Joel Mokyr co-won the 2025 economics Nobel for exploring the question that traces back to the beginning of economics: how did sustained economic growth suddenly become normal? For nearly all of human history, cleverness didn’t compound. What changed, according to Mokyr, was twofold: first, you need to know why something works, so that one advance can seed the next; second, you need a culture willing to tolerate the disruption. His new book contrasts Europe with China, showing how Europeans learned to cooperate with people they weren’t related to, in guilds, monasteries, cities, and universities, while China organized itself around the extended clan. One path led to internal stability and peace; the other, more restless and outward-looking, was the one that decided the world could always be made better.
Tyler and Joel discuss European corporations vs. Chinese clans, why the Catholic Church became obsessed with cousin-marriage, how persistent cultural trends really are, why Chinese cities became so populous relative to Europe, why it took so long for European living standards to surpass China’s, why sinified invaders kept getting swallowed by the dynasties they conquered, how geography kept Europe fragmented and China unified, where India fits into the story, why the Romans never made spectacles, why British soldiers stood two inches taller than the French, what powered the sudden rise of 19th-century German science, how disruptive winning a Nobel is, and much more.
Watch the full conversation
Recorded February 20th, 2026.
TYLER COWEN: Hello, everyone, and welcome back to Conversations with Tyler. Today, I’m chatting with Joel Mokyr. Joel is a professor at Northwestern University. He has a wonderful new book out called Two Paths to Prosperity: Culture and Institutions in Europe and China, 1000–2000, and he is one of the economics Nobel laureates from this past year. Joel, welcome.
JOEL MOKYR: Thank you, Tyler.
COWEN: Start by telling us, in the book, your thesis about European corporations versus Chinese clans and the importance of that difference. How would you explain it?
MOKYR: Well, the difference is, basically, the kind of organizations that produce what we call local public goods, so things like food relief and education, religious services, things like that, I would think that if you look at the world, say, around 800, at the time of Charlemagne, the difference between Europe and China isn’t very large. At some point, during the Middle Ages, you can see this divergence getting started. What’s happening is that, in Europe, there is more and more of a decline in the extended family or the extended kinship group, we call it clan, and instead, people get together and cooperate with other people to whom they are not related and with whom they do not share an ancestor.
Whereas in China, it moves exactly in the other direction. In China, you get more and more people getting organized by their extended family. The reasons for that are fairly complex. In Europe, it’s particularly the Catholic Church that played a major role here. This was argued quite a while ago by a guy, an anthropologist called Jack Goody, but your own colleague Jonathan Schulz wrote, what I think is one of the best papers on the subject, who pointed this out in great length and actually provided a fair amount of systematic evidence for this.
In China, there is no Catholic Church. The imperial bureaucracy is more and more in cahoots with local clans to whom they actually outsource a fair amount of the things that they were supposed to do. As you move on out of this period of the Song dynasty into later dynasties, you see this thing growing. The problem in Europe is that the nuclear family, which became the fundamental building block of society, is too small to provide local public goods. You need to cooperate with others. What emerges in Europe, and quite spontaneously, is a bunch of things that provide these local public goods that you just don’t see in China.
For instance, we have something called universities. We have monasteries. We have autonomous cities. All of those things are what we call corporations. What it is, is people who are not related, but what they share is not an ancestor but an objective. Guilds have one kind of objective, universities have another one, and so on and so forth. That divergence in social organization turns out, in our view, to be one of the key components of the divergence between Europe and China.
COWEN: Do you take that change in policy from the Catholic Church as exogenous or that it is rooted in earlier features of Western society such as the ideology of Christianity itself or maybe earlier Roman times? What is causing what? What’s the most fundamental driver here in the West?
