A Farewell to Alms, through p.272

by on September 4, 2007 at 6:49 am in Books | Permalink

Clark reconceptualizes what the Industrial Revolution was all about.  It wasn't a huge spurt of technology, circa 1780-1830, but rather there was a prior period of slow and gradual improvement in living standards.  That contribution completely revises the "rise of the West debate."  While Clark is not the first "gradualist" on this topic, he makes the best and most conceptual case for throwing out previous understandings of the Industrial Revolution.

That point alone makes this one of the most important books of recent times.  My main difference with Clark, in these sections...

…comes again on the question of science.  He points out correctly that most of the major technological innovators did not get much for their efforts.  Clark therefore does not see the late 18th century or early 19th century as giving special incentives for science.  I agree as far as he goes, but I view the incentives for science more broadly.

Core Europe, starting in late medieval times, developed a new and still poorly understood organizational technology.  This was, very roughly, the ability to work in groups, cumulate technologies and advances, and learn from each other in competitive environments.  Most notably, this new technology led the Florentine and Venetian Renaissances, especially in the visual arts.  But there was more.  The rise of printing.  The rise of classical music, starting in 1685 or whenever.  The rise of early modern philosophy.  Europe goes crazy with inventiveness, albeit in splats and bursts.  (Clark’s own chapter 12 gives good evidence for this tendency, though it will play a less central role in his version of the story.)

It is also the case that most of these bursts of inventiveness didn’t do much for the average standard of living.  Yes mastering oil paint technique made Florence richer but not so much.

It just so happened that one of these bursts came in science, technology, and engineering.  And it came in England, mostly for reasons of "national character."  It just so happened that the English burst did more for the standard of living, for reasons of external benefits.  But having had such a burst was not unique to England.  England was just one spoke on a more broadly turning wheel, and a European distribution of bursts was well in place prior to most of the special conditions we might find in England.

England, by the way, also had the literary revolution of the 18th century, and England plus Scotland drove the rise of modern economics.  There is no Chinese Adam Smith and that is because that Europe was pulling decisively ahead in ideas production.  I consider this a fact of great importance whereas for Clark it is a sideshow to some other story.

Most generally, I see the historical problem of growth through the lens of culture — in the sense of the history of the arts, music, and letters — more than through the economic history literature.  I am very taken by Max Weber’s writing on Western music and also his conception of the broader style of Western rationality.  And I see the rise of these organizational improvements as a central — the central? — story of early modern Europe and the move to prosperity.  It simply took a long time to apply these organizational movements to science, and to turn that science into concrete technical advances.

None of this need contradict Clark and indeed you will find parts of this narrative in his book.  But unlike Clark I would not superimpose this on a broader Malthusian story or an emphasis on the long run.  Nor am I putting much stock in genetic evolution.  So these organizational/technological improvements, in my view, move closer to the center of the story of European progress.

Unlike Clark, I think incentives to create matter greatly, but not through patents or other direct pecuniary rate of return effects.  The great creators have a burning desire to create, provided they have the opportunity to do so.  This new European technology of organization (whatever it should be called), combined with growing wealth for the upper classes, meant that such creative opportunities were far more available than ever before.  And powerful intellects grabbed them, for reasons of psychic incentives.  So incentives are paramount to the European story, while Clark remains correct in criticizing the standard account of how those incentives might have mattered.

I also see England has having innovated with the quality of its state in particular its fiscal grounding.  I wish this played a larger role in Clark’s account although of course I understand why it does not.  Institutions are not allowed to become a competing force on center stage.  The economic returns from colonies might be given more play as well.

Overall I am willing to accept many of Clark’s arguments, but I always go back to wanting to superimpose a broader institutional story on his microfoundations.

He resists that move, and that is the major place where I part company with him.  I think he is too intent on pushing institutional and ideological factors off the stage; I am happy to allow Clark’s factors on the stage — most of all gradual growth downward mobility and quality of labor — but I want a very busy and cluttered stage.

I believe, by the way, that if Clark’s vision were correct, Australia and New Zealand would be stronger economic powerhouses than has turned out to be the case.

