The New Comparative Economics versus the Old: Less Is More but Is It Enough?

The seeming demise of the field of comparative economics as it evolved in the 20th century is often seen as the result of the collapse of the communist economy, which left us with only one economic system, capitalism. Moreover, the old comparative economics has been replaced by the new comparative economics, which focuses on varieties of capitalism and ascribes an almost exclusive explanatory role to institutions. I argue that the demise of the old comparative economics has more to do with the fact that it was fatally flawed in terms of the criteria it used for comparing economic systems rather than with the demise of communism or the fact that it failed to understand the causes of inter-system differences in outcomes. The great advantage of the new comparative economics is in its choice of a single criterion for judging the performance of an economic system. I illustrate these advantages of such a single criterion by examining the contributions of the new comparative economics to the cross country analysis income levels, and, on the basis of this analysis, I then suggest that there is still value in the approach of the old comparative economics to the analysis of economic outcomes.