MOKYR: Well, there’s some debate about that. They don’t, of course, tell you. There are, I think, two components about this, and I would not know how to weight them. There are two things happening here. The first is that the Catholic Church really becomes quite obsessive about certain sins that they consider to be particularly egregious. One of those sins is incest. Every society in the world prohibits marriage between siblings, but other more remote relatives is more ambiguous. The Church becomes quite obsessive about this. At the end, there are places where they actually prohibit the marriage of fifth-degree cousins. Now, how anybody in the Middle Ages would know who is fifth-degree cousin is, is unclear. I don’t know who my fifth-degree cousins are. Maybe you do.
The other thing, which is also sort of Goody’s argument, and I think there’s a great deal of truth to that, is that the Church wants to weaken any kind of organizations that compete with it for power and control in the local communities. They also have figured out that if you organize society by nuclear families, then a certain proportion of people die without heirs. If they die interstate without heirs, that in many cases, the property that these people own reverted to the Church. Pure naked greed by the Church, which was not unknown in the Middle Ages, I think, was a driver here. Goody convinced me that that actually is a substantial factor.
There are other arguments that have been made in this context, but I think these are the two that are most striking. The other question is, why is it that the clan in China is so convenient for the imperial bureaucracy to rely on? Both of those things happen in parallel. I would think, maybe, if I may allow one observation, in both cases, this is history as historical outcomes, as the unintended and unanticipated consequence of very different actions. There’s no question that the Church never, I think, foresaw the emergence of corporations in Europe, nor do I think that the Chinese imperial service ever seriously considered the possibility how this would change life in China. That’s what happens. You try to follow one objective and then something very different emerges over time. That’s what history is all about.
COWEN: Now, why are these cultural trends so persistent? I recall, in the 1990s, reading Francis Fukuyama’s book Trust. He argued that large Chinese corporations were going to be very difficult to establish because China did not have enough trust, unlike Japan. Now, a few decades later, that seems obviously wrong. There are many quite large Chinese corporations, and the large Japanese corporations, they’ve maintained a foothold, but they actually haven’t done that well. Things changed quickly. Why so much persistence here?
MOKYR: That’s a very good question. There’s some debate about how much persistence there really is. Particularly, the communist regime under Mao did all they could to erase the influence of clans and replace it, of course, with communist functionaries. There’s some evidence, and some research has recently shown, that that wasn’t 100 percent successful. I think what you get, particularly in societies such as China, but in other places as well where corporations were largely absent and where your society was organized by family, is that it actually changes people’s culture and people’s values.
If you look at all the work that’s been done by economists like Stephen Enke and anthropologists like Joe Henrich, they all show a very tight correlation between attitudes and cultural values and kinship, whether that’s extended kinship or nuclear family. I think what you could do in China and in Europe is you could maybe change your organizations, but you cannot change the state of mind.
An interesting fact is that many of the corporations that we talk about that were established during the Middle Ages eventually disappeared or became very unimportant. For instance, guilds eventually got abolished after the French Revolution on the continent, and they were weakened in England much earlier. Monasteries still exist in Catholic countries, in Protestant countries, and in England. They were completely abolished. But the frame of mind and the cultural values that growing up in a nuclear family imbues, that kind of thing sticks around. Corporations, of course, remained, but they changed their form very much.
The one most persistent of all those corporations, interestingly enough, were universities. Effectively, the form of universities, with the fact that they are self-governing and they’re sort of self-contained organizational units that write their own rules and their own bylaws, that thing, despite a lot of pressure on them, is still surviving, which I find very striking.
We should think about a world that consists of lots and lots of different organizations like that, in which cities, for instance, were self-governing and made their own rules. Again, you see cooperation between people who share a location but not necessarily an ancestor. These things tend to be very persistent precisely because of institutions interacting with culture and culture feeding back into institutions. They evolve or co-evolve, I should say, together. That makes them, I think, much more persistent, Tyler.
COWEN: Why is it so late in history that Chinese cities still have more people than, say, London or Paris, if the Chinese model is economically inferior?
