The Enlightened Economy: An Economic History of Britain 1700 – 1850 — Joel Mokyr

Ideas matter. So does the ability to execute those ideas. Britain had both, in the form of the Enlightenment and the Industrial Revolution, both of which were important but neither of which has been fully considered as twinned phenomena. Nows they have been, and have been impressively.

The Enlightened Economy sounds boring but isn’t, and it ties together two trends that Mokyr argues should be appreciated more: the dovetailing of the Enlightenment and the Industrial Revolution, both of which are entangled and driven by ideas to a greater extent than previously appreciated. Both were concerned with ideas; both occurred around the same time; and many participants in one also participated in the other. Furthermore, ideas motivated both; as Mokyr says, “Ideas, in the eighteenth century as much as the twentieth, competed in a market for ideas.” But the idea of a marketplace of ideas was new and relied on a lessening of religious control and a greater willingness to challenge existing ideas and beliefs. Ideas had to be “contestable,” as well as cumulative and consensual, to become useful and lead toward exponential growth. The strange thing is still that the Industrial Revolution didn’t happen earlier or in some other place. The other strange thing is how many ideas that played out across the eighteenth century continue to play out today, as reading The Enlightened Economy or Louis Dupré’s excellent The Enlightenment and the Intellectual Foundations of Modern Culture shows.

In terms of economic structure and organizations, consider that Mokyr writes that “More than anything else, the reduction in [the power of British trade guilds] was hastened by mobility; many of the activities that urban craft guilds controlled could and did move out of their geographic sphere to the countryside or to towns free from guild control.” Later on the same page, he says that “The London guilds, known as ‘livery companies’ saw their powers erode when economic activity moved to the suburbs such as Whitechapel and Spitalfields.” You can see the same issues with union or government control versus the private sector, which is still widely debated.

The same basic dynamic has been occurring in the United States for decades: heavy manufacturing in the Northeast and Midwest has become more mobile, both abroad to places like China and Mexico as well as to union-unfriendly Southern states like Alabama. Recent wrangling around car company bailouts showed that political logic follows economic logic: senators representing states with BMW, Toyota, Honda, and Audi plants fulminated against bailouts, while northern states where unions still have some power favored bailouts. In the meantime, however, union power has been waning in the private sector for years, even as it has grown in the public sector, where the inability of cities, towns, school districts, and the like to go bankrupt thanks to immediate competition allows unions to exist. Still, the overall direction of the world is obvious to current observers, even if it wasn’t to many eighteenth Century ones. The power of individual and capital mobility lessens the power of rent seekers (Mokyr: “In the second half of the eighteenth century, most important intellectuals became increasingly hostile to what modern economists would call rent-seeking, namely the use of political power to redistribute rather than create wealth”).

As mentioned previously, one major issue and still unresolved issue is why the Industrial Revolution happened when and where it did. Almost no one knows. The discovery process itself became systematized:

The pre-modern economies were at times capable of creating radical inventions, but such advances tended to settle down rather quickly into new dominant design largely because most inventions were arrived at through trial and error and hit-and-miss procedures. Systematic research and development based on something we would recognize today as scientific rigor was still highly uncommon.

And those techniques are only more common because we pass them down and forget less successful techniques.

Of course, Mokyr is in part writing about the current economy: he writes about workers, locations, idea transmission, and more. Today, Richard Florida relies heavily on concept of “the creative class” (I wonder if I’m a member) in his writing and “highly qualified personnel” (HPQs), as Alex Usher calls them in an academic context. The most interesting thing is how (relatively) few of such people, networked together, can make an enormous difference in not just the quality of their own lives but the productivity of everyone around them. As Paul Graham says in “Taste for Makers“, “Nothing is more powerful than a community of talented people working on related problems. Genes count for little by comparison […]” I’ve been looking for more formal studies of the general ideas around talent clustering but haven’t been able to find any. Nonetheless, such people are likely to be the ones who push society forward through thinking or finding new ideas, becoming repositories of ideas, or seeking new methods of doing things. As Mokyr says:

[… I]t is important to realize that an economy in which there are innovators is not one in which all or even most people are inclined to experiment or to take risks, much less express their disrespect for the wisdom of their teachers and ancestors by declaring the new to be better.

