The Relationship of Technological Change With Economic Growth From the Perspective of Institutional Economics

Introduction

The problem of the source of the capital accumulation of the society and the steady increase of this accumulation has always been an important focus in the economic literature. At this point, the mission of technology as a resource, in terms of economic growth, has indisputably been among the main topics of almost all periods. So much so that even schools at different ends of economics have created an intense theoretical debate on the functions of technology in economics.

Here, the role of technological progress in growth, especially as an accelerator of capital accumulation, is emphasized in the capitalist economic order. New products and new markets have been seen as the result of technology and progress in this field. In the second half of the 20th century, theoretical studies on growth started to include the technology parameter in their modeling, first externally and then internally. There has been a process that has evolved from the Solow-Swan Growth Model, in which technology is externally accepted, to growth models (Romer and Lucas), where knowledge, that is, technological progress, is internally accepted. At this point, technology is accepted as the most important power in growth theories.

In order to comprehend the importance of technology and innovation necessary for technological change today, consulting the views of two pioneering scientists, Veblen and Schumpeter, who analyzed these phenomena for the first time with their economic and social aspects, will add an intellectual depth to the subject. The main point of this study is to discuss the ways in which both thinkers approach technology and institutions by making a synthesis.

In fact, all these discussions are lived on the individual and his behavior patterns. In that case, it would be useful to start the technology issue with a gradual introduction, from the perspective of Veblen and Schumpeter, through the individual.

The debate on whether individuals are rational beings who act with the profit motive in the economics literature, which has not been reached a consensus, is still up-to-date. The discussion in question also changed the economic theory and included a human figure that adapts its behavior to the changes experienced instead of the human figure exhibiting rational behavior in the theoretical models here. In this sense, Veblen and Schumpeter's approaches to economic theory can be positioned at both ends of the spectrum. In Schumpeter, this approach takes place as an evolutionary process with the creative response that accompanies the creative destruction process in the market brought about by technological change. In this context, economic units act with a profit motive in the market, in a way that constantly moves the market and every area touched by the economy in a world where the basic paradigm is mostly established on the axis of economic relations. The function of the institutional structure in this process is to reveal the creative destruction-response processes. According to Schumpeter, the economic reflection of this behavior pattern also creates the growth dynamics in a given economy.

On the other hand, in Veblen, which can be positioned at the other end of the spectrum, economic units are far from being rational in their behavior but have distortions such as conspicuous consumption. This understanding of irrationality, unlike Schumpeter, combines with the assumption that individuals do not act together with the profit motive. In this context, while the effect of the institutional structure on technological change and economic growth in Schumpeter presents a more passive structure, in Veblen, technological change and economic growth are integrated with the institutional structure. The main reason for this is that the institutional structure in a country reflects the thinking habits and lifestyles of the society. Another important point is that while the basic dynamic of technological change in Schumpeter is the dominance of the market, Veblen considers the technological change process as a social development process in a way. In this context, institutional development and technological change accompanying the process of social change provide economic growth.

In the light of the explanations, rationality, which can generally be presented as a linear behavior pattern brought by the profit motive in Schumpeter, is considered as possible in an economy with a market economy, while Veblen bases his thoughts on the fact that technological change will occur in parallel with the development of a society. The role of institutions, on the other hand, is opened to discussion in different contexts, depending on their effectiveness and passivity.