From Adam Smith to endogenous growth theory (the ‘new’ growth theory) via Ricardo, Marx, Harrod and the early reactions – neoclassical and post-Keynesian – to Harrod (the ‘old’ growth theory): this is the theme of the present chapter. Are we then only now back from where we started–that is to say, with Adam Smith? Arthur Smithies (1962) certainly thought so, indeed he thought that we had not even left Smith's insights!
Perhaps the whole problem is too complicated for adequate reflection in a formal model. In that event, we could do worse than re-read Adam Smith (or possibly read him for the first time). In Book I, he said that the division of labour was the mainspring of economic progress; and in Book II, that accumulation was a necessary condition for increasing division of labour. How far have we got beyond this?
Luigi Pasinetti (1981, 1993) thought that his writings in many ways served to fulfil the suggestions and conjectures to be found in Smith. Heinz Kurz (1997) argued that the ‘new’ growth theory would have had nothing of substance to tell Smith and Ricardo that they did not already know from their own contributions: all very sobering and modesty-making! Prue Kerr (1993) has argued – and I certainly agree with her – that Smith did provide both the concepts and the wherewithal for a richly satisfying theory of distribution and growth in which was incorporated a theory of endogenous technical change based on the two propositions of which Smithies 1962 reminded us.