Science, Bourgeois Dignity, and the Industrial Revolution

What happened to make for the factor of 16 were new ideas, what Mokyr calls “industrial Enlightenment.” But the Scientific Revolution did not suffice. Non-Europeans like the Chinese outstripped the West in science until quite late. Britain did not lead in science---yet clearly did in technology. Indeed, applied technology depended on science only a little even in 1900.scientific revolution, science, technology, industrial enlightenment, applied technology

Domestic Reshufflings, Such as Transport and Coal, Do Not Explain the Modern World

Transportation improvements cannot have caused anything close to the factor of 16 in British economic growth. By Harberger’s (and Fogel’s) Law, an industry that is 10% of national product, improving by 50 percent on the 50% of non-natural routes, results in a mere one-time increase of product of 2.5% (= .1 x .5 x .5), when the thing to be explained is an increase of 1500%. Nor is transport rescued by “dynamic” effects, which are undermined by (1.) the small size of the static gain to start them off and (2.) the instable economic models necessary to make them nonlinear dynamic. The same holds for many other suggested causes of the modern world: enclosure, for example, or the division of labor or the Kuznets-Williamson Hypothesis of reallocation from agriculture to industry, country to town. Wider geographical arguments, such as Diamond’s or Sachs’, turn out to be ill-timed to explain what we wish to explain. And “resources,” such as oil or gold, have both the Harberger Problem and the timing problem. Not even coal---the favorite of Wrigley, Pomeranz, Allen, and Harris---can survive the criticism that it was transportable and substitutable. The factor-bias arguments of Allen have the old problem of the Habbakuk Hypothesis, namely, that all factors are scarce. Even if we add up all the static and quasi-dynamic effects of resources, they do not explain Britain’s lead, or Japan’s or Hong Kong’s catching up.British economic growth, transportation, coal, growth hypotheses, industrial revolution

The immoral equivalent of war

Estamos en guerra, dicen todos los presidentes, los presidentes reflexivos y cuasi liberales como Emmanuel Macron en Francia y Moon Jae-in en Corea, así como los irreflexivos y cuasi fascistas como Donald Trump en Estados Unidos y Viktor Orbán en Hungría. Una guerra terrible. Pero lo peor no es la guerra contra la enfermedad y, como daño colateral, el aplastamiento de la economía, por miserables que sean. La peor parte es la probabilidad de posguerra de un estatismo triunfante, y luego el fascismo al que regularmente da lugar el estatismo triunfante. La enfermedad es para 2020. El fascismo es para siempre.We are in a war, say all the presidents, the thoughtful and quasi-liberal presidents such as Emmanuel Macron in France and Moon Jae-in in Korea, as well as the thoughtless and quasi-fascist ones such as Donald Trump in the US and Viktor Orbán in Hungary. A terrible war. But the worst part is not the waritself against the disease and, as collateral damage, the crushing of the economy, wretched though they are. The worst part is the post-War likelihood of a triumphant statism, and then the fascism to which triumphant statism regularly gives rise. The disease is for 2020. The fascism is forever.peerReviewe

Creative Language, Creative Destruction, Creative Politics

Why did the North-Sea folk suddenly get so rich, get so much cargo? The answers seems not to be that supply was brought into equilibrium with demand---the curves were moving out at breakneck pace. Reallocation is not the key. Language is, with its inherent creativity. The Bourgeois Revaluation of the 17th and 18th centuries brought on the modern world. It was the Greatest Externality, and the substance of a real liberalism. Left and right have long detested it, expressing their detestation nowadays in environmentalism. They can stop the modern world, and in some places have. The old Soviet Union was admired even by many economists---an instance of a “cultural contradiction of capitalism,” in which ideas permitted by the successes of innovation rise up to kill the innovation. We should resist it.innovation; bourgeois revaluation; liberalism; success of innovation

