Balzan Preis 2015 für Wirtschaftsgeschichte
Synthese der Forschung – Bern, 12.11.2015 Forum (Video + Text – englisch)
As an economic historian, the central question on anyone’s mind is the emergence of modern economic growth or, as McCloskey (2015) refers to it, the Great Enrichment. In the last two centuries, living standards, however measured, have risen by a far greater factor than in all of human history before. The metaphor of a hockeystick — a long flat handle and a sharply upturning blade — is as apposite for per capita income and economic or biological measures thereof as it is for the atmosphere’s temperature or the oceans’ acidity. Indeed, the two are of course closely related.
What has kept us economic historians busy for many decades now is the question why this happened at all, and why it happened when and where it did. Many bookshelves are devoted to the issue, and many theories have been suggested (Jones, 1981; Clark, 2007; Galor, 2011; McCloskey, 2010) . What we do know with certainty is that the phenomenon started in Western Europe in the middle of the eighteenth century, and that it took almost a century to switch into high gear. Among the many plausible theories that have been suggested are Europe’s geography and location, its classical heritage, the high cost of labor, religion, and the rise of nation states that provided Europe with institutions that led to the rule of law and a higher level of property protection.
It is not my intention to provide a complete survey of this literature here, but rather to highlight one factor that until my work came around has not been connected to the Industrial Revolution and all that came after: the European Enlightenment. The literature on the Enlightenment is at least as large as that on the Industrial Revolution, yet oddly enough the two phenomena have rarely been explicitly connected. There are at least two reasons for this omission. One is that the historiography has always seen the Industrial Revolution as a British phenomenon while the Enlightenment has been seen as primarily French. This distinction is profoundly mistaken: they were both fundamentally western European phenomena, in which we see British and French actors, but also Italians, Germans, Swiss, Dutch and Scandinavians. The other reason is that economists, until quite recently, have eschewed explanations that reeked of culture. While they may have paid some lip service to seminal scholars such as Max Weber (1905) and David Landes (1998), they felt more comfortable with arguments that dealt with prices and resource constraints. Culture used to be something best left to other scientists or humanists. In recent years, this has changed dramatically: economists have rediscovered culture and are trying to integrate it with modern economics (Tabellini, 2007, 2008; Guiso, Sapienza and Zingales, 2006; Spolaore and Wacziarg, 2013; Bisin and Verdier, 2011).
The European Enlightenment is one of the central cultural phenomena of all times. It has been controversial: some modern scholars have criticized it severely and even blamed for everything bad that happened subsequently including, absurdly, the rise of totalitarianism. Others have felt that there was enough diversity and disagreement among the philosophes that we should speak of many enlightenments instead of one. Whatever the case, it seems clear that the Enlightenment preceded the Industrial Revolution, and affected the same countries. Yet that by itself is far from proving any kind of causality. We must suggest mechanisms by which the Enlightenment may have affected technological progress and its economic effects. In my books Mokyr (2002) and (2009) I have made that argument. The mechanism worked through two channels.
The first channel was what I have called the Industrial Enlightenment. Enlightenment thinkers increasingly came to believe in a very material version of progress, one that would be very close to our modern notion of economic growth (although eighteenth century thinkers of course did not use that term). Specifically, they believed that such progress was a feature of their own history, and that it could be sustained for a long time, Second, they mostly believed that such progress was a desirable phenomenon, one that should be the object of both policy makers and ordinary citizens. Third, they suggested a detailed program on how to bring it about, and specifically how to encourage the growth of what they called “useful knowledge.” While they did not predict the enormous impact that science would have on the economy, some far-sighted clearly realized that knowledge was the key to progress. The Industrial Enlightenment did not blindly set its sights on science alone; they full-well realized that those who knew things, the savants, should cooperate with those who made things, the fabricants. The mutual exchange of information, they thought, was the cornerstone of progress — and so it turned out to be.
The second channel worked through what we would call growth-enhancing institutions. The Enlightenment increasingly rejected mercantilist notions that were based on the zero-sum notions of a previous generation. They realized that exchange of goods, services, knowledge and skills between nations would benefit all sides and that free markets, under certain restrictions, worked best. Equally important, they abandoned the ancient view that the glory and honor of the rulers were the main purpose of society and objective of economic activity. Instead, the intuitive notion of a civil economy slowly began to ripen, in which there was a social contract between the state, and the citizens, and which committed the state to act in the interests of its citizens and provide them with services that they could not get in other ways. The state needed to heed private property rights, could only tax the population with their consent, and was asked to enforce the rule of law while it pre-committed credibly to observe this rule itself. It is this belief, that institutions should serve the nation at large, which was at the heart of the institutional reforms inspired by the Enlightenment during the American and French Revolutions. While writers of course differed on the precise ways in which to enrich their nations and enhance the economic welfare of the population, they more or less agreed that it was the real purpose of policy, rather than the glory and power of the dynasty or the diffusion of their religion.