1 michael vassar September 4, 2007 at 8:15 am

Tyler: I agree that internal motivations, status, opportunity, etc are far more important drivers for high quality innovation and creation than monetary incentives are, and that the monetary incentives rarely ever go to the great innovators anyway. This and history tend fairly strongly to make me think that patents and copyright don’t increase, and possibly greatly decrease society’s level of creativity and innovation, while an unconditional basic income would drive an unprecedented hyper-renaissance. Do you agree with these economic predictions?

2 Gavin Kennedy September 4, 2007 at 9:23 am

The deeper I get into ‘A Farewell to Arms’ the outline of Gregory Clark’s main thesis begins to take shape. I cannot anticipate its full form, but I am getting restless with it already. I find the book enjoyable to read, and exasperating in parts at the same time. His main but flawed criticism of Adam Smith, apart from lumping him carelessly with neoclassical economics, jars when he quotes in place of the so-called ‘industrial revolution’ a phrase that could have come direct from both Wealth Of Nations (1776) and Lectures On Jurisprudence (1762-3), namely ‘slowly and gradually’, and while claiming this as a correction to the wilder ideas of 19th century and 20th century economic historians, he also uses it to take a side swipe at Smith, as if he wrote something different.

Smith historical analysis would sit easy with Clark’s ‘brief economic history of the world’. Smith sourced the habits of commercial society right back in the hunter-gatherer ‘rude’ societies, the ‘very slow and gradual consequence’ of ‘the propensity to truck, barter, and trade’. His assessment of each ‘age’ that followed – shepherding and agriculture – was that they increased the productive powers of labour.

Hence, the history of the last ten millennia is not the fact that subsistence levels of consumption did not change (which Smith agreed was the case to the 18th century), but that total output of the ‘necessaries, conveniences, and amusements of life’ did change constantly. To focus on per capital averages and not on gross annual outputs is misleading.

Technology did change and improve constantly, though not year-by-year. Clark is in a hurry – ‘why did it take so long?’, etc. I find asking why Babylon didn’t go on to a massive rise in per capita income a most strange idea. How many ‘hanging gardens’ could they produce and who would invest their non-extistent capital in them elsewhere? Labour is not enough for speeding through to the commercial age.

The pace began to ‘quicken’ (relatively speaking; more like separate strands were converging slowly: think of Smith’s account of the common labourer’s jacket) in the 16th – 18th century. Everything else was dragged along not just by knowledge, but by its dissemination (printing, art, culture, languages, and inter-actions on a scale in Europe). The image that Clark gives by way of criticising standard ‘explanations’ of applying neoclassical rational thinking to all (something Smith could never be accused of) and to history is perfectly justified, though his examples sometimes are quite, er, ‘silly’, for example in respect of the alleged economics of slaves doing a deal with their masters. Isolated examples are not data. Nor does it help, in my view, that Solow’s neoclassical growth theory, with its equilibrium explanations and assumptions, etc., is used to explain history. Growth is a process of disequilibria.

History, since ‘rude’ society is the history of the ruling orders, who built the artefacts of civilisation out of the surplus extracted from the subsistence labour of the majority. This raised poor bright people as well as it gave roles for disinherited rich sons. That innovators did not gain the prizes they are supposed to have lusted after is not germane. They didn’t know they were going to be cheated out of their ‘letters patent’. Think of Harrison’s chronometer and his non-‘prize’ denied to him by rivals for many years, which changed shipping by enabling longitude to be measured on great circles, anywhere on earth, thus raising productivity. Joan Thirsk has written about the Elizabethan attempts to kick start economic development and get the poor to work, and how its many gains were sullied by the attendant corruption that set in. (Economic Policy and Projects: the development of consumer society in Early Modern England, OUP,1978).

