Varieties of capitalism

Thu 2nd January 2014 | Blog

Will HuttonDuring the Christmas and New Year break one of our most difficult problems has been to create a plan for the CORE curriculum that lives up to our promise to teach economics “as if the last three decades had happened” while not overloading the course.

If we claim that modern economics is often too narrow in scope—a problem that our parent organisation, the Institute for New Economic Thinking, is trying to solve in many areas—then we also need a coherent idea of how that scope should be broadened, and the usefulness of any new investigation we might undertake. A fundamental part of this is the concept of “capitalism” itself, and the roots of success and failure.

The Observer newspaper in the UK joined the debate at the end of December. Will Hutton (pictured), journalist, author, principal of Hertford College, Oxford University, chair of the Big Innovation Centre at The Work Foundation, and a governor of the LSE, asked “Which will be the big economies in 15 years?” It is, Hutton writes, “a puzzle that preoccupies futurologists, business strategists, economists and the world’s foreign offices.”

Hutton uses the annual world economic league table, compiled by the Centre for Economics and Business Research, to argue that the response of economists to this puzzle is often inadequate. He writes that a debate about policy that values only “low taxes, deregulation, the inevitable efficiency of markets and the accompanying inevitable inefficiency of the state as drivers of growth” ignores the economic lessons of recent history.

He also mentions the INET CORE project as one of the attempts that the economics profession is making to broaden the discussion. From the article:

“[T]he best economics now has much more sophisticated understanding of what drives innovation, investment, productivity and growth than the simple faith in low tax and loosely regulated markets. It criticises the refusal to understand the complexity of how economies and societies create and assimilate paradigm-changing technologies… The best brains in economics are now working on how economies work in reality.”

We don’t make the claim to be the “best brains in economics”, but students taking the INET CORE course in future will certainly learn the importance of geography, institutions, cultures and other influences on the economy. An introductory course cannot cover every aspect of this complexity – but we hope to give students a much wider range of tools and models, so that they can gain more realistic insights into puzzles like the one that Hutton presents.