TOWARD A COUNTER-COUNTERREVOLUTION IN DEVELOPMENT THEORY

During the 1940s and 1950s a distinctive set of ideas emerged in devel opment economics that stressed the importance of increasing returns an d pecuniary external economies arising from the effects of market size . Unfortunately, the economists who proposed these ideas were at first unable, and later unwilling, to codify them in clear, internally cons istent models. At the same time the expected standard of rigor in econ omic thinking was steadily rising. The result was that development eco nomics as a distinctive field was crowded out of the mainstream of eco nomics. Indeed, the ideas of ''high development theory'' came to seem not so much wrong as incomprehensible. This paper argues that in light of new developments in industrial organization, international economi cs, and growth theory, the old development economics now looks much mo re sensible than it seemed during the ''counterrevolution'' against in terventionist development models. While development economics has been used to justify some highly destructive economic policies, there is a valid and useful set of core ideas that can be usefully resurrected. Thus this paper calls for a ''counter-counterrevolution'' that restore s some of the distinctive focus that characterized development economi cs before 1960.