A Culture of Growth

The Origins of the Modern Economy

Joel Mokyr

• Publisher: Princeton University Press
• Year: 2016
• ISBN:
  9781400882915
• Topic: Economía
• Subtopic: Historia económica

Why Enlightenment culture sparked the Industrial Revolution During the late eighteenth century, innovations in Europe triggered the Industrial Revolution and the sustained economic progress that spread across the globe. While much has been made of the details of the Industrial Revolution, what remains a mystery is why it took place at all. Why did this revolution begin in the West and not elsewhere, and why did it continue, leading to today's unprecedented prosperity? In this groundbreaking book, celebrated economic historian Joel Mokyr argues that a culture of growth specific to early modern Europe and the European Enlightenment laid the foundations for the scientific advances and pioneering inventions that would instigate explosive technological and economic development. Bringing together economics, the history of science and technology, and models of cultural evolution, Mokyr demonstrates that culture—the beliefs, values, and preferences in society that are capable of changing behavior—was a deciding factor in societal transformations.Mokyr looks at the period 1500–1700 to show that a politically fragmented Europe fostered a competitive "market for ideas" and a willingness to investigate the secrets of nature. At the same time, a transnational community of brilliant thinkers known as the "Republic of Letters" freely circulated and distributed ideas and writings. This political fragmentation and the supportive intellectual environment explain how the Industrial Revolution happened in Europe but not China, despite similar levels of technology and intellectual activity. In Europe, heterodox and creative thinkers could find sanctuary in other countries and spread their thinking across borders. In contrast, China's version of the Enlightenment remained controlled by the ruling elite.Combining ideas from economics and cultural evolution, A Culture of Growth provides startling reasons for why the foundations of our modern economy were laid in the mere two centuries between Columbus and Newton.

Part I

Evolution, Culture, and Economic History

Chapter 1

Culture and Economics

The world today is richer than it has ever been. We know a great deal about the economic transformations that made it this way thanks to a vast literature examining every possible aspect of modern economic growth taking place since ca. 1800. We know what happened, and we know more or less how and where it happened. What remains very much a mystery is why. This book tries to provide an answer.

The basic facts are not in dispute. The British Industrial Revolution of the late eighteenth century unleashed a phenomenon never before even remotely experienced by any society. Of course, innovation has taken place throughout history. Milestone breakthroughs in earlier times—such as water mills, the horse collar, and the printing press—can all be traced more or less, and their economic effects can be assessed. They appeared, often transformed an industry affected, but once incorporated, further progress slowed and sometimes stopped altogether. They did not trigger anything resembling sustained technological progress, and their effects on income were small and in many cases barely enough to offset population increase. As late at 1754 David Hume summarized the economic history of the world until that time by noting that “if the general system of things, and human society of course, have any … gradual revolution, they are too slow to be discerned in that short period. … Stature and force of body, length of life, even courage and genius, seem hitherto to have been in all ages pretty much the same” (Hume [1754] 1985, p. 378). As a description of the past, Hume’s summary is consistent with much of the consensus in economic history today (leaving aside, perhaps, courage, on which little has been said).

But as a prognostication of what was to come, this turned out to be spectacularly incorrect, and Hume was wise to add the qualification “hitherto.” The early advances in the cotton industry, iron manufacturing, and steam power of the years after 1760 became in the nineteenth century a self-reinforcing cascade of innovation, one that is still very much with us today and seems to grow ever more pervasive and powerful. If economic growth before the Industrial Revolution, such as it was, was largely driven by trade, more effective markets and improved allocations of resources, growth in the modern era has been increasingly driven by the expansion of what was known in the age of Enlightenment as “useful knowledge.”

What had started in a few counties in the English midlands and the Scottish lowlands soon spread to the European continent and to America. By the end of the nineteenth century, the Industrial Revolution had transformed the economies of much of Europe and the European offshoots, and it began to spread to Japan and other non-Western economies. Transformative technological change turned from an unusual and remarkable phenomenon to something routine, expected. By 1890, one might not know what kind of and where a wave of technological progress would erupt, but one got accustomed to something happening. The results were inescapable: nearly everywhere on the planet men and women lived longer, ate better, enjoyed more leisure, and had access to resources and delights that previously had been reserved for the very rich and powerful, or more commonly, had been utterly unknown. With these blessings came disruptions, environmental disasters, and at times utter destruction. Technology and economic might provide the human race with more powerful tools, nothing more. Today, although the rate of measured economic growth in the industrialized world has slowed down, such blessings and curses are still piling up. Measured economic growth in the industrializing economies in the nineteenth and twentieth centuries approached a rate of 1.5–2.0 percent a year, perhaps ten times faster than before. Moreover, the resulting prosperity turned out to be persistent. Despite a series of self-inflicted political and economic disasters in the twentieth century, the industrialized West recovered miraculously after 1950 and was able to reach living standards that would have been unthinkable in 1914, let alone in 1800.