MOKYR: No, I didn’t… it isn’t economically. We never say in the book—anyway, you will not find this—that it was economically inferior. That’s a way of thinking that we have long abandoned. It’s different. In many ways, under the empire, the Chinese got what they wanted. What Europeans think of being inferior, the Chinese actually [had] that as their objective. What they wanted, above all, was stability and internal peace, rather than what the Europeans wanted, which was progress and growth. These huge cities in China, well, remember, it’s an incredibly populated place, but in fact, urbanization in China, say, if you look at 1850 or 1900, is much lower than in Europe.
The urbanization that you see now is really all post-imperial. In fact, a lot of it is the consequence of the last 20 and 30 years. Although you should keep in mind that since the First Opium War, Europeans have been penetrating China, and many of the European values and ideas were being mixed in with the Chinese culture. What you get is some kind of mixed product, which produced many of these cities. Many of these cities were what’s known as treaty ports, Hong Kong and Shanghai and so on. They grew, in large part, because the Westerners that came there and settled there and actually ran their own show.
China, certainly since the death of Mao in 1976, [has] adopted many of the European ideas and many of the European cultural values. As a result, what you get today in China is sort of a weird mixture of persistence of things that were around during the empire and for thousands of years, Confucian beliefs and so on, with Western values.
I’ll give you one example, which I find particularly striking. One of the great insights of Western society over the years has been the idea of intellectual property rights. You don’t really actually see anything like that anywhere in the world. The combination of a patent system and copyright and all these things, that’s a very Western European thing. The Chinese never had anything like that. The whole concept of intellectual property right was alien to Chinese thinking until about 30 or 40 years ago.
Now, if you look at the data, Chinese patents have just skyrocketed. Clearly, that idea has now penetrated Chinese society. The idea, for instance, of having self-governing autonomous universities still hasn’t quite gotten there because Chinese universities are very much run and managed by politicians, unlike, I hope, most American universities.
COWEN: Why does it take so long for the wealthiest parts of Western Europe to surpass Chinese living standards? Say that’s happened by 1700 or 1720, that’s many centuries after this medieval divergence. If it takes so many centuries, is the medieval divergence really the relevant factor? Why is it such a slow process?
MOKYR: Yes, I think it is. I think it’s a main factor. I think the idea of looking at standard of living, one thing, I’m very skeptical about how standards of living are actually measured. I know that this is what Pomeranz and other people have, and Jack Goldstone and other people have argued that the living standards in China were comparable to the West as late as 1750. I’m not 100 percent sure that that is true. Certainly, for my money, what really defines the divergence is that, technologically, the gap between the two countries starts to become visible at the time of the Renaissance, in terms of a whole bunch of things that you see growing in Europe and stagnant in China.
Now, keep in mind, of course, that part of the European growth is due to the fact that they borrowed ideas from China. Then the Industrial Revolution consists, to some extent, of imports institution by Europeans trying to mimic the goods that they were importing from China—not just from China, from India as well. Pottery is a good example. One of the things they really wanted from China was Chinaware. That’s why it’s called Chinaware. It took them a while to be able to match the Chinese capability in the ceramic industry, but they do so eventually. Then they stop importing this stuff from China. The same is true for, say, cotton and other products that we’re getting from the East.
European living standards, I think, should be measured, in part, by the fact that when the Europeans start their voyages across the globe in the late 15th and early 16th century, they are able to bring in a whole bunch of new crops and new techniques from other areas which they merely adopt. You’ll see Europeans very soon growing tobacco and potatoes and corn and other things like that. They are the agents of global change. Not only that they change their own diets, they change the Chinese diets because the Europeans bring from the New World things like peanuts and sweet potatoes and things like that. They change the Chinese diets, but the Chinese themselves are not agents here.
