental to institutional economics, and, thus, institutionalists have an interest in the literature of all ideological paradigms represented in economics about those subjects. (2) Nelson's presentation is an excellent review of the other literature, and the presentation is well organized, well written, and rich with insights. (3) Much of Nelson's analysis and many of his conclusions are consistent with institutional economics.
The lack of progress regarding the conceptualization and integration of technology, institutions, and economic growth owes much to the ideologies dominating economics. Technology, institutions, and growth are "three topics that continue to be repressed, or misspecified, in standard growth theory, including the new neoclassical growth models" (p. 27). To this concern Nelson states that "the reaction of many of my colleagues in economics to the complexity of the phenomena our subject is supposed to address, and the difficulty of understanding cause-effect relationships in that complex setting, has been to define the...