Britain, China, and the Irrelevance of Stage Theories

Britain was first, though the classical (and many of the neoclassical) economists did not recognize that its course was beginning the factor of 16. The slow British growth in the 18th century proposed by Crafts and Harley is unbelievable, but however one assigns growth within the period 1700-1900 it is now plain that something unprecedented was happening. Only non-economists recognized it at the time. The central puzzle is why innovation did not fizzle out, as Mokyr has put it---as it had at other times and places. Productivity in cotton textiles, for example, grew at computer-industry rates, and continued to into the 20th century. But Europe’s lead was not permanent. The California School of Pomeranz and Goldstone and Allen and others have shown that China led the West in 1500, and maybe as late as 1750, then fell dramatically behind. It was the continuation of European growth in the 19th and 20th centuries that is strange and new. Explaining the Great Divergence requires focusing on non-European events in the 19th century---not some deep-seated European cultural superiority. On the other hand, Europe’s fragmented polity was an advantage, as shown in the swift uptake of the printing press. The way that non-European places like Japan or Botswana or India have been able to grow demonstrates that the stage theories popular in European thought from the 18th century to the present (for example, in modern growth theory) are mistaken. The metaphors of biological stages or human foot races are inapt, as in the business-school talk of “competitiveness” nowadays. The “rise” of non-European economies does not presage a “decline” or Europe or its offshoots, merely a borrowing of social and engineering technologies such as Europe once borrowed from elsewhere. The dignity and liberty of ordinary people stands in the middle of such “technologies.”industrial revolution, economic history, growth theory, productivity, Britain, China, non-European economies

The Institution of Douglass North

North, with many other Samuelsonian economists, thinks of “institutions” as budget constraints in a maximization problem. But as Clifford Geertz put it, an institution such as a toll for safe passage is “rather more than a mere payment,” that is, a mere monetary constraint. “It was part of a whole complex of moral rituals, customs with the force of law and the weight of sanctity.” The Geertzian metaphor of negotiation and ritual makes more sense than the metaphor of a mere budget constraint. Meaning matters. North in particular thinks that the budget line of anti-property violence was shifted in the late 17th century. It was not: on the contrary, England was a land of property rights from the beginning. So “institutional change” does not explain the Industrial Revolution. The timing is wrong. Incentive (Prudence Only) is not the main story, and cannot be the main story without contradiction: if it was Prudence Only the Industrial Revolution would have happened earlier, or elsewhere. Other virtues and vices mattered—not only prudence, beloved of the Samuelsonians; but temperance, courage, justice, faith, hope, and love, which changed radically in their disposition in the seventeenth and eighteenth centuries. Sheer commercial expansion is routine and predictable and ill-suited therefore to explaining the greatest surprise in economic history. The Glorious Revolution of 1689, which North and Weingast have cast in a central role, merely made the British state effective. It did not change property rights, as economists such as Darin Acemoglou have supposed, on the basis of North’s tale. North praises patents and incorporation laws, neither of which had much impact in the Industrial Revolution. The 18th century, in other words, was not a century of “institutional change.” Nor is the entire absence of property relevant to the place or period. Richard Pipes argued it was relevant, on the basis of the Russian case. Yet only in society’s dominated by Steppe nomads was property weak---in Europe in the 16th and 17th centuries, as in China then, it had been strong for centuries past. The Stuarts were not princes of Muscovy. And indeed private property characterizes all settled human societies.Douglass North, Industrial Revolution, institutions, Clifford Geertz, institutional change, virtues

The Inheritance of Gregory Clark

An extreme materialist hypothesis explaining the Industrial Revolution would be simply genetic. Gregory Clark asserts such a theory of sociobiological inheritance in his Farewell to Alms (2007). Rich people proliferated in England, Clark argues, and by a social Darwinian struggle the poor and incompetent died out, leaving a master race of Englishmen with the bourgeois values to conquer the world. Clark will have no truck with ideas as causes, adopting a materialist (and as he believes is implied by materialism a quantitative) theory of truth. His method, that is, follows Marx in historical materialism, as many scholars did 1890 to 1980. But he does not follow through on his promise to show his argument quantitatively. The argument fails, on many grounds. For one thing, non-English people succeeded, as for instance the Chinese now are succeeding. And such people have always done fine in a bourgeois country. For another, Clark does not show that his inheritance mechanism has the quantitative oomph to change people generally into bourgeois, nor does he show that bourgeois habits of working hard mattered, or that bourgeois values caused innovation. What made for success in 1500 is not obviously the same as what made for innovation in 1800. And in the modern world of literacy such values are not transmitted down families, but across families. Literal inheritance anyway dissipates in reversion to the mean. What mattered in modern economic growth was not a doubtfully measured change in the inherited abilities of English people. What mattered was a radical change 1600-1776, “measurable” in every play and pamphlet, in what English people wanted, paid for, revalued.gregory clark, economic history, industrial revolution, sociobiological inheritance