They are accepting the stuff that the Europeans did to some extent, and they’re rejecting others, but it’s the Europeans who are the agents of change here. They are the entrepreneurs. They are the people who bring about the changes, Tyler. My sense is that typifies the difference between Europeans and the Chinese. Europeans are more aggressive. They are more outward-looking. In the end, what you see by the 1830s and 1840s, you see that the technological gap is huge, in some ways much larger than the living standards gap. Even in the 19th century, in terms of food, the Chinese were capable of producing enough food. The number of famines in China is probably not a lot worse than in Europe.
When you see what happens during the First Opium War, one English ship is blowing all of this sort of mighty empire to pieces, and the Chinese have to accept this terribly humiliating peace, you can sort of see how the technological gap has grown between the two. For me, that is much more telling than the living standards. The other thing that I should like to point out is that, when you look at Europe in the 16th and 17th century, you can see that the capability of expanding the set of useful knowledge, including science, is just growing very rapidly. Whether there is a scientific revolution or not is a debate that I want to get into.
Certainly, by 1700, Europe is on the verge of really changing our understanding of how creation works. That’s not just Newton and Galileo. There’s a whole body of work that is emerging. There’s really nothing parallel like that in China. China is a very sophisticated society in many ways. The literacy rates are high. They have a well-funded and well-organized system of education, but they don’t really continue their earlier forays into science and into new technology.
Somebody actually went out and looked at Joseph Needham’s many volumes on Chinese technology and science, or Science and Civilisation [in China], as he called it, and he discovered something—which I guess we all knew, but they put numbers on it—almost nothing that Needham pointed out as an innovation happens after 1400. There’s complete stagnation setting in and some of the things that they knew how to make in earlier times, like the sophisticated clocks that they built in the 11th century, they disappear. For me, that’s more telling than how many calories of carbohydrates were consumed on average, if we could ever calculate that correctly.
COWEN: Now, there’s another problem in Chinese history, as you well know, for instance, Song China falls to Kublai Khan, even though Song China is relatively wealthy for its time. There were other cases of so-called barbarians coming down from the north, taking over parts of what we now call China. Why is that happening? Is that also because of the clan system?
MOKYR: No, no, no, no, no. I think China is simply located in a very different kind of geographical and demographic neighborhood. Essentially, it remains for all practical purposes, unified since the rise of the Song in 960. There’s a splitting of the Southern and Northern Song for a little while, but it’s basically a unified society, which shares a language, particularly a written language, which is very important. What happens is there’s these wild people on their border that, every once in a while, invade China. That happened more than once. It happened during the Mongols, of course, in 1279. The Mongols actually established a dynasty, the Yuan dynasty that lasted about 80 years, if I recall correctly.
What is interesting, Tyler, is that when these people from the steppe, and some of them were Mongols, some of them were Turkmen, some of them were actually partially Chinese, but if they are not full-blooded Han Chinese and they come in and invade, very often they become sinified. They start speaking Chinese, they start dressing like Chinese, they behave like Chinese, they adopt Confucianism, and they accept most of the Chinese institutions, such as the imperial examination, and they get absorbed into the clan system.
There’s nothing like that in Europe. Europe really, since the early Middle Ages, is not invaded effectively by any other non-European power. The Ottomans try a couple of times and they get defeated. The Mongols try once in 1240, and then if they had taken over Europe, history would have been very different, but they turned around and go back for internal reasons. What that really means is that the Europeans are mostly confronting one another, whereas the Chinese, in most cases, are worried about people from the outside, which is they have this wall and they have this military that’s posted on the outer boundaries of China to keep the savages out. That creates a very different kind of world.
Interestingly enough, again, one of your colleagues, at George Mason, Mark Koyama, has a bunch of papers that describe this in great detail and quite, I think, elegantly and ingeniously, how that geographical differences created the difference between the Chinese government, which remained a unified state, and Europe, which remains fragmented, basically, until the present day.
COWEN: How does historic India fit into your schema?
