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Our Shrinking Economic Toolkits

For the last four decades, mainstream economists and policymakers have been wedded to fixed dogmas. Their blind belief in fiscal discipline and consolidation, and resulting refusal to consider more public spending even in an obvious downturn, now threatens the very stability of societies.

NEW DELHI – In the natural world, humans stand out for the complexity of the tools, technologies, and institutions that we have developed. According to the anthropologist Joseph Henrich, we owe this success to our ability to accumulate, share, and adapt cultural information across generations. But just as interconnection causes our “collective brains” to expand over time, isolation can cause them to shrink. Economists should take note.

Since innovation and accumulation are socio-cultural processes, larger and more interconnected populations create more and increasingly sophisticated tools. The inter-generational expansion of our collective brains depends, according to Henrich, on “the ability of social norms, institutions, and the psychologies they create” to encourage people freely to “generate, share, and recombine novel ideas, beliefs, insights, and practices.”

To see how isolation can disrupt and even reverse this process, consider Tasmania, which some 12,000 years ago was separated from mainland Australia when the melting of polar ice caps flooded the Bass Strait. Archaeological remains indicate that prior to this separation, Tasmanian and mainland populations possessed the same skills – such as fire-making – and technologies, including the boomerang, spear-thrower, and polished-stone and bone tools.

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