Last week, two economists and one economic historian were awarded the Nobel Prize in economics for explaining innovation-driven economic growth. Northwestern University professor Joel Mokyr was commended “for having identified the prerequisites for sustained growth through technological progress” and French economist Philippe Aghion and Brown University’s Peter Howitt were jointly honoured “for the theory of sustained growth through creative destruction”.
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It was noble (no pun intended) of the Royal Swedish Academy of Sciences to acknowledge the role of an economic historian, because the modern generation of quantitative economists seeking universal theories on how economies work often tend to ignore context and history.
In his 2002 book The Gifts of Athena: Historical Origins of the Knowledge Economy, Mokyr cited how the Greek goddess of knowledge, wisdom, warfare and handicraft gave the founder of Athens an olive tree, which led to the flourishing of Greek philosophy and science. Mokyr argues that a culture of growth through technology hinged on the foundations of “useful” knowledge. He drew attention to the difference between knowledge of “what”, or propositional knowledge, and knowledge of “how”, or prescriptive knowledge, applied through technology and craftsmanship.
The culture of growth came from competitive pluralism with an open market for ideas. Mokyr says a major reason the British led Europe into the Industrial Revolution was because of its great engineers and craftsmen.
Mokyr understood deeply that knowledge is cultivated in institutions, where organisations that preserve, diffuse and augment knowledge (such as universities and research institutions) created rules and practices (such as open science, resource funding by priority, evidence-based approach and commercialisation) that helped the West advance ahead of the Rest.
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The history of the growth of useful knowledge is the history of an elite. But if the elites lose the way, history can take different turns.