April, 2003

Comments on Peter Boettke's 'The New Comparative Political Economy'

  • John Nye

    Frederic Bastiat Chair in Political Economy, Mercatus Center
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Hayek and his views are now mainstream but the focus on the debate over planning does not really give us a good idea of why economists abandoned their core ideas of the market in a discipline which still paid homage to Adam Smith. For that, we had the simultaneous effects of the Keynesian revolution, the mathematization of economic theory, and the demonstration effects of the war. Peter alludes to these but does not really stress how the concern over the Great Depression, and the perception of ordinary people that World War II saved the economy contributed to the interventionist presumptions and increased the willingness to believe in fiscal policy’s effectiveness in controlling the business cycle. But he also leaves out a more important idea that still persists and in my view bears a bigger burden of the mistakes of development policy: the notion that technological change was the primary if not the sole explanatory variable in encouraging long-run growth. If technology could do so much, who needed to worry about institutions?