Tuesday, 30 December 2014

If you teach economics, this may be the most important book published in 2014

I once taught economic policy in France to civil servants for several years in a row. Of course, I always considered that the most important part of the course was the one about the Solow model and productivity growth. As Paul Krugman once pithily and famously put it: "Productivity isn’t everything, but in the long-run it’s almost everything." (*) If I had been restricted to giving only one lecture in the course, this would be the one I would have given.

What was surprising is that, a couple of times, I stood in for colleagues towards year end, professional civil servants who taught the same course than I did but had unexpectedly had to quit teaching, having been called to a higher job, and then I discovered that they had skipped this all-important bit, and that I did have in fact to give their students that lecture.

That set me thinking and I made a quick survey of soft economics textbooks, which showed me that growth theory was not always, even seldom, taught to non-economics majors. So not only was productivity growth all-important, it was also under-taught.   

In the medium term, the main driver of productivity growth, of course, is technological progress, something which happens in a very unruly and haphazard manner - and cannot be centrally planned, contrary a misconception quite common among politicians and mandarins. To make that very fundamental point clear, I used to give out to students a short but quite illuminating text, Innovation, Components and Complements [PDF] written in 2003 by the great Hal Varian, who authored in the 1980s what is still the standard graduate Microeconomics textbook and then went on to become Google's chief economist.

So I was delighted to stumble this month on another text, How we got to now, [WSJ review, NYT review] book-sized this time but extremely entertaining, which raises nearly all the important questions about innovation while being very accessible, a compulsive,  beach-compatible and exhilarating read.  

Its author, Steven Johnson, a polymath with a literary degree, has already written several popular books about the history of technological innovation, but this one, companion to a PBS series, is the most thought-out and pedagogical. If I was still teaching, it would be on the top of the required holiday readings list for students, probably together with Tim Harford's Adapt

Highly recommended.

(*) The Age of Diminished Expectations, 1994