From Growth Theory to Development Theory: Beyond Stationary Trajectories

This article provides an overview of recent theoretical and empirical research clarifying the mechanisms of qualitative transformations in the economy and society that create conditions for modern economic growth. The focus is on the endogenous transition of states and societies from one system of institutions and values to another, from stagnation to sustainable development, and from one technological paradigm to another — going beyond the fundamental models of economic growth, which center on the 20th-21st centuries and primarily examine balanced growth trajectories. A distinctive feature of the reviewed studies is their use of unique datasets, including archaeological, historical, and biogeographical data, which refine the determinants of long-term economic development. This review focuses on the pre-industrial era and explores the connections between its developmental features and modern economic outcomes. It highlights the similarities between pre-industrial and contemporary sources of economic growth. The discussion begins with the earliest stages of human societal development, including the Neolithic Revolution and the formation of early states. It also examines the role of institutional, educational, and cultural factors in the emergence of the first industrial revolution and the modern growth era. A new class of models is introduced to explain how institutions and cultural traits that promote growth are formed, while those that hinder development are dismantled. The historical examples discussed –such as the development of Italian city-states, the rise and fall of guilds in Europe, and the long divergence between European and Islamic economies — can be incorporated into development theory courses. These examples highlight not only the quantitative growth of production factors but also the qualitative changes in the economy and society.