Slavery and Imperialism Did Not Enrich Europe

Since trade was not an engine, neither was a part of trade, such as the trade in slaves. And certainly the profits from the trade did not finance the Industrial Revolution. Imperialism, too, was a mere part of trade, and despite the well-deserved guilt that Europeans feel in having perpetrated it, it was not an engine of their growth. Stealing from poor people is not a good business plan. Certainly the possession of India did little for the great British public, except tax them for the Navy. That Europeans did not benefit from imperialism does not mean that imperialism was good for the imperalized. That a thief kills his victim does not add to the thief’s monetary profit, and some imperialism was certainly killing. The cases of simple theft, such as the Belgian Congo, did nothing to enrich the average Belgian. Nor have internal imperialisms, such as apartheid, been profitable. The episode of economic success in Europe came from domestic sources of innovation, not from exploitation

Growth, Quality, Happiness, and the Poor

Real national income per head in Britain rose by a factor of about 16 from the 18th century to the present. Other cases, such as that of the U.S. or Korea, have been even more startling, historically speaking. Like the realization in astronomy during the 1920s that most of the “nebulae” detected by telescopes are in fact other galaxies unspeakably far from ours, the Great Fact of economic growth, discovered by historians and economists in the 1950s and elaborated since then, changes everything. And 16, if one follows William Nordhaus’ persuasive arguments about quality improvements in (say) lighting, is a very low lower bound: the true factor is roughly 100. As Maxine Berg has argued, changing quality of products was as important as changes in process. But the gain is not to be measured by pot-of-pleasure “happiness studies.” These are questionable on technical grounds, but especially on the grounds that they do not measure human fulfillment. They ignore the humanities, pretending to scientific precision. It makes more sense to stay with things we economists can actually measure, such as the rise of human scope indicated by the factor of 16 or Nordhaus’ factor of 100, or by what Sen and Nussbaum call “capabilities.” Of course, what we really care about are the scope or capabilities of the poor. These have enormously expanded under “capitalism”---though a better word is simply “innovation,” arising from bourgeois dignity and liberty. It is the Bourgeois Deal: let me alertly seek profit, and I will make you rich.

Britain, China, and the Irrelevance of Stage Theories

Britain was first, though the classical (and many of the neoclassical) economists did not recognize that its course was beginning the factor of 16. The slow British growth in the 18th century proposed by Crafts and Harley is unbelievable, but however one assigns growth within the period 1700-1900 it is now plain that something unprecedented was happening. Only non-economists recognized it at the time. The central puzzle is why innovation did not fizzle out, as Mokyr has put it---as it had at other times and places. Productivity in cotton textiles, for example, grew at computer-industry rates, and continued to into the 20th century. But Europe’s lead was not permanent. The California School of Pomeranz and Goldstone and Allen and others have shown that China led the West in 1500, and maybe as late as 1750, then fell dramatically behind. It was the continuation of European growth in the 19th and 20th centuries that is strange and new. Explaining the Great Divergence requires focusing on non-European events in the 19th century---not some deep-seated European cultural superiority. On the other hand, Europe’s fragmented polity was an advantage, as shown in the swift uptake of the printing press. The way that non-European places like Japan or Botswana or India have been able to grow demonstrates that the stage theories popular in European thought from the 18th century to the present (for example, in modern growth theory) are mistaken. The metaphors of biological stages or human foot races are inapt, as in the business-school talk of “competitiveness” nowadays. The “rise” of non-European economies does not presage a “decline” or Europe or its offshoots, merely a borrowing of social and engineering technologies such as Europe once borrowed from elsewhere. The dignity and liberty of ordinary people stands in the middle of such “technologies.