It may seem churlish to argue at length with a generous and thoughtful review of my Culture and Growth such as Professor Hodgson's (Reference Hodgson2021). Yet, the candid exchange of ideas on topics that actually matter is an inextricable part of what intellectuals do, and many of the points made by Hodgson are valuable even if we do not see fully eye to eye on every matter.
In the 5 years since the publication of my book, the issues it raised have been discussed at some length in journals, conferences, and seminars. This is gratifying, not only because the book obviously hit a nerve with some scholars, but also because there has been a tendency among scholars in economic history – especially young scholars – to eschew ‘bigthink’ issues and to work on fairly small pieces of the puzzle that lend themselves to cleaner econometric identification. In the trade-off between saying less and less about more and more, or saying more and more about less and less, the tendency has been in recent years to move to the latter. Better data due to technological advances, and more user friendly econometric software, as well as better training of economists in leading research universities have led to a flourishing of economic history, working on highly specific topics. Almost inevitably, this has resulted to some extent in a search for lost keys under the proverbial streetlight. More ‘senior’ (I mean old) scholars, who no longer have to worry about tenure and promotion committees can afford to raise more ambitious questions, and they have done so in spades.
Hodgson raises a number of such ‘big-think’ issues, not all of which I can deal with in the detail they deserve. But, he makes a number of important points that could use some clarification. First and foremost, there is the concept of a ‘market for ideas’, which plays a big role in the book. It is a metaphor he clearly does not approve of, and he is not alone. Ideas, he says, are not traded and have no market-clearing price mechanism. Of course not. They suffer from classic public-good features: non-excludability, non-rivalrousness, and negligible marginal cost of reproduction being the more obvious ones. As a result, ideas are rarely traded unless there is some kind of institution that artificially excludes others from utilizing them – as in a patent. As economists have known for many decades, such non-appropriability will lead to a socially suboptimal production of new ideas.
So, what accounts for intellectual and technological innovations? One answer I suggest in my book, is the ‘credit-without-profit’ incentive. Coming up with an idea first and being awarded priority rights (which does not always follow) has benefits: as every economist knows, fame and fortune awaits those who have an idea associated with them: the Solow-model, the Lucas-critique, and Tobin's q all led to desirable outcomes for their propagators, even if the monetary component of those outcomes were relatively modest. In the book I discuss priority rights at some length because they clearly became more common in the period under discussion. To this day, priority rights remain a major component of the Republic of Letters (which is still alive and well even if we no longer use the terminology). Who among us scholars has not opened a new paper in their field and checked if their name appears in the references? It is of course about more than pride: priority rights correlate with reputation, and in the market for ideas reputation rather than material benefit is the coin of the realm.
What then is a transaction in the market for ideas? By presenting a new idea to others in a seminar or paper, I try to persuade them (although the meaning of ‘persuasion’ requires more elaboration than I can provide here). If they accept in some form my idea, I have made ‘a sale’. This kind of logic applied to Martin Luther and Spinoza as well as to Galileo and Newton. It even applies to economic historians writing overly ambitious books. They may not have paid me, as Hodgson points out, but all the same I will be made better off and this incentive compensates in part for the non-appropriability issue.
What do we gain from the concept of a ‘market for ideas’? It is not just a nice metaphor. Quite a few of the features of markets carry over. For one thing, both can entertain the idea of competitiveness: in some societies there were virtual monopolies in the market for ideas – think of the ones that practiced orthodox Marxism or Islam. Closely related is the question of barriers to entry. All societies put up some barriers to entry: in 16th-century Europe, being literate was a minority feature, and without being able to write Latin, the market for ideas was almost inaccessible. Over times, these barriers came down, and by 1750 outside Sweden almost nobody wrote in Latin. Today, social media have essentially eliminated these barriers for entry with mixed results, since such barriers obviously served some social function of weeding out misinformation and bogus science.
Another concept that carries over in part is market integration: do good ideas accepted in one location spread to other parts of the market? William Harvey's idea of the circulation of blood was accepted within the (medical circles of the) Republic of Letters within a few decades (Grell, Reference Grell, Smith and Schmidt2007). Copernicus's ideas took a bit longer to be accepted, but in the end they too became part of the consensus. In other aspects, too, the metaphor works: for instance, we have taboos in the ‘real’ market: human beings and their body parts cannot be sold legally, nor can controlled substances. Similarly, the market for ideas has taboos, and we all know what they are.
