Institutional Change and Economic Growth

The meteoric rise of the new economic history reflects the fact that historians abhor a vacuum and sometimes it seems to reflect an even baser instinct that any theory is better than no theory. Of course, any explanation always uses theory; however, it was usually implicit and frequently a bouillabaisse in which Marx, Veblen and the German historical school floated around in as equally indigestible lumps. But the combination of an internally consistent paradigm based on a few simple assumptions and the mysteries of econometrics simply overwhelmed the older historian, as much as anything else, because he could not understand the rules of the game, much less play it. But even while the new breed was destroying one traditional explanation after another, the traditional historian even in retreat kept muttering over and over, “But you are destroying the existing myths without replacing them. Soon there will be no explanation—no economic history—just an immense heap of numbers.” And sometimes, plaintively from the left flank of the retreating historians, there would come the cry, “But institutions ARE important!”