MOKYR: Well, if I may admit it, my knowledge of India and Indian history is probably not up to par. I’m a Europeanist who spent the last five or six years familiarizing myself with Chinese history, but in the last chapter, there is some discussion of India. My sense is that India is a different version of the Chinese clan system. It’s organized differently because you have this combination of clans and caste in India. Basically, they too are unable to create the kind of unique system that you see in Europe, in which you see these nuclear families living in a society which is organized mostly by corporations.
In that sense, I would say, if I may add to that, all of the three great Asian civilizations—Middle Eastern Muslim civilization, Indian Hindu and Muslim civilizations, and China—share something, which in Europe that is the “weirdos.” It’s Europe that are the exceptions. That’s essentially the tenor of Joe Henrich’s book called The WEIRDest People, in which he points this out. That book, I think, has a big influence on us because it really shows, in great detail, how organizing people by nuclear family creates not only a different set of social organization but the culture that goes with it.
Now, I don’t want to draw the analogy between India and China too far, but it’s kind of striking that many of those European corporations are woefully missing in India as well until the Brits show up and, in a way, show them how to do it. Even there, I think it is fairly rare, certainly until 1948, and India becomes independent. The truth is, I did not really want to get too deeply into India because it’s pretentious enough for me to spend a couple of years reading Chinese history without people spending their entire lives on one village or one county. It’s just a huge ocean. I can’t really say that I did more than dipping my toes in it.
We wanted to take a step back and look at these two big civilizations and try to see why they differed. I want to stress again, we don’t make the argument that India or China failed. They were doing what their preferences and their institutions, in some sense, dictated. I find it always telling that the British established an East India Company that trades with India in London, but that, in Delhi, you don’t see a Western European Company or an England Company that does to the Europeans what the Europeans did to them. That asymmetry is already there in 1600.
COWEN: Why was there no Industrial Revolution in the Roman Empire?
MOKYR: Oh, God. That’s a huge question.
COWEN: Is it coal? Is it human capital? Is it something else?
MOKYR: Well, I think my sense would be that both Roman and Greek civilizations were, in many ways, creative, but the creativity did never really extend very much into the technological realm. Insofar that they did science, they were mostly uninterested in applying that science to day-to-day problems. That insight, the kind of knowledge that we have about nature, physics, chemistry, biology, astronomy, and so on and so forth, that should be applied toward material improvement, that’s not an immediate and obvious insight, nor is it an immediate and obvious insight that progress, as we understand it today, is feasible and/or desirable.
These are all insights that arose in Europe in the 16th and 17th centuries. I have referred to these things, as you surely know, as what I call the industrial enlightenment. There is this change of mind in European’s thinking after maybe 1450 or 1500, maybe because of the printing press, maybe because of other reasons, but in which Europeans essentially start to convince themselves that they are smarter than anybody that came before them, that a lot of these great Hellenistic and Greek scientists were wrong about many things, and that they could do better.
Once you have that belief—and Francis Bacon and a whole bunch of other people were all in that tradition—in Rome, what you see is a whole bunch of clever people, but they’re not that interested in technology. Let me give you one specific example, Tyler, that I have always found particularly intriguing, although I don’t have a good answer why it happened. If you think about human needs, one of the constants of human needs, above all, is that, at some age, we need glasses. I don’t know when you start wearing glasses, but I started wearing glasses when I was in my early 40s in order to read and things like that. That’s not a cultural feature. That’s something that’s hard-wired in us.
The Romans, certainly the upper class, were literate people, and they had glass, but they never invent spectacles. They don’t have optics, and they’re not interested in optics. There’s this passage in Seneca in which he looks at a glass that has water in it. He says, “Hey, it is interesting. The stuff that’s behind the glass actually is magnified.” But they never take the step of coming up with eyeglasses. You wonder why, because, clearly, if necessity is the mother of invention, this was a necessity. They never do it.
