It was Not Allocation, but Language
The main economic puzzle with the explanations of the Age of Innovation proposed so far is that they assume that, until 1750 and the wave of gadgets sweeping over England, opportunities for profit were simply ignored. As I’ve said now repeatedly, that’s not economically reasonable. If the spinning jenny was such a swell idea in 1764 C.E., why was it not in 1264, or 264, or for that matter in 1264 B.C.E.? If factories extracted surplus value in 1848, why not in 1148? Thus the economic puzzle of the Industrial Revolution.
The other, historical puzzle, as I’ve also noted repeatedly, is that many of the so-called preconditions (high savings rates, lots of international trade, private property, science) happened long before, and in other places than northwestern Europe. Bragging, thrusting, crusading Christendom was notably backward compared to the great Asian empires even in 1700 and certainly in 1600, and quite embarrassingly so in 1500. Imagine as a mental experiment that preconditions of the material sort — investment, trade, empire, science — do make for an industrial revolution and for the sustained enrichment of the poorest among us. In that case China or India should have had an industrial revolution in 1600, or centuries earlier, as should Rome or Greece. The historical puzzle is the temporary oddness of the lands around the North Sea after, say, 1700 or 1800. One can offer plausible offsets in the case of Greece or Rome, especially the slavery and misogyny that supported a contempt for labor, and for active, stirring, laborious men of business. It might apply to China and India and the Ottoman Empire, too. In other words, I am claiming, the anti-bourgeois character of society before 1700, in Europe, too, explains the lag.
The economic and the historical puzzles are twins. If having lots of foreign trade in Britain in 1700 C.E. made for explosive opportunities for profitable innovation and an Industrial Revolution by 1800, and a sharp rise of living standards in northwestern Europe by 1900, then why did it not do so in China in 700 C.E. or Egypt in 1700 B.C.E.? If security of property and other such legal institutions made the modern world, why did they not in Republican Rome or Muslim Spain? Unless European people changed around 1600 or 1700 in their greediness — a popular notion right down to modern anti-consumerism, though hardly plausible — heaps of 100-guilder or 100-pound-sterling notes or coins cannot have sat on the ground for hundreds of years un-picked up. Whatever the cause of the modern world, in other words, it has to be something that does not assume that earlier or non-North-Sea people were so stupid as to ignore strikingly good deals. And it has to be unique to a very recent time and to a northwestern European place.
Why did the North-Sea folk suddenly get so rich, get so much cargo? The answer can’t be that the Dutch and English (suddenly, belatedly) showed racial superiority. A sensible answer has to honor the Dutch and English around 1700, but not in the same breath dishonor the rest of humanity, including in the dishonor the earlier Dutch and English. After all, the rest elsewhere caught on to the North-Sea routine pretty quickly once it had been invented. If they happened to move to Holland or Britain or America they did well, whatever their genes. And at home they often nourished their own, if constrained, traditions of bourgeois virtue. In the end people in Asia and Africa and all over, in Taiwan and Botswana and Chile, learned pretty quickly to perform the northwestern European trick. But the trick could not have consisted of an open opportunity lying around all over the place, unused even in England for centuries, such as the routine taking of opportunities for profit from digging a canal or from sending a ship to Africa — that would violate economics just as Euro-centrism violates history.