The importance of the growth of useful knowledge as the key to economic progress was one of the central pillars of the Industrial Enlightenment. The great scientific discoveries of the seventeenth century, and above all the path-breaking work of Isaac Newton in figuring out the mechanics of celestial bodies filled people with confidence about the role of human knowledge in securing economic progress. Newton was not the only scientist who helped change the way people saw the role of “natural philosophy” in bringing about a better life for Europeans, but there can be little doubt that the publication of his Principia in 1687 was the grand crescendo following the work of many hundreds of learned men and women since the early sixteenth century. It is hard to think of any other work that has so enhanced the belief in scientific progress, in the capability of humans to fathom the secrets of the universe and to harness this knowledge to improve the human condition.
The very notion that somehow the fathoming of natural phenomena and regularities is supposed to be directed at improving the human condition seems so utterly axiomatic to us that it hardly needs discussing. Basic research is still regarded as important by all thinking people (which, unfortunately does not include all members of the US Congress), but even if the research is not applied, we often hope that one day it will yield some unexpected fruit in agriculture, medicine, communications or entertainment. But a century before Newton such views were still quite novel and rare. Knowledge, the Ancients had taught, was its own reward. Knowledgeable people had richer lives and better characters, regardless of whether this knowledge was used for anything. The age of the great voyages and the Reformation, however, started to demonstrate the value of knowledge for solving day-to-day problems, in farming, in navigation, in medicine, in metallurgy, and many other areas. A program to carry out research that would solve many of the hard problems of daily life by investigating nature in novel ways started to emerge in the mid-seventeenth century. Historians know it today as the Baconian Program in honor of Francis Bacon who, by wide agreement, was its most influential proponent. The Baconian program became the heart and center of the Industrial Enlightenment, a powerful movement to carry out scientific research that would have practical benefits and improve human conditions or as Bacon put, bring about the “relief of man’s estate.” Enlightenment science would be unthinkable without this foundation.
The paramount question then becomes, why does the Enlightenment movement emerge in Europe and nowhere else? The answer I will suggest provides insights into the way we do science today and the outlook for science in the future. What we have to realize is that Europe in the centuries before the Enlightenment was a fractured and fragmented world. Not only that some entities such as Germany and Italy were divided into numerous autonomous cities and territories, but even seemingly coherent states such as France and Spain were full of autonomous or semi-autonomous “corporations” such as towns and universities, which ran their own affairs. Moreover, after the Reformation Europe was also fragmented religiously.
What this meant was that political units, big and small, competed with one another at many levels. Of course, the most prevalent and visible form this competition took was at the battlefield and the high seas, but rulers also competed to attract to their courts the best and the brightest people of Europe and offered them so-called patronage jobs. Patronage was not limited to scientists and philosophers: artists, musicians, astrologers, even jesters all tried to get such patronage jobs, which offered the successful both a steady income and a great deal of social prestige. What we see, then is a highly competitive market in which agents on both sides, demand and supply, competed with each other, trying to do as well as they could. As one might expect, the result was in many ways a very skewed distribution: a few superstars — Newton and Galileo more than anyone — did very well. A larger number found middling patronage positions in universities or smaller courts. The majority of aspiring scholars were disappointed and ended up making a living in some other fashion.
The way this market worked was primarily through reputation. Scholars were assessed primarily by their peers and these assessments were the key factor in determining their chances of landing a coveted patronage position. To impress other scholars, one had to bring one’s work to their attention and impress them with the novelty, originality and solidity of their work. One had to acquire a certain fame for one’s work and it had to stand the scrutiny of other people’s work. Needless to say, this system did not work perfectly — many charlatans and fakers managed for a time to impress others, while some solid and important work was slighted. Yet, perhaps surprisingly, the system worked reasonably well. Many of the great scientists and philosophers ended up with the recognition they merited and found the patronage positions they deserved. The economics of this result is centrally important: patronage and fame provided the incentives that other scientists needed to exert the effort and discover new things that would make their name. Obviously, one cannot “own” knowledge and so it is not easy to make a living off it. Seeing the honor, respectability, and comfort provided to such luminaries as Kepler, Galileo, Leibniz and most of all Newton must have made many a talented and ambitious youngster want to “be like Isaac.” The result was the emergence of what we call today “open science” — in which the rule is that new knowledge is placed in the public realm, where priority rules and which is based on “credit but no profit” — one does not get paid for making a discovery, but one’s reputation gets credit for it (Dasgupta and David, 1994; David, 1998).
