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Chapter 11 - Innovation Systems of the Past: Modern Nation-States in a Historical Perspective. The Role of Innovations and of Systemic Effects in Economic Thought and Policy

Published online by Cambridge University Press:  13 April 2024

Erik Reinert
Affiliation:
Tallinna Tehnikaülikool, Estonia
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Summary

‘The same principle, the same love of system, the same regard to the beauty of order, …frequently serves to recommend those institutions which tend to promote the public welfare. …When the legislature establishes premiums and other encouragements to advance the linen or woollen manufactures, its conduct seldom proceeds from pure sympathy with the wearer of cheap or fine cloth, and much less from that with the manufacturer or merchant. The perfection of police (i.e. policy), the extension of trade and manufactures, are noble and magnificent objects. The contemplation of them pleases us, and we are interested in whatever can tend to advance them. They make part of the great system of government, and the wheels of the political machine seem to move with more harmony and ease by means of them. We take pleasure in beholding the perfection of so beautiful and grand a system, and we are uneasy till we remove any obstruction that can in the least disturb or encumber the regularity of its motions.’

The early Adam Smith, still a ‘Mercantilist’ before his meetings with the French physiocrats, on economic institutions and on the ‘Innovation System’, in The Theory of Moral Sentiments (1759), in Collected Works, London, Cadell and Davies, 1812, Vol. 1, p. 320 (our emphasis).

‘There is no such thing as society. There are individual men and women, and there are families.’ This famous 1987 quote by Margaret Thatcher is a logical reflection of the methodological individualism of both the mainstream and Austrian schools of economics. We shall argue in this chapter that early economic thought – starting at least as far back as in the 1200s – was dominated by what we could call methodological holism. The economy could only be properly understood as a complex system of synergies that created welfare, something closely resembling a National Innovation System. We shall argue that the later Renaissance discovery of individualism was superimposed upon this earlier synergetic view of society, creating a dualistic view of the economy in which both the viewpoint of society and of the individual had to be taken into consideration. At times this dualistic approach obviously created tensions between the two perspectives, and a need for conscious trade-offs arose in the political sphere.

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The Other Canon of Economics
Essays in the Theory and History of Uneven Economic Development
, pp. 307 - 378
Publisher: Anthem Press
Print publication year: 2024

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