The Role of Economic History in Modern Economics

The discourse on the 2025 Nobel Economics Prize highlights the significance of the economics of innovation and growth. A noteworthy comment by laureate Joel Mokyr was that "economic historians don't win the prize," emphasizing the undervaluation of economic history, despite its crucial role in understanding long-term economic phenomena.

Modern Growth as a Social Technology

• Mokyr emphasizes that modern growth is more of a social technology than a mechanical one.
• The Industrial Enlightenment was a product of civic machinery such as printers, coffee houses, and guilds which facilitated the spread of knowledge.
• Guilds, while sometimes restrictive, often incubated capabilities and innovation through apprenticeships and practical engineering heuristics.

Complementing Schumpeterian Growth

• Mokyr's narrative is complemented by the work of Philippe Aghion and Peter Howitt, who focus on the Schumpeterian growth framework.
• This framework describes how innovation rents attract entrepreneurs and how policy can impact market dynamics and entry barriers.

The Importance of Economic History

• Despite Mokyr's quip, historical economic analysis is crucial, as demonstrated by laureates like Douglass North, Robert Fogel, and Claudia Goldin.
• Economic history serves as a laboratory for testing the influences of rules, culture, and technology on growth.

Addressing Current Global Anxieties

Economic history provides valuable insights into contemporary issues:

• Artificial Intelligence (AI) and Jobs
  • Technology shocks restructure tasks rather than simply eliminating jobs.
  • The focus should be on managing transitions and ensuring workers’ readiness for new roles through measures like portable benefits and skills bridges.
• High Public Debt
  • Historical examples show that credible borrowing requires more than austerity; it needs strong civic infrastructure.
  • Fiscal sustainability is deeply tied to institutional development.
• Inequality
  • History shows that market entry barriers often hide behind quality control claims, suggesting the need for contestability and open standards.

The Broader Implications of Economic History

• Economic history is crucial for understanding the long-term narratives essential to tackling present-day challenges like automation and geopolitical shifts.
• Prizes and productivity statistics often lag behind the most pressing issues, which are best understood through a historical lens.
• The ultimate lesson is that prosperity requires continuous institutional support and argumentation.

Chirantan Chatterjee is Professor of Development Economics, Innovation and Global Health at U-Sussex.