Recent Nobel prizes for economics seem loaded with irony: Here's why

Copyright © HT Digital Streams Limited All rights reserved. Recent Nobels explain the real drivers of economic growth: Is anyone listening? This Nobel Prize in economics awarded for innovation comes at an interesting time in the political history of the world. (REUTERS) Summary This year’s economics Nobel focuses on the role of innovation and creative destruction, while last year emphasized the value of institutions. With democracy under pressure, science politicized and nations tipping over power, the awards remind us that the basics of progress are at stake. This year’s Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel was awarded “for explaining innovation-driven economic growth,” with one half going to Joel Mokyr “for identifying the prerequisites for sustained growth through technological progress” and the other half jointly to Philippe Aghion and Peter Howitt “for the theory of sustained growth through creative destruction.” This Nobel Prize in economics awarded for innovation comes at an interesting time in the political history of the world. Much of the world today is dominated by what authors Steven Levitsky and Lucan Way call “competitive authoritarianism.” Levitsky and Way define it as a hybrid regime where democratic institutions exist but are undermined by authoritarian practices, making elections real but mostly unfair. They introduced the concept in their influential 2002 essay and expanded on it in their 2010 book of the same name. Recently, the authors in Foreign Affairs magazine argued that the US has now become a poster child of competitive authoritarianism. The primary characteristic of such regimes is that they use the power of the executive and state to keep the brainchild of elections alive, but then play the electoral contest with self-serving biases. The usual blueprint for this is to use the state and its agencies as instruments against free and fair competition. Political office bearers regularly misuse state resources, manipulate the media, harass the opposition and thereby skew electoral processes. During the past two decades, the journalist and commentator Fareed Zakaria has also written about “illiberal democracy” that has taken hold in many countries. Broadly speaking, competitive authoritarian regimes and illiberal democracies are similar concepts, except for the emphasis. Zakaria’s emphasis is on the erosion of liberal rights after elections and the abuse of power after gaining office. The idea of ​​competitive authoritarianism extends that argument not only to the exercise of power, but also the necessity to “stay in power” by changing the nature of competition. German American political scientist Yascha Mounk extends these ideas to “populist governments” that threaten both liberalism and democracy by weakening institutions and delegitimizing dissenting opinions. Apart from the media and other independent institutions such as the judiciary, an important ‘voice of truth’ in society emerges from science, technology and innovation. Although the mainstays of populist regimes do not specifically include an anti-science mindset, many of them have adopted such a stance to court an anti-establishment electoral base. In the US today, we see attitudes that combine an anti-science mindset in some areas, such as vaccination and climate change, with a pro-innovative one in others, such as blockchain (or crypto) and artificial intelligence. Both AI and crypto are used as tools of power for either national security or social capitalism. It is in this context that last year’s Nobel Prize in Economics, awarded to James Robinson, Simon Johnson and Daren Acemoglu for pioneering work on the importance of institutions, and this year’s award for work on innovation both seem particularly ironic. This is either a post-facto award for a remarkable seven decades since the Second World War of institutional development and innovation, or a signal from the Nobel Committee that democratic backsliding must be countered with strong support for institutions, science and innovation. As an economic historian, Mokyr showed that cultural openness to new ideas and institutional support for science are essential to turning inventions into sustained growth. The operative words are ‘openness’ and ‘institutional support.’ Among the key contributions of Aghion and Howitt is the proposition that dynamic competition is critical to the process of innovation through creative destruction. At a semantic level, dynamic competition is intimately linked to both fairness and a level playing field. In many parts of the world, including in the US, science has become a national project, equipped with the goal of entrenching clothing, rather than a serious and open pursuit of new knowledge. Paradoxically, China has leaned on this with a dramatic pro-science stance. Shing-Ting Yau, one of the world’s leading mathematicians from Tsinghua University, says that “China’s mathematical progress is behind the US, but the gap is not insurmountable. Chinese middle and high school students, as well as university students, have abilities comparable to, or even surpass, their peers in the US and other countries. These funds provide sufficient funds for a, and minimal progress. By promoting a more pluralistic approach, China can better harness the potential of its brightest minds.” If India is to realize its ambition of becoming an upper middle-income country in 25 years, it cannot afford to confine science to a national project. What Professor Yau says also applies to India. The government should fund science, but get out of the way of deciding its direction. Science policy, unlike industrial policy, requires enablers, incentives and non-interference. PS: “Science, my man, is made of mistakes, but they are mistakes [that are] useful to make because they lead little by little to the truth.” said Jules Verne. The author is Chairman, InKlude Labs. Read Narayan’s Mint Columns at www.livemint.com/avisiblehand Catch all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint. 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