We still see elements of this kind of thinking in the education system, although the system seems better at critiquing itself than it once might have been in the past. Self-modification is relatively rare. The absolute number of people willing to be innovators might now be higher, the percentage might be the same. The comparisons between the eighteenth century and now, which Mokyr sometimes makes and sometimes leaves to the reader, might be the most radical and unusual parts of this book.

It is a book about ideas that on its own contains many ideas that illuminate how the world was changing—and how it is today, as we live in a society that is saturated with ideas—provided that we are willing to find and follow those ideas. And think about them on a meta level—in other words, deal with ideas about ideas. This is relatively hard and requires a lot of training to accomplish. Mokyr reminds us of why it is important.

A final note about the materiality of the book in question: The Enlightened Economy is scholarly and concomitantly expensive. It’s also very nicely bound and easy to read. It feels like it will last a very long time, which is good, because I haven’t digested it yet and doubt many could in a first reading.

Dan Ariely in Seattle

In addition to being an excellent economist and writer, Dan Ariely has among the best syllable-to-letter ratios for any last name I’ve heard. I only learned how to pronounce AR-EE-el-EE on Feb. 27, when he visited Seattle to discuss Predictably Irrational. He warmed the crowd with a visual illusion I fell for; this YouTube clip is a variation. Carefully count the number of one- versus two-handed passes in the video.

If you haven’t watched the clip, don’t read on. If you have, the question isn’t about passes: did you notice the guy with the cell phone walk up to the door behind the girls with the ball? Ariely’s video was more obvious: men in black and white shirts passed two basketballs and a guy in a gorilla suit walked through. Like most of the rest of the crowd, I didn’t notice the gorilla because I was busy counting passes (18 in all, though it depends on whether one counts a pass at the very end). To judge from the self-conscious laughter when Ariely pointed this out to us and the few hands that went up when he asked how many of us saw the gorilla, many others were in my situation. And with that, we were primed with a metaphor for the brain’s ability to create mental illusions.

Ariely gave many examples of such illusions and preferences. For example, opt-in versus opt-out retirement systems have widely varying degrees of participation, as do countries with organ donations, depending on whether people are enrolled by default or must opt-in. It turns out that we seem to have difficulty with multiple, complex choices and a tendency to fall back on defaults in the face of these choices. I’m reminded of Philip Zimbardo’s The Lucifer Effect: Understanding How Good People Turn Evil, which shows how otherwise normal people who receive arbitrary authority and limited oversight can do evil acts. That tendency might be an aspect of a default option: obeying perceived authority.

Both Zimbardo and, implicitly, Ariely, argue that by becoming aware of such tendencies we can better correct or fight them. The tendency towards defaults, initial choices, and authority might also explain why change in societal attitudes often happens slowly: it takes generations for tides to shift and first decisions to be made anew. Paul Graham says, “I suspect there is some speed limit to the evolution of an economy. Economies are made out of people, and attitudes can only change a certain amount per generation.” Ariely’s research supports that conclusion, but I can also see how and why change might be accelerating: as people become more accustomed to change as the norm and as the first choice, it becomes more natural for the individuals who make up societies to reorient themselves faster to new choices. This could also help explain some of the findings in Gregory Clark’s A Farewell to Alms, which argues that the Industrial Revolution took off more because of attitudes and culture in England than other conditions. England’s culture during the Industrial Revolution had finally reached a place where change and innovation became the norm, and where society could support that change rather than relying on defaults like superstition or religion to explain worldly phenomena. It’s an intriguing hypothesis, though off the top of my head I can’t immediately think of a clever way to test whether change becoming a default norm might help change in the future, perhaps explaining why I’m not a behavioral economics professor.

