Between Theory and History: The Structural Dynamics Tradition

This chapter argues that structural dynamics has been at the forefront of the economists’ investigations into the dynamics of the wealth of nations since the formative period of political economy. Central to this analytical tradition is the focus on the deep (relative invariant) structure of the economy and on hypothetical conditions (such as full employment or maximum growth) as a device by which the sequence of changes prompted by any given dynamic impulse is made to engender a determinate trajectory. This approach suggests that the economic system reacts to any given impulse, or to any given operating force, by changing its original state under a limited set of feasible transformations. Relative structural invariance allows certain transformations and excludes others along the trajectory initiated by the dynamic impulse under consideration. Hypothetical conditions make structural dynamics trajectories determinate but do not limit the scope of structural economic dynamics. They are rather devices to highlight the causal mechanism at work under a variety of historical trajectories. The chapter explores the implications of this approach for the relationship between short-, medium-, and long-term dynamics, and for the alignment between policy measures corresponding to different time horizons.