Heterodox economists such as Erik S. Reinert and Ha-Joon Chang have argued that economic transformation moves the economy away from an asset-based system running on unskilled labour towards a knowledge-based system running on skilled labor. Again, however, there is a manufacturing bias in this submission: the emphasis on technological and knowledge bases requires a separation of agriculture from manufacturing, because the two sectors respond differently to technological changes. According to Erik Reinert, technological innovation in agriculture or products with perfect competition is more likely to reduce prices for consumers than to increase benefits for producers (Reinert, 2005, xii). In contrast, price making in imperfect competitive activities increases the likelihood of producers’ gaining from technological advancement. Furthermore, agricultural activities eventually reach a point of diminishing returns, after which it becomes difficult to improve productivity and input increases relative to output. Speaking of the theoretical contributions of new-trade theory (which basically delineates sectors), Krugman argued that possible to “[i]t’s conjure up examples in which countries are worse off with trade than without, in a way that isn’t possible in pure comparative advantage models.” He concluded that clear presumption is that trade is a good thing under increasing returns” “the (Krugman, 2008, 340; italics mine). Nations that trade products with diminishing returns in the international market will reach the point of intensive production due to the exhaustion of the vital resource(s) needed to cultivate the product in question. Exchanging products produced using intensive methods (an increase in labour or other input), which do not reflect price changes, amounts to a loss from trade. Earlier development economists such as Arthur who arguably created the sub-discipline of development economics in his influential article “Economic Development with Unlimited Supplies of Labour” (Lewis, 1954), followed this separation of sectors in his development model. In the model,” also known “Lewis as the model,” development and structural change are explained in “dual-sector terms of a labour transition between two sectors capitalist and subsistence. – Development occurs when labour (and other production factors) is reallocated away from the subsistence sector to the capitalist sector. Outside the mathematized region of neoclassical economics, there is something of a silent consensus that
Heterodox economists such as Erik S. Reinert and Ha-Joon Chang have argued that economic transformation moves the economy away from an asset-based system running on unskilled labour towards a knowledge-based system running on skilled labor. Again, however, there is a manufacturing bias in this submission: the emphasis on technological and knowledge bases requires a separation of agriculture from manufacturing, because the two sectors respond differently to technological changes. According to Erik Reinert, technological innovation in agriculture or products with perfect competition is more likely to reduce prices for consumers than to increase benefits for producers (Reinert, 2005, xii). In contrast, price making in imperfect competitive activities increases the likelihood of producers’ gaining from technological advancement. Furthermore, agricultural activities eventually reach a point of diminishing returns, after which it becomes difficult to improve productivity and input increases relative to output. Speaking of the theoretical contributions of new-trade theory (which basically delineates sectors), Krugman argued that “[i]t’s possible to conjure up examples in which countries are worse off with trade than without, in a way that isn’t possible in pure comparative advantage models.” He concluded that “the clear presumption is that trade is a good thing under increasing returns” (Krugman, 2008, 340; italics mine). Nations that trade products with diminishing returns in the international market will reach the point of intensive production due to the exhaustion of the vital resource(s) needed to cultivate the product in question. Exchanging products produced using intensive methods (an increase in labour or other input), which do not reflect price changes, amounts to a loss from trade. Earlier development economists such as Arthur who arguably created the sub-discipline of development economics in his influential article “Economic Development with Unlimited Supplies of Labour” (Lewis, 1954), followed this separation of sectors in his development model. In the “Lewis model,” also known as the “dual-sector model,” development and structural change are explained in terms of a labour transition between two sectors – capitalist and subsistence. Development occurs when labour (and other production factors) is reallocated away from the subsistence sector to the capitalist sector. Outside the mathematized region of neoclassical economics, there is something of a silent consensus that
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