I admit the danger in the argument here, the Fallacy of the Immeasurable Residue. It is not entirely cogent to keep measuring causes, finding the measurable ones to be small, and then concluding that The Cause Our Author So Persuasively Proposes must be true, though hard to measure. The method of knocking off contrary hypotheses, I said, is what John Stuart Mill recommended in his System of Logic, and is the admired practice in physical and biological sciences. But it is biased towards the immeasurable — witness string theory in physics, or for that matter Newton’s anti-Aristotelian but question-begging terminology of “gravity” as a force, measurable in result but not in cause. As Mill wrote, the Method of Residues works “provided we are certain that [in the present case, a rhetorical change] is the only antecedent to which [the Industrial Revolution] can be referred. But as we can never be quite certain of this, the evidence from [the method] is not complete.”1 What may be missing is an unnoticed but still material and measurable alternative. (There are immaterial and measurable causes, too, by the way: it is another of the numerous materialist prejudices floating in the minds of many historians and social scientists in the twentieth century that there aren’t any. Opinion, for instance, is measurable — better measured in many cases, for example, than pot-of-pleasure “happiness.”) Theists have often made the similar tactical error of positing a God of Gaps, supposing on the eve of the discovery of evolution by natural selection, for example, that the complexity of, say, the astonishing and delicate machinery of the eye implies an unexplained gap in materialist explanations, and there an eye- (and watch-) making God.2 Like the unlucky theists, maybe I have overlooked some material cause that in contrast all the ones I have here examined, separately or in combination, actually explains the factor of 2 or 16 or 100. I’m very willing to concede the scientific point — if some materialist can find a material cause that works. I have little optimism that she will succeed, having myself tried them repeatedly since 1966 and having found them in the end to be wanting. As Emerson noted, “an idealist can never go backward to be a materialist.”3
A piling up of rejected alternatives, all of the same re-allocative character, does suggest by sober scientific criteria that we may be looking in the wrong place — perhaps under the lamppost of static economics, or under a somewhat grander lamppost of a dynamics depending on statics, or under the grandest lamppost discovered so far, of a non-linear dynamics of chaos theory. Perhaps we are looking in such places not because the evidence leads us to them but on account of the excellent mathematical light shining under all these impressively ornamented lampposts. Yet one after another of the proffered material explanations has failed. No believable case can be made that adding them all together would change much, or that other countries and other times did not have equally favorable material conjunctures — not if we are trying to explain the unprecedented factors of growing production per head.
The problem with all the economistic explanations lies deep within classical and most of subsequent economic thought: the conviction that shuffling stuff around makes us rich. Transportation. Reallocation. Information flow. Accumulation. As Kirzner expressed it, “for [the British economist flourishing in the 1930s Lionel] Robbins [and the Samuelsonians], economizing simply means shuffling around available resources in order to secure the most efficient utilization of known inputs in terms of a given hierarchy of ends.”4 Yet the path to the modern was not through shuffling and reshuffling. It was not by the growth of foreign trade or of this or that industry, here or there, not by shifting weights of one or another social class. Nor indeed was it about reshufflings of property rights. Nor, to speak of another sort of reshuffling, was it through rich people piling up more riches. They had always done that. Nor was it through bosses being nasty to workers, or through strong countries being nasty to weak countries, and forcibly shuffling stuff towards the nasty and strong. They had always done that, too. Piling up bricks and money and colonies had always been routine. The new path was not about accumulation or theft or commercialization or reallocation or any other reshuffling.
It was instead about discovery and a creativity supported by novel words. Previously unknown inputs were discovered (coal for steam engines; coke for iron), fresh hierarchies of ends were articulated (in the new political economy, for example, the ends of general vs. privileged prosperity; in the new politics the radical end of achieving strict equality), new goods and services were created (black tulips, common stocks). The new path led around 1700 from the change in rhetoric by around 1800 and especially by around 1900 to shocking innovations in factory machinery and in business practice. It was supported and extended by shocking innovations in politics, with the result that as early as 1832 a few countries protected your life, liberty, and pursuit of innovation from progressive or conservative assault. The result was a startling enrichment of our ancestors, poor though they began. We ourselves are now better off than all but the richest of the ancestors were, measured by goods and human flourishing.
In a deep sense, in other words, the economist’s model of allocation does not come close to explaining the factor of sixteen. If allocation and accumulation and property rights were the only causes, then previous centuries and other places would have experienced what Britain experienced 1780 1860 and after. Macaulay said, in a Smithian way, “We know of no country which, at the end of fifty years of peace, and tolerably good government, has been less prosperous than at the beginning of that period.”5 Yes, agreed. But 100 percent better off, and most particularly on the way to 1,500 percent better off? There had been many times of such peace before, with no such result as the factor of sixteen. By 1860 “what had really changed” writes the wise Goldstone, “was that innovation became common and widespread, even expected, because a British culture of innovation gave people the outlook and the intellectual and material [and sociological] tools to search for their own new ways of working.”6
To put it another way, economics in the style of Adam Smith, which is the mainstream of economic thinking, is about scarcity and saving and other Calvinistic notions.7 In the sweat of thy face shalt thou eat bread, till thou return unto the ground. We cannot have more of everything. Grow up and face scarcity. We must abstain Calvinistically from consumption today if we are to eat adequately tomorrow. Or in the modern catch phrase: There Ain’t No Such Thing As A Free Lunch (TANSTAAFL).
