Economic growth and technological change: A comparison of insights from a neo-classical and an evolutionary perspective

Over the last two decades, dissatisfaction with the traditional Solow-Swan model of economic growth resulted in two new classes of models of economic growth and technological change: neo-classical endogenous growth models, and evolutionary growth models. The first class of models has been labeled endogenous, because of its key feature of endogenizing technological change. The second class of models endogenizes technological change as well, but according to an evolutionary view on economic growth and technological change. In this paper we discuss the insights from both the neo-classical and the evolutionary perspectives. It is argued that in evolutionary models technological and behavioral diversity, uncertainty, path dependency, and irreversibility are elaborated in a more sophisticated and explicit way than in neo-classical growth models. However, this level of microeconomic diversity comes at a certain price. Due to the complexity of the models, which preclude analytical tractability, the mechanisms behind the aggregate dynamics are not always clearly exposed. In addition, it will be argued that the neo-classical and the evolutionary approach are converging in the Schumpeterian framework. The latter framework is developed in both classes of models as a means for theorizing on technological change. A challenging task for further research is to combine the fruitful insights of both the neo-classical and the evolutionary approach to improve our understanding of complex processes of technological change in relation to other micro- and macroeconomic processes.