Cutting Through

The Enlightened Economy: Britain and the Industrial Revolution 1700-1850, Joel Mokyr, 2011.

Dazzle-Ships in Drydock at Liverpool, Edward Wadsworth, 1919.

Eric Hobsbawm famously said that “whoever says Industrial Revolution says cotton”. Today this is no longer true, and a myopic focus on Lancashire mills marks out an economic historian as rather old-fashioned. But it is likely still the case that whoever says Industrial Revolution says Britain. Why exactly it all started on that dreary island is the ‘second question’ of economic history, after why the Industrial Revolution happened at all. There is a sense in which all economic historians worth their salt must be at least mediocre historians of eighteenth century Britain, and there is an enormous and ever-expanding literature trying to unearth what made Britain special.

Joel Mokyr’s The Enlightened Economy is, first and foremost, a comprehensive to-a-fault attempt to get to the bottom of this vast literature. As a result, it is not an easy book to summarise, and figuring out how to write this review was more difficult than usual. For starters, The Enlightened Economy is a true 800-page monster. With tomes of this size, I usually try split my piece in two bite-sized parts, for my benefit, and hopefully, for yours.

But, in this case, I could not decide on an elegant split. Mokyr’s book is broad, even too broad, but it nonetheless demands to be swallowed whole. This is an attempt to get to grips with a single question — why Britain? — from every angle possible: demography, geography, institutions, the state, culture, trade, empire, human capital and capital markets. The book is both impossibly wide and, for my purposes at least, totally indivisible.

Luckily for this reviewer, however, Mokyr has bones to pick and a clear thesis to defend. In the last post I reviewed Mokyr’s The Lever of Riches, a history of technology and technological progress. I was struck in that book by how non-polemical Mokyr was, how hesitant he seemed, for the most part, to pedestal or dismiss any given theories or explanation.

This is not the case in The Enlightened Economy, which is trenchant in its criticism of the three most influential theories of the British Industrial Revolution: the trade-and-colonies approach favoured by so many historians, Robert Allen’s factor price divergence model, still popular among economists, and Douglass North’s new institutionalism. Mokyr is also unambiguous about what he believes allowed Britain to pull ahead: the ‘Industrial Enlightenment’, or the diffusion of belief in technological progress in the British economy and society. As Mokyr puts it, “the great minds of the Industrial Enlightenment had shown how the useful knowledge they were accumulating could be used to improve, to rationalise, and to innovate. The rest is commentary”.

On the face of it, a major problem with the Enlightenment-forward approach is that The Enlightenment was anything but a British phenomenon, while the Industrial Revolution (at least at first) entirely was. Mokyr, of course, is aware of this. On the one hand, he is of the view that Britain was not that special per se, and that “had [the Industrial Revolution] not started in Britain, it would have started somewhere else in Western Europe”. On the other hand, Mokyr’s Industrial Enlightenment is quite different to The Enlightenment itself.

Peasants, artisans, and merchants were not keeping Voltaire and Descartes in mind as they went about their day, in Britain or anywhere else, and this is not what Mokyr has in mind with the Industrial Enlightenment. He acknowledges that only a “small minority” was exposed to Enlightenment thought, and “that much of its thinking served class interests”, being neither “egalitarian nor democratic”. His claim is only that Enlightenment thought instilled a belief in the possibility and desirability of progress, however defined, which translated into an elite preoccupation with expanding “useful knowledge” which had not previously existed in Britain, nor yet substantially taken root elsewhere. This change in attitudes was enough to raise the rate of technological progress to the point of allowing escape from the Malthusian trap.

Mokyr’s method to demonstrate this is resolutely historical. Much of the book is an exquisite survey of the technological improvements conceived in Britain during the period: the by whom, why, and how. This is well-suited for making one of his key points: that the wide range of sectors in which new technology was implemented demonstrates the Industrial Revolution cannot be confined to cotton, or thrown out as a concept at all. This is an important point, but no longer a particularly relevant one. To my mind, debates over whether the Industrial Revolution ‘happened’, as lively as they were in the last century, are no longer much contested. One might say Mokyr is beating a dead horse.

Mokyr’s most effective interventions, however, are not made in support of his thesis, but against those which he rejects. First on the block is the notion that the Industrial Revolution grew out of commerce and empire. This Mokyr says is both “inaccurate and incomplete”, a result of a “post-hoc-ergo-propter-hoc logic”. He takes direct aim at Hobsbawm as well as Findlay and O’Rourke, who wrote the influential global economic history Power and Plenty (2007). If trade had any role to play, Mokyr argues, it was through facilitating the exchange of ideas. Mercantilism, naval supremacy, and war only impeded things. He boldly makes the claim that “if there had been no cotton, there still would have been an Industrial Revolution”.

