Prices, institutions and the coordination of economic growth

The paper discusses two approaches to growth. The first one focuses on price-centered coordination. The economy boils down to the market, with institutions merely complementing prices. The alternative view is that coordination of the economy does not and cannot occur only through prices. The economy is an open system and institutions do not merely complement prices: they regulate the way they function. These two different approaches reflect different views of the economy and of society. They lead to different views with regard to what growth involves, thus also with regard to the actions that governments can and should take. Ultimately, they lead to different conclusions with regard both to what pattern of growth is possible and required and to how such a growth can be pursued.