Owen Barder thinks Amartya Sen is true about we can judging the development on freedom (people’s well-being) but this is not mean that development is the sum of the individual success. He states that Development is not an accumulation of individual success but is related to a whole system, like economic and social system, and need to proceed in small steps experiments.
The average income per person of South Korea increased a lot in those 50 years, but in Ghana remains the same. He uses this comparison to demonstrate that regarding development as the sum of what happens to individuals and firms is not a complete measurement of the development. The conventional economic model, the virtuous circle, thinks that as long as there is investment a country can thrive. The conventional economic model, the virtuous circle, failed to explain why south Korea grew so fast and Ghana didn’t.
Thomas Thwaites attempt to make an electric toaster entirely from scratch. When he entered the Argos, he bought the cheapest electric boaster but still found it was extremely complicated. He used 9 months to try and made an electric toaster without the rubber which wasn’t insulated, so declared a partial success on the toaster project. Through the toaster project, we found out that development is not an increase in output by an individual but a whole system.
They regard economic growth as the economic development. Harrod Domar’s growth model states that it is the increase in capital and labor can contribute to an increase in output which can boost the development of the economy. Since most of the developed countries have labor resources, what constrained them is the capital. Walter Rostow then proposes the virtuous circle which states that as long as there’s an investment, a poor country can thrive. This model is useful in calculating the financing gaps, but this can’t explain the reality like the comparison between South Korea and Ghana.
Robert Solow Model added technical change which is an unexplained component in the original model to explain that it is the capital, labor, and unexplained component which would determine whether the economy can be improved. This model fits the reality better but it still doesn’t explain the reason and where this unexplained component comes from.
Ajaokuta Steelworks in Nigeria is the largest international investment on an infrastructure project. In this project, they had enough labor and capital but didn’t have the output and the growth they originally expected. Through this project, economists found out that the development is not mainly because of the policy but also depends on the management and health condition. In other words, the failure in economic development is not because of the failures of policy but institutions. In the book Why Nations Fail, they state how endogenous characteristic plays an important part in the development. Every country has its own way which suits the powerful elites to run things in this way.
There’s been fast progress over the past 50 years. However, people still have no explanation for why some countries developed rapidly and some didn’t. They discovered many endogenous characteristics but still couldn’t find the missing ingredients.
Creative destruction doesn’t come from within the firm but from a creative destruction process. For example, NOKIA was ruled out of the game when needs to transform from phones to smartphones by Samsung. All adaptations interact with each other and different technologies all co-evolved at the same time. An industry adapting process, for example, change in technology may lead to the increase in the use of Amazon. This change can lead to a different way for people to spend their leisure time which may influence the planning regulations.
Like its name, complex adaptive system is not linear systems but a complex nonlinear system. They all have certain similarities like they have general patterns but impossible to predict, have emergent properties, tend towards greater complexity, and doesn’t have an equilibrium.
Haile Sellasie was the Emperor of Ethiopia. When he ruled the country, it was dangerous to tell him there are poverty and starvation in the country. The book analyses reasons for the fall of the regime which is because Haile Sellasise suppressed the coevolution of more plural and equal institution. I agree with this analysis that dictatorship can stifle the possibility of changes.
We are hard to engineer solutions in a complex adaptive system because the evolutionary processes often outperform design and it is hard to predict the changes in detail. Iso-morphic mimicry means in biology it is way easier for an animal to look really dangerous than being actually poisonous. Thus, we may always see an institution that looks like a well-functioning one but actually not.
“Resist fatalism” means people don’t have to accept the biology evolution process in the development of a country. It is true that in biology, we have natural selection. However, it is possible to accelerate and shape the evolution of society. For example, Norman Borlaug increased agricultural production by different techniques like hybridized seeds. This is the green revolution.
He suggests that government needs to promote funded research to create the conditions suitable for the innovations. This is a positive feedback loop that can promote adaptation suitable to that environment. One of the reasons for the failure of command economies may be the absence of effective feedback mechanisms. For example, free media which provides public opportunities to access information more easily can trigger changes in politics.