Complexity and Synthesis

In the 1990's, some of these different views of economic growth have begun to flow together. It is too soon to say whether there will be a synthesis, and just what the synthesis will look like. But here is one possibility. (Warning: up until now, this chapter has attempted to express views that are established in the economics research literature, and that is the main purpose of this hypertext as a whole. But in this page the author will give his own interpretation, which is not "established," and may never be. Please take it in that spirit.)

What Smith's division of labor, and the increasing returns some British economists based on it; and the Austrian roundaboutness theory, and the endogenous innovation theory have in common is complexity. What I mean is that they see the economic system as a complex system (which it clearly is) and see some aspects of that complexity as the basis for its productivity and growth.

Modern mathematics and computer science have studied complex systems in a more general way, and a common finding is that complex systems have properties that cannot be predicted on the basis of the simple parts that make up the complex system. A few economists (including the author of this page) and other scholars have come to see economic growth as one of those properties.

A little more terminology -- my own terminology this time -- will help us move forward. Let's say the work of production is "collaborative" to the extent that the work is divided into different tasks that complement one another, reinforcing the productivity of one another. Then

Smith's "division of labor" divides the work among people, a form of collaborativeness
the Austrian "roundaboutness" divides the work over time, a form of collaborativeness
investment in research and development is a particularly important instance of increased roundaboutness
economies of scale exist because the larger scale of production allows for more collaborativeness of all sorts

We would then see collaborativeness as being at the center of the twentieth century "virtuous circle" theory of growth: growth increases the scale of production, which allows the work of production to be organized in more collaborative ways, which increases labor productivity, which in turn further increases the scale of production, starting the cycle again.