Structural Economics: Measuring Change in Technology, Lifestyles, and the Environment

Citation

Engelbrecht, H. (2000), "Structural Economics: Measuring Change in Technology, Lifestyles, and the Environment", International Journal of Social Economics, Vol. 27 No. 1, pp. 86-96. https://doi.org/10.1108/ijse.2000.27.1.86.2

Faye Duchin belongs to the growing number of economists who rightly believe that economics should be relevant to the real world. The data intensive approach to economic analysis she advocates in her book, namely, sectorally disaggregated analysis based on input‐output techniques, is based on the work of the late Wassily Leontief, with whom the author worked closely for many years. She has conducted many detailed empirical studies of technological change, often in collaboration with engineers.

Unlike much of mainstream neoclassical economics, her approach is pragmatic and has a problem‐solving orientation. She has now labeled this type of analysis “structural economics”. According to the author, “… this volume brings together for the first time a full description of structural economics … The effort involves integrating qualitative understanding into a flexible quantitative framework …” (p. xiii). This is achieved by, in particular, focussing on household lifestyles and analysing alternative scenarios. The author hopes that structural economics will stimulate new thinking about promising scenarios of the future. Her aim is to establish structural economics as a viable, independent field that provides an alternative to neoclassical economics (p. 14).

The book consists of nine chapters and several appendices and is written for the general reader. By general reader the author has in mind economists, social scientists and others not specialising in her form of modeling, as well as the general public. Each chapter is intended to be self‐contained, leading to some, but not to excessive, overlap and repetition. The work has been partly supported by the program in sustainable development of the United Nations University in Tokyo.

Chapter 1 introduces the main themes of the book. It defines structural economics, discusses its origins, its relationship with sustainable economic development and the importance of incorporating lifestyle options into the analytical framework. The latter is achieved through the inclusion of different, carefully designed, household categories. The next chapter introduces the widely used industrial classification scheme and describes the analysis of technological change within the structural tradition of input‐output analysis.

Chapter 3 develops the parallels between changes in technology (narrowly defined) and changes in lifestyles. The latter has received very little attention in the literature. It is argued that “… two concepts, lifestyle and technology, are centrally important for all approaches to achieving sustainable development” (p. 51). The focus on lifestyles and quality of lives also leads the author to conclude that, in contrast to the mainstream economic obsession with growth, scenarios of sustainable development for the developed countries should include the possibility of stagnant or even contracting GNP. The mix of lifestyles in a society is seen to influence and reflect material production, and changes in lifestyles are seen as crucial for achieving sustainable development.

Chapter 4 elaborates further on the conceptual framework of structural economics. It shows how to integrate concrete empirical content about technology and lifestyles into a systematic, quantitative data‐ and modeling‐framework, i.e. input‐output analysis and its extensions. This chapter also contains the first formulae of the book and a survey of relevant input‐output studies the author has been associated with, including a critical assessment of her study of the implications of the Brundland Report on sustainable development.

The next two chapters are more mathematical than the rest of the book. They can be skipped by the non‐mathematical reader. Chapter 5 describes the social accounting matrix approach and summarizes several studies using the Indonesian matrix as an example. The following chapter presents the core model of the author’s “structural economics” approach. The formal mathematical framework integrates social accounting and the “structural scenario” approach within a model that endogenizes households. Emphasis is also put on the fact that in structural economics (in contrast to neoclassical economics) price changes do not have automatic feedback effects on physical relationships.

Chapter 7 provides descriptive information on the Indonesian economy and its households. It shows how information on households can be used in the formulation and analysis of scenarios about lifestyle changes associated with development. The chapter finishes with recommendations to improve the Indonesian social accounts. The information about Indonesian households is used in the following chapter which, in a sense, is the culmination of the book. It presents the analysis and discussion of a hypothetical scenario about structural change in Indonesia between 1985 and 2000 within the analytical framework introduced in chapter 6. It is a good example of what this type of analysis can achieve. It is commendable that the author has stated the assumptions and limitations of her approach. Professional readers can have a flick through the chapter to form a quick impression about the advantages and disadvantages of Duchin’s “structural economics”.

In the short last chapter the author reiterates her case for structural economics, discusses some of the “loose ends” of the approach and comments on the future challenges facing it. There are also three appendices that provide further information on the classifications and data used in the main case studies presented in the book.

Several criticisms came to mind when reading the book. First, the author believes that modeling should take place in a framework that sees developing countries achieve economic growth but developed countries achieve zero or even negative growth as conventionally measured. The reader might (or might not) accept the premise that sustainable development implies no growth in advanced countries at a time when much of material production is becoming “immaterial”, that is knowledge‐intensive production. Moreover, the author does not discuss the causal relationship between lifestyles and material production in much detail, although this relationship is at the heart of her approach. Are lifestyle changes necessary to change material production arrangements or vice versa (or both)? Which is more feasible? Which is more likely? The author also says little about income distribution issues associated with “no‐growth” scenarios.

Second, if the book is meant to be a comprehensive account of structural economics, it seems conceptually limited to the incorporation of household technology at a sufficiently disaggregated level (“lifestyles”) alongside “narrowly defined” technological change to allow policy relevant assessment of growth scenarios that take the problem of sustainability into account. This is certainly a major extension of conventional social accounting matrix analysis. However, while structural economics, as defined by the author, is a lot about extending existing concepts, databases and models, this reviewer is surprised that many topical extensions of current practice are hardly (or not at all) mentioned in the book. I shall give just some examples.

Little is said about the role of knowledge, compared to “technology”, in economic and social development. However, partly due to the development of endogenous growth theory, this has been a major research topic in recent years. See, for example, the latest World Development Report (World Bank, 1999). There is also a large literature on the measurement and analysis of various domestic and international knowledge spillovers and their absorption using input‐output techniques. I certainly would have expected a mention of this literature, as well as a discussion of the concept of “absorptive capacity” for technological and lifestyle changes. None of it appears in the book.

Non‐marketed household production is only briefly mentioned in chapter 3, and in the last paragraph of the concluding chapter. I suggest that a more extended discussion of non‐marketed household production is called for, instead of putting the topic in the “too hard basket”. In particular, I would like to see the value of such production, as well as a breakdown by gender, included in any analysis of lifestyles. See Waring (1988) for a feminist perspective on the issue.

To sum up, the book is of interest to the general reader who wants an introduction to industrial classification schemes, input‐output and social accounting analysis and their extensions in the context of sustainable development. It is also of interest to professional input‐output researchers and those interested in economic growth and sustainability from an interdisciplinary, non‐mainstream economics, perspective. It makes a major contribution by advancing the inclusion of household lifestyles into social accounting analysis, and by advocating the use of alternative scenarios for sustainable development and as a guide to further model‐development. However, the book is largely a compilation of earlier work by the author and does not comment on some currently prominent and highly topical related issues. Finally, I doubt that the approach to economic analysis advocated by the author justifies to be labeled a new paradigm, namely, “structural economics”.