Saturday, November 3, 2007

The Lever of Riches

An interview with Joel Mokyr in latest World Economics- some excerpts below;

In a recent paper in the Journal of Economic Perspectives, David Landes has revisited the question of why China was not the first country to have an Industrial Revolution. Why did China fail to have the first Industrial Revolution, given that it is generally agreed that China was the world’s technological leader until about five hundred years ago?

Well, 1500 is perhaps a bit late in the game… 1350 would be my break point on China’s technological leadership. Why not China? This is undoubtedly one of the big questions in human history. China certainly had the numbers in terms of population if you believe the Jones–Kremer story. We know that eighteenth-century China is a very sophisticated, commercialised, monetised, economy with good property rights. What I think was the missing ingredient in China was that Francis Bacon was not Chinese. This is the first part of the story. The ‘Baconian Revolution’, and the founding of the Royal Society is pivotal to what is happening in Europe. Essentially this revolution created bridges between the people who make things with the people who know things. That’s what really counts. It doesn’t matter how many smart people you have who know things if they do not have contact with the people who make things out in the fields, factories and workshops. This contact raises important questions, such as, How do we fix this machine so that it works better? How do we make this? How do we break through this barrier? What Bacon and other Enlightenment thinkers bring to this story is a pragmatic, material, set of questions. They were not creating things to demonstrate metaphysical points about the wisdom of the creator, or attempting to foresee the future using astrology, or dabbling in the occult. They wanted to help the farmer and the manufacturer with practical down-to-earth knowledge. That is the essence of Francis Bacon’s message and it did catch on.

Was there nothing like this in China?
The Chinese do not have anything that looks like an Enlightenment. The Chinese court controls everything, whereas in Europe the Industrial Enlightenment and Baconian program are driven by private individuals, not by governments. The whole intellectual process in China is largely government controlled, manipulated and managed. There are European countries which also follow this model and they are the ones who do not make it to the convergence club; for example, countries such as Spain, dominated by a counter-Reformation, and Russia, ruled by a tyrannical government.

The second part of the story is not so much to do with technology but with the institutional aspects of the Enlightenment. This is the belief that the economic game is not zero sum. The idea that trade between regions and countries could lead to mutual gain is one that the mercantilists rejected. Mercantilism is essentially a system of rent seeking based on the assumption that wealth is increased by grabbing as much as you can. The new thinking rejected this idea and suggested that such behaviour would, more than likely, cause the overall size of the economic pie to decline.

The ultimate culmination of this new thinking is Adam Smith’s book The Wealth of Nations, published in 1776.

The ideas are already in the air a century before this. Joseph Schumpeter once said that the Wealth of Nations does not contain anything new. But Schumpeter did not like Adam Smith very much so he would say that, wouldn’t he? [laughter]...

Every economic historian must have a favourite date, event, era or story. What is yours?

I have lots of stories, as you can imagine. Let me think…yes, I do have a favourite. Vaclav Smil writes about what he considers to be the most important invention in history, certainly twentieth-century history. The invention is the synthesis of ammonia, because it is the basis of all fertilisers. Without this we would all starve to death. Although eighty per cent of the atmosphere is nitrogen; people could not turn this nitrogen into ammonia and then into fertiliser. Then a process was invented by a German Jewish physical chemist called Fritz Haber (1868–1934) who received the Nobel Prize in 1919 for identifying how to synthesise ammonia from its elements, nitrogen and hydrogen. By all accounts, Haber was a genius, but also a first class jerk [laughter]. He was an ardent German nationalist. By 1914, the Germans knew that if war broke out there would be a high probability that they would be subject to a naval blockade from the British. Before the war, Germany imported most of its nitrogen from Chile. Nitrogen is not only a fundamental raw material used for the production of fertilisers, it is also a key ingredient for the production of explosives. So if Germany ran out of nitrogen, it would be unable to fight a war. So Haber’s invention not only helped feed the world, it also allowed the First World War to last for four years instead of six months, with the loss of millions of lives. There are two interesting footnotes to this story that make it really interesting. First, when the war got bogged down in the fields of Flanders in 1915, Haber announced that he knew of a way of breaking through the British and French lines. He suggested developing gas as a weapon and this would win the war. He took his idea to the German generals and pushed and pushed until they eventually took up his ghastly idea. So, at the instigation of Haber, chemical weapons were introduced into the conflict. This hardly makes Haber a character to be admired. These new weapons did not help the Germans to win the war but it did make the conflict even more dreadful. After the war was over he was awarded the Nobel Prize in chemistry because he was the leading chemist of his time. In 1933, when the Nazis came to power, none of his scientific achievements, his nationalism or anything else did him any good. He was Jewish so they kicked him out. He died forgotten, lonely, abandoned, on a ship on its way to Palestine in 1934. He was one of the greatest inventors and greatest jerks of the twentieth century. I like the story because it conveys the ambiguity of technology and the folly of human ingenuity if harnessed in the service of nationalism and aggressive patriotism, all the things that I abhor. He used his scientific knowledge to serve his nation and was then rejected by that same nation. A famous student of technology, Melvin Kranzberg, once said, technology is neither good nor bad, nor is it neutral. This is known as Kranzberg’s first law of technology. What it means I have no idea [laughter].

No comments: