Midwest Economics Assoc.1 The Cultural Origins of Modern Economic Growth Presidential Address Midwest Economic Assoc.11 Cleveland, March 21, 2009 Joel

Midwest Economics Assoc. 1

The Cultural Origins of Modern Economic Growth

Presidential Address

Midwest Economic Assoc.11

Cleveland, March 21, 2009

Joel Mokyr

Northwestern University


For many years, economics regarded institutions and culture as exogenous and “outside” the discipline.

In the past twenty years they have provided increasingly sophisticated definitions and analyses of institutions, and a school has arisen that regards them as central to the process of modern growth.

In this economic historians and growth economists have found a common language (e.g., North, 2005; Greif, 2005; Acemoglu and co-authors, 2001-2006; Rodrick et al. and many others).


If Institutions are becoming fashionable, can Culture be far behind?

• There is a “sense” that it should be important and so in 2006 the Journal of Economic Perspectives published a special issue of Economics and Culture.

• Since then, some important papers have been published by theorists (e.g. Benabou, 2007) and empirical economists such as Tabellini (2007, 2008).

• These papers make a prima facie case that “culture” plays a central role in economic outcomes.


Why have economists been reluctant to deal with culture?

One reason is ambiguous definitions. In 1952, Kroeger and Kluckhohn counted 164 different definitions of “culture” --- and that was then!

Since then, scholars in social science and history have written endless books and articles on “culture” where many alternative definitions are proposed.

But the economics profession is still new at this.


Need a formal definition that excludes some things and still is useful

Proposed definition: Set of beliefs, values, and preferences shared by some

subset of society that are not transmitted genetically.

Beliefs: a set of positive statements about the world that catalog phenomena and postulates patterns and regularities among them.

Values: a set of normative statements about how individuals and society should behave.

Preferences: a set of statements about personal attitudes toward states of the world, including the consumption of goods and services (widely defined) consumed by this individual.


The central point is that dominant culture is the “deep” foundation of institutions.

For example, if institutions are the rules by which society operates, cultural beliefs provide the base why we have some rules and not others.

Cultural beliefs also stipulate whether people think that obeying the rules is good behavior.


Example: corruption

• Whether there is a lot of corruption in an economy is an institutional feature. But whether people think corruption is a “bad” feature is part of culture.

• In an important paper, Hauk & Saez-Marti (JET 2002). show that there are two equilibria, one high corruption and one low-corruption. Like many papers in the tradition of cultural evolution, they assume that people are born with no preferences about whether corruption is bad or not and get them from their parents or from someone else in their environment. It turns out that even if people think it’s “bad”, they could end up with a lot of corruption.


What makes culture so interesting is that it is intergenerationally correlated.

• But the rate of persistence is itself endogenous to technological and economic change, and so we have a dynamic system that is inherently open and unpredictable.

• Culture is transmitted from generation to generation by means other than genetics (by definition). This process is as yet poorly understood, and promises serious gains from cooperation between evolutionary theorists and economists.

• Example: the seminal paper on cultural transmission in economics (Bisin and Verdier, 2001) and the basic work in evolutionary cultural processes (Boyd and Richerson, 1985, 2006) still need to be better integrated.


To see how this model works (based on Boyd and Richerson)

Gt(geneticallytransmitted

traits)

Ct(culturally

transmitted

traits)

Phenotypes(behavior, actions)

expression

choices

Gt+1

Ct+1

V1: reproduction

V2: cultural transmissionby parents

Teachers, role models

VerticalTransmission (V)

ObliqueTransmission (D)

Peers, media

HorizontalTransmission (H)

Ontogeny Phylogeny


• What matters to flexibility (non-persistence) is (D+H)/(V1+V2), that is, how much culture do people absorb from non-parents.

• Standard assumption made by Bisin&Verdier (2001): non parental culture is received from a “random individual” who is not a parent.

• This has some nice qualities, but seems at variance with reality.

• Boyd and Richerson (1985): there are “biases” (deviations from parental culture).


Boyd and Richerson’s (1985, 2005) “biases”:

• Content-based bias: People pick cultural variants because of their inherent qualities. They are convinced by new facts (or at times try to ignore them, as in Benabou 2008).

• Model-based bias: we imitate the beliefs of people who are “role models” or appear worth imitating, because these traits are correlated with others that are desirable (e.g. material success).

• Direct bias: Through “authority” --- society appoints cultural authorities who have great influence. Especially important in religion.

