The Significance of Economic Knowledge for Welfare and Economic Growth in History

Economic knowledge tends to be neglected as a factor of growth in economic science, with ordoliberalism being the only significant exception; usually technology is emphasised as the main driver of growth. Here, important cases are discussed of how economic knowledge did become essential in certain phases for the path of economic development, starting with current examples like that of the European Union, going backwards in history to the ethical reflections in the Middle Ages and then describing the peculiar economic institutions and the economic thought in Ancient Greece. The functioning of the economy presupposes institutions, and the founding of economic institutions presupposes economic understanding. Ancient Greece presents an interesting case because of the tradition of Greek philosophy and history writing, which show how the economic institutions of the Ancient institutions such as gift-giving or liturgies were understood. A paradoxical example is provided by the institutions of credit: Interest-taking was regarded as immoral, but credit relationships were indispensable. This contrast compelled Western societies to analyse justifications, hence causes of interest-taking, ultimately leading to more sophisticated monetary institutions and economic theory, while Ancient China tolerated interest and then lacked these sophistications.