Conventions and economic change: A contribution toward a theory of political economy

This essay presents a perspective on the growth of knowledge as the source of economic growth. After a critical examination of the reasons why the crucial issue has been neglected in the dominant tradition in economics, a concept of paradigm-seeking as the essence of decision making under uncertainty and learning is proposed. Behavioral implications of paradigm-seeking include the generation of conventions by which people stabilize their expectations and build a network of coordination and cooperation. The stability of conventions, however, generates a dynamic process of change, by creating unexploited opportunities. Entrepreneurial successes and their emulation amount to the process of social learning and growth of knowledge. It is further suggested that implications of the proposed perspective are consistent with other observed phenomena. © 1999 Kluwer Academic Publishers.