Biases


Biases (cont’d)

• Rhetorical Bias: through persuasion, in which some successful individuals persuade others of the correctness of their views, often through disciples or epigones (Jean Calvin, John Knox, Guido de Bres; or Adam Smith and Dugald Stewart).

• Frequency dependence: If many others (mostly peers) believe something, it must be true.

• Coercion: “accept my views” [or at least the actions implied by them] “or else” (Lenin, Khomeini). Can control transmission mechanism (schools, churches, press).

• Salient events can have a discontinuous effect: catastrophes such as the Black Death or 9/11 can change ideology.


Most work on cultural economics to date is about social beliefs about how others behave.

Issues that come up are above all (Tabellini, 2008; Benabou, 2007):

• “Trust” in “others” (like oneself) as well as in “the authorities.”• Collectivist vs Individualist views of the economy (Greif, 1994). • Perceived merits and flaws of free markets vs. governments.• Belief in “generalized” vs “local” morality.• Belief that an egalitarian society with redistribution is preferable to

an unequal one with more high-powered incentives (Piketty, 1995). • The degree to which poverty and poor individual performance is the

result of bad luck vs. laziness (which implies certain institutions).


But in addition to values, people are imbued by their parents with preferences

This is stressed in an important paper by Doepke and Zilibotti (2008):

• Parents teach their children time preference (patience)

• Parents teach their children diligence (leisure preference)

In addition:

• Parents teach their children prudence (risk aversion)

• Parents teach their children a sense of guilt (not be free riders)


Is Europe more successful economically because it has a “different culture?”

Landes and others: yes.

But what is it about European culture and institutions that explains this difference, and where does it come from?

Tabellini (2008) shows two important things:

• Political institutions in the past affected cultural beliefs in the present. “Good” political institutions led to a culture more favorable to economic success.

• Within Europe those societies with “better governance” indicators (people trust their government and one another, even people they don’t know well) specialize in highly productive sectors that require well-functioning property rights and legal institutions and are usually more prosperous.


Behind these political institutions rests a central historical fact that set Europe apart

That fact is that between 1700 and 1850 European culture underwent epochal changes (from the point of view of economic growth as well as others).

We might think as the Enlightenment as the Mother of all Cultural Changes (Mokyr, 2009).


All the same, this story (basically David Landes’s) is unsatisfactory by itself as an explanation of modern economic growth

WHY?


It is only half the story in explaining modern growth

• The reason is that it does not come to grips with the cultural roots of technological change. It explains “Smithian Growth”, not “Schumpeterian Growth”.

• Technology is inherently a game against nature.

• Hence, to understand the cultural roots of innovation, we need to stress relations between people and their (perceived) physical and metaphysical environment no less than between them and other people.


“Culture” may affect technological change directly

Five cultural mechanisms proposed:

1. Lack of local cultural arrogance

2. The absence of respect toward the knowledge of previous generations and “tradition”

3. Cultural beliefs about the relation between people and the environment (“anthropocentrism”)

4. A set of values that places “work” and physical production higher in the ladder of social prestige.

5. Agenda toward the investigation of nature and natural philosophy (“R&D”)

Important: These are differences of degree, not absolutes.


1. Lack of Cultural Arrogance

• Some societies are more willing to overcome a “not-invented here” attitude.

• Medieval Europe is good example. Adopted a large number of important innovations from other societies (whom they otherwise had no love for), especially Moslem society: paper, medicine, mathematics, windmills, navigational instruments.

• This gets much more pronounced after 1500, when Europeans scour the world, in large part in search of gold but also new ideas and techniques.


• Typical of the Europeans' approach was the great Leibniz, who implored a Jesuit travelling to China “not to worry so much about getting things European to the Chinese, but rather about getting remarkable Chinese inventions to us; otherwise little profit will be derived from the China mission”

• Or consider the introduction of smallpox inoculation by Lady Montague, wife of British ambassador in Constantinople (1720) from Turkish women.


They were not in the least bashful of “invented elsewhere” as evidenced by the terms used:

• Arabic numbers• Calicots• Japanning• Chinaware• “Lateen” sails• Turkeys

• Or the retention of Arabic terms such as algebra and alcohol.


This kind of attitude is not universal

• Chinese have little interest in western technology, as evidenced by failed Lord McCartney mission of 1792 that purported to impress the Chinese with British technology.

• Moslem world deliberately cuts itself off from most European inventions after 1600.

• Tokugawa Japan “locks out” all foreign culture till 1853. Then switch from one extreme to another.


