Capitalism as an engine of progress

Abstract

Economists, from Marx, to Schumpeter, have touted capitalism as an engine of technical progress. But what kind of an engine is it? How does it work? What are the strengths and weaknesses? This essay hazards some answers to these questions. 1 1 An earlier version of this paper was published as “Institutions Supporting Technical Progress in American Industry” in Dosi et al. [16]. Section 1 is a broad theoretical assessment that begins with Joseph Schumpeter's seminal analysis of technical advance as an evolutionary process, but augments it, and then diverges from it in important ways. In particular, it develops the point that the relationships among science and technology, and the institutional structures supporting scientific and technical advance, are much more complex than Schumpeter and scholars following in his tradition have recognized. Section 2 is the heart of the essay. It draws on a wide range of recent scholarship to describe the different parts of the modern capitalist engine, what they do, and how they mesh. Based on the foregoing, Section 3 develops a particular view of the current debate about strengthening mechanisms to facilitate R&D planning and coordination.