I have the greatest respect for such economics, which I acquired laboriously, Calvinistically from 1961 to 1981 or so, and of which I am still learning new uses and new tricks. It is a great intellectual construct. I’ve written whole books in its praise. No joke.8 But the chief fact of the quickening of industrial growth 1780 1860 and its amazing aftermath in the Age of Innovation is that scarcity was relaxed. It was relaxed in the long view, not banished in the short view by an “affluent society” — whatever the size of income at any one time, more of it is scarce, and cannot be seized for admirable public purposes without loss. That is what economists mean by a “production possibility curve.” More Housing has always an opportunity cost in All Other Goods and Services. So far Samuelsonian economics goes — and is correct. But over time, taking the long view, modern economic growth has been a massive free lunch. Discovery, not reshuffling, was the mechanism. As Kirzner put it, entrepreneurship is not about optimal shuffling — a hired manager can carry out that routine. “The incentive is to try to get something for nothing, if only one can see what it is that can be done.”9 A new rhetorical environment in the eighteenth century encouraged [literally: gave courage to] entrepreneurs. As a result over the next two centuries the production possibility curve bulged out by a factor of sixteen, and more.
In 1871, a century after Smith, John Stuart Mill’s last edition of Principles of Political Economy marks the perfection of classical economics. Listen to Mill: “Much as the collective industry of the earth is likely to be increased in efficiency by the extension of science and of the industrial arts, a still more active source of increased cheapness of production will be found, probably, for some time to come, in the gradual unfolding consequences of Free Trade, and in the increasing scale on which Emigration and Colonization will be carried on.”10 Mill (whom you know I admire) was here in error. The gains from trade, though statically commendable, and well worth having, were trivial beside the extension of industrial arts. The passage exhibits Mill’s classical obsession with the “principle of population,” a leading theme in economics from 1798 to 1871. Mill, with many others, believed that the only way to prevent impoverishment of the working people was to restrict population growth. His anxieties on this score find modern echo in the environmental and family limitation movements, such as China’s one-child policy, arising from pessimistic (and Orientalist) theorizing in the West. The prudence of such a policy seems very doubtful today, and its lack of justice and liberty are plain. In any case the Malthusian idea told next to nothing about the century to follow 1871. The population of the United Kingdom increased by a factor of 1.8, yet income per head more than tripled.11 Nor did Mill’s classical model, as we have seen, give an altogether reasonable account of the century before 1871.
Mill again: “It is only in the backward countries of the world that increased production is still can important object: in those most advanced, what is economically needed is a better distribution, of which one indispensable means is a stricter restraint on population” — still more wrong, in light of what in fact happened during the century before and the century after.12 Mill did not anticipate the larger pie to come, so strong was the grip of classical economic ideas on his mind — even in 1871, even after a lifetime watching the pie grow larger. He says elsewhere, “Hitherto it is questionable if all the mechanical inventions yet made have lightened the day’s toil of any human being,” a strange assertion to carry into the 1871 edition, with child labor falling, education increasing, the harvest mechanizing, and even the work week shortening.13
Mill was too good a classical economist, in other words, to recognize a phenomenon inconsistent with classical economics. That the national income per head might triple in the century after 1871 in the teeth of rising population is not a classical possibility, and he would have seen the factor of sixteen in Britain from the eighteenth century down to the present as science fiction. And so the classicals from Smith to Mill put their faith in greater efficiency by way of Harberger Triangles and a more equitable distribution of income by way of improvements in the Poor Law. It should be noted that Mill anticipated social democracy in many of his later opinions, that is, the view that the pie is after all relatively fixed and that we must therefore attend especially to distribution. That the growth of the pie would dwarf the Harberger Triangles available from efficiency, or the Tawney Slices available from redistribution, did not fit a classical theory of political economy. Macaulay’s optimism of 1830 turned out to be the correct historical point: “We cannot absolutely prove that those are in error who tell us that society has reached a turning point, that we have seen our best days. But so said all who came before us, and with just as much apparent reason.”14 The pessimistic and Calvinistic classical economists, with the pessimistic and Calvinistic and Romantic opponents of industrialization at the time such as Carlyle and Ruskin, and the Calvinistic and Malthusian opponents of modern economic growth nowadays, too, have come up short.
