Ideas and Economic Growth
By Arnold Kling
What counts for economic history was the beginning of a long and drawn-out rise in the belief in the transformative powers, social prestige, and virtuousness of useful knowledge. Without the continuous emergence of new techniques based on a better understanding of natural processes, growth will inexorably grind to a halt.
—Joel Mokyr, A Culture of Growth, pages 267-268.
Economic historian Joel Mokyr has written a capstone work on the dynamics of the industrial revolution.1 The book has several overlapping themes:
- 1. Sustained economic growth involves continuous innovation that integrates scientific findings with practical know-how.
- 2. The growth process is favored by positive feedback mechanisms. New inventions enhance material conditions. Better material conditions promote institutional improvements. Institutional improvements foster the acquisition and spread of knowledge. More knowledge in turn gives rise to new inventions.
- 3. However, the growth process is also subject to negative feedback mechanisms. There is the Malthusian collision between increases in population and diminishing returns in production. There is an increased incentive for predation. Finally, there is resistance from those whose prestige rests on their role as guardians of traditional wisdom.
- 4. In Western Europe in the period from 1500 to 1800, an intellectual movement arose that was powerful enough to overcome the inertia of traditional wisdom. The fear of heresy came to be replaced by admiration for progress in science and material conditions.
A fundamental issue in all of the disciplines that study human society, including economics, is the relative role of material conditions versus human agency as causal forces. Many writers focus on material conditions. For example, such a viewpoint can be seen in the title of Jared Diamond’s famous Guns, Germs, and Steel.2 Those of us on the other side of that debate, including Mokyr, assign more credit to intangible factors, notably ideas and culture.
Mokyr notes that the term “culture” takes on many meanings. In order to be more precise, he offers his preferred definition:
Culture is a set of beliefs, values, and preferences, capable of affecting behavior, that are socially (not genetically) transmitted and that are shared by some subset of society. (page 8)
“Mokyr argues that the subset of society that initially developed the culture that would lead to the industrial revolution was a relatively tiny elite that combined intellectual curiosity with practical interests.”
Mokyr argues that the subset of society that initially developed the culture that would lead to the industrial revolution was a relatively tiny elite that combined intellectual curiosity with practical interests. His longest chapter, and what struck me as the centerpiece of the book, is called “Competition and the Republic of Letters.”
The Republic of Letters that began to emerge in Europe around the time of the great voyages and reached a crescendo in the age of Enlightenment is the most significant institutional development that explains the technology-led quantum leap in economic performance heralded by the Industrial Revolution. (page 222)
The Republic of Letters was a multi-national network of scientists and tinkerers. One of their important values was “open science,” meaning that they agreed that findings should be disseminated and discussed. Rather than compete on the basis of private knowledge, they competed for prestige based on their contributions to generally available knowledge.
The growth of open science as the central institutional principle of the intellectual world of early modern Europe… was an emergent property, the unintended consequence of a different phenomenon: scholars trying to build reputations among their peers… (page 183)
The Republic of Letters was supported more by the printing press and the newly-developed postal networks than by existing institutions.
Most universities tended to be conservative and protective of entrenched knowledge, which limited their ability to transform elite cultural beliefs. (page 189)
One cannot help but wonder to what extent universities continue to play this role, with the Internet perhaps the contemporary analogue to the printing press and the postal networks.
Mokyr says that the ethos of the Republic of Letters created an open market for ideas. The participants in this new market had to replace the focal point of ancient wisdom with new criteria for judging ideas.
The most important of these were… mathematics where it was applicable… the validity of experimental data in those fields where experiments were possible, and the collection and careful taxonomy of empirical observations where neither of those approaches worked…. (page 190)
Mokyr credits Francis Bacon and Isaac Newton with playing important roles in bringing about the Republic of Letters. Bacon instilled in intellectuals a belief in material betterment through the accumulation of useful knowledge. Newton clearly demonstrated that science could progress beyond the wisdom of the ancients.
