aghion v.2005/08/19 Prn:8/09/2005; 15:21 F:aghion1017.tex; VTEX/Lina p. 1 aid: 1017 pii: S1574-0684(05)01017-8 docsubty: REV 1 Chapter 17 1 2 2 3 LONG-TERM ECONOMIC GROWTH AND 3 4 THE HISTORY OF TECHNOLOGY 4 5 5 6 6 JOEL MOKYR 7 7 Departments of Economics and History, Northwestern University 8 8 9 9 Contents 10 10 11 Abstract 2 11 12 Keywords 2 12 13 1. Introduction 3 13 14 2. Technology and economic growth 4 14 15 3. A historical theory of technology 7 15 16 4. The significance of the Industrial Revolution 14 16 17 5. The intellectual roots of the Industrial Revolution 19 17 18 6. The dynamic of technological modernity 32 18 19 7. Human capital and modern economic growth 43 19 20 8. Institutions and technological progress 49 20 21 9. Conclusions: Technology, growth, and the rise of the occident 58 21 22 Acknowledgements 62 22 23 Uncited references 62 23 24 References 62 24 25 25 26 26 27 27 28 28 29 29 30 30 31 31 32 32 33 33 34 34 35 35 36 36 37 37 38 38 39 39 40 40 41 41 42 Handbook of Economic Growth, Volume 1B. Edited by Philippe Aghion and Steven N. Durlauf 42 © 2005 Elsevier B.V. All rights reserved 43 43 DOI: 10.1016/S1574-0684(05)01017-8 aghion v.2005/08/19 Prn:8/09/2005; 15:21 F:aghion1017.tex; VTEX/Lina p. 2 aid: 1017 pii: S1574-0684(05)01017-8 docsubty: REV 2 J. Mokyr 1 Abstract 1 2 2 3 Modern economic growth started in the West in the early nineteenth century. This survey 3 4 discusses the precise connection between the Industrial Revolution and the beginnings 4 5 of growth, and connects it to the intellectual and economic factors underlying the growth 5 6 of useful knowledge. The connections between science, technology and human capital 6 7 are re-examined, and the role of the eighteenth century Enlightenment in bringing about 7 8 modern growth is highlighted. Specifically, the paper argues that the Enlightenment 8 9 changed the agenda of scientific research and deepened the connections between theory 9 10 and practice. 10 11 11 12 12 13 Keywords 13 14 14 15 Industrial Revolution, economic growth, technological progress, access costs, useful 15 16 knowledge 16 17 17 18 JEL classification: N13, O31, O41 18 19 19 20 20 21 21 22 22 23 23 24 24 25 25 26 26 27 27 28 28 29 29 30 30 31 31 32 32 33 33 34 34 35 35 36 36 37 37 38 38 39 39 40 40 41 41 42 42 43 43 aghion v.2005/08/19 Prn:8/09/2005; 15:21 F:aghion1017.tex; VTEX/Lina p. 3 aid: 1017 pii: S1574-0684(05)01017-8 docsubty: REV Ch. 17: Long-Term Economic Growth and the History of Technology 3 1 Some of the material in this chapter is adapted from my books The Lever of Riches: 1 2 Technological Creativity and Economic Change, Oxford University Press, New York, 2 3 1990; The Gifts of Athena: Historical Origins of the Knowledge Economy, Princeton 3 4 University Press, Princeton, 2002 and The Enlightened Economy: An Economic History 4 5 of Britain, 1700–1850, Penguin Press, Harmondsworth, 2004, as well as from a number 5 6 of more detailed papers available upon request. 6 7 7 8 8 9 1. Introduction 9 10 10 11 11 As every economist knows, the modern era is the era of economic growth. In the past 12 12 two centuries, measures of output per capita have increased dramatically and in a sus- 13 13 14 tained manner, in a way they had never done before. It seems by now a consensus to term 14 15 the start of this phenomenon “the Industrial Revolution”, although it is somewhat in dis- 15 16 pute what precisely is meant by that term [Mokyr (1998b)]. In the past two decades an 16 17 enormous literature has emerged to explain this phenomenon. A large number of “deep” 17 18 questions have emerged which this literature has tried to answer. Below I list the most 18 19 pertinent of these questions and in the subsequent pages, I shall make an attempt to 19 20 answer them. 20 21 1. What explains the location of the Industrial Revolution (in Europe as opposed to 21 22 the rest of the world, in Britain as opposed to the rest of Europe, in certain regions 22 23 of Britain as opposed to others). What role did geography play in determining the 23 24 main parameters of the Industrial Revolution? 24 25 2. What explains the timing of the Industrial Revolution in the last third of the eigh- 25 26 teenth century (though the full swing of economic growth did not really start until 26 27 after 1815)? Could it have started in the middle ages or in classical antiquity? 