This book tells the story of a single technical paper in economics—the events leading up to its publication in 1990 and some subsequent changes in our understanding of the world. My subsidiary aim is to convey something about how economics is done today in universities, for it is there, not in central banks or government offices or Wall Street firms, that the most important work takes place.
Between 1979 and 1994 a remarkable exchange unfolded among economists in hard-to-read technical journals concerning economic growth: what it is, what makes it happen, how we share it, how we measure it, what it costs us, and why it is worth having. Such was the sense of novelty that emerged from this exchange—of learning how to understand something for the first time, to write it down in such a way as to perpetuate the understanding of it, of discovery, in other words—that this literature quickly became known as “new growth theory.” Many persons made contributions. A new generation rose to prominence in the field. Yet the issues themselves and the manner of their resolution remain unfamiliar to a wider audience.
I am an economic journalist, for many years a newspaperman, not an economist or a historian of economic thought. My mathematics is rudimentary, but my English is good, my skepticism fluent, and my background knowledge of economics fairly extensive from having followed the field for many years. The book is written from an outsider’s point of view—an appreciative outsider, but one who hasn’t altogether surrendered his skepticism. In other words, I am a civilian and a believer in civilian control.
Why focus on a single skein of work? Progress in economics these last thirty years has been rapid. Its scope has broadened and its generality increased. There are a great many stories to report. The new growth story first caught my eye because I was interested in specialization and the growth of knowledge. I’ve come to see it since, however, as a representative story—an illustration of how mathematics became the working language of modern economics, of why its practitioners deem their formal methods to have been such a success.
The new growth story shows how economic discovery occurs—in intense intellectual competition among small groups of researchers working in rival universities. From this competition emerge occasional transformations in understandings of the world, reflecting simultaneously the cumulative work of generations and the -border–crossing journeys of research partners or, perhaps, a single person. Gradually these transformations make their way outward, like ripples spreading from a pebble thrown on a pond, until what originally was their understanding becomes our understanding as well.
Even today a majority of economists may not have made up their minds about what happened to their subject during the 1980s and early 1990s, in the subdiscipline of their field that is concerned with growth and development. Specialists tend to keep their heads down, after all. Nor have all the parties to the argument capitulated. Some readers may prefer to skip the backstory in this book and go directly to the various guides and textbooks that are beginning to appear.* They will be missing altogether a good story (and an important lesson) in their haste.
Many of the more public events in this story I covered as they occurred, often in meetings in stuffy hotel rooms on sunny days and in the conversation afterwards—a strange kind of news indeed. It is humbling to look back and see how slowly the significance of these developments dawned on me, and how much longer it took me to put it into words on paper. But then, if it had been obvious, it
wouldn’t be news.
I talked to many people along the way. Almost all of them talked back, with varying degrees of candor. My thanks to all. Economists are a good lot, and they like a yarn as well as the next person. Only toward the end did I realize how much they were interested in keeping secret. Economists have their foibles too.
* Elhanan Helpman’s The Mystery of Economic Growth is the most illuminating of these summaries; Charles I. Jones’s Introduction to Economic Growth, the best of the texts. David Landes’s The Wealth and Poverty of Nations: Why Some Are So Rich and Some So Poor is a brilliant, entertaining, but largely atheoretical world tour of the issues.