Humanomics: Values and Innovation

Matt Ridley and I form a little mutual admiration society — I have learned a great deal from his beautiful books, and he seems at least to tolerate mine. Well, not all of the latest one, not the parts where I appear to him to have fallen among thieves who think that ideas of liberty and dignity for the innovating middle class powered the modern world.

We agree at least that innovation is the key. That’s a very, very important agreement. Joel Mokyr, Jack Goldstone, and our own Greg Clark join Matt Ridley, Robert Allen, and me in affirming it. It sets us Innovators off from most economists and historians, who are Accumulators. We say that the modern world got rich by (at a minimum) 1500% percent compared with 1800 not, as the sadly mistaken Accumulators say, because of capital accumulation, or exploitation of the third world, or the expansion of foreign trade. The world got rich by inventing cheap steel, electric lights, marine insurance, reinforced concrete, coffee shops, saw mills, newspapers, automatic looms, cheap paper, modern universities, the transistor, cheap porcelain, corporations, rolling mills, liberation for women, railways.

What’s distinctive in my own book is the old idea that “bourgeois dignity and liberty” started it all off, and sustains it right down to the present. It’s as “old” as eighteenth-century political thinking. The “dignity” part, note, is as important as the second, “liberty” part that Matt thinks I am resting with. The history of the European Jews 1800 to 1945 exhibits the unhappy results of according legal liberty without also the dignity that protects and encourages liberty to innovate. Without a society admiring innovators and merchants and bankers, their liberty, and ultimately their lives, are in danger.

Matt thinks I am saying that “human nature” changed. But that’s a Weberian hypothesis I in fact reject in detail (in Chapter 16 out of 46; at at length in Chapters 30-32 against the genetic form of changing human nature put forward by Greg Clark; one has to read the book to see that I do: I invite you all to read, and especially to buy, buy, buy). It’s not the “mind of the innovator” or his genes that changed but his (or in more cases than one might think, her) social standing and political liberty.

Matt says that on the contrary it’s all quite Smithian. Rising trade causes a greater division of labor which causes innovation. Simple. Greg Clark, Jack Goldstone, Joel Mokyr, and I reply that, no, large trades were commonplace in the Mediterranean or the Indian Ocean for centuries before the stirring of Atlantic trade, yet resulted in no sustained industrial revolution. The gigantic magnitude of what happened in northwestern Europe from the eighteenth century on is crucial to getting the science right. A factor at minimum of 16 (that 1500% I mentioned) can’t be explained by trade, which was routine in the Ottoman Empire, or coal, which was routine in China.

As to coal. Bob Allen’s The British Industrial Revolution in Global Perspective, which leans heavily on coal, is dazzling work, but mistaken. Like a recent book by Douglass North, Barry Weingast, and John Wallis (modestly subtitled A Conceptual Framework for Interpreting Human History) it doesn’t carry out the promise of the title, not getting much beyond England and France. Getting beyond the English Channel is the program of the new work on global economic history (to which Allen has in fact contributed), and its findings radically change the story. Coal after all was how China made “china” to export to the coal-stupid English and French. And on the other side, charcoal from wood continued to be used to make iron very late in places like the United States (as Peter Temin showed along ago) and in Sweden. The last Swedish charcoal-fueled blast furnace closed as late as 1965. I have a Swedish acquaintance who exhibits photographs on the remains of the one that closed in 1962.

Most centrally, Allen’s book and the coal argument that otherwise brilliant folk like Tony Wrigley and Matt Ridley cling to, is based on a non-sequitur — one persuasive to non-economists but known by all us mistresses of the science (don’t try this at home) to be nonsense. Matt correctly summarizes Allen’s argument as “[high English] wages . . spurred on labor-saving innovation in machinery.” But wait: a shilling is a shilling, and adds to profit whether got by saving labor or by saving coal (saving coal is in fact what the early steam engineers mainly obsessed on, as Peg Jacob has shown, which is a trifle odd if cheap coal is what is supposed to have driven innovation). “Scarce” labor (and what about its relative scarcity in fourteenth-century Italy or second-century China?) means that people will substitute machines and land (e.g., coal) for labor. But it doesn’t mean that technology as a whole will get better.

And what about the inverse: if labor is cheap in Russia or India, why wasn’t there a labor-using industrial revolution there? After all, something is always relatively scarce, and the scarcity argument implies therefore that everyone will have an industrial revolution. You can see there is something screwy with the Allen and now Ridley argument. If spaghetti is cheap relative to rice in Italy compared with Japan you can expect Italians to eat relatively more spaghetti than rice. Yet such an expectation about static substitution does not say anything about how much food in total the two countries will consume, one sort of food aggregated with another. In explaining modern innovation of a factor or 16 or 30 or 100, the aggregate is what matters, not the scarcity-driven pattern of substitution at any one time. The aggregate, as Mokyr, Goldstone, Eric Jones and others of the New Anti-Materialism claim, was determined by ideas, such as the bourgeois dignity of my title.