It is not the certainty of prizes, or rewards, that drove them – that prizes didn’t come after the fact cannot be said to have influenced their work beforehand. If James Watt had not been refused the right to work as an instrument maker in Glasgow by the local Guild, and the Senate at Glasgow University, a member of which was Adam Smith, had not appointed him to the University in 1763, which was outside the Guild’s legal rights to prohibition, he would not have been given the University’s model Newcomen steam engine to repair, which he did and then went on the improve it. Such are the tenuous events that led to Britain’s lead in power-driven machinery in the 19th century.

I look forward to the next chapters.

3 nick September 4, 2007 at 10:46 am

That’s one of the (many) reasons I read this blog every day – Gavin Kennedy that’s probably the best blog post I’ve ever read. I’m waiting to read the book as I’m currently away from my amazon delivery address, but I can’t wait now…
Viva la (Marginal) Revolution!

4 David R. Henderson September 4, 2007 at 11:19 am

Clark’s most important piece of evidence, at least relative to my priors, is the table on p. 235 in which he shows that many of the inventors of important technologies did not have their intellectual property rights protected. This will be grist for the mill (pun intended) of Julio Cole, Jeff Hummel, and others who think that the importance of intellectual property rights has been way overstated. Clark also points out (p. 236) that of the 379 people who died in Britain in the 1860s leaving estates of more than half a million pounds, only 17 were in textiles. I find this second piece of evidence interesting but only somewhat persuasive. Half a million pounds back then translates into somewhere between $10 million and $20 million today. So could there have been many textile people dying in the 1860s who left estates of a quarter of a million pounds? The equivalent of $5 million would have been a strong incentive to innovate, especially given the high marginal utility of money then compared to now—remember his own Malthusian trap that Clark has leaned on throughout the book.

I also think Clark too quickly dismisses Kremer’s population argument (p. 228). He states, “Under Kremer’s argument, the growth rate of ideas would be at best just proportionate to population size.† I think this is false. My own hunch is that it would be proportionate to the square of population density: with more people around there is more interaction and linearity doesn’t apply. And since, for a given land area, population density is proportional to population, then the growth rate of ideas would be proportional to the square of population. If I’m right then the solid line graph on p. 227 does fit Kremer’s story.

Two great sections of writing and thinking to highlight before I get to some smaller criticisms:

First one, p. 211:
Yet this approach exerts its powerful hold over the economics profession in part because of the limited historical knowledge of most economists. The caricature many modern economists have of the world before the Industrial Revolution is a mixture of all the bad movies ever made about early societies. Vikings pour out of long ships to loot and pillage defenseless peasants and burn the libraries of monasteries. Etc.

Second one, p. 230. (Adam Smith couldn’t have said it better):
As the [French] revolutionaries fed on each other, revolutionary equality soon yielded to a vainglorious military dictatorship that led hundreds of thousands to their starving, frozen end on the Russian steppes. Meanwhile a “nation of shopkeepers,† incapable it seemed of vision beyond their next beef pudding, was transforming the possibilities for all humanity. And in the process, as we shall see, they ushered in more egalitarian societies than had been witnessed for thousands of years.

Finally, three critical comments:

1. On p. 205, Clark makes an amazing statement about causality. He states, “When two variables are so closely correlated one must cause the other.† His only hedge is a footnote that states, “Or there could be a single independent cause for both.† This is absolutely false. What happened to what we point out in introductory econometrics classes: correlation does not necessarily imply causation.
2. Clark misuses the term “beg the question.† (p. 259). What he means is “raise the question.†
3. I must agree with Gavin Kennedy that reading this book is frustrating. Clark sprinkles astounding bits of information that make me glad I read the book while at the same time not steering a clear path. Or, more correctly, maybe he’s steering a clear path but he seems to get sidetracked.

5 Gregory Clark September 4, 2007 at 11:32 am

I am enjoying these comments – even the more critical ones. I do want to respond, but will be out of action for the next 3 hours with some daily life business.

6 Barkley Rosser September 4, 2007 at 1:37 pm

All right, I should not be commenting here as I have not read the book, but I see
no contradiction between established stories about the Industrial Revolution in Britain
from many sources and the claim of a gradual rise in living standards there between 1780
and 1830. This strikes me as simply being a matter of a simple mathematical confusion,
that between a discontinuity in a level and a discontinuity in a rate of change.