The only thing that you see happening in Rome, and even that was very constrained, is they do come up with water mills, but the water mills remain, by and large, tools for grinding wheat, wine, and corn. They don’t actually take it to the kind of extremes that Europeans did in the Middle Ages, turning it into sawmill and fulling mills, which is why factories were known as mills. They never do that. I think the reason is because the people who made things, the artisans, the workmen, and the people who knew things and studied things, which is the scientists and the mathematicians and the teachers, never talked to each other.
What’s more, the scientists essentially looked upon hard work and manual labor with a great deal of contempt. Both Plato and Aristotle make these points, but the Romans took it over. It was a slave society. Slave societies often look at manual labor with a great deal of condescension. In the end, I think that’s what stopped them. The other thing is, I think that if you don’t have a concept of progress and you don’t think that by studying things and investigating things and doing what we would call research in order to make the world a better place, at least from a material point of view, if you don’t have that concept, there’s not going to be an Industrial Revolution.
The Chinese don’t have that concept either. Coming back to China, I looked quite a long time for this. Basically, all the Chinese experts, that I have read, essentially said that the concept of progress is basically absent. Now, that’s a concept that’s emerging in Europe in the 15th to 16th century. By 17th century, it’s quite commonplace. Once you have that, you can sort of see all those smart guys trying to solve practical and pragmatic problems. Scientists, many scientists, almost all scientists, I would think, there’s some exceptions, almost all of them said, “Look, I want to do science not only because I’m curious and not only because I want to illustrate the glory and the wisdom of the Creator; I want to do science because I want to make life better. Now, whose life is a different question. That is what really emerges in Europe. No other civilization does that, Tyler.
COWEN: The Romans are very good at infrastructure. You can go see the aqueduct in Segovia or the waterworks in Istanbul, the Roman system of roads. Isn’t there some notion of progress behind those developments with Caesar encountering what we now call Britain, right?
MOKYR: No. I think the idea that they had a concept of progress—they were practical people. They needed to bring water from here to there. They did that. They needed to build roads so that their soldiers could march and occupy the world, or the world as they knew it. I don’t think there is a concept of progress the way we would think of it. It’s sort of an interesting little book that I published in my series, which you may want to look at, about Pliny. This is somebody who really knows Pliny. He really points this out, that Pliny, you cannot find anywhere. Pliny was sort of the type to summarize—essentially, a little encyclopedia of what was known—basically, there is no concept that things were getting better over time. This is a book by Richard Saller. He was one of the great classical scholars of our time.
Essentially, there is no concept of progress in there. There is no concept of progress in any of the Roman writers. Now, some of the engineers, obviously, were trying to make things work better, but it is not really a social movement, and as soon as a problem had been solved, they say, “Okay, we solved that, and that’s it.” Whereas in Europe, it’s never good enough. You make water mills more efficient, you make them even more efficient, and on and on and on. That is the engine that drives sustainable growth. The idea that whatever we have today, we can make it better. That’s maybe not a natural insight. Maybe it’s not hard-wired in us.
COWEN: You’ve argued that during the Industrial Revolution, the British have a notable advantage in human capital over, say, the French. What are the ultimate roots of that advantage? Where does it come from? Is it Protestantism? Something else?
MOKYR: No. In fact, are the British Protestants? The Anglican Church is sort of a weird mixture of a lot of Protestant belief minus the pope, right? I’m not sure that you could call them Protestant. They’re kind of Anglican. But, no, it’s not religion. I think that’s a load of nonsense. What happens in Britain is, and this is something worth pointing out because this is the sort of new book that I’m writing right now. It’s based on some articles you’ve seen. The new book is basically arguing that the main thing that gave Britain its advantage of other things was that they had more skill and that their skilled workers were better than everybody else.
The question is where do these skills come from? There’s only one answer. That is apprenticeship because there’s no engineering schools. There’s no technical schools. Basically, every skilled engineer, artisan, mechanic, shipbuilder, whatever you are looking at, they are all trained by other people like that. Their apprentices are trained as masters. That’s how it works. It works like that everywhere. The difference is that, in England, the system is market-based. In Europe and on the continent, until the French Revolution came around, this is controlled by guilds. It’s very heavily regulated. It’s very heavily scripted.
