Robert Wade — The market paradigm versus the production paradigm

As Ricardo is the source of the market paradigm, Charles Babbage is the source of the production paradigm, in the form of his 1832 book, On the Economy of Machinery and Manufacturers.[8] His successors included Alfred Marshall, Allyn Young, Edith Penrose and George Richardson. It is a fair bet that most economics PhD students in Anglo universities have never heard of these people, let alone read them.

The production paradigm says that the core mechanism of how economies transform (or not) lies in the combination of production capabilities, business organization, and economic governance; or what Michael Best calls the “capability triad”. Economies with high capability pivot on a sufficient density of “entrepreneurial” firms which pull basic and applied R&D or production and marketing ideas from MNCs [Multi-National Corporations] with branches in the economy in question, into innovation in products, processes, organizations, and marketing. These entrepreneurial firms do not emerge by themselves as a natural result of a well-working market. Their own internal capacity development requires a larger ecosystem of finance, skills and S&T partnerships; which depends on trust in social interactions, and therefore physical and/or cultural proximity. The government (national or regional) is the organizer, the steward of the infrastructure needed to support this ecosystem....

Real-World Economics Review Blog
The market paradigm versus the production paradigm

Robert Wade | Professor of Political Economy and Development at the London School of Economics