The Nobel laureate Robert Solow once quipped that every attempt to explain differences in economic performances using culture has ended up in a “blaze of amateur sociology”1. In his latest book – A Culture of Growth – Joel Mokyr, the eminent economic historian from Northwestern University, takes this challenge head on and puts forth the argument that culture is the answer to arguably the most important question in economics: why the Industrial Revolution, and thus the very origin of the modern economy, began in Europe and not anywhere else. Judging from the almost universal praise the book has gotten, from Angus Deaton to Robert Lucas, Mokyr has perhaps succeeded. Mokyr’s book follows neatly from Dierdre McCloskey’s three-volume Bourgeois Era2. In her heroic trilogy, McCloskey, an equally distinguished economic historian, argued that the birth of the modern economy in the 18th century was due to ethical and rhetorical changes that celebrated rather than repressed the liberty and dignity of ordinary folks to try new ideas and ways of doing things. For Mokyr, the Industrial Revolution was foremost a scientific paradigm shift underpinned by a change in culture which enabled the accumulation, diffusion and application of useful knowledge the world had never seen before. Together, they have built a convincing case that the intangibles were the root causes of economic progress in the modern world.To understand Mokyr’s core argument, it is useful to first distinguish between a Smithian growth and a Schumpeterian growth. A Smithian growth relates to allocative efficiency and growth through trade and specialisation, in which cultural elements such as trust and respect for the law are vital. A Schumpeterian growth, on the other hand, is one that is driven by the advances and application of useful knowledge. It is this type of growth that led us to escape the Malthusian limit in the 18th century and has been sustaining long-term economic growth ever since. For Mokyr, the Schumpeterian growth breakthrough in Europe began with a fundamental reassessment of what science was in the 18th century. The person who left a lasting influence that led to that reassessment was Francis Bacon, who Mokyr calls a ‘cultural entrepreneur’. Bacon advocated that science needs to be based on facts and experiments, and that it should be directed towards improving the lives of people. This Baconian reform had two very important path-changing implications. First, the emphasis on empiricism allowed for meaningful scientific progress rather than wasteful intellectual energy spent on blind veneration of early scholars and exegesis of ancient texts. This shaped a progressive culture that was more confident of the future, and not unduly focused on some ideal past. Second, with the purpose of science in advancing the material conditions of humans, the gap between scholars and artisans was made narrower, leading to a virtuous cycle of creation and application of useful knowledge. Bacon, Mokyr explains, was someone with the idea that “knowledge ought to bear fruit in production, science ought to be applicable to industry, and it was people’s sacred duty to improve and transform the material conditions of life”.
The reason why this ‘culture of growth’ began and flourished in Europe was due to a unique combination of competitive pluralism in politics and the existence of a transnational and mobile intellectual community. Europe had a multitude of relatively weak and fragmented states that fiercely competed with each other. This prevented any single state from successfully repressing progressive ideas but instead created a continent-wide competitive market both for and among intellectuals that stimulated intellectual innovation. At the same time, a transnational community of intellectuals, known as the Republic of Letters, emerged during this age. The Republic of Letters connected intellectuals through correspondences of letters and exchanges of published papers and pamphlets. This led to an era of ‘open science’, in which new ideas circulated and contested throughout the Continent. In short, Europe of the 18th century “had the best of all possible worlds in having all the advantages of diversity and fragmentation and yet have a unified intellectual community”.Mokyr has argued persuasively that a change in culture was central in explaining the origins of the modern economy as we know it. This, of course, is not the first time that economists turned to culture. From Max Weber to David Landes, many economists have put forth the proposition that culture is important in economic development. More recently, even the World Bank waded gently into this matter in their flagship publication, the 2015 World Development Report. An accompanying working paper3 for the report, “Does Culture Matter for Development?”, used the experience of Japan during the Meiji Restoration as an example of how cultural change was instrumental in economic development. While contextually very different, the parallels that exist between the Industrial Revolution, as explained by Mokyr, and the Meiji Restoration, as per the working paper, are striking. With the collapse of the 250-year old Tokugawa shogunate in the late 19th century, Japan turned its back from its insular and backward-looking culture towards one that was forward-looking and open to new ideas. This cultural shift shaped much of the changes in political and social structures of Japan that underpinned its rapid economic modernisation. Using Mokyr’s term, Home Minister Okubo Toshimichi became the foremost ‘cultural entrepreneur’ for Japan during this period.Despite various attempts, however, culture remains very much at the fringe of mainstream economics. There are a variety of reasons for this. Firstly, the challenge of defining and measuring culture with any precision means that it is difficult to reconcile it with the mathematical rigour demanded by mainstream economics. Secondly, culture – almost by definition – does not fit comfortably within the positive-normative distinction in economics and the commonly accepted position of economics as a value-free science. Lastly and perhaps most importantly, any contemporary discussion on culture and economic development is almost sure to be controversial as it could be interpreted as criticism of a particular religion, racial tradition or nationality.But culture matters. As it is almost self-evident for all of us, culture – our beliefs, values, and preferences – is central to our everyday lives. In pretending that it does not matter or discounting its significance, we risk impoverishing our capacity to understand the world and diminishing our usefulness to inform policy. If doing amateur sociology makes me a better economist, sign me up.