In the beginning was the word. Free innovation led by the bourgeoisie became at long last respectable. For instance, the merchants and machine makers and manufacturers in northwestern Europe were elevated for the first time to the rank of “gentlemen” (the ladies, once “women” or “wenches,” were carried along). The middling sort of man came slowly to be called by the word previously reserved for the idle and well-born. For that matter some of the gentlemanly idle and well-born, in Holland and England and Scotland and the British colonies, and then a few decades later even in France, took to trade and innovation. Voltaire wrote in 1733 that in England “a peer’s brother does not think traffic is beneath him. . . . At the time that the Earl of Orford [that is, Robert Walpole] governed Great Britain, his younger brother was no more than a factor in Aleppo.”15 A Swiss traveler wrote about the same time that “in England commerce is not looked down upon as being derogatory, as it is in France and Germany. Here men of good family and even of rank may become merchants without losing caste.”16 He meant it literally: in France and Spain a nobleman caught engaging in commerce could be stripped of his rank. The rule was ancient. “In Thebes,” wrote Aristotle with evident approval, “there used to be a law that one who had not abstained from the market for ten years could not share in office.”17 Surprisingly, in their rhetoric the northwestern European elite began to deem a bourgeois career honorable. During the seventeenth and early eighteenth centuries at Rotterdam, Bristol, Glasgow, Boston, and then later at Rouen and Cologne, the younger sons of gentry and even of noblemen embarked at length on bourgeois careers. And indeed the honorable classes in Holland and England had long viewed the improving of their estates as a good idea — if not going so far as to become a factor in Aleppo.
The historian Tim Blanning puts it so: “In the past it had been an axiom of English political theory that a virtuous polity depended on a traditional of civic humanism, sustained by a landed elite whose independence ensured their virtue” — thus Roman and neo-Roman theorizing down to Thomas Jefferson, and in the mid-twentieth century also certain British Tories and American Republicans. By the early eighteenth century in England, though, a century after its emergence in the Netherlands, “there emerged a greater willingness to view commercial society, not as a sink of corruption but as a wholly legitimate sphere of private sociability.”18 The debate in the middle of the eighteenth century, argues John Danford, was “whether a free society is possible if commercial activities flourish.”19 The models on the anti-commercial side of the debate, as Pocock and Skinner have shown, were Republican Rome and especially, of all nightmarish ideals, Sparta. Thus Thomas More’s Utopia. Commerce such as the Athenian and now the British favored would introduce “luxury and voluptuousness,” in the conventional phrase of the Scottish law lord Kames, as the debate reached its climax, which would “eradicate patriotism,” and extinguish at least ancient freedom, the freedom to participate. As the Spartans vanquished Athens, so likewise some more vigorous nation would rise up and vanquish Britain, or at any rate stop the admirably Republican “progress so flourishing . . . when patriotism is the ruling passion of every member.” And the poet William Cowper in 1785: “Increase of power begets increase of wealth;/ Wealth luxury, and luxury excess.”20
Danford reads Hume as opposing such a civic humanist view, that is, the view that stressed “the primacy of the political.” Commerce, said Hume, was good for us, and Georgian mercantilism in aid of the political was bad for us. “In this denigration of political life,” writes Danford, “Hume [is] thoroughly modern and [seems] to agree in important respects with [the individualism of] Hobbes and Locke.”21 Hobbes, Locke, and Hume constituted “the challenge posed by early modern thinkers to the understanding of human nature which had been regnant for nearly two thousand years.”22 Danford does not claim that all we moderns now reject the nationalist, sacrificial, anti-luxury, classical republican view. On the contrary, he says, no paradigm rules without challenge. We can see the Spartan ideal in politics left and right, Green and nationalist. Classical republicanism is alive and well and living in the pages of The Nation and The National Review. In Germany, for example, great social distance and a deference to various pseudo- and real aristocracies persisted into recent times, with unhappy results. The secularized Christianity known as socialism scorned the bourgeoisie in Russia, with equally unhappy results. Still today, even in the strongholds of commercial prudence in America and Europe, the old models of priest or knight continue to shine, alongside the new model of the entrepreneur. The academic expert is a new priest, the TV cop a new knight. The entrepreneur gets the blame — because after all she makes obscene amounts of money. Some of our fictional heroes are businesspeople (Jimmy Stewart in “It’s a Wonderful Life”), but not many.
By the late nineteenth century in the democracy-honoring and bourgeois-admiring United States, which lacked real aristocrats, the word “gentleman” — so called in address, if less so behind his back — became almost completely democratic. It meant any adult, male, white, non-immigrant citizen. Outside the old Confederacy few aristocratic gestures were admired. Mark Twain’s Connecticut Yankee in King Arthur’s court astounds the aristocratic rubes with industrial devices, not with knightly heroism, which on the contrary he thinks silly. Outside of church, a peasant/Christian holiness was laughed at. Twain spoofed Christian Science so harshly that (it is said on admittedly dubious authority) those mild folk are sworn to undertake to cut out any reprinting of the essay from public library books. By now over 90 percent of Americans identify themselves in surveys as part of a quasi-gentlemanly “middle class.” It shows up in the terminology of American elections, in which “the middle class” means virtually everybody.23 (“Don’t tax him./ Don’t tax me./ Tax that duke behind the tree.”) The words assume that dealing and marketing and innovating is what we Americans are supposed to do. Every gentleperson from truck driver to congresswoman in the United States thinks of herself as doing a little business, and dreams of novelties.