Still, Mokyr also falls back on a materialist story.
The key to Europe’s success was its fortunate condition that combined political fragmentation with cultural unity. (page 215)
Without cultural unity, it would have been impossible for ideas to spread and to cross-fertilize. Without political fragmentation, Mokyr argues, it would have been too easy for reactionary forces to repress new ideas. Because of fragmentation, a heterodox intellectual could always look to another European polity for refuge, or even patronage.
While individuals from many European countries participated in the Republic of Letters, Great Britain experienced the earliest and strongest industrial take-off. Mokyr’s explanation for this is given in the title of another chapter, “Puritanism and British Exceptionalism.” He argues that the Puritans and like-minded individuals carried the torch of Bacon’s progressive vision of utilitarian science, enabling it to take firm root in British soil.
Mokyr argues that China never was able to sustain an intellectual movement comparable to the Republic of Letters. It could not overcome the inertia embedded in its public administration examination system, which put great emphasis on the student’s ability to memorize ancient wisdom.
The Mandarinate consisted of individuals who had voluntarily submitted to intensive indoctrination by an orthodox ideology… The unassailability of these texts remained the most effective bulwark against troublesome innovators… until the nineteenth century we cannot find scientists willing to abandon values and beliefs that had evolved for thousands of years in the view of “proven facts.” (page 305)
For more on these topics, see the EconTalk podcast episodes Joel Mokyr on Growth, Innovation, and Stagnation and Manzi on Knowledge, Policy, and Uncontrolled. For background information, see Industrial Revolution and the Standard of Living, by Clark Nardinelli and Standards of Living and Modern Economic Growth, by John V. C. Nye in the Concise Encyclopedia of Economics, and also the EconTalk podcast episode McCloskey on Capitalism and the Bourgoies Virtues.
Mokyr emphasizes that prior to 1500, Europe was no more ready than China to embark on a voyage of economic progress fueled by innovation and science. Intellectuals in medieval Europe were isolated from the material world and unwilling to question ancient wisdom. They would not have been interested in working with new instruments or inventions. Once Bacon and Newton had helped to forge a new intellectual climate, the conditions for an Industrial Revolution could be created.
There are other opinions about the Industrial Revolution. Reviewing Mokyr’s book in Nature, economist Brad DeLong remarks that he prefers the view of another economic historian, Robert Allen.
In Allen’s view, the only route to modern economic growth required an array of elements never seen together before in Britain. Among them were high, imperialism-driven wages; cheap coal next to an ample canal network; and an open trading network allowing for a vast expansion of textile exports.3
The controversy over the relative role of material factors and intangible factors is not going to be settled easily. There is too much of what James Manzi calls “causal density” at work.4 Still, I find it difficult to agree that coals, canals, and a trading network are sufficient to launch a long period of exponential growth.
When I was in graduate school forty years ago, economic historian Charles Kindleberger warned students away from writing on the Industrial Revolution. He referred to it as a “well-squeezed orange.” This turns out not to be the case. Many interesting works have appeared in recent years, and Joel Mokyr’s A Culture of Growth is particularly juicy.
Joel Mokyr, A Culture of Growth: The Origins of the Modern Economy, Princeton University Press, 2016.
Jared Diamond, Guns, Germs, and Steel: The Fates of Human Societies. W. W. Norton & Company, 1999.
*Arnold Kling has a Ph.D. in economics from the Massachusetts Institute of Technology. He is the author of several books, including Crisis of Abundance: Rethinking How We Pay for Health Care; Invisible Wealth: The Hidden Story of How Markets Work; Unchecked and Unbalanced: How the Discrepancy Between Knowledge and Power Caused the Financial Crisis and Threatens Democracy; and Specialization and Trade: A Re-introduction to Economics. He contributed to EconLog from January 2003 through August 2012.
For more articles by Arnold Kling, see the Archive.