In England, it’s a much freer system. Every young lad who’s looking for a master, can go around and choose the master that he likes best and that is most suitable to him. What you get is that because this market is competitive, you get a quality of education to these people, which is vastly better than it is in continent. People are more diverse. They’re more flexible. They’re better trained. Certainly, by the middle of the 18th century, this is what everybody is saying. The French and the Germans and the Dutch and the Austrians and the Spanish, all know that if you want to build a sophisticated piece of equipment, you need an English engineer to run it. That’s what they do.
These people are all over the continent. Of course, Britain is worried about this, so they passed these laws prohibiting the immigration of artisans which, of course, they couldn’t enforce. The fact that that is so is by now, I think, not really disputed. The argument that we’re making is that, inventors are all good and nice, but if you don’t have the people to scale it up and maintain it and install it and operate it, it’s not going to do you any good. That’s where the skills are, and that’s what they had. We have hundreds of pages of evidence on that. We’re looking at every industry you can imagine, and it pops up over and over and over again.
COWEN: Several years ago, you had a piece in the Journal of Political Economy with Morgan and Cormac on living standards, and you gave a somewhat more optimistic perspective on the Industrial Revolution living standards. Could you explain what you find in that piece?
MOKYR: If you’re talking about the JPE article that we published in 2023, that piece wasn’t so much about living standards. It really was about regional distribution of Britain’s industry and how the center of gravity of the economy moved from the south to the north of England, at least temporarily, I should say. It was really mostly about skill. What is true, in that argument, is not so much that the living standards were increasing, but that they were just higher and that, basically, the quality of life in Britain as early as 1700 was higher than anywhere on the continent with the exception of the Netherlands.
There’s very good evidence that the British were better fed, better educated, better housed, and on and on and on. As a result, the reduced form of looking at that is height. The data showed that, on average, British soldiers, which are the people that are getting measured, were two inches taller than the French. The reason for that is because, as children, they experienced better living standards. I think that is the way of thinking about it.
Now, that feeds back again into the fact that the quality of workers in general is substantially higher than it is on the continent. Therefore, their wages are higher. The notion that they were innovative because people were trying to save labor because wages were so high in England, misses sight of the fact that the reason wages were higher was because British workers on average were more productive. I would be hesitant to say that I’ve ever convinced myself that living standards were rising during the sort of heyday of the Industrial Revolution. That turns out to be a complicated issue because, at the same time that Britain was developing technologically very quickly and establishing factories, they have very rapid population growth.
It’s population growth that’s driven by higher birth rates rather than by lower death rates. What that means, of course, is that you have a very large chunk of people who are young and still not productive but need to be fed. The rise in the dependency ratio, in addition to the fact there’s more people around, is essentially putting a constraint on the rise of living standards. That abates at some point in the middle of the 19th century. Then you see living standards rising very rapidly. During the Industrial Revolution, the evidence that things were getting better is very mixed.
I know there are optimists and there are pessimists about this. I would count myself as probably somewhere in between. Things weren’t getting a lot worse. Things weren’t getting a lot better. A lot depends on for whom. There’s groups that are gaining clearly. There are groups that are losing clearly. There are groups where we don’t know. On balance, I would say, probably overall living standards in Britain in 1840 were not much better than they were in 1760, but they were different. One of the reasons that people don’t do well is they live in cities, which are terrible at the time.
This is widely described. The most famous book about that was, of course, Friedrich Engels’ Condition of the Working-Class in England, which was largely plagiarized from a whole bunch of doctors living in the Midlands and observing these places. That is a complication in the history of living standards during the Industrial Revolution. That really means that it isn’t so obvious that this was good for the people living through it. It was very good for their grandchildren.