So, people like Alexander Gerschenkron and Simon Kuznets, who set out to document when
the Industrial Revolution started in various countries, observed its takeoff (to use
Rostowian langugage) as coinciding with a discontinuity in the rate of growth, usually
from near zero in per capita terms to something noticeably positive, with Gerschenkron’s
famous law of relative backwardness arguing that the later a country takes off, the more
rapidly it grows (or can grow), at least at first after the takeoff due to being able to leapfrog
over greater degrees of technological differentiation and productivity as compared to the
leading edge of the world economy. Given Britain’s role as the starting country, its takeoff
was the least dramatic and the slowest as there was no such possibility of any accelerated
leapfrogging, although still a discontinuity in the rate of growth supposedly occurred around 1780.

So, a discontinuity in the rate of growth that moves it from near zero to about 1-1 1/2% results
in a gradual rise in living standards over the next 50 years. But what triggered that discontinuity?
Does Clark deny that there was a major wave of technological innovations in the period around
1780 in Britain, with the justly famous Watt steam engine of 1776 being a crucially important one
and with a bunch of others clustered in a short period of time in what most historians have long
identified as the technologically leading sector, the textile industry?

I apologize for commenting on this without having read the book, but I would be curious to read
how the book refutes this rather standard story that I have just laid out above. What has been
presented so far both by Tyler and the discussants does not even begin to do so, and the claim
that the story of a gradual increase in living standards in Britain between 1780 and 1830 is
somehow enormously important strikes me as enormously exaggerated. It is simply the logical and
obvious outcome of the standard story of a technologically induced upward ratcheting of the
long rate of economic growth in Britain, if not as sharp a one as would happen in other countries
later that went through the same “Revolution,” as explained by Gerschenkron (1962).

7 David H. Levey September 4, 2007 at 2:13 pm

Much of the recent commentary focuses on the relation between what Tyler calls Clark’s “microfoundations” (the material/demographic trends of the Malthusian regime) and the specific cultural or institutional changes traditionally used to explain the location and timing of the breakout from the Trap. This is — as I pointed out in an earlier post — analogous to the “infrastructure/superstructure” debate among Marxist historians of the rise of capitalism.

Part of the problem is caused by the very different time frames inherent in the two levels of analysis. Clark’s mechanisms can explain why all settled agricultural regimes subject to the Malthusian pressures would eventually create human beings capable of making the breakthrough to modern economic growth, thereby explaining its global spread — regardless of whether the selection processes involved were cultural, genetic or, most likely, both (what recent theory calls “co-evolution). But with these processes working over long periods and relatively slowly (the unit time of transmission being a generation), it’s hard to explain with Clark’s framework alone the “precociousness” of England. Why was the supply of innovators so large in 18th century England? Why did the latest theoretical and experimental science get readily incorporated into the work of these innovators (as shown by Margaret Jacob and Joel Mokyr). Why England before the rest of Europe and Europe before China and India?

To answer these questions, what we need to “superimpose” (as Tyler puts it) on top of Clark’s framework is not so much institutions of governance or property, but the kind of developments outlined in Weber’s Sociology of Religion and Merton’s Sociology of Science, which can explain why English society could generate — and incorporate — the innovators and why China, India and the Islamic world had no equivalents of Bacon, Newton, Smith, and Malthus himself.

8 Barkley Rosser September 4, 2007 at 6:08 pm

So, fine, I agree that “culture of creativity” is probably necessary, especially for an initial
industrial revolution, with a bunch of institutional and other stuff lying behind it. But is not
the standard story still true at the immediate point, that an outburst of linked technological
innovations in the late 1700s in Britain triggered a discontinuous increase in the long run growth
rate that then led to a gradual increase in living standards? Does Clark’s book deny this, and if
so on what grounds?