2. Respect toward previous generations

• How much do we hold the knowledge of previous generations to be sacrosanct? This is an example of Kuran’s (1988) “tenacious past”.

• Was it “all” in the canon such as Aristotle and Avicenna?

• A famous dictum from the Jewish Chazal (earlier sages) has it that "if those who were before us were like angels, we are but men; and if those who were before us were like men, we are but asses.“

• Concepts of “heresy” and “apostasy” (in Christianity) and bidaa in Islam trying to thwart innovation.

• This is critical because an invention of any kind is implicitly a form of disrespect toward earlier knowledge.


• Literalism and Orthodoxy. Many strict cultural systems insisted on the sanctity of ancient knowledge and that wisdom consisted not of innovation but of repetition, interpretation, and exegesis.

• This was true for Confucianism, Islam, and Judaism, as well as Christianity --- but for none of them was it time-invariant. Also, some constrained flexibility was always possible under the aegis of “interpretation.”


• Such respect started to decline in Europe in the late middle ages.

• It led to the Reformation but also to a growing skepticism of “ancient authorities” in natural philosophy and medicine.

• Slowly respect for “the canon” is eroded, as various doctrines are overturned, Copernican revolution being the most famous. Many others (e.g., Paracelsus, Petrus Ramus, Galileo)).


None of this goes over smoothly:

• Copernicus, Lavoisier, and Darwin only best-known examples of “rebellious” innovations that raised a lot of resistance.

• Technological change almost without exception runs into resistance by incumbents (Mokyr, 2002).

• Yet in the West this resistance in the end loses out (at least where it counts).


This lack of respect has accelerated in recent times

• In the nineteenth and twentieth centuries, rapid rates of technological and scientific change established a disdain for the knowledge of previous generations. The equation newer = better applied in many areas.

• Authority and literalness fell into disrepute, especially in the secular twentieth-century West. This is now taken as axiomatic. In many disciplines of science and technology practitioners have no knowledge of or respect for the “wisdom of earlier generations.” [That includes economics …].


3.People and Environment

• Religion has always had a big impact on the “virtuousness” of manipulating the environment.

• As Mumford pointed out, if every stream and mountain has a deity, people may be scared to make radical changes. The environment remains capricious, unpredictable, and uncontrollable. Any attempt to alter it may raise the awesome ire not only of Zeus but of small-time local deities as well.

• Need to preserve “natural harmony” --- which often meant the status quo.

• Innovators were often depicted as sinful because “technology plays God” --- consider the myth of Prometheus or the parable of the sorcerer’s apprentice.

• This all changed in the medieval West.


• Argument put forward by L. White (1968):

• Medieval Christianity was an anthropocentric religion. People were the crowning achievement of creation. It postulated that the natural environment was there for the people, and the creator wanted Man to exploit the environment. Technology was not a sin, but a virtuous deed because it illustrated the wisdom of the Creator.

• Western Christianity in the later middle ages increasingly developed a view of a rational and calculating God, the designer of a huge, intricate, logical mechanism called the Creation. God "commands man to rule the world and to help to fulfill the divine will in it as a creative cooperator with him." Christian beliefs began to take it as axiomatic that nature has no reason for existence save to serve mankind.


Logical, knowable, and controllable universe• By late middle ages, the West had adopted increasingly a belief in a controllable,

mechanistic universe in which human beings should exploit the immutable laws of nature for economic purposes; by the end of the Middle Ages, it had triumphed.

• In the later Middle Ages, God is increasingly depicted as an engineer or an architect in technological terms. World compared to a mechanical clock (which was invented around 1200).

• Very different from Islamic culture, where there is a growth of what is known as “occasionalism,” hugely influential writings of al Ghazali (1058-1111), denying natural causality.

• This cultural attitude increased over time: In eighteenth and nineteenth centuries Britain there were very few qualms about the manipulation of nature in the interest of people. This was not the result of secularization. Britain in the Industrial Revolution is a deeply religious society. They felt that this is what God wanted them to do.


4. Hierarchy of values

• Culture determines which kind of human achievements are respected and that success in them conveys social prestige:

For example:• Jewish society: learning and knowledge of the written records

• Roman Republic: military leadership and generalship

• Medieval Europe: physical prowess

In most societies hard work, technical skill, and economic success conveyed little social prestige.


Physical work

• In many societies the elites owned land and did not work.

• Physical Work was associated with slaves and there was a huge gap between those who worked and those who thought.

• Medieval Christianity was the first society to consciously build a bridge here.