COWEN: Now, in mid- to late 19th century, German science starts doing incredibly well. What is behind that?
MOKYR: I think there is a major revolution in Germany during and after Napoleon. You get a whole bunch of reforms. Most famous are reforms, of course, in Prussia, which is the main country in the northern part of Germany, in which they completely rejiggered their administration. The Stein-Hardenberg reforms basically create the world’s first really effective civil service. At the same time, what the Germans do, they invest very heavily in human capital. The evidence suggests that German universities and German schools were much more geared toward giving people a background in the kind of knowledge that helps creating the basis for a sort of second-generation manufacturing technology.
Lots of this is associated, of course, with the reform of the German university system, associated with Wilhelm von Humboldt, who essentially created what one might call the idea of the modern research university. There’s also these technical universities, the Technische Hochschule, which the Germans founded. There’s a recent paper by a former graduate student of mine, Ralf Meisenzahl, at Chicago Fed, who shows that the closer you were to a university in the middle of the 19th century, the more likely you were to be in advanced manufacturing.
I think, here it really is, to some extent, the improvement in human capital, but also the fact that the state in Prussia and in other places as well, this little state that basically convinced themselves that this was the way of the future. If Germany was going to be playing with the big boys and not being wiped out by Napoleon as they were in 1806, they should build an economy based on science. The odd thing is that, Britain, even so, it was the leader, really was actually late in catching that answer. British universities, really, by the middle of the 19th century, people start worrying about this, “Look, the Germans and the French have these more advanced institutes of higher education, and our universities are still way behind.”
In the second half of the 19th century, there’s this sort of supposed decline of Britain because they’re still based on skills, whereas the Germans, more and more get committed to the application of scientific research to their economy. That takes a long time, and it’s not an easy thing. The two Germans invent things like organic chemistry: Justus von Liebig and Friedrich Wöhler. They make major contributions to electricity, to internal combustion engine, to a whole range of industries.
A lot of that is based on science, and it’s striking, not just that German universities produce these scientists, but that businesses, particularly manufacturing, hire these people as consultants and put them on their board of governors and their board of trustees. That’s, I think, a striking thing. The Germans really, more than the British, realized the potential of science. Certainly by 1900, they’re leading the world, certainly in chemical, in electricity, in food processing industries. It is, I think, above all, human capital, but also the policies that were there to support it.
COWEN: How much of a burden on your life has your new Nobel Prize been or is it just fun?
MOKYR: No, I mean, it is a lot of fun. It’s really a lot of warm glow. I’m still waking up every morning and say, “Am I dreaming this? What the hell am I doing?” It has, obviously, disrupted my life. I’m going to turn 80 this summer, so I’m sort of settled in my way, so to speak, and this has disrupted it to a great extent, and I’m still trying to cope with that.
One of the things that’s working to make that worse is because I refuse to retire. Peter Howard, my friend and my colleague who’s almost exactly my age, retired 12 years ago from Brown. He’s living in a life of leisure, and I have to go to faculty meetings and supervise 10 graduate students and teach at another graduate course. That, plus all the other things that are demanded of me, has been, shall we say, disruptive. I sleep relatively poorly now because I wake up in the middle of the night and I go, “Oh, shit, I forgot to reply to that email and I haven’t yet committed to that invitation,” and I forget everything. These things happen.
I hope that that will fade eventually, that I’ll settle into a new pattern, but it will be probably quite different from the previous pattern, Tyler. My wife is looking at me with some concern, shall we say, about how I’m having 10 balls in the air and, every once in a while, I drop one.
COWEN: We’re about out of time. Joel Mokyr, thank you very much. Again, I’m a big fan of your new book with Greif and Tabellini, Two Paths to Prosperity, comparing Europe and China.
MOKYR: Oh, yes. Keep advertising it, Tyler.
Photo Credit: Shane Collins
This episode was made possible through the support of the John Templeton Foundation.