4 - The Role of the State in Economic Growth

Summary

THE RENAISSANCE STATE VERSUS NATURAL HARMONY

In 1338 Ambrogio Lorenzetti finished his frescoes Allegory of Good and Bad Government in Sienna's town hall. The fresco symbolizing good government shows thriving shops, fine buildings, and dancing citizens; that symbolizing bad government shows ruin, rape, robbery, and murder. The Allegory of Good and Bad Government represents the optimistic Renaissance view of humanity's potential to improve its own situation. In this view, history is the record of “man's wit and will” applied to harnessing the forces of nature to improve his lot through the ongoing acquisition of new knowledge.

The starting point for Renaissance economics and the birth of the modern state was an acute awareness of how far short of an imagined ideal humanity's current lot fell, and how much it could be continuously improved through a learning process that resembles today's evolutionary economics at its best.

The state's role in this process grows out of the Renaissance concept of the commonweal – the common good or the general welfare – a systemic dimension that is lost in the atomistic and static structure of today's mainstream economics. I use the term “Renaissance state” to denote a type of activist and idealistic state that has been an obligatory stage in the process of creating a modern industrial nation, bringing the nation into economic activities that create a commonweal through increasing returns and self-enforcing feedback mechanisms. I shall argue that the growth of complex economies has important similarities to the growth of complex technological systems, and that in both cases increasing returns are at the core of positive feedback mechanisms that promote the general welfare.