Veblen and the Origin of the Catching-Up Hypothesis
James M. Cypher
CONCLUSION ( ...continuation )

Another area where Veblen appears to have failed to disenthrall himself of prevailing neoclassical orthodoxy relates to the assumption that technology is to be easily transferred, normally through market forces. In fact, technologies have been jealously guarded throughout history by both nations and the monopolistic giant firms Veblen analyzed so thoroughly. As well, through legal institutions such as patents and property rights, crucial components of “know-how” (the capacity to duplicate technology) and “know-why” (the capacity to create technology) are circumscribed. Veblen’s powerful ideas pertaining to the developmental prospects arising from borrowing is diminished by his acritical suppositions regarding these limits and barriers that any borrowing nation must confront.

At the same time, Veblen’s influence on the pioneering work of Harold Innis was, by all accounts, formative (Baragar, 1996; Innis, 1962a: 17-26). As Albert Hirschman acknowledged, Innis was the source of one of the most important and useful sets of concepts that development economics deploys—forward, backward and horizontal linkage effects (Innis, 1962b: 242-251). All of the above, points to the conclusion that Veblen was an important forerunner and forbearer of development economics. As such, it is unfortunate but not unanticipated to find that Veblen’s significant work in this area has largely been, and continues to be either, 1) underappreciated, 2) misunderstood, or 3) ignored. Veblen certainly contributed to this state of affairs through his insistence on a form of baroque-to-impenetrable expression that efficiently marginalized his startlingly innovative ideas and concepts crucial to understanding the development process.

Given this, the tendency to conflate Veblen with Gerschenkron, or to ignore him altogether has unfortunately continued. As a result, there has been a slow and inadequate acknowledgment of the potential power of Veblen’s seminal developmental ideas. Veblen juxtaposition of “the efficacy of borrowing” technological innovations and “the penalty for having been thrown into the lead” provided an original analysis of the way that some nations—without making sequential, long-term, prior investments—could leapfrog up the technological ladder. As such a society successfully introduces scientific and technological advances, giving rise to increasing returns, and as the economic surplus generated from such activities is reinvested in an expanding industrial base, a process of positive cumulative causation is engendered and catching-up becomes a possibility.

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