Dynamic Comparative Advantage and the Evolution of the Capitalist World System

Abstract

This chapter attempts to build a framework of the capitalist world system so that modern economic development in Japan and China can be better explained and understood. I consider that a conceptual “marriage” between historical and theoretical political economy, on the one hand, and institutional and evolutionary economics, on the other, is possible and necessary for such a framework. Such a framework is effective and most promising for explaining different types of modern political economy.¹ In this chapter I propose a new framework for historical and theoretical political economy: an institutional political economy, which consists of a basic theory of modern capitalist economy and intermediate theory of specific types of capitalist world systems, and use the framework to explain the rise and fall of the different world economic systems, and how the modern economic development of Japan and China relate to the evolution of the world economic system.