Immanuel Kant and Endogenous Growth Theory

DOIhttp://doi.org/10.1111/sjpe.12099
AuthorGabriel Fagan,Vitor Gaspar,Peter McAdam
Publication Date01 November 2016
IMMANUEL KANT AND ENDOGENOUS
GROWTH THEORY
Gabriel Fagan*, Vitor Gaspar** and Peter McAdam***
ABSTRACT
Despite the modern origins of endogenous growth theory, we argue that the ‘Idea
for a Universal History with a Cosmopolitan Aim’ written by Immanuel Kant in
1784 provides an early and coherent example of such a theory. Kant’s endoge-
nous growth mechanism is driven by the inherent rivalry that exists between
agents which increases effort and strengthens the accumulation of knowledge,
which in turn is carried through generations. In an exercise in ‘rational recon-
struction’, we present a mathematical model of Kant’s mechanism. We use the
model to contribute to the contemporary policy debate as to whether ‘keeping up
with the Joneses’ leads to excessive effort.
The human species is supposed to bring out, little by little,
humanity’s entire natural predisposition by means of its own
effort. One generation educates the next. (Kant, 1803; 1999a,
9:441)
If lives are too short or too dull, sustained growth at a positive
rate is impossible (Lucas, 2009, p. 9)
II
NTRODUCTION
This inquiry seeks to establish that in the 1780s Immanuel Kant advanced key
ideas that can be related to endogenous growth theory introduced in recent
decades by, amongst others, Paul Romer (1986, 1994) and Robert Lucas
(1988, 2002). More specifically, we seek to establish that in an essay first pub-
lished in 1784, ‘Idea for a Universal History with a Cosmopolitan Aim’ (here-
inafter Kant’s Idea), he showed that rivalry between agents leads to increases
in effort and thereby accelerates the accumulation and retention of knowl-
edge
1
. In Kant’s view, advances in knowledge that can be carried on through
generations may also lead to advances in civilization. Our research suggests
*Central Bank of Ireland
**International Monetary Fund
***University of Surrey
1
All quotations from Kant’s works are from the Cambridge Edition of the Works of
Immanuel Kant (Kant, 1784; 2007a).
Scottish Journal of Political Economy, DOI: 10.1111/sjpe.12099, Vol. 63, No. 5, November 2016
©2015 Scottish Economic Society.
427
that this kernel of thinking advanced by Kant should be considered as
remarkably prescient and also as a significant contribution to early political
economy that, unfortunately to date, has been neglected, even though such
ideas have cropped up in recent endogenous growth theories.
To explore Kant’s contribution in a systematic manner, we engage in an
exercise in what Waterman (2003) called ‘rational reconstruction’. In our case,
it is a rational reconstruction of Kant’s growth mechanism. We develop a
compact mathematical model which, in our view, encapsulates the fundamen-
tals of the mechanism of endogenous progress contained in Kant’s Idea [see
Waterman (2003) for a comprehensive discussion of this approach to the his-
tory of economic thought]. In summary, our framework focuses on the inter-
action between interpersonal comparisons, learning by doing, the non-rivalry
of knowledge and the transmission of knowledge across generations as key
elements stressed in Kant. The formal modeling shows that the assumptions
made by Kant indeed deliver sustained growth, consistent with his verbal
argument.
Moreover, our model should not be considered as limited to historical
curiosity; instead, we seek to provide some novel insights into contemporary
policy debates. The example we explore focuses on recent arguments that con-
sumption externalities, which induce consumers to attempt to ‘keep up with
the Joneses,’ lead to a socially inefficient equilibrium of excessive labor effort.
Some commentators have suggested corrective taxes to rectify this distortion.
Our modeling of Kant’s growth mechanism suggests that such proposals
should be dealt with cautiously. We are of the opinion that complications
could indeed arise, and therefore we think that the following needs to be con-
sidered. It could well be the case that consumption externalities related to
higher levels of effort might reduce levels of welfare over a short run. How-
ever, this higher level of expended effort might also accelerate growth rates of
accumulated knowledge that benefits future generations.
Our paper is organized as follows. In Section II, we outline the seminal nat-
ure of Kant’s contribution, highlighting how it relates to both the theories of
classical economists and contemporary growth theory. In Section III, we
provide a more detailed overview of Kant’s endogenous growth mechanism,
following a close reading of original sources. This is followed by a simple for-
malization of what a Kantian endogenous growth model would comprise.
There we make plain the importance of social comparisons between agents as
well as the contribution of each generation’s labor efforts to the accumulation
of knowledge. In Section V, we rely on our model to address issues related to
a socially optimal level of effort. Finally, we conclude.
II KANTSSEMINAL CONTRIBUTIONS
This paper seeks to extend our understanding of the antecedents of endoge-
nous growth theory by focusing on another important thinker, Immanuel
Kant, and, in particular, his Idea. In this remarkable work, Kant sets out a
general theory to explain how, via the interaction of interpersonal
428 G. FAGAN, V. GASPAR AND P. MCADAM
Scottish Journal of Political Economy
©2015 Scottish Economic Society

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