An evolutionary theory of long-term economic growth

Abstract

Neoclassical attempts to explain long-term economic growth have met with very limited success. Strong empirical confirmation is lacking and the theoretical foundations of the approach are insecure. The present article sketches an alternative "evolutionary" theory of long-term growth and extends preceding work by the author in the area. Major stress is placed on institutional disruptions such as wars or revolutions and on the existence of political institutions such as multi-party democracy. Inspiration is taken from both the earlier ideas of Thorstein Veblen and the recent work of Nelson and Winter. A microeconomic process explaining the effect of disruption on productivity growth is also outlined. An econometric test confirms some of the major propositions in the article.