In order to understand how the market for ideas works, it is critical to deploy the evolutionary concepts that both Hodgson and myself have a weakness for. The market for ideas shares an important feature with evolutionary biology: evolutionary systems reflect the twin phenomena of superfecundity and selection. Any epistemic system produces more ‘variants’ than society can absorb, and so some form of selection is crucial. Long before the tsunamis of bad ideas emanating from social media in the 21st century, people came up with new ideas and narratives, many of which were simply rejected and vanished without a trace. They thus resemble mutations in that they are throwing up many potential variants that for one reason or another do not make it. The place where this happens is in the market for ideas. A neglected or rejected idea is one that does not persuade enough people to catch on.
Selection of ideas, of course, differs from what happens in the natural world. In biology, ‘natural selection’ is purely metaphorical. The selection mechanism is driven exclusively by differential survival and reproduction. In contrast, in the market for ideas people actually make conscious choices, choosing one cultural element over another from a menu of options. The book relies heavily on a classification of so-called ‘biases’ that make people choose one idea or belief over another. Of those, I would single out perhaps confirmation bias as the one that deserves more emphasis. People reject ideas that conflict with their priors, even if objectively the evidence may seem persuasive to an outsider. In the age of climate-change deniers and vaccination objectors, this observation seems particularly apposite. Confirmation bias is not all-powerful – or else we would not see cultural change at all. We are living in an age in which new ideas sometimes overcome confirmation bias: we have seen the moral acceptance of gay marriages, transgendering, and the legalization of marijuana. Why some intellectual innovations overcome confirmation bias and other do not remains one of the prime questions in this field.
Despite the differences, there are enough similarities that make evolutionary concepts useful in this context. Like species, some widely held ideas may eventually go ‘extinct’ in the face of a powerful new competitor (e.g. geocentric astronomy or miasma theories of disease), but in other cases new ideas may coexist with the old ones in some kind of mixed equilibrium in which the competitive environment is insufficiently stringent to bring about a complete domination of the innovation. This happens most often when knowledge is ‘untight’ so that it is hard to come up with smoking-gun type evidence to support or refute an idea. Much of the relevant history of ideas is not so much about the first occurrence of new ideas as much as about how over time they became tighter as more evidence poured in. An example is the idea that small organisms are the cause of infectious disease. The idea of germ-caused infection was first proposed by Girolamo Fracastoro in his De Contagione (published in 1546). In 1687, another Italian doctor, Giovanni Bonomo, explicitly argued that some skin diseases were transmitted through minute living creatures that he had observed through a microscope, and that he believed were passed from person to another (Connor, Reference Connor2004: 227–230; Reiser, Reference Reiser1978: 72). Yet, it is not until the last third of the 19th century that the germ theory became tight enough to completely revamp humanity's understanding of infectious-disease medicine. This tightening of knowledge was made possible in part by the invention of new instruments that revealed more of nature's secrets, much like the telescope had done two centuries earlier and laser-based instruments are doing today, and in part thanks to the growing prestige and influence that cutting-edge scientific research had acquired in the century before Pasteur.
What makes the story interesting then is that exactly because the selection among competing ideas is conscious and direct rather than the unintended consequence of differential population growth, it is affected by technology. Technological progress has provided new tools for what Price (Reference Price and Laudan1984) famously called ‘artificial revelation’, aiding scientists struggling to choose between competing hypotheses. Thus, a positive feedback loop is created that may well be the foundation of modern economic growth: technology feeds back into science just as much as science provides a base for technology (Mokyr, Reference Mokyr2002). Again, there was nothing inevitable here: giving society the right tools does not guarantee they will do anything with them. China had access to telescopes fairly soon after Europe, but did little to deploy them in exploring the universe (Huff, Reference Huff2011). The cultural environment mattered no less than the tools available.
Evolutionary analysis, by its very nature, is better at explaining the past than at making clean and testable predictions in large part because both innovation and selection depend on so many contingencies. The same is true for the market for ideas. It is hard to know which ideas will emerge at all, and once emerged, which ones will prevail through the selection process. It simply seems hard to accept Morris's (Reference Morris2010: 476, 568, 621) pithy statement that each society ‘gets the ideas it needs’. Clearly being ‘correct’ may help an idea find acceptance, but historians of science insist that what may seem correct to one generation may seem wrong to another. The best we can do here is that it is more likely to be accepted if it conforms to the rhetorical standards of the age.
