Thinking Outside the Box

Robert W. Fogel died on 11 June 2013.  He shared the 1993 Nobel Prize in economics with Douglass North and pioneered use of quantitative analysis to explain economic and institutional change. Why should anyone outside academia really care? A couple of interesting insights from two of his most famous works may make you think again.

Analyzing  long-term historical data, Fogel found that railways played a much more modest role in the overall economic growth in the 19th century America. In his view, the alternative network of canals and wagons would have carried on American expansion, albeit at somewhat higher costs.  Without going into the merit of his claim, an important lesson emerges from this debate that is worth remembering. Impact depends on the counter-factual assumed.  This is specially so for infrastructure networks where overall impacts are extremely sensitive to the ground realities.   Indian bureaucracy and political leadership are busy fast-tracking billions of infrastructure investments, underlying assumption being that this single action will spur the much-needed economic growth. Will it, really?

Fogel also created another storm with his work on slavery in America when he, along with Stanley Engerman challenged mainstream belief that slavery was inefficient, and in decline before the civil war.  They found that slave plantations were as efficient and profitable as free plantations because owners treated slaves as economic assets.  In their view, slavery would have continued, if it were not for the political change. While defending their work, we were reminded that what is economically efficient may be far from morally justifiable.

Fogel thrived on challenging prevailing dominant views.   We will miss Fogel who was one outstanding-outside the box thinker.

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