9 Lee A. Arnold September 4, 2007 at 8:45 pm

I agree with Tyler Cowen and David H. Levey. I am not a monist and don’t suppose that there is a single answer. But I think the most important thing by far was that the Renaissance was capped in England by Francis Bacon. It is remarkable how many people in our time have forgotten what a huge turnabout in cultural outlook was programmed by that man, nearly in a moment. He was cited continuously for 200 years.

Bacon wrote down the rule that instrumental rationality was applicable across the board — across the entire range of human endeavors. Splitting, weighing, rejoining materials was a general strategy that could be pursued everywhere; material improvements could be sought everywhere; life might be improved everywhere. It wasn’t merely “science” as now defined — occultism and magic were also instrumental pursuits. And Bacon and his followers singled-out the artisans and manufacture, as ripe for scrutiny and improvement.

Bacon described and called for an “institutional” change in the broadest sense of a mental redirection. He called it the “instauration.” Given the enormous mental inertia that was still to be overcome, perhaps we ought be surprised that the Industrial Revolution followed in only 150 years.

There had been NO statement of this program before this time, anywhere. The religious teaching was that the world had fallen from a perfect state into degeneration.

Of course there was medieval preparation for the instauration: in thinking with objects, strength of materials, and diagrammatic and mathematical invention such as the “latitude of forms.” Much of this, such as some of Leonardo and Galileo, had come out of practical orientation. And the Renaissance was already noted for, among other things, a huge acceleration in the number of Aristotelian commentaries: 6653 commentaries were written between 1500 and 1650 A.D. (That was an elevenfold increase from the prior century.)

Although he was the closest precursor to Bacon in generality of program, of course Aristotle did not call for the general rule of experimental improvements in the mechanical arts, so far as we know. Although, from around 150-100 B.C. (150 years after Aristotle,) we have THIS show-stopping little number!:

http://en.wikipedia.org/wiki/Antikythera_mechanism

10 Eric Preston September 4, 2007 at 9:34 pm

As a physicist with little former knowledge of economics, perhaps I can contribute an outsider’s perspective on the book thus far.

1. Before the IR, humankind was in a quasi-static ecological equilibrium. The rate at which efficiency grew was slow with respect to the time scale of population growth. Easy enough.

2. What was the IR? The best answer I can glean is found in Figure 12.8, which shows a population growth which did not push down income per person. It held steady for a while, than actually started to increase. Seems to me this would be driven by an increased rate of efficiency growth (to offset and eventually overcome the decreasing marginal output per worker). Once the threshold is crossed the geometric nature of population growth takes over.

3. Even before getting to the presentation of Pomerantz’s theory on pg 260, I asked myself the question: what allows our immensely greater efficiency then pre-IR society? I answered: fossil fuels. What would happen to efficiency or income per person if we ran out of oil tomorrow?

4. Can we really say we have escaped the “Malthusian Trap?” After all, death rates must eventually equal or surpass birth rates. We have been in a far-from-equilibrium condition for 200 years, a blip in geological time. This cannot last forever. In order to maintain a high income per person, we need to continue to have external sources of energy and limit fertility. Is it even possible to equilibrate at close to the present value of income per person, or will this era combust as quickly as its energy source?

5. The idea that evolved cultural traits are required to establish a modern economy seems like a no-brainier. A portion of this is probably biological, but I expect cultural is more important (given how the variations between individuals swamps variations between populations). Precisely what these traits are (and how heritable they are) is an important question and should be explored directly, rather than indirectly inferred and theorized about.

11 Daniel Klein September 5, 2007 at 1:15 am

Garett,

Thank you for the focus on why the IR didn’t come earlier.

You suggest that Britain in, say, 1400, had property rights and limited government. I don’t know, let’s say they did.

But did they have moral authorization to go out and get rich? Did they have moral authority to abandon hidebound traditions?

My historical knowledge is meager, but my impression is that they had no such moral authorization.

As I understand it, they weren’t enlightened in that way. That only came later, notably by virtue of individuals who made a profound and elegant case for the moral warrant to go out and get rich, within the grammar of commutative justice.

