Main trends of research in the social and human ... - unesdoc - Unesco

328 Economics
nomics with the passage from the static to the dynamic (and particularly long-
term dynamic) approach. None of the ‘data’ of the static theory of equilibrium
retain their character in a long-term, dynamic analysis: they all change into ‘var-
iables’ and must be treated accordingly, The population changes, both in terms
of rate of increase and structure. The level and structure of income change. The
level of technical knowledge changes, and technological progress cheats the as-
sumption of diminishing returns. There is no way of determining once and for
all the long-term trend of the relation between outlays and effects. All these
changes affect incomes and the pattern of production, and necessarily affect
consumer preferences. The assumption of the absolute sovereignty of the con-
sumer whose preferences independently decide how adaptation shall take place
in production can no longer be upheld. Being a dependent variable, consumer
preferences must be investigated, forecast and suitably influenced - as must like-
wise the institutional organization, the capacity to innovate, the degree of social
mobility that exists, and so on.
Economics has thus come to face quite new problems:
I. The identification and classification of the factors which directly or indirectly
determine the growth of output, and effect changes in its structure;
2. The identification and quantification of the functional relationships that
exist between the variation of different growth factors, and the corresponding
variations in the volume and structure of output;
3. The investigation of the sources and trends of change in the factors of growth
or, at least, the adoption and verification of pertinent findings from other
disciplines.
Quite evidently, these and similar issues make much greater demands on eco-
nomics than the static equilibrium theory, and even the short-period dynamic
analysis that has been widely used since Keynes. This is not because the static
equilibrium theory and business cycle theory both employ simplified assump-
tions - in any theory, including the theory of growth, all the assumptions do not
necessarily have to be made tangible; it is because of the nature of the relation-
ships between the variables, and the number and diversity of the factors that are
involved in the process under investigation.
Under the static equilibrium theory, the investigator could assume that all
economic actions had the uniform motive of maximizing private gain (expressed
in monetary terms), and that the demand-supply equilibrium was a uniform,
objective condition. He could then analyse the mechanism necessary to establish
this equilibrium, and deduct the logical relationships between the economic
magnitudes, promoting these relationships to the status of laws. But in analysing
the conditions under which the existing factors of production could be fully
employed, the economist already had to resort to a less monolithic construction,
and introduce a variety of elements, including some not entirely verified elements
from other human sciences, e.g. the psychological categories of propensity to
consume, propensity to save, liquidity preference, and so on. In the course of
this process, reality proved far removed from the enticing and fallacious un-
equivocality of his conclusions. This is particularly true of one crucial point: the
factors which determine the volume of investment.