Ariely also showed how we’re constantly using imperfect and imprecise knowledge to make decisions, allowing first decisions their power to frame how we think about something. In an experiment, Ariely read poetry to students and then asked how much groups of students would either pay or agreed to be paid to hear him recite poetry again shortly. The group asked how much they would pay offered to pay to hear Ariely read, and the group that he offered to pay demanded money. It would appear that the way he framed the question caused them to offer or demand money—and offer more or demand more the longer the reading went on. I would also note that, although Ariely gave an excellent econ talk, I’m not sure I would go for his rendition of “Leaves of Grass.” But students who asked how much they would pay did offer money for it because of the way Ariely framed the question.

Now that I know, I wouldn’t pay to hear him read poetry regardless of whether he asked. But if he’s in town for economics, I’d see him, and so should you. You’ll laugh and learn, and the former might be the optimal way to induce the latter.

Product Review: Kindle

Failures-waiting-to-happen like the Amazon Kindle electronic book are highly frustrating, especially because both it and the Sony eBook suffer from the same problem: how to get books and other material on to the device. In the press and on the web, comparisons to the iPod abound, but they fail because when the iPod was released lots of people already had mp3 files on their hard drives. It was easy to acquire more from existing collections by ripping CDs, so you could, with a minimal amount of effort, load the $500 or whatever you’ve already invested in CDs on the iPod. If you’re a scofflaw, you could load your friends’ CDs too. To most ears, music is nearly identical whether on a CD or compressed to an mp3 (audiophiles: I know you love vinyl for its fidelity or whatever, but I’m talking about everyone else here). Tons of material was already available for the iPod.

Contrast that situation with books. Since I don’t want to read books on my computer screen, I haven’t bothered becoming a digital ruffian and downloading books from peer-to-peer or Bittorrent networks, assuming they are even available. Even though I have a nice shiny iMac with a monitor crisper than 90% of those used in the industrial world I still don’t want to do it. There’s no easy way for me to transfer the 200-odd books Delicious Library tells me I have to a Kindle. They’re a mix of hardcover and paperback, new and used, but I’d be comfortable wagering that their average cost is about $10, and I’m not about to throw that out for a digital reader that, just to get the reader, costs as much as 40 books. Furthermore, I know that I’ll be able to read my copy of A Farewell to Alms in ten years. Will Amazon still produce the Kindle or Kindle store in ten years? Maybe, maybe not. I have books printed a hundred years ago that have journeyed places I doubt their original owners could’ve fathomed. Most Kindles will end up in consumer electronic junk heaps in five years, just like most iPods.

The Kindle functions a bit like public transportation in the sense that public transportation really works when it allows you to live without a car. Likewise, the more paper I need to keep, the worse the Kindle looks. Right now there’s no way for me to easily transfer my subscriptions to The Atlantic and The New Yorker. Amazon isn’t going to have every book I want available, and every book I want that I can’t find and have to buy or check out of the library represents another mark against the Kindle. If you want to read blogs, Amazon acts as a gatekeeper and charges you for the privilege; I like the iMac screen well enough to read blogs that otherwise cost money.

I feel slightly bad writing this, as it shows that I’m susceptible to the Amazon hype machine. But if the hype machine had substance underlying it, I’d be elated. Instead, I’m disappointed, but the Kindle does make me wonder how I’ll be reading thirty years from now; it seems improbable that I’ll use pulped trees. The remaining question is how and when the transition will happen. Maybe someone will come along and give me a free e-book of every regular book in my library. Amazon could do it, and I’d be much more inclined to like the Kindle. Maybe piracy networks will develop, although this seems unlikely given the number of books out there and the difficulty of converting them from bound paper to digital files. Or maybe environmental problems or commodity prices will make printing and shipping books so cost ineffective that we’ll convert to e-book devices for financial reasons. Whatever the cause, I don’t see it happening on a wide basis until a solution for the content problem arrives.

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