27 28 3. Is sustained economic growth and continuous change the “normal” state of the 28 29 economy, unless it is blocked by specific “barriers to riches” or is the stationary 29 30 state the normal condition, and the experience of the past 200 years is truly a 30 31 revolutionary regime change? 31 32 4. What was the role of technology in the origins of the Industrial Revolution and 32 33 the subsequent evolution of the more dynamic economies in which rapid growth 33 34 became the norm? 34 35 5. What was the relation between demographic behavior (and specifically the fall in 35 36 mortality after 1750 and the subsequent decline in fertility and shift toward fewer 36 37 but higher-quality children) in bringing about and sustaining modern economic 37 38 growth? 38 39 6. What was the role of institutions (in the widest sense of the word) in bringing 39 40 about modern economic growth, and to what extent can we separate it from other 40 41 factors such as technology and factor accumulation? 41 42 7. To what extent is modern growth due to “culture”, that is, intellectual factors re- 42 43 garding beliefs, attitudes, and preferences? Does culture normally adapt to the 43 aghion v.2005/08/19 Prn:8/09/2005; 15:21 F:aghion1017.tex; VTEX/Lina p. 4 aid: 1017 pii: S1574-0684(05)01017-8 docsubty: REV 4 J. Mokyr 1 economic environment, or can one discern autonomous cultural changes that 1 2 shaped the economy? 2 3 8. Did the “Great Divergence” really start only in the eighteenth century, and until 3 4 then the economic performance and potential of occident and the orient were 4 5 comparable, or can signs of the divergence be dated to the renaissance or even 5 6 the middle ages? 6 7 9. Was the Industrial Revolution “inevitable” in the sense that the economies a thou- 7 8 sand years earlier already contained the seeds of modern economic growth that 8 9 inexorably had to sprout and bring it about? 9 10 10. What was the exact role of human capital, through formal education or other 10 11 forms, in bringing about modern economic growth? 11 12 12 13 13 14 2. Technology and economic growth 14 15 15 16 Economists have become accustomed to associate long-term economic growth with 16 17 technological progress; it is deeply embedded in the main message of the Solow- 17 18 inspired growth models, which treated technological change as exogenous, and even 18 19 more so in the endogenous growth models.1 An earlier growth literature regarded tech- 19 20 nology as a deus ex machina that somehow made productivity grow miraculously a little 20 21 each year. The more modern literature views it as being produced within the system by 21 22 the rational and purposeful application of research and development and the growth of 22 23 complementary human and physical capital. The historical reality inevitably finds itself 23 24 somewhere in between those two poles, and what is interesting above all is the shift of 24 25 the economies of the West in that continuum. Whatever the case may be, technology is 25 26 central to the dynamic of the economy in the past two centuries. Many scholars believe 26 27 that people are inherently innovative and that if only the circumstances are right (the 27 28 exact nature of these conditions differs from scholar to scholar), technological progress 28 29 is almost guaranteed. This somewhat heroic assumption is shared by scholars as diverse 29 30 as Robert Lucas and Eric L. Jones, yet it seems at variance with the historical record 30 31 before the Industrial Revolution. That record is that despite many significant, even path- 31 32 breaking innovations in many societies since the start of written history, it has not really 32 33 been a major factor in economic growth, such as it was, before the Industrial Revolution. 33 34 Instead, economic historians studying earlier periods have come to realize that tech- 34 35 nology was less important than institutional change in explaining pre-modern episodes 35 36 of economic growth. It is an easy exercise to point to the many virtues of “Smithian 36 37 Growth”, the increase in economic output due to commercial progress (as opposed to 37 38 technological progress). Better markets, in which agents could specialize according to 38 39 39 40 40 41 41 1 The opening line of the standard textbook in the area states that the “most basic proposition of growth 42 theory is that in order to sustain a positive growth rate of output per capita in the long run, there must be 42 43 continual advances in technological knowledge” [Aghion and Howitt (1997, p.