This is a substantial topic which I want to avoid getting lost in for now: suffice to say, I think that Mokyr’s claim in this instance is too strong by half. If there had been no cotton we may still have seen an Industrial Revolution, sure, but not anything which looks like the Industrial Revolution. Mokyr’s case that the fundamental causes of economic growth are not Britain’s overseas pursuits is a solid one. But it would be a stretch to suggest that they did not play a major role in shaping the contours and consequences of this growth after ignition.

Moving on from that unsatisfactory note, Allen’s factor price model is next on Mokyr’s list. Allen’s famous argument is deliciously simple: labour was expensive relative to capital in Britain relative to other countries as a result of both high wages and cheap coal, and this encouraged development of technologies which substituted labour for capital. This theory has been hit with innumerable critiques, and Mokyr is far from the first to take a shot. But his rebuttal is original. While most question the first part of Allen’s argument (the claimed divergence in factor prices), Mokyr’s target is the idea that such a divergence would incentivise the substitution of labour for capital through new technology.

Mokyr presents a barrage of points here. He writes that “while it is obvious that costly labour would make firms choose techniques that were intensive in nonlabor factors, it is far from obvious that the same holds for the search for new techniques”. Furthermore, “firms try to save all costs, not just those of relatively expensive factors”, and “one could question whether mechanisation and steam power were as uniformly labour-saving as they are made out to be”. Mokyr questions the assumption that technological progress could even be factor-targeting — “it is not always clear at the start of a research project whether the end-product of the research will save labour more than capital”.

To top it off, he argues that Allen’s theory is still downstream of his Industrial Enlightenment: that fuel costs are not exogenous, and that “the price of coal at any given location except pithead was a function of the improvements and investments in the transport system that a society hell bent on progress had made”. These are well-considered points, much less glib than Mokyr’s rebuttal of all of trade-and-empire historiography. They left me questioning an aspect of Allen’s thesis I had never thought to question before.

Finally there is Mokyr’s rejection of new institutionalism. This is only a partial rejection, as Mokyr has sympathy for the significance of informal institutions; norms of behaviour, such as reputation mechanisms, which enable exchange. While he thinks informal institutions mattered in an abstract sense, however, he does not think Britain had uniquely effective ones, nor that they flourished in eighteenth century Britain (in fact, he argues their importance diminished).

Formal institutions are given much less time. Mokyr does not believe that the relative security of property rights, be that physical or intellectual, had much of a role in Britain’s Industrial Revolution. To start, stories based on property rights “must face up to the degree of day-to-day property security in Britain by 1700”, which was both not great and largely maintained by informal norms and not state enforcement. Intellectual property is even more dubious. Of all the 6,377 inventions exhibited at the Crystal Palace in 1851, for example, only 11.1% were patented. The patent system could be as much of an obstacle as a benefit to inventors, involving substantial and uncertain costs as well as the potential for litigation. Overall, it “did not give Britain a significant advantage over its European competitors”.

This sentiment is in fact at the centre of Mokyr’s overarching perspective on institutionalism in this context, which is that the pros and the cons wash out. Britain “had some institutions that fostered and encouraged growth, while many others were more of an obstacle than a support for economic development”. It is not apparent that the landscape of economic incentives, as a whole, changed substantially before the British Industrial Revolution, even if specific ‘improvements’ can be identified.

This point is crucial. Mokyr rejects the Northian institutionalist view precisely because it pedestals changing-incentives-as-explanation. This is the essential difference between Mokyr’s approach circa 2011 and new institutionalism that has perhaps been lost of late as the conceptual barrier separating culture and institutions has faded. I believe that Mokyr would not think that the Industrial Enlightenment, for example, was an ‘institution’, because his argument is that a broad swathe of the British people became more interested in progress and technology despite the fact that they were not any more incentivised to do so. Culture and belief are genuinely upstream of the economy, insofar as they are forces for change which act prior to, not in response to, economic incentives. At least that is how I read Mokyr’s argument.

Mokyr views his own perspective as somewhat heterodox. He anticipates the resistance of scholars who “share with Marx a historical materialism which holds that ideology is basically endogenous to economic environments”. This is a group into which he lumps most economists and historians. Today, post-Nobel Prize, Mokyr’s views are surely less unorthodox than they perhaps had been in 2011. My impression, as I mentioned in my piece on Gregory Clarks’ A Farewell to Alms, is that academic acceptance of the economic role of culture has risen substantially of late even if what exactly this means usually remains unclear. But I also believe this acceptance is in part a product of the clouding of the distinction between culture and institutions which I outlined above.

I have largely avoided commenting on how much I agree with Mokyr. In short, I would still consider myself amongst those materialists instinctively sceptical of Mokyr’s idealism, even while I agree with many of his criticisms of competing approaches. But I respect the boldness of Mokyr’s claims on behalf of the Industrial Enlightenment in this book and his unwillingness to collapse the concept into a toy model. Like with The Lever of Riches, Mokyr’s approach to the causes of technological progress in The Enlightened Economy is deeply idealist: it has a somewhat mystical component. I wonder if Mokyr — at least, the Mokyr calcified within this book — is in fact more unorthodox than many economists might believe.

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