/Dan

12 Max September 5, 2007 at 5:32 am

@michael vassar:

Why would an unconditional basic income spur a hyper-rennaissance? wouldn’t it, with todays methods of “having fun”/distraction, actually do the opposite?
You take it for granted that more free time and less ordeal in general life would increase time spent on creative activities. However, regard people on unemployment pays and do you see them miraculously invent new principles/ideas or even works of art?
I think maybe one of the conditions that also brought up invention in Britain was the need to invent. Why are the Jewish people always been rich and inventive, because they always were a minority that had to suffer from the societies majorities and thus became inventive out of the need to survive.
So, I think a basic income as it is already implemented in Germany or France, actually decreases invention and creativity.
And I tend to agree, if I have to look at myself at the moment, rather writing an over-long comment instead of working properly…

13 Gregory Clark September 5, 2007 at 9:30 am

I do not want to debate Gavin Kennedy on intellectual history (that would be like me challenging Roger Federer to a tennis match).

But I do relish debate him and others on my court, which is economic history.

The widespread impression that between 1300 and 1800 England experienced significant institutional improvements is just wrong. There were changes, yes. But not improvements.

England in 1300 was a highly commercial society, with commodities like grain flowing freely across England, and between England and the rest of Europe. In 1300 in London you could rent storage in granaries for grain on a weekly basis. Court records reveal a web of debt stretching out from London into the Midlands between grain suppliers and London merchants (see the work of Bruce Campbell and his co-authors on the medieval London grain market).

The peasantry rather than being the subjects of abusive overlords, had instead largely expropriated from their supposed masters they land they cultivated, paying rents well below market values in most cases.

Guilds restricted trade and crafts in towns, but there was so much competition between different towns that these restrictions could have only modest effect.

Transport costs in 1300 were no greater than in 1750 (though these costs did fall in the late 18th c).

Taxes and trade restrictions, unlike in 1800, were minimal.

So why was medieval England largely stagnant technologically?

14 Gregory Clark September 5, 2007 at 10:03 am

Tracy W.

NZ is actually used as an example in the book of an economy where in the last 20 years the government did everything that economists would advise to stimulate growth, yet NZ has been described by Tim Kehoe (from Minnesota) as having experienced one of the “Great Depressions” of the modern world – slow growth compared to the rest of the advanced economies.

Greg

15 Mark Koyama September 5, 2007 at 11:24 am

Greg, the evidence you’re discovered on the level of market integration and development in medieval England is certainly important and will force economists to rethink their views of the pre-industrial economy.

Nevertheless, in 1300 a far higher proportion of the population lived off the land than did in 1800 or 1750, and urbanization levels were much higher in England in 1800 or 1750 than they were in 1300. And if we think of market development and integration not just in terms of competitive prices for certain goods (like grain) but in terms of the range of goods available, the extent and complexity of the division of labour then 1750 wins over 1300. Of course this does not necessary undermine the case made in the book but it does add caveats.

Another caveat: even if Greg was right and the number of trading opportunities in 1300 was comparable to the number in 1750, this statement could not hold for intervening period. This is because of the famines of the 1320s and the Black Death which reduced the population from circa 6 milllion in 1300 to 2 million in 1450.

16 Kent Guida September 5, 2007 at 12:27 pm

Was the Principia necessary for the invention of the steam engine? Was there anything lacking in the knowledge of, say, Archimedes that would have precluded a Newcomen or even a Watts steam engine? Just asking. We may need Newton for lots of things in the modern industrial era, but not so much for the early innovations of the IR. That seems to me to be one of the points Clark is making.

17 Barkley Rosser September 5, 2007 at 3:01 pm

Professor Clark,

Of course I continue to be completely out of line here, but I have just read your paper on Coal and the Industrial Revolution. In it you minimize the role of technological change in the coal industry to the IR. But the issue is that it stimulated the technological development of steam power, which was crucial to the IR, and its ready presence in the UK gave it an advantage in this beyond all the cultural/genetic stuff, much as Pomeranz argues with regard to why China did not have the IR (somebody was going to).