To work properly, this market — like any other — needed some kind of institutional framework that set its rules and enforced them as well as it could. No single state, of course could do that even if it had the desire to do so. What emerged was one of the most under-rated institutions in economic history, but one that played a critical role in the emergence of science and technology as the main drivers of economic progress. This institution is what became known as the Respublica Literaria or Republic of Letters (Daston, 1991; Grafton, 2009; Fumaroli, 2015). Despite its name, it was anything but a formal political institution: it was a loose network of men and women of letters who corresponded, read one another’s books and pamphlets, and (rather rarely) met physically. The central feature of the Republic of Letters was that it was transnational: it ignored political and religious boundaries and was interested primarily in the content and merit of research. Work written in, say, Leyden, would be read and discussed within a few years in Edinburgh, Padua, Krakow, and Lisbon. The transnationality had two enormously important consequences.
First, what it meant was that local authorities had only very limited influence over the content of the intellectual output of Europe. Innovative scholars who ran afoul of conservative rulers and felt in some way threatened by them had the option of packing their suitcases and leaving. If they were sufficiently well-known, another court or university would be glad to accept them. Intellectuals were, indeed, a peripatetic lot, and despite the woeful transport system most of them moved from town to town, escaping persecution. The great Czech intellectual, Jan Comenius, moved repeatedly from place to place, and spent much time in London and Amsterdam. But England was not always a tolerant haven itself: Hobbes wrote Leviathan in Paris and Locke wrote his Letter on Toleration in Amsterdam. On occasion, of course, authorities could grab someone whose writings they disliked and execute him or force him to recant. But in fact, such events were rare, and had very little effect. Even if the person could be coerced, printing presses abroad could still publish his work — when Galileo was under house arrest in Arcetri, his banned books were smuggled out of Italy and published in Protestant cities (such as the Discorsi (1638) published in Leiden, and the Dialogo re-published in Strasbourg). Suppressing any kind of knowledge because it offended someone or jeopardized a vested interest became increasing difficult. By the eighteenth century, most regimes just gave up, and even in the most outrageous cases their suppression of heretical views was more window-dressing than real. Pluralism and contestability became the central features of the Republic of Letters, and from those sprang creativity and progress.
Second, it meant that in some sense Europe ended up in the best of all possible worlds. To see this, consider two rather common insights from economics. The first is that if the number of units that compete with one another is large, competition will work better. On the other hand, if the number of entities is small, they will be larger and be able to realize economies of scale. The economies of scale in the production of knowledge are obvious: the cost of writing a book or the effort of carrying out an experiment is the same whether the constituency is ten people or a thousand, so it usually is not worth one’s while to write a book or prove a theorem for a small village audience. Thanks to the Republic of Letters, an idea generated anywhere in Europe would reach a Continent-wide audience. What the Republic of Letters achieved is that these scale economies could be realized, while the benefits of fragmentation and decentralization were maintained. No other part of the world enjoyed this unique combination.
One fundamental rule on which the Republic of Letters was built was contestability. There were to be no more sacred cows: everything that the ancients had taught was to be re-examined and tested. Experiments, data, and mathematical logic were applied mercilessly to ancient beliefs. If they were found wanting, they were rejected. Ptolemaic cosmology, Galenian medicine, and above all the teachings of Aristotle were all rejected often with little of the respect and reverence that more conservative writers felt the “ancients” were due. Aristotle had taught that all the stars except the planets were fixed and unchanging; but Tycho Brahe showed him wrong when he documented a supernova. Aristotle had taught that nature abhors a vacuum, but Torricelli and von Guericke produced a pump that created one. The great sixteenth-century French philosopher Petrus Ramus is said to have defended the thesis that “everything Aristotle had said was false.” The Royal Society, the establishment of which was explicitly inspired by Bacon’s writing had as its epigraph “nullius in verba”. The classics were still taught, of course, but the idea that they were to be treated as gospel was abandoned. It took the Chinese a great deal longer and two revolutions to do the same to Confucius.
The growth of open science as the central organizing principle of the intellectual world of early modern Europe did not occur by any conscious design. The Republic of Letters was an emergent property, the unintended consequence of a very different process, in which scholars tried to build reputations among their peers in order to gain financial security and the freedom and time to do undisturbed research through patronage positions. It relied on the development of the printing press, the improvement of transportation, the growth of intra-European commerce and communication, the improvement of postal services, and the prevalence of a lingua franca among intellectuals. Once in existence, the institution took a life of its own, and from it the Enlightenment was born. Modern science still works this way: we no longer call it “patronage”, we call it “tenure.”
