The Industrial
Revolution is the key driver behind modern sustained economic growth in Europe,
and Joel Mokyr is a leading economic historian who has extensively researched
it. His meticulous research enabled him to differentiate the technical
breakthroughs of the era into two main types: macro-inventions –
paradigm-shifting innovations – such as the steam engine, that completely
revolutionised the way that things are done; and micro-inventions that have
brought incremental improvements that acted as catalysts in unlocking the
economic potential of their macro counterparts.
He also found that the positive feedback loops between propositional and
prescriptive knowledge as well as increased communication between savants and
fabricants, lead to sustained scientific and technological progress.
His research
identified the Industrial Enlightenment of the 18th century and the
scientific revolution of the 17th century as the key drivers behind
the Industrial Revolution in the West, particularly in England. Five decades of Mokyr’s work on the cultural
and intellectual history of economic growth in the continent have revealed that
economic progress is critically dependent on open intellectual inquiry, the
free exchange of ideas, and people’s curiosity to learn and defend scientific
principles. He avers that more than economic inputs, it is such an intellectual
climate that allowed knowledge to accumulate and spread, resulting in
technological progress that ultimately led to modern economic growth. In his book, The Enlightened Economy (20
09), Mokyr argues that economic modernity
has not emerged from capital accumulation, resource endowments, or the opening of trade routes, but
rather from a cultural transformation centred on reason and scientific
discovery.
It was Joseph Schumpeter, an
Austrian economist, who first coined the idea of ‘creative destruction’ in the
1940s, which encapsulates the idea that economic progress is accompanied by
significant disruption – that every major innovation has displaced older
technologies, jobs and firms. It, however, remained primarily as a descriptive
concept for over 50 years. This year’s Nobel laureates, Philippe Aghion and
Peter Howitt, provided this intuition with a rigorous mathematical framework
that explains the precise mechanisms, incentives, and conditions under which
creative destruction generates aggregate economic growth. The model places entrepreneurs and their purposeful investment in
research and development at the centre of growth, highlighting the significance
of policy implications such as R&D subsidies, resolution of conflicts
between new and established firms, and labour policies, particularly support
for displaced labour by new technologies from governmental agencies. That
aside, their models inspired many researchers to connect growth theory to
microdata on firms and empirically test how innovation, competition and firm
dynamics interact. They have later researched how education systems,
competition, regulation, and state policies impact the innovation process.
Right from economists to political leaders, all are
interested in knowing what drives long-term economic growth. In the 1950s,
Solow came up with a long-run economic growth model, which showed that capital accumulation,
labour and technological progress drive economic growth. But the model does not
explain how technological progress leads to growth except to state that it happens
exogenously and increases the productivity of both capital and labour. Interestingly,
Mokyr, Aghion, and Howitt brought innovation in technology into the model to examine
its impact on economic growth. Their work offers a post-Solow explanation of growth
by mathematically formalising the process by which innovation cycles replace
older technologies.
The research output
of these three Nobel Laureates offers crucial insights for India, which is
currently facing challenges in sustaining its growth as the world economy becomes
increasingly protectionist, knowledge sharing is under scrutiny and
geopolitical tensions are mounting. Their research suggests that we must work
towards creating open, adaptive societies that allow new ideas to challenge
incumbents, so that vested interests do not block technological advances and
progress. Increased investment in education and training is crucial for maintaining
a steady supply of skilled innovators, which is essential for sustaining
growth. Additionally, linking universities, entrepreneurs, and manufacturers to build a vibrant
innovation ecosystem will go a long way in sustaining purposeful innovations.
Innovation is like yoga—it requires greater mental
clarity, emotional balance, a sense of mental peace, discipline, and a sense of
purpose. This can happen only when ease of living is ensured and is not
threatened by fear of repercussions. Above all, economic progress is critically
dependent on open intellectual inquiry and the free exchange of ideas. India
once had a free and fair atmosphere in which great spiritual thoughts were produced—the
likes of the Upaniṣads,
Sankhya philosophy, Patanjali’s Yoga Sutra, Sushruta Samhita, and Charaka Samhita were produced. In one
of his lectures in London, Vivekananda said: “I see before me … that in some of those
forest retreats this question [of Maya] is being discussed by those ancient
sages of India … where even the oldest and the holiest fail to reach the
solution, a young man stands up in the midst of them, and declares, ‘Hear, ye
children of immortality, hear, ye who live in the highest places. I have found
the way …’”. However, unfortunately, once a culture of secrecy and control by a
caste-based system crept in, intellectual excellence began to decay, giving way
to meaningless rituals. So, we must eradicate the culture of control that
thwarts the generation of ideas and innovations in our society. Leadership is
what counts in all these initiatives for India to grow.
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