Here Matt preaches an unattractive materialism which I wish he would work on escaping from. I shall pray for him to my Anglican god. After all, he and I write books trying to change people’s minds. If we were consistent materialists we would put down our pens and start offering people large bribes to become liberals. He claims that “thinkers follow rather than precede in the innovation story.” Well, who says? (Greg Clark falls into a similar materialism — what the modern Marxists call “vulgar Marxism” — when in a single sentence he dismisses ideational forces in European history.)

I don’t think thought follows matter, not always. The U.S. Constitution, for example, as the historian Bernard Bailyn argues, was a creative event in the realm of ideas — and its economic origins are easily exaggerated. “The Atlantic democratic revolutions of the later eighteenth century,” writes Jonathan Israel, “stemmed chiefly from a general shift in perceptions, ideas, and attitudes,” a “revolution of the mind.” The abolition of slavery, a policy once advocated merely by a handful of radical churchmen (and the Baron de Montesquieu), played in the 1820s and 1830s a role in British politics, and later of course a much bigger role in American politics. It had less to do with the North’s material interests than with cheap printing (matter induced in part by innovative ideas) interacting with evangelical Christianity (ideas only, thank you). As Lincoln famously said on being introduced to the author of Uncle Tom’s Cabin (1852), “So you’re the little woman who wrote the book that made this great war!” Books can indeed make big wars; as another example, Erskine Childers’s spy novel, The Riddle of the Sands: A Record of Secret Service (1903), was no minor influence on the Anglo-German naval rivalry. Socialist ideas and at length socialist reality spread after the disappointed revolutions of 1848 in congresses and party meetings and manifestos. Scribble, scribble, scribble. Various nationalisms had spread across Europe in reaction to Napoleon’s conquests, but then were matured in poetry and songs of risings and in the screeds of exiles resident in London. Talk, talk, talk. Ideas matter. And they matter in the economy as much as in politics or society. One doesn’t have to be a materialist just because one is talking about ships and stocks and labor.

I invite Matt, then, to abandon his historical materialism and come over to the little band of practitioners of a new “humanomics” (Hirschman, Klamer, Bronk are some names to conjure with, and Smith, Mill, Keynes, Hayek, Boulding in olden times). We humanomists believe that humans are motivated by more than incentives, just as Greg Clark summarizes my views in his comment. We abhor Max U as a sociopath, admitting that sometimes Prudence Only is satisfactory in explaining some events; we urge Max to become a more reasonable Maxine U, exhibiting the full range of human virtues — prudence, yes, but also temperance, justice, courage, faith, hope, and love. And that’s how we believe one should explain the Industrial Revolution and its astonishing sequel.

Also from This Issue

Lead Essay

  • Bourgeois Dignity: A Revolution in Rhetoric by Deirdre McCloskey

    In this month’s lead essay, Deirdre McCloskey summarizes the argument of her forthcoming book, Bourgeois Dignity: Why Economics Can’t Explain the Modern World. She argues that while the modern world rode an economic tide, the tide did not have economic causes. Changes in thinking and, yes, in rhetoric did the real work. Neither thrift, nor greed, nor the Protestant ethos are at the heart of this transformation, which brought material prosperity to whole classes that had never before known it. A variety of possible causes must be dismissed, she argues, from foreign trade, to legal institutions, to coal. The dignity and liberty of the bourgeoisie are the keys to economic transformation.

Essays

  • Why Economics MUST Explain the Modern World by Gregory Clark

    Gregory Clark argues that cultural or intellectual developments, like the rise of the bourgeois virtues, ultimately can’t explain the modern world. Not only were such virtues around long before the Industrial Revolution, but they have come and gone throughout many different societies over thousands of years. Why, then, did the Industrial Revolution only happen so recently, and only once? Worse, if we accept that cultural changes brought modern prosperity, we face the prospect that future changes in intellectual fashion may rob us of prosperity as easily as it was bestowed. This he finds both unfortunate and, thankfully, unlikely.

  • Don’t Dismiss the Materialist Explanation by Matt Ridley

    Matt Ridley makes two connected points: First, surges in creativity and innovation are far from unique. They can be observed throughout history, and they are usually connected to increases in trade and specialization. In this sense, Britain during the eighteenth century was not exceptional.

    Second, however, Britain was exceptional in another respect – it had large reserves of coal, and it began putting them to use. Cheap energy helped ensure that the boom in innovation didn’t die out. Entrepreneurs won out against plunderers in part because they had this resource at their disposal, and because they could make the case for the benefits of innovation so easily. It was only after the switch to a coal-driven economy that wages finally began to rise for the typical British worker. They continue to do so today thanks to coal and to other sources of cheap energy that have since been discovered and exploited.

  • Unleashing Creative Development by Jonathan Feinstein

    Jonathan Feinstein suggests that the revolution in human creativity is still underway, and that we have not yet fully recognized what it means to be creative. The science of creativity, he argues, is key here, as the creative process is very different from what most people imagine it to be.

The Conversation