It may be a little early, but I want to make a conditional nomination for the 2018 Nobel Prize for economics. If all goes well, the European Union, which has just won the 2012 Peace Prize, will by then have met the criteria for the economics award: a “work on economic sciences of eminent significance”. The EU writes in deeds rather than essays or equations, but the unconventional form only adds to the accomplishment. Here is a preliminary draft of the citation.
The European Union is awarded this prize for its advances in the theory of economic organisation in modern industrial economies. The EU has added to our knowledge of the relationships between the economic good and political goals, between bureaucracy and entrepreneurial initiative and between private and state ownership. It has also contributed to the study of managing economic change. The EU’s “European theory” is supported by the most persuasive evidence: a unified, prosperous and fairly just economy.
The European arrangement is sometimes called the Social Market Economy. That title captures two key tenets: that the economy should always be considered as part of the broader society, and that competitive markets should play a major role in modern economies. However, “Social Market” misses several important European ideas: that regulation and enterprise should be mutually reinforcing; that supranational and national governments can perform complementary economic tasks; that many economic activities, including health care and education, are best offered by enterprises which are neither under direct government control nor purely private and profit-seeking; and that meritocratic bureaucracies can make valuable contributions in all parts of the economy.
Several aspects of the European theory deserve special notice.
First, it does not assume that higher GDP is a worthy goal in itself. Indeed, when Robert Schuman first proposed the European Coal and Steel Community in 1950, the French foreign minister said that he hoped a “common economic system” would be “the leaven from which may grow a wider and deeper community”. Those were not idle words. The entity that was to become the EU adopted an explicit social agenda in 1960. This broad European outlook is unusual among economists; too often they forget that ever more stuff cannot make communities good or people happy.
Second, the European theory combines idealism and pragmatism. It is idealistic in its expectations of citizens – that they can and with some prompting will replace enmity with co-operation – and of governments – that they can and mostly will use their economic power to promote the common good. It is pragmatic in the assumption that new practices should be introduced gradually, that compromises are usually the best way to resolve conflicts, and that the economy is too complicated to be guided by simple rules. This pragmatism has served the EU well. While the path to every economic accomplishment, from the elimination of steel tariffs to the creation of a single currency, has been crooked and slow, the achievements have been numerous.