The name is absent

illlsuited to take into account externalities, whle the long-term future is heavily discounted as
a result of positive real rates of interest (Bojo, 1990; Pearce, 1990).

At the same time, the economic model underlying the adjustment philosophy was reviewed
critically. One criticism was the relatively weak economic performance of many of the
'adjusting' countries, especially the fall in investment rates. Another was the failure of the
economic model to capture essential elements of the successful East Asian cases (Pack and
Westphal, 1986; Amsden, 1989; Wade, 1990), where the government was shown to have
played a much more active role than allowed for in the market model, while, high savings and
investment levels and human resources and well developed institutions (private, public and
community) were also important features.

Theoretical critiques of the neo-classical model gained ground, questioning the view of
economic agents as exclusively and unavoidably short-term maximisers, and reflecting the
finding that trust is an important part of an exchange economy, which is economically costly
to replace. Criticisms of the consequences for efficiency of short-term maximising behaviour
even extended to the private sector, where large firms increasingly emphasise the need for
cooperative behaviour.¹² These critiques pointed to important factors neglected by the pure
market model, including the role of institutions in development (initiated by North’s studies);
they criticised the model’s assumptions about individual motivation¹³ and about
information¹⁴; while new developments in growth and trade theories emphasised the
importance of learning, economies of scale, oligopoly and externalities¹⁵; others criticised the
views of the new political economists¹⁶. Such work is, of course, ongoing. Together these

¹² Some empirical evidence suggests that 'participation, communication, creativity and
decentralisation' within the firm is positively correlated with growth in sales and profits
(Denison, 1993, p 266).See also Kay, 1998.

¹³ See Sen, Bowles and Gintis and socio-economists such as Etzioni.

¹⁴ In a series of important articles on the implications of asymmetric information by
Stiglitz and others.

¹⁵ E.g. Lucas; Roemer; Krugman and others.

¹⁶ See e.g. Grindle, Toye.

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