As usual, Tim Harford, the FT’s undercover economist, publishes in this week-end’s paper a fun and insightful column. This time, it’s about a student who tried to build a toaster from scratch and failed miserably. The morale of the story is that one always depends on tools built before. To put it another way,we are all standing on the shoulders of silex.
Beyond the conclusions Haford draws from the experiment, I believe it should be pointed out that economies should always be considered in four dimensions. Time matters as much as space and how classical economics predicts a market would function in two dimensions. That’s why economic history matters: the same way as you cannot build a toaster without the help of past manufactures, you cannot understand an economy by simply looking at the present.
Up to a point, I think instead of economic history, we should talk about the economics of endowment.