By Bertin Martens
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Additional info for The Cognitive Mechanisms of Economic Development and Institutional Change (Routledge Frontiers of Political Economy, 54)
One sets up a regression programme that tries out all kinds of model specifications on all these variables, and selects the (statistically) most promising results and labels them as ‘growth models’. It is sometimes hard to qualify these as explanatory economic models. The computer may detect a statistical link, but does not provide an economic explanation for that link. For instance, what is the economic explanatory value of variables such as ‘geographical region’ and ‘distance from the equator’?
For instance, what is the economic explanatory value of variables such as ‘geographical region’ and ‘distance from the equator’? Sala-I-Martin (1997) asserts that he found more than sixty statistically significant variables to explain economic growth: is this an economic theory or pure ad-hoc casuistic? To the extent that knowledge is a fully excludable factor of production and a normally tradable good, not subject to significant spillovers and externalities, endogenous growth models are simply models of human capital accumulation.
In order not to lose track of it, an analytical definition is required, so that it can be more easily recognised if presented under different names. 1 References to the concept of division of labour are rather scarce in the modern economics literature. 2 Stigler (1976) pointed out that it has no significant explanatory role in modern mainstream economics, which could very well do without it. This chapter presents a very short history of economic thought regarding division of labour or (asymmetrically) distributed knowledge.