A few days ago I was mulling over here the way the physical network created by modern information and communication technologies has transformed the economy in the past generation and yet has not been recognised very much at all in the way we theorise about the economy. That same point applies with even more force when it comes to thinking about globalisation. After all, the post-1980 globalisation is entirely driven by ICTs. Without computer power, the internet, cheaper phone calls etc, the phenomenon of sliced-up global supply chains and the massive growth of trade in intermediates would not have taken place. Few people realise how much of China’s success lies in supply chain logistics, as well as low-cost manufacturing. Its firms can not only assemble the materials and make cheap clothes, they can also adopt new designs quickly and get the items to shops in the US and Europe, ready-packaged for display, with appropriate labels, within a few weeks.

Yet the radically changed character of international trade has not been thoroughly reflected in economics. Even my reference book, the [amazon_link id=”069112812X” target=”_blank” ]Princeton Encyclopedia of the World Economy,[/amazon_link] has little about technology. So it was with delight this morning that I read this Vox column by the brilliant Richard Baldwin, which is exactly about the way technology has transformed the character of trade (and consequently trade policy). (There is also a longer CEPR policy brief by him on the subject, link at the bottom of his column). Given the likely role of global imbalances in the crisis, the doubts about what trade statistics are actually measuring, and the extraordinary complexity of the global economy, this is a key area for more thinking and empirical research.

On reflection, the fact that the literal rewiring of the global economy and national economies has not been the subject of much debate and research is a striking example of how hard it is for us to see large phenomena that are in plain view. Another is the astonishingly little attention economists paid to the explosion of bank balance sheets ahead of the financial crisis, one of the most dramatic macro-level phenomena. It does make you ask what else we are missing.

[amazon_image id=”069112812X” link=”true” target=”_blank” size=”medium” ]The Princeton Encyclopedia of the World Economy. (Two volume set)[/amazon_image]