There can be no doubt that growth of this kind, while of global consequences, started in the West. What used to be known as the literature on “the rise of the west” or “the European Miracle” (following E. L. Jones’s seminal 1981 book)—now more commonly referred to as “the Great Divergence” or “the Great Enrichment”—documents and describes the West’s leadership in the emergence of Modern Growth. But a consensus on why this happened seems remote.¹ Some scholars have branded the writings of those who point to the Western origins of modern economic growth as “Eurocentric,” implying that such explanations suggest some kind of inherent superiority of European culture or institutions. While it is undeniable that some accounts have tried to credit some aspect or other of Western civilization, most scholars have eschewed such simple arguments and tried either to avoid cultural explanations altogether or to come to grips with the question of why certain values and beliefs differed systematically. One can write such histories without sounding “triumphalist” (Goldstone, 2012). The account below should be seen as part of this tradition.

In this book, I propose a new explanation, largely based on events in Europe. It is one that relies on something I call “culture,” but unlike most accounts that rely on this vague concept, the notion of culture I deploy will be circumscribed and defined with precision. The great economist Robert Solow once remarked that all attempts to explain differences in economic performance and growth using culture “end up in a blaze of amateur sociology” (quoted in Krugman, 1991, p. 93, n. 3). Perhaps. But if we are to look for institutions to explain historical development, can culture be far behind?

My approach simultaneously resolves two difficulties in the “Great Divergence” literature, one historical and one economic. The historical riddle is what might be called the great dilemma of the new institutional economic history: much of the literature in economic history that is trying to explain differences in economic performance and living standards, both by economists and historians, has accepted in one way or another Douglass North’s call for the integration of institutions into our narrative of economic growth (Acemoglu and Robinson, 2012; Sened and Galiani, 2014). An economy that grows as a result of favorable institutions requires a world of well-delineated and respected property rights, enforceable contracts, law and order, a low level of opportunism and rent-seeking, a high degree of inclusion in political decision making and the benefits of growth, and a political organization in which power and wealth are as separate as is humanly possible. Such institutions—whether part of the formal political structure (as embodied for example in a constitution) or based on private-order institutions—are credited with many positive economic developments in the past: the rise of more effective product and factor markets (and thus more efficient allocations), the growth of international and interregional trade, and the accumulation of capital, to name a few. But, as other scholars (Vries, 2013, p. 433; McCloskey, 2016b) have argued, the puzzle is that better markets, more cooperative behavior, and more efficient allocations simply do not in themselves account for modern economic growth. What is far harder to explain is the growth of technological creativity and innovation in Europe and especially the surge following the middle of the eighteenth century. The Industrial Revolution, in the sense of an acceleration of technological progress, at first blush does not seem to have been a response to any obvious institutional stimulus. We actually know remarkably little about the kind of institutions that foster and stimulate technological progress and more widely, intellectual innovation.

The second riddle is closely related but looks at the problem from a different, more economic, point of view. If the generation and continuous improvement of new “useful knowledge”—both scientific and technological—is at the core of modern economic growth, the riddle is one of motivation or incentives. Knowledge, as has long been understood, is an unusual commodity, subject to rather serious public good properties: it is very hard to exclude others from using it, and the cost to the owner from sharing it is negligible or zero. As a result, economists suspect that knowledge tends to be chronically underproduced, because those who spend resources, time, and effort generating it have difficulty appropriating any returns. As far as technology or prescriptive knowledge is concerned, the existence of a patent system or other ways to reward inventors has provided a (very) partial solution.² But advances in natural philosophy and propositional knowledge could not be patented. This is especially problematic because the growth of technological knowledge by itself, without the constant interaction with some form of formal or informal science, would not have been able to generate growth and development at the rates observed. The issue of the exact role of science in the Industrial Revolution is still debated, but there can be no doubt that as growth accelerated, the input from science increased and became the dominant motive power at some point after 1830.

As this book makes clear, the solutions to the historical and the economic riddles coincide. My focus is on the period from 1500 to 1700, during which the cultural foundations of modern growth were laid. These foundations grew out of a set of political and institutional developments and cultural changes that were not intended to produce these results, and their deeply contingent nature is a recurrent theme in these pages.

A famous distinction made in Jewish law illustrates the difference between the type of phenomena we associate with institutions, on the one hand, and the importance of process and product innovation fed by growing human knowledge of natural forces on the other. The Talmudic tradition distinguishes between affairs that concern relations between the individual and others, and the relations between the individual and makom—a somewhat unusual name for the deity, meaning literally “place” and practically interpreted as one’s physical environment.³ Commerce, the division of labor, effective markets in labor, credit and land, and similar institutions associated with Smithian growth were all outcomes of games between people. They depended on what values people adhered to and what they believed about others’ values and behavior. What is less discussed is a set of cultural beliefs that pertain to games against nature, in which individuals try to understand natural regularities and exploit them to their advantage. Religious beliefs and metaphysical attitudes condition a society’s willingness to investigate the secrets of nature, alter its physical environment irreversibly, and “play God.” Technology is at its very core a relation of people with the physical environment and not with other people. For such practical matters as the diffusion and implementation of new techniques, of course, social relations are central to technological progress. But in the end the willingness to challenge nature in some way to reveal one of her secrets is based on metaphysical beliefs held at the individual level.

