The relative de-emphasis of institutions and values since the middle of the 20th century did not reflect a lack of recognition of their significance in affecting economic behaviour and public policy. I would argue that it was largely the result of various factors and assumptions: first, that for a given country institutions and values could be taken as given elements of the broader economic environment that evolved very gradually over time; second, that their effects on economic behaviour were indirect and relatively small, compared with the influence of other determining factors of demand and supply; and third, that their role in explaining market developments and economic relationships would be captured in terms of two key fundamental market determinants: “productive technology” and “preferences” of economic agents and authorities. There are two key questions of scientific and policy relevance. First, what are the underlying factors and forces that shape preferences, drive scientific and technological advances, foster innovation and nurture an entrepreneurial spirit that ultimately are encapsulated in the economy’s production processes and the functioning of markets? Second, to what extent does the observed economic performance of nations reflect these underlying factors and forces, which may be partly captured by economic institutions and prevailing economic cultures and social models? Since the late 1990s, increasing attention has been paid by economists and policy-makers to finding answers to these questions.
Were that in doubt, consider that, in 2002, Churchill was voted “the greatest ever Briton” in a BBC poll. Or that he continues to command vast international recognition as a hero of the free world. Churchill’s contributions extended beyond his pivotal roles in the nation’s martial and political histories. He is the only British Prime Minister to have won the Nobel Prize in literature. He was a prodigious painter, and, perhaps thankfully, the only Prime Minister to enter the music charts. The wisdom of his witticisms is legion, extending as far as the dismal science. Central bank forecasters can identify closely with his advice that, “it is a much better policy to prophesy after the event has already taken place.” Polymer But in some prophesies we can be confident: for example that our new polymer banknotes, of which The New Fiver is the first, will stand the test of time. Polymer marks a major innovation. It is cleaner, safer, and stronger. It is resistant to dirt and moisture, so the note won’t wear out as quickly as the current fivers but will stay in good condition for longer. It is stronger than paper and can better withstand being repeatedly folded into wallets or scrunched up inside pockets. Polymer notes can survive a splash of Claret, a flick of cigar ash, the nip of a bulldog, and even a spin in the washing machine afterwards to boot.