PerspectiveEconomics

Intellectuals and the rise of the modern economy

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Science  10 Jul 2015:
Vol. 349, Issue 6244, pp. 141-142
DOI: 10.1126/science.aac6520

For many decades, economists dismissed culture as irrelevant to most questions in economic growth. However, in the past decade they have rediscovered its importance in the emergence of the Great Enrichment (the rapid and unprecedented process of economic growth since 1850) (13). In retrospect, this development seems inevitable. Once it was accepted that institutions are a powerful factor in explaining differences in national per-capita income today (4), culture—in the sense of the beliefs and values on which institutions were founded—could not be far behind. In a recent paper, Squicciarini and Voigtländer (5) provide further support for this idea by showing how culture affected the rise of the modern economy.


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Fostering scientific creativity.

A page from an 18th-century encyclopedia (15) illustrates the tools used in book binding. Squicciarini and Voigtländer argue that the relative numbers of subscribers to such works predict the subsequent rate of economic development. Thus, small, well-educated elites were—and arguably still are—crucial for scientific and technological creativity.

ILLUSTRATION: BEQUEST OF MARIANNE KHUNER/METROPOLITAN MUSEUM OF ART

But whose culture matters here? Was it popular culture, the beliefs of the great masses, and the growth of general literacy and mass education? The answer is not simple. The Industrial Revolution of the late 18th century and the continuing waves of economic growth that followed it were largely driven by inventions and the science on which they increasingly relied. In the Victorian age, many authors tended to explain the advent of the Industrial Revolution by the actions of a few great inventors such as Watt and Arkwright and great scientists such as Galileo and Newton. In the 20th century, scholars (many of them influenced by Marx) reacted to such hero worship by seeing the sources of ingenuity as impersonal deep forces and denying single individuals any agency at all. Tolstoy famously advocated in War and Peace that “To study the laws of history we must completely change the subject of our observation, must leave aside kings, ministers, and generals, and study the common, infinitesimally small elements by which the masses are moved” (6). In this view, individuals matter little; if Henry Bessemer had not invented the converter that made cheap steel possible, someone else would have.

That said, what explains truly transformative technological ideas such as steam power, gas lighting, smallpox vaccination, the transistor, and antibiotics? Single individuals may have mattered less than their worshippers suppose, but it is hard to deny that in the 18th century, the segment of the population that generated and created new technology and new science was a very thin slice indeed. Technological improvements leading to a rise in living standards were created by people who were either educated and learned or extremely skilled and resourceful—and of course quite a few who were both. Some scientists were also brilliant instrument makers, such as the great Alessandro Volta, or inventive engineers with good connections to the scientific community, such as James Watt and John Smeaton.

Pathbreaking advances were adapted to production by a second tier of tweakers and implementers (7). However, that still meant a small minority of the population—a few thousand at most—who challenged conventional wisdom and created the new techniques and machines that made the modern age. No one put it better than the prescient scientist and master instrument maker Robert Hooke, who noted in 1666 that “There hath not been wanting in all ages and places great numbers of men whose genius and constitution hath inclined them to delight in the inquiry into the nature and causes of things, and from those inquiries to produce somewhat of use to themselves or mankind. … But this newfound world must be conquered by a Cortesian army, well Disciplined and regulated, though their numbers be but small” (8).

A more formal representation of this idea is to consider the distribution of human capital in society. Typically economists such as Richard Easterlin have regarded human capital as a precondition for economic growth and examined various measures of it, such as overall literacy rates or the mean (or median) number of school years completed. There are good reasons for this approach, but historical data suggest that focusing on the entire labor force is more appropriate for explaining the adoption and diffusion of existing technology rather than the generation of new knowledge (9). What matters for the latter are those in the right-hand tail of the distribution: a small number of exceptional people who can think creatively and have the cutting-edge knowledge and training to carry cutting-edge technology to the operational stage (10, 11).

Squicciarini and Voigtländer (5) have put this proposition to an imaginative test. They reason that high-quality individuals generated economic progress in two ways. First, they were able to make the new blueprints work and scale them up. Second, they continuously improved those techniques by small adjustments and adaptations. These individuals were the key actors in economic progress. Squicciarini and Voigtländer measure the number of such intellectuals from an unexpected source: the relative number of people who subscribed to the Grande Encyclopédie, published in France in 1777–1778. About 7000 French intellectuals bought subscriptions to this heterodox and progressive work, often regarded as the epitome of Enlightenment thought.

Squicciarini and Voigtländer argue that these subscribers represented a practical intelligentsia: After all, the encyclopedia contained practical information and descriptions of techniques in use at the time (see the image), in addition to liberal philosophy. They then show that the relative number of subscribers in French cities predicts the subsequent rate of economic development in French cities after the process of industrialization, using the new technology, took off in the late 18th century. Moreover, the average level of human capital, as measured by literacy rates, mattered little in the early stages of industrialization. In other words, by itself, the number of people able to read was not important for growth. What mattered was the elite: the number of well-educated people who read sophisticated texts.

How precisely the reading of such texts affected inventive and entrepreneurial activity is, of course, still a mystery. It stands to reason that both are related to unobservable characteristics such as curiosity, scientific creativity, access to cutting-edge knowledge, and a desire to increase economic efficiency.

Does this finding have implications for our own time? Modern research has suggested that the benefits of education for economic growth are far from obvious (12, 13). The total stock of human capital is not a sufficient statistic for explaining the growth rate of an economy; in addition, we need to know the composition of the human capital (highly educated versus more widespread education) and how close the economy is to the world technology frontier (14). For economies that are at the technological frontier, investing in the education of the best and the brightest may be as important as raising the mean of the entire distribution. For the rest of the world, which imitates and adopts rather than invents, investing in mass education is still the best strategy for economic growth.

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