The drivers of technological progress and eventually economic performance were attitude and aptitude. The former set the willingness and energy with which people try to understand the natural world around them; the latter determines their success in turning such knowledge into higher productivity and living standards.⁴ In this book I will be concerned with attitudes. The proposition I put forward here is that the explosion of technological progress in the West was made possible by cultural changes. “Culture” affected technology both directly, by changing attitudes toward the natural world, and indirectly, by creating and nurturing institutions that stimulated and supported the accumulation and diffusion of “useful knowledge.” For quite a few years now, economists have become increasingly open to the idea that long-term economic change cannot be seriously analyzed without some concept of “culture” and some idea of how it changes and why these changes matter. McCloskey’s massive trilogy (2006, 2010, 2016a) is by far the most significant of these analyses, but many mainstream economists are now committed to the significance of culture in the evolution of modern economies.⁵ The reason this is so has been ob vious for a long time. Individuals are assumed to have preferences and beliefs that determine how they are likely to act both toward others and toward their natural environment. However, these cultural elements can change, and we want to know why they change, and why at times culture changes at a tectonic pace, and at others with startling rapidity (Jones, 2006). But “culture” is a vague and mushy word, and as such is not a satisfactory term: here we need to be much more specific about whose culture and what specific elements of it mattered. Moreover, we must understand how culture changes and why societies have different cultures. If economists cannot contribute to this literature, they should leave it to other social scientists, but in that case they must concede much of the explanation of modern economic growth to others. An alternative is to see what historians and students of “culture” (in a certain sense) have had to say and incorporate their insights into the economic narrative (Vries, 2001).

To start with: Culture means various things to different people, and to begin, we need to clarify the concept and our use of it. Given the rather astonishing popularity of the concept of culture in the social sciences and the humanities and the mind-boggling number of definitions employed, it is useful for an economist to start off by defining precisely what is included in and excluded from “culture” and how it differs from “institutions,” before we examine its role in the origins of modern economic growth.⁶ The definition I use here (and one very similar to the definition proposed by Boyd and Richerson, 1985, p. 2) is: 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. In what follows, my approach is similar to and inspired by the literature on cultural evolution proposed by some anthropologists. It will have little in common with “cultural studies” and the cultural analysis implied by social constructivism.

What does this definition buy us? First, beliefs contain statements of a positive (factual) nature that pertain to the state of the world, including the physical and metaphysical environments and social relations.⁷ Second, values pertain to normative statements about society and social relations (often thought of as ethics and ideology), whereas preferences are normative statements about individual matters such as consumption and personal affairs. Third, culture is decomposable, that is, it consists of separate cultural elements or features. Much like genes, these traits are largely shared by people of the same culture; a single individual cannot have a cultural trait that is not shared by others, but each individual is unique in that it is highly unlikely that two people share precisely the same combination of cultural elements. There is no puzzle here: by analogy, all individuals have somewhat different genotypes (identical twins excluded) yet they share the vast bulk of their genes with other people and even with other mammals that have quite different phenotypes. Furthermore, this definition stresses that culture involves social learning, so that one’s beliefs, values, and knowledge are not built-up from scratch for each individual but are acquired from others. The key concepts of attitude and aptitude are contained in the larger category of culture, and they will remain at the center of the discussion.

One could argue whether behavior itself (that is, actions) should be included in the concept of culture, but it seems useful to separate actions (which may be driven by a combination of cultural and other causes) from culture that guides and constrains it, although a great deal of culture, much like junk DNA that does not code for any known proteins, just “is” there in our minds and conditions no actions. The use of these evolutionary terms suggests an analogy that treats culture as genotypical and actions as phenotypical. Although tempting (and the subject of a large literature), such analogies should be carried out cautiously, as facile projections from one subject area to another are fraught with pitfalls. The argument that social phenomena or historical developments can be analyzed as analogous to biological processes is more misleading than helpful. Rather, my approach here is derived directly from the approach outlined in Aldrich et al. (2008), in which we argued that Darwinism in a historical framework is more of a general tool of analysis. The basic argument is not a facile shoe-horning of complex social phenomena into a framework derived from biology but rather a generalized Darwinism that “relies on the claim of common abstract features in both the social and the biological world; it is essentially a contention of a degree of ontological communality, at a high level of abstraction and not at the level of detail” (Aldrich et al., p. 579).⁸

Before proceeding, it is important to distinguish between such terms as “culture” and “institutions.” For my purposes it seems best to regard culture as something entirely of the mind, which can differ from individual to individual and is, to an extent, a matter of individual choice. Institutions are socially determined conditional incentives and consequences to actions. These incentives are parametrically given to every individual and are beyond their control. In that way institutions produce the incentive structure in a society. Institutions as “rules” can be seen as a special case: the rules specify certain behaviors to be proper and legal, but they also specify the penalties for breaking them and the rewards for meeting them.⁹ Beliefs and preferences are the “scaffolds,” to use Douglass North’s (2005) term, of institutions. In a sense culture forms the foundation of institutions, in that it provides them with legitimacy.¹⁰ In a different context, Leighton and López (2013, pp. 11, 112–22...