I read From Poverty to Prosperity: Intangible Assets, Hidden Liabilities and the Lasting Triumph Over Scarcity, by Arnold Kling and Nick Schulz on a weekend trip to Venice. There could hardly be a better place than La Serenissima to reflect on the tides of economic history, given its trajectory from trading capital of the western world through sad decline post-Napoleonic conquest, to today's playground for affluent tourists.

The subtitle of the book indicates the breadth of ideas its authors aim to capture, and although I don't think they bring it off as a synthesis, it's an interesting read and I enjoyed it.

The thrust of their argument is that government interventions are often the worst way to respond to market failures, especially in places where the quality of government is low, such as poor countries. They emphasize the importance of economic institutions for development and growth outcomes. Institutional quality, or perhaps social capital, is essentially what they mean by the intangible assets of the subtitle. They are advocates of Austrian economics and the work of Friedrich Hayek. Their account of economic development rightly emphasizes innovation, entrepreneurship and the barriers which prevent the creation of new products and services.

The book makes the arguments about the evolutionary or emergent nature of economic outcomes, and the importance of markets rather than planning, in a clear and readable way. I particularly enjoyed the series of interviews with a number of sympathetic economists: Robert Vogel, Bob Solow, Paul Romer, Joel Mokyr, Douglass North, Bill Easterly, Edmund Phelps, Amar Bhide, William Lewis and Will Baumol – albeit that they print verbatim transcripts which read a little oddly. The work of these economists does point to a coherent account of economic development.

What doesn't work so well is their description of this story as 'Economics 2.0', a radical departure from boring old Economics 1.0 which by implication most economists do. They use the metaphor of the economy as a computer system consisting of hardware, software and operating systems protocols, which for me simply confuses matters. The book isn't about economics per se so the attempt to dip into the debate about economic methodology is a diversion. Nevertheless, this book is a useful overview of the institutionally-rich and historically-rooted version of economic development which is actually shared by many economists now.