Less so in other countries. In a much more class-conscious Britain the percentage self-identifying as “middle class” in 2007 was only 37 percent, though well up from figures one would get in 1900.24 In France in 2004, 40 percent replied “middle” to the question, “To which class do you have the feeling of belonging?” About 23 percent in France replied “working” — high by American standards, if sharply down from what French (and British and even American) people would have said in 1904. That in the French survey only 4 percent called themselves “bourgeois” reflects the unpopularity of the B-word in modern European politics. It would be good to revive the word and its associations with liberty. But even so, note that forty percent and more of people in rich countries call themselves middle class, if not the Marx-spoiled “bourgeois.” Compare the much lower percentages one can imagine in the worlds of André Gide or of Stendhal, not to speak of Molière. The change in rhetoric has constituted a revolution in how people view themselves and how they view the middle class, the Bourgeois Revaluation. People have become tolerant of markets and innovation.
The argument applies to routine innovation as much as to great creative ideas, to Mokyr’s macro-invention as much to the micro-inventions that refine the inventions. The economist Alan Kirman has pointed out to me that much innovation is as he puts it “generated by demand,” such as the improvement in the ballast-sweeping brooms on rail lines that an Australian friend of mine resident in Amsterdam has developed and sold to railways worldwide. But such innovations depend if anything more on respect for the bourgeoisie and the liberty to innovate than the macro inventions. Great geniuses forcing the pace of innovation like Edison or Ford might have braved contempt and interference better than the modest genius improving ballast-sweeping.
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[back] Mill 1843, p. 464.
[back] Collins 2007 93, 95, 193-195, 204.
[back] Essays, "The Transcendentalist," p. 1.
[back] Kirzner 1976, p. 79.
[back] Macaulay 1830, p. 183.
[back] Goldstone 2009, p. 120.
[back] Again see Nelson 1991, 2001.
[back] See all my writings before about 1983, and many even afterwards.
[back] Kirzner 1976, p. 84.
[back] Mill 1871: Bk IV, ch. ii. l : 6. Note his usage of the word "science," in the older and wider sense of "systematic inquiry," as in all his writings.
[back] Maddison 2006, pp. 415, 419, 439, 443.
[back] Mill 1871 : Bk IV, ch. vi. 2: 114.
[back] Mill 1871: Bk IV, ch. vi. 2: 116.
[back] Macaulay 1830, p. 186.
[back] Voltaire 1733, p. 154. The remark is not strictly accurate, since Walpole, though the longest-serving prime minister in British history (1721-1742), became an Earl only after his fall from power in 1742 (Voltaire must have added the remark to a later edition, since the earldom did not exist at the time of the first edition, in 1733). But for my purposes it will do: Walpole when in power was made early a Knight of the Bath, and was in other ways a member of the aristocracy, or at the worst the very highest ranks of the gentry.
[back] César de Saussure in 1727, quoted in Blanning 2007, p. 110.
[back] Aristotle, Politics 1278a, 20-25.
[back] Blanning 2007, pp. 110-111.
[back] Danford 2006, p. 319. The quotation from Lord Kames (1774) is Danford's.
[back] Cowper 1785, The Task, Book IV.
[back] Danford 2006, p. 324.
[back] Danford 2004, p. 325.
[back] Pew Research Center 2008, p. 10. The authors of the report, for reasons they do not state, want to define people who call themselves "upper middle" (19 percent) as "upper" and people who call themselves "lower middle" (another 19 percent) as "lower," which is how they arrive at the assertion that only 53 percent identify as middle class (these being people who replied to the phone survey "middle" with no adjectives). That puts Americans in the same range as British and French respondents. But taking people at their self-defining word, all but the 2 percent pure "upper" and the 6 percent pure "lower" (and 1 percent not replying at all), use the middling word. The fact is at least rhetorically interesting.
[back] National Centre for Social Research 2007, p. 2. Compare Marshall and others 1988, p. 144, 38.5 percent identifying as middle class.
