“WHY ECONOMICS CAN’T EXPLAIN THE MODERN WORLD.” The subtitle of Deirdre McCloskey’s book is: “Why Economics Can’t Explain the Modern World.” What she means is that economics can’t explain why it came about that we are living in a world with 16 times the income per capita that had been experienced by the ordinary person up until the 1700’s. More and more economic historians are coming to agree on an answer to the question “How did it happen?” That answer is: “Technological change” is what led to the increase in incomes. There was a sustained burst of innovation which began in the 1700’s and continued up to today.But, as McCloskey argues, there is no answer that commands agreement as to why the technological change happened. Or to pose the question in a way that McCloskey frequently does: why didn’t it happen earlier? When she writes that economics can’t explain what happened, she means that there are no plausible economic models which give rise to the increase; the answer has to come from outside the system—from outside the models. In the essay by Robert Solow that I referred to yesterday, he concludes that the hypothesis that any explanation has to beat is that the burst of innovation was simply a random event. Professor McCloskey has another explanation that is the title of her book.
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