Technological Learning, Institution Building and the Microeconomics of Import Substitution

Abstract

The history of economic thought is marked by a deep divide between the structuralist current originating in the German historicist school and the positivist approach arising from the work of thinkers such as Hume and Smith. While initially both responded to the distinct problems faced by both countries in the world order of nations around the beginning of the Industrial Revolution, the differences have persisted, and still form the basis of fierce confrontation on ideological and intellectual matters at the heart of the profession today. The first approach advocates an interventionist policy, which derives from Germany’s need to close the technological gap between it and British best practice. To achieve this, the approach establishes the state as the central agent of social organization, coordinating and directing individual economic relations. The second approach, on the other hand, favours unhindered free trade and sees laissez-faire as the most suitable way of achieving the optimum allocation of available resources.

The ideas expressed here are the sole responsibility of the authors. They are both grateful for comments from those who participated in the seminar on Latin America’s Economic History in the Nineteeth Century, held in Paipa, Colombia in May 1997, especially those comments from Rosemary Thorp, Enrique Cárdenas, José Antonio Ocampo and Arturo O’Connell which made it possible to improve the original version of the text. The chapter has been published in Desarrollo Econó,nico vol. 37, 1998. Permission to reprint is acknowledged.