Cumulative causation theory

A summary of cumulative causation theory with a case, it's applications & the conclusions.

1. ASSIGNMENT - 1 CUMULATIVE CAUSATION THEORY KUMAR KUNAL; 50054674; SEM VII

2. KUMAR KUNAL; 50054674; SEM VII The term cumulative causation was coined by the Swedish economist Gunnar Myrdal. In An American Dilemma (1944), Myrdal used the concept of cumulative causation to explain race relations in the United States . In Myrdal’s analysis, the circular interdependence between social, economic, and political forces, by hindering identification of the “primary” factors (e.g., economic) behind social issues, challenges traditional scholastic boundaries among the social sciences . Cumulative causation is also central to the view of economic growth as a “learning process” (resulting from virtuous circles of specialization and technical progress) that emerged in the 1960s and 1970s (e.g., Arrow 1962 ). Fundamentally, Myrdal’s notion of cumulative causation conflicts with the concept of “stable equilibrium” (central to most social sciences, particularly to economics)—that is, the self-stabilization properties of the social system, whereby a disturbance to it will trigger a reaction directed toward restoring a new state of balance between forces. Theory by Karl Gunnar Myrdal

3. KUMAR KUNAL; 50054674; SEM VII Myrdal addressed the failure of neoclassical economic theory to account for the persistence and widening of spatial differences in economic development within and between countries . He ascribes these differences to cumulative processes, whereby regions or nations that gain an initial advantage maintain and expand it as they attract migration, capital, and trade to the detriment of development elsewhere , an idea that permeates the voluminous “ non-formal ” literature on “uneven development” of the 1960s and 1970s. Economic Theory and Under-Developed Regions (1957) It rejects the assumption of automatic tendency of socio-economic system towards stabilization and holds that a change does not create opposite reaction but other changes which emphasize it .

4. KUMAR KUNAL; 50054674; SEM VII When analyzing the socio-economic development at a global level, this theory is based, according to Blazek (2008) on three facts: There is a small group of wealthy countries and many more extremely poor countries , Wealthy countries continues to grow while poor states stagnate (here Myrdal notices the paradoxical fact that the stagnating countries are termed developing countries - the countries which are developing ), From a global point of view the differences between the rich and the poor are growing larger. Economic Theory and Under-Developed Regions (1957)

5. KUMAR KUNAL; 50054674; SEM VII Myrdal´s theory received different evaluations - application of some of the components of this theory aided in some countries to a significant improvement in lifestyle (e.g. Sweden after WWII) but, on the other hand, this theory also led to the expansion of public sector , increased taxation and the loss of competitiveness. In developed countries the positive effects on less developed regions is more significant than in developing countries due to the system of parliamentary democracy, stable and integrating institutional framework and a conscious effort of the state to decrease the differences between the rich and the poor in accordance to the concept of welfare state . APPLICATIONs The main tool to improve underdeveloped region is, according to Myrdal, an integrated development plan which allows the implementation of investments which are beneficial for the whole society, they are non-profit, but they allow the achieve external economies of scale to other subjects and thus initialize growth in regions.

6. KUMAR KUNAL; 50054674; SEM VII This model combines national and international forces which tend to keep backward countries in cumulative process where poverty becomes its own cause . Made important contributions to the theories of convergence and divergence, agglomerations and locational economies and the theory of vicious circle. Myrdal was in support of balanced growth and wanted it to be initiated, directed and sustained by government and supported the theory of SPONSORED GROWTH. Criticized regarding the “accidental factors” as the only factors which start the growth process . There are setbacks in developing regions and there can be development in vicious circle region . The agglomerating factors can also bring decreasing returns when diseconomies overcome the economies. Free play of market forces and unhampered trade have tended cramp the export potential of such countries creating a GREAT GAP bet imports and exports of underdeveloped countries which makes economic development a costly and lengthy affair. CONCLUSION