ABSTRACT
Literature on economic development frequently includes statements that critically rely on a key assumption: under diverse economic environments, individual producers choose process technologies from among a set of available techniques. The choice itself is a function of a series of economic parameters such as prices, wages, and the rate of profits (or the rate of interest). As price distortions appear, because of market failure or trade union influence on the relative price of labor, the choice of technique may be affected and resources may be misallocated. Problems in areas such as growth, employment, international trade, agriculture, and industrial economics are analyzed through an approach that all too frequently relies on the crucial assumption that producers are engaged in a process of choice of technique. Recent literature, whether on sectoral or macroeconomic themes, continues to adopt this perspective. For example, many scholars believe that misallocation of resources and involuntary unemployment are caused by distortions in the relative price of labor. Thus, when making new investments, producers (capitalists) select techniques of production that have a labor-saving bias in an economy with abundant labor resources.1 In the field of development economics there are several classic critiques of this paradigm (Sen 1962; Bhalla 1975; Stewart 1977). The neoclassical apparatus has also attracted criticism from economists specializing in the history of technology (Rosenberg 1976). However, their criticism was limited to the lack of realism of the production function.