Furthermore, I think you make a crucial error in that paper. Wood was not a substitute for coal in fully mechanized industrial processes. It does not have the sufficient specific heat in fires, even from charcoal, to match what coal produces. Steam engines simply will run a lot more efficiently and with much greater power to be able to run much more powerful machines if they are run by coal-fired steam engines. That is not captured by your cliometric analysis.

Regarding the gradualism issue, I confess to being a saltationalist Schumpeterian, with the major breaks in world history being driven by clusters of crucial innovations. The effects of these show up only gradually over time later as they fully diffuse, such as the gradual rise in living standards in Britain after the wave of late 18th century inventions and innovations.

BTW, one piece of support for your argument regarding the early development of commercial culture in England, I will note that the world’s first futures markets originated in England in the 12th century, innovated by Cistercian monks for the wool industry, and predating the futures markets for rice developed a few centuries later in Japan.

18 Barkley Rosser September 5, 2007 at 5:29 pm

TGGP.

In northwestern Europe where by the 1700s it was pretty clear that the IR was going to break out in one or another of the countries, Britain was far ahead of any of its continental rivals in coal supplies, with France being next, followed by Germany, but both way behind it.

19 Tracy W September 6, 2007 at 5:45 am

Tracy W.

NZ is actually used as an example in the book of an economy where in the last 20 years the government did everything that economists would advise to stimulate growth, yet NZ has been described by Tim Kehoe (from Minnesota) as having experienced one of the “Great Depressions” of the modern world – slow growth compared to the rest of the advanced economies.

Indeed. However, you claimed that The reason it is largely abandoned is that the IR is a huge, glaring challenge that mocks the pretensions of modern economics to understand economic growth. This implies that you think that modern economics pretends to understand economic growth. This is a rather different claim to saying that 1980s economics was wrong about how to get an economy to grow.

The failure of NZ to grow strongly has provoked a great deal of debate amongst NZ economists and even outside NZ. I have participated in this debate myself. Rather than resulting in “pretensions to understand economic growth”, the experience of NZ has created even more uncertainty about what causes economic growth amongst modern economists. NZ is often cited as an example by economists of how we don’t know what causes economic growth, including by my lecturers at university.

Therefore I don’t think that modern economics as a whole has any pretensions to understand economic growth. Specific economists may, but not the profession as a whole.

20 nick September 6, 2007 at 9:17 pm

Some important institutional changes — some of them arguably radical improvements — in England between 1300 and 1800:

* The mechanical clock, 14th century. The resulting rise of clock culture and the time wage may have slowly but radically improved the coordination and work habits of Europeans. Earlier adaptation to clock culture, a process that may take centuries to evolve, may explain the large discrepencies between European and many non-European laborer work habits that Clark cites.

* The printing press and the rise of book consciousness, which radically decreased the costs of teaching economically important knowledge to both children and adults. The rise of book consciosness, reflected in the literacy and book cost data Clark graphs, explains the most prominent puzzle revealed by Clark’s data: the fact that skills and innovation rose dramatically even as the rewards to skills were stagnant or declined.

* Nationalization the Church in England and secularization of family law, 16th century.

* The incorporation of the Lex Mercatoria into the common law, and the resulting rise of modern contract law, 18th century. Indeed, much of this occured in the same decades as the start of the industrial revolution.

* The “Romanization” of property law, rendering land more freely saleable, divisible, and mortgageable, which Adam Smith noted was an important improvement still in process at his time.

* The rise of marine insurance (e.g. Lloyd’s of London) and the associated rise of colonialism and world trade, 17th-18th century.

* The decline of guilds and monopolies, 16th-18th centuries. Medieval England was certainly not a highly competitive market economy. Commerce in goods was dominated rather by monopolies and a variety of price and quality controls instituted by guilds and towns.

21 TGGP September 7, 2007 at 1:23 pm

I think France, Spain and Portugal were also involved in the same slave trade to a similar extent (Thomas Sowell says most slaves were sent east from africa rather than west, but they were used as servants rather than agricultural laborers), so England doesn’t seem to stand out there. The last country in the western hemisphere to abolish slavery was Brazil.

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