از ضروریات تا دنیای فرضی: تغییرات ساختاری، کیفیت محصول و توسعه اقتصادی

In this paper we explore how innovation and structural change affected economic development in the long run, by which we mean a period such as the one between the industrial revolution and the present. We separate the period since the industrial revolution into two sub periods, which we call ‘necessities’ and ‘imaginary worlds’ and focus on three trajectories, increasing productive efficiency, increasing output variety, and increasing output quality and differentiation. In the paper we show how a combination of the three trajectories gave rise to the transition between ‘necessities’ and ‘imaginary worlds’ and propose a mechanism of economic development which could have given rise to the type of economic system which we can observe today. To create growing output quality and differentiation higher competencies were required. These higher competencies required higher levels of education and demanded higher wages, which contributed to raise consumers' purchasing power. These phenomena, combined with the income effect of the creation of new sectors, generated the disposable income with which consumers could purchase the new, higher quality, non necessities, goods and services generated by innovation. In the paper we study the impact of several model parameters on the stability of the virtuous circle previously described.

The main objective of this paper is to compare the roles of output variety and of product quality in economic development. In particular, we wish to explain why product quality started increasing only a considerable time after the beginning of the industrial revolution and was preceded by an economic development driven almost exclusively by sectoral differentiation. Thus, we separate the period since the industrial revolution into two sub periods, which we call necessities and imaginary worlds. In the first period most people could afford only necessities while in the second one a growing percentage of the population of industrialized countries started to be able to afford goods and services which were not necessities, but what some authors have called higher goods services [24]. In this paper we use the concept of trajectory and focus on three trajectories, increasing productive efficiency, increasing output variety, and increasing output quality which includes also product differentiation. Among the variables which we expect to have the greatest impact on output variety and on product quality we have selected wages, rates of population growth and education. In the paper we will use a model of economic development by the creation of new sectors, called TEVECON, which we have previously created. In the paper we will describe TEVECON in greater detail, but some of its features deserve to be anticipated here. Thus, innovation and structural change play a central role in it. Furthermore, TEVECON is intended to be a long run model of economic development, an objective which is here interpreted as potentially focusing on the period starting from the beginning of the industrial revolution. TEVECON is a systemic model, in which the interactions between the components of the model are of crucial importance. For example, search activities and demand co-evolve. A distinctive feature of our approach is that we take into account both demand and supply factors by studying the co-evolution of demand and innovation.

The main problem we have been focusing on in this paper is the relatively late onset of a pattern of consumption which differentiated away from necessities to include many products and services which either were not available and/or could not have been judged necessities. The problem is not so much that this type of differentiation occurred but that it did not start occurring earlier in spite of the considerable improvement in production efficiency which began with the industrial revolution. An explanation which was previously given for the above phenomenon relied on the high rate of population growth accompanying the first part of the industrial revolution. The early gains in productive efficiency would then have been used up to feed a growing population rather than to expand individual consumption. Although we find that population growth did play a role in the sense indicated, our paper shows that other mechanisms were at work to determine the observed economic development path. In this paper we maintain that economic development could not have been based exclusively on the productive efficiency but it needed to rely on the joint co-evolutionary effects of three trajectories: (i) increasing productive efficiency, (ii) increasing variety and (iii) increasing sectoral output quality and differentiation. We showed that different combinations of increasing variety and of increasing sectoral output quality and differentiation lead to strikingly different economic development paths. We did this by comparing two scenarios, called low quality (LQ) and high quality (HQ), which differ because once new sectors are created their output quality remains constant in the former (LQ) while it keeps increasing in the latter (HQ). We show that the LQ scenario leads to a higher rate of employment growth and to an initially higher rate of income growth but with persistently low wages, output quality and sectoral demand while the HQ scenario leads to income being initially lower but after a while overtaking that of the LQ one. On the basis of these results it seems as if the historically observed development path resembles a combination of the LQ and HQ scenarios with a transition from LQ to HQ (LQ → HQ) occurring after a given period. This transition is explained by the fact that initially the LQ scenario would have ensured both a higher employment and a higher income, but that after a period the HQ scenario overtakes in terms of income generation. To explain the (LQ → HQ) transition we hypothesize a mechanism of economic development in which high output quality, high competencies and high wages co-evolve and mutually reinforce one another to provide both the required technological capability and the purchasing power. Thus, the (LQ → HQ) transition together with the dynamics of population growth explains to a considerable extent the delayed outcome of the transition from necessities to imaginary worlds. Furthermore, we investigate the interaction of population growth and education by assuming that growth of the latter reduced the rate of growth of the former. Thus, not only the falling rate of growth of population induced by growing education contributed to enhancing individual consumption but it also reduced unemployment, thus compensating one of the weaknesses of the HQ scenario relative to the LQ one. These results depend on two central features of our TEVECON model: i) economic development is intrinsically linked to structural change and it keeps occurring due to the capacity of the economic system to keep differentiating by creating new sectors and by continuously increasing their output quality and internal differentiation, ii) the long run pattern of growth we analyze depends on the co-evolution of a number of variables and not on the separate action of any of them. A number of policy implications can be derived from our model. For example, we can expect an economic system which has the capability to create new sectors faster than others to experience higher growth rates. We can observe that the most successful developing countries of the past fifty years have applied a strategy heavily emphasizing export variety [36]. Furthermore, the higher rate of productivity growth of the USA with respect to the EU during the period 1980–2005 can be partly explained by their superior capacity to create high tech firms in new sectors entering them at earlier times when rates of growth of profits and of employment are higher. This subject is partly explored in the paper by Hoelzl and Janger (this issue). However, while a development strategy based on output differentiation in the double sense of increasing variety and of increasing sectoral quality and differentiation is one of the most effective economic development strategies, other ones are possible and compatible with TEVECON. For example, countries can choose to increase their product quality or differentiation more than their overall output variety. The German model is a notable example of this strategy. Another possible economic development strategy which we have not analyzed with TEVECON but which has been the object of empirical studies is heavily based on natural resources. In summary, the world economic system developed by increasing its output variety and its product quality and differentiation and it would not have experienced the observed pattern and rates of growth if it had not differentiated the way it did. This overall development mechanism created an economic environment in which additional strategies based on product quality or on natural resources became possible. The presence of co-evolution in TEVECON has important policy implications. The positive feedback loops occurring in co-evolution involve the interactions of different variables. Thus, to exploit the advantages of co-evolution one would expect policies and policy instruments to focus on several interacting variables rather than on each one of them in isolation. This implication bears a considerable similarity to the advice given by Borras and Edquist (this issue) to use policy mixes rather than single policy instruments, an advice that they justify on the basis of complexity. Awareness of the multifactor nature of economic growth is present in the paper by Marrocu, Paci and Usai (this issue) although they do not elaborate on the implications of the interactions between different variables.