What happens when a new technology transforms production? Does technological progress necessarily create prosperity? What happens to workers when machines replace tasks? Why do some inventions become transformative innovations while others disappear without leaving a lasting mark? And what role do institutions, governments, markets and social values play in shaping technological change?
These questions are at the heart of contemporary debates about artificial intelligence, automation, climate technologies and economic development. But they are not new. Economists and social thinkers have been discussing versions of them for centuries.
This realization was one of the starting points for our book.
Innovation did not begin with Schumpeter
When we talk about innovation in economics, Joseph Schumpeter is often the first name that comes to mind. His concepts of the entrepreneur, creative destruction, and economic development have become central to the modern language of innovation.
But the history is considerably longer.
One of the motivations behind the book was therefore to look backwards. Several contributions explore how thinkers before Schumpeter approached invention, technological change, institutional transformation and economic development. The book includes discussions ranging from the Scottish Enlightenment to Friedrich List, Marx, Weber, and the development of modern innovation economics.
The history of economic thought is sometimes seen as a history of theories that have been replaced by newer and supposedly better ones. We approached it differently. For us, the history of economic thought is also a history of questions.
Ideas that emerged in very different historical circumstances can still help us understand problems that we face today. Reading earlier economists allows us to see that concepts we now take for granted have acquired their present meanings gradually. One of the most rewarding aspects of editing the volume was seeing how these different perspectives could speak to one another.
This historical perspective changes the question. Innovation is not simply the introduction of a new technology. It can also involve changes in habits, forms of organization and knowledge. Our chapter, “Invention, Institutional Change, and Economic Development: From Scottish Enlightenment to the IPE,” develops this perspective by connecting classical discussions of invention and institutional change with more recent approaches to innovation.
From invention to innovation
One question kept returning throughout the project: when does an invention become an innovation? It is tempting to think of technological change as a linear process. Someone has a new idea, a technology is developed, firms adopt it, productivity increases, and society moves forward.
History tells us that the process is rarely so simple. An invention can exist without becoming economically significant. Its adoption may depend on institutions, available infrastructure, financial resources, knowledge, skills, political decisions, or cultural attitudes. Sometimes a technology arrives before the society around it is ready to use it. The historical economists we encountered were not simply interested in machines. They were interested in how societies change.
That distinction matters.
The forgotten history of innovation
One of the surprises of working on the book was discovering just how much of the history of innovation is hidden in discussions that do not necessarily use the word “innovation”.
Before innovation became a central concept in economics, economists were already discussing invention, machinery, scientific knowledge, technical progress, specialization, productivity, entrepreneurship and institutional change.
The Scottish Enlightenment provides an especially interesting example. Thinkers such as Adam Smith were fascinated by the ways in which changes in could transform societies. Later thinkers approached these questions differently. Friedrich List emphasized productive capabilities and national development. Marx placed technological change at the centre of transformations in production and social relations. Max Weber explored the connections between economic organization and social values. Schumpeter famously placed innovation and the entrepreneur at the centre of economic development.
These traditions are not interchangeable. They often disagree about the causes and consequences of technological change. But putting them into dialogue reveals something important: there has never been only one way of thinking about innovation.
When technology changes work
Another issue that became increasingly important as the project developed was technological unemployment. The fear that machines will replace human labour is not a product of the digital age. It has accompanied technological change since the Industrial Revolution.
Yet history also complicates the simple idea that machines merely destroy jobs. Technological change can eliminate particular tasks while creating new occupations and forms of economic activity. It can alter the skills that workers need and change the organization of production.
The question is therefore not simply whether technology creates or destroys employment. It is also: what kind of economy does a particular technology create? This question has acquired a new urgency with artificial intelligence and automation. The technologies may be different from those of previous industrial revolutions, but the underlying economic questions remain familiar.
History does not tell us exactly what AI will do to employment. It does, however, warn us against assuming that technological change has a single, automatic outcome.
The unintended consequences of progress
The same lesson emerged when we considered sustainability.
Economic thought has often associated technological progress with greater efficiency: producing more with fewer resources. Yet greater efficiency does not always mean lower resource consumption.
The history of the Jevons paradox provides a striking example. Improvements in the efficiency with which a resource is used can sometimes encourage greater use of that resource rather than reducing total consumption.
This historical insight is particularly relevant to contemporary debates about climate change and the green transition. Technological innovation is undoubtedly important for addressing environmental challenges. But technology does not operate in isolation. Prices, incentives, institutions, consumption patterns and social behaviour all influence its effects.
The lesson is not that technological progress is undesirable. Rather, it is that technological solutions have economic and social contexts.
Understanding those contexts is essential if we want innovation to contribute to sustainable development.
What we learned while making the book
Perhaps the most valuable part of editing this volume was the opportunity to bring together scholars working on different periods, economists and traditions. The process reminded us that intellectual history is rarely a straight line. Ideas disappear and return. Concepts change meaning. Questions that seem new turn out to have long histories. And sometimes an old debate becomes relevant again because technological circumstances have changed.
We also discovered that studying the history of innovation requires us to move beyond the image of the solitary inventor. Innovation is collective. It depends on knowledge accumulated over generations, institutions that support experimentation, people who develop and adapt technologies, firms that invest in them, workers who use them and societies that decide—explicitly or implicitly—which technologies they are willing to adopt.
This is perhaps one of the most important ideas we would like readers to take from the book.
Why this history matters now
Today, we are surrounded by claims about technological revolutions. Artificial intelligence promises to transform knowledge work. Automation is changing production. Biotechnology is opening new possibilities in medicine and agriculture. Renewable energy technologies are reshaping discussions about economic development and climate policy.
It is easy, in such an environment, to assume that we are living through something completely unprecedented. And in many respects, of course, we are. But the economic questions generated by technological change have a much longer history.
Who benefits from innovation? Who bears its costs? Which institutions encourage technological development? Why do some societies adopt technologies faster than others? What happens to workers? Can productivity growth be reconciled with sustainability? And how should economic policy respond when technology changes faster than institutions? These questions cannot be answered simply by looking at the past. But the past can help us ask them more intelligently.
That is ultimately why we believe the history of economic thought matters for the study of innovation.
Beyond the book
Editing this volume changed the way we think about innovation.
We began with a desire to understand the historical roots of contemporary debates. We ended with a stronger conviction that innovation is not simply a story about new technologies. It is a story about people, knowledge, power and social change.
Perhaps the most important lesson is therefore also the simplest: inventions do not determine the future on their own. Societies decide how inventions are developed, adopted, regulated, financed and used. Institutions shape technological possibilities, just as technologies reshape institutions.
Looking back at the history of economic thought does not allow us to predict the next technological revolution. It gives us something more modest—and perhaps more valuable. It reminds us that the future is not made by technology alone. It is made by the interaction between technology and the societies that choose what to do with it.