National Capabilities and Economic Development: A subjectivist view

Abstract

The fundamental problems of economic development, namely uncertainty and co-ordination, have not been adequately diagnosed in the neoclassical mainstream economics. To fill this gap, the article constructs a theory of national capabilities from the subjectivist perspective. Using the ‘first person’ perspective, this article starts from the level of individual human agency and explains economic capabilities based on the theory of human action. This subjectivist perspective is then extended and applied to the firm in relation to national capabilities and competitiveness. While the influence of institutions on firms' decision making is recognised, the subjectivist perspective, unlike contemporary evolutionary literatures, highlights the fact that all institutions represent the co-ordinating effort of human agents who attempt to interpret external events or make sense out of social or economic interactions. The subjectivist perspective on national capabilities developed in this article will be used to explain some important issues in development economics.

Keywords:

• national capabilities
• economic development
• knowledge
• human agency
• subjectivist interpretation