Let me now come back to the question of economic growth. As economic historians have known for many years, it is difficult to argue that the scientific revolution of the seventeenth century we associate with Galileo, Descartes, Boyle, Newton, and the like had a direct and major impact on the pivotal technological breakthroughs of the eighteenth-century Industrial Revolution, especially in the key sectors of textiles and iron. Technological progress in the Industrial Revolution, most students are taught, was the result of inspired tinkering by brilliant and dexterous craftsmen with no more than a smattering of best-practice science (which was not very good to start with). The bulk of the most significant advances in physics, chemistry, biology, botany and other areas occurred too late to have an effect on the great changes of the last third of the eighteenth century we associate with the Industrial Revolution.
The important thing about the culture of useful knowledge in Europe, however, was not that it yielded immediate economic benefits, but that most practitioners believed that in the very long run it would. Bacon’s vision was to be realized, but it became a matter of centuries, not decades. Most of the problems that people wanted to solve, from infectious disease to the harnessing of electricity, were harder than the savants had imagined. Yet there were exceptions and these were important, less in their direct economic impact (though it was there) than in demonstrating the potential of the Baconian promise: the atmospheric engines, advances in hydraulics, the evolution of gas lighting, the eradication of smallpox, and the use of chemical bleaches in textiles — all depended in one way or another on breakthroughs in knowledge even if they were not all strictly science-based inventions.
One final remark: my work has strongly argued that what people believe and think about the world around them is an important factor in economic development, perhaps the most important. But whose beliefs exactly mattered? Advancing the frontier of science and technology were then, just as now, the responsibility of a small minority. Just as the Republic of Letters was an elite phenomenon, the technological thrust of the Industrial Revolution was the result of the actions of a small and select group. Some economic historians, in their justified anxiety to get away from the absurd Victorian hagiography of a few key inventors having carried the entire Industrial Revolution, have tended to go too far in the other direction by implying that unless much or most of the population had access to education and technical knowledge and were richly endowed with human capital, the emergence and spread of new techniques would be limited. The truth is somewhere in between; it is undeniable that technological progress during the Industrial Revolution was an elite phenomenon, carried not by a dozen or two of big names who made it to the textbooks, but by the thousands – but not hundreds of thousands – of trained engineers, capable mechanics, and dexterous craftsmen on whose shoulders these inventors could stand (Meisenzahl and Mokyr, 2009; Squicciarini and Voigtländer, 2015). Technological advance in the period of the Industrial Revolution was a minority affair; most of the entrepreneurs and industrialists of the time were not like Matthew Boulton or Josiah Wedgwood and had little knowledge of or interest in science or even innovation. But the dynamics of competition in a market economy are such that in the long run the few drag along the many.
It is time to come back to the Great Enrichment. I did not mean to make it as one-dimensional as this brief summary might indicate. Everything should be made as simple as possible — but not simpler said Einstein. Modern economic growth cannot be explained without worrying about many, many factors, such as capital accumulation, trade, education, finance, entrepreneurship, demography, and labor markets. I wanted to highlight one particular aspect in large part because other scholars so far have neglected it. It is hard to know if science and technology contributed more than other factors to the prosperity that an ever-growing part of humanity are enjoying. My sense is that at first its contribution was modest, but over time it grew steadily. What I do strongly suspect is that in the future its role will become increasingly dominant. Economists have long known that all other factors that explain economic growth, from capital accumulation to the growing volume of international trade and integration, are subject to diminishing returns, and eventually growth based on such factors — as Adam Smith and his followers believed — would lead to what economists call a stationary state, in which growth has petered out into a trickle. But is growth based on an ever expanding knowledge of nature subject to these forces? Will it ever “exhaust itself”?
History is a poor guide to the future, and this is especially true for economic history in which the only thing we can expect is the unexpected. But what we can say is that all those who feel that “everything that can be invented has been” and that “all the low-hanging fruits of science have been picked” have turned out to be wrong, over and over again. In my analysis of the growth of useful knowledge, I have stressed repeatedly that there is a positive feedback between knowledge of “what” and knowledge of “how” — and that models of positive feedback may never converge to a new attractor. Armed with unimaginable computing power and an array of powerful tools in chemistry and physics and genetics, our understanding of nature will continue to grow, perhaps without bound. Whether that is the good news or the bad news is something I will leave undecided here. But we should all be concerned whether our political and social institutions can evolve pari passu with our technological capabilities and the enormous powers over nature that the human species has acquired. Will humanity be able to handle the difficult social and economic adjustments to technological change? Here I must sound a tone of concern and cite Freud’s masterly understatement in his The Future of an Illusion, “While mankind has made continual advances in its control over nature and may be expected to make still greater ones, it is not possible to establish with certainty that a similar advance has been made in the management of human affairs.”