Why did the economies of continental Europe fail to converge on the US after their brilliant post-second world war resurgence and then, more recently, start falling behind again (see charts)? Why are they mired in high unemployment? What do these facts tell us about their economic model? Last year’s Nobel laureate, Edmund (Ned) Phelps of Columbia University responds by arguing that continentals have chosen the wrong system: corporatism.

As Prof Phelps noted in his Nobel lecture, he starts from a rejection of orthodox neoclassical economics.* This, he insists, abstracted from the “distinctive character of the modern economy – the endemic uncertainty, ambiguity, diversity of belief, specialisation of knowledge and problem solving”.