The bridge was certain types of the regular clergy (monks)

• “Idleness is the enemy of the soul and to labor is to pray,” taught St. Benedict. The concept of penitential labor was supplanted by the idea of physical labor as a positive means to the salvation of the soul.

• “For the first time the practical and the theoretical were embodied in the same individual ... the monk was the first intellectual to get dirt under his fingernails" (White, 1968, p. 65).

• Most of the known inventors and engineers of the middle ages were monks, who were responsible for the diffusion of new technology especially better agricultural techniques, windmills, and mechanical clocks.


In the subsequent years, there was a rise in the social prestige of commerce and industry

• Often associated with religion (Max Weber), the rise of Atlantic trade (Acemoglu-Johnson-Robinson, 2005), or that of an urban bourgeoisie with a new ranking of virtues (McCloskey, 2006).

• Especially remarkable in Western Europe, where money increasingly could buy you a position as part of the commercial oligarchy (in the Netherlands) or the noblesse de la robe in France. Bourgeois virtues (hard work, thrift, ingenuity, honesty) associated with commerce earned a place next to piety or courage.

• Engineers and highly skilled craftsmen became, if not quite dominant, more respected by authorities realizing their value.


In a famous passage, Adam Smith noted that the main purpose of making money was social prestige

“To what purpose is all the toil and bustle of the world . . . the pursuit of wealth, of power, and preeminence? What are the advantages [then] by that great purpose of human life which we call bettering our condition? . . . It is the vanity, not the ease of the pleasure, which interests us. But vanity is always founded upon our belief of our being the object of attention and approbation. The rich man glories in his riches, because he feels that they naturally draw upon him the attention of the world. . . . Everybody is eager to look at him. . . . His actions are the objects of the public care”.

Theory of Moral Sentiments, 1759, pp. 50-51.


The implication is that people who made inventions that greatly increased their wealth (and that of the realm) were increasingly the target of approbation.

Great inventors were often raised to the statute of national heroes, none bigger than James Watt (MacLeod, 2007).


5. The agenda of research

Until the sixteenth century, the purpose of natural philosophy is basically knowledge itself.

The modern notion that technological change comes from “useful knowledge” (that is to say, science) had a long and slow emergence.


Francis Bacon, 1561-1626


Bacon’s most famous insights

The purpose of useful knowledge is to increase economic welfare, or in his own words

• “The greatest error … is the mistaking of the last or furthest end of knowledge … as if there were sought in knowledge not a rich storehouse, for the Glory of the Creator and relief of Man’s estate (= improve Man’s material condition).”

Francis Bacon, Advancement of Learning (ed. Brian Vickers), pp. 147-48


The concept of technology is to exploit Nature for people’s material needs:

“If Man endeavor to establish and extend the power and dominion of the human race itself over the universe, his ambition…is without doubt a wholesome thing and …noble… Now the empire of man over things depends wholly on the arts and sciences. For we cannot command Nature except by obeying her.”

New Organon, aphorism 129.


Bacon’s Influence is huge:

• Baconians: The “Invisible College” (Incl. Robert Boyle, Christopher Wren, Robert Moray, Samuel Hartlib) whose declared purpose was to increase useful knowledge to improve the material world. But also outside Britain, e.g. Comenius, French philosophes.

• Led to the founding of the Royal Society in 1660, modeled after Bacon’s “Solomon’s House” and many academies that imitated it (Paris, Berlin etc.).

• The Royal Society at first displayed a strong interest in studying and improving techniques. This enthusiasm cooled after 1720, but other academies grew up elsewhere in Britain that took over this function.

• Still heavily cited as role model in late eighteenth century by Enlightenment philosophes and scientists, e.g. as source of inspiration for the Grande Encyclopédie ed. by Diderot and d’Alembert.


Those five factors were not new in 1750

• When they combined with Enlightenment views, they create the kind of culture that created modern economic growth.

• This is not to denigrate institutional and political factors, but to argue that not everything runs through them.


Conclusion: Above all, we should eschew Historical Materialism

• That is, we should stay away from the assumption that cultures are “chosen” to suit the economic needs of society and are wholly endogenous to economic needs.

• Such Marxist views seem oddly attractive to modern economics, but they are mistaken. Culture is to a large extent an autonomous and contingent force, which affects economic outcomes. That is not to say that it is not itself subject to economic and technological effects.


• Thank you.

Documents

Midwest Economics Assoc.1 The Cultural Origins of Modern Economic Growth Presidential Address Midwest Economic Assoc.11 Cleveland, March 21, 2009 Joel