All that said, one idea that caught on in the market for ideas in early modern Europe was the belief in the possibility and desirability of human progress (although different thinkers meant somewhat different things by progress). One can see why many people at the time came to believe in it: between 1450 and 1550 Europeans had experienced a great deal of progress on a number of dimensions. They had sailed to practically every region on the planet, learned to print and disseminate the written word like never before, and experienced considerable advances in a range of technologies, including metallurgy, music, painting, and mining. Cities and commerce had grown, and new consumption goods were becoming available through the Columbian Exchange. By the late 17th century more and more people felt that social and economic progress were possible and that they could do something about it. The so-called ‘battle between the ancients and moderns’ was a landmark event in the market for ideas, and by 1700 the moderns had won the battle decisively. Believing in progress in itself may not have been sufficient to bring about economic growth and technological advances, but it may have helped to overcome resistance to them.
On a different matter, Hodgson feels that I place a bit too much weight on too few extraordinary people. In all fairness, I did spend a fair amount of space on two pivotal figures in the market for ideas, Newton and Bacon – in large part because of their influence on 18th century thought. But, unlike what he claims, the analysis does not really depend on ‘successive, fortuitous cultural mutations’ and it surely is not quite true that I argue that ‘Bacon's influence greatly contributed to the eventual industrial take-off…it is almost as if without him the Industrial Revolution would not have happened’. My argument (p. 67) is more nuanced. My approach does not imply that individual cultural entrepreneurs were, in some sense, indispensable, nor the other extreme that individuals did not matter because they and their work were inevitable products of their environment and times. But within those limits, there remained many degrees of freedom, and much like other great entrepreneurs in history, the details, if perhaps not the main tale, would have read differently in the absence of the Vital Few. Equally important, like any well-functioning market, the success of able and lucky entrepreneurs was like the proverbial canary in a coal mine. The proliferation of successful entrepreneurs is a telltale sign of well-functioning markets. That, too, may be a feature common to both markets for goods and markets for ideas.
But, if the question is whether I think that intellectual elites were critical to the outcome, I plead guilty as charged. Yes, progress was driven by a small group of intellectuals – not a few individuals such as Bacon or Newton, who placed major new items on the agenda, but a small number of intellectuals, physicians, engineers, highly skilled artisans, mathematicians, and natural philosophers, what is becoming known as upper tail human capital (UTHC). The motto for my 2002 book Gifts of Athena contains the statement of the English natural philosopher and master inventor Robert Hooke that the difficulties of ‘natural knowledge’ would be conquered by a ‘Cortesian army, well-Disciplined and regulated, though their numbers be but small’. Subsequent research has validated the importance of small minorities in steering economies forward (Dittmar and Meisenzahl, Reference Dittmar and Meisenzahl2020; Squicciarini and Voigtländer, Reference Squicciarini and Voigtländer2015). It is important to stress that the UTHC hypothesis pertains not only to natural philosophers and medical doctors, but also to high-skill artisans and applied arithmeticians (Kelly et al., Reference Kelly, Mokyr and Gráda2021; Kelly and Gráda, Reference Kelly and Gráda2021).
Finally, Hodgson feels that one should pay more attention to the possibility that exogenous shocks and environmental changes may trigger innovation and economic development. As he sees it, these shocks cannot be too disruptive (such as the pandemics wrought upon the populations of the New World with the arrival of Europeans). Moderately-sized shocks, such as the Glorious Revolution or the arrival of American warships at Tokyo Bay in 1853 fit this goldilocks view of historical change. Such exogenous shocks, indeed, can be argued to have played an important role in institutional change. For instance, nothing seems to have been as good for rapid institutional reforms as losing a war – think of the Stein-Hardenberg reforms after the defeat of the Prussian armies in 1806 or the abolition of Russian serfdom after the Crimean War, to say nothing of post-1945 Germany or the Soviet Union post-Afghanistan. In terms of the issues I was concerned with in my book, perhaps the main ‘shock’ was the European overseas voyages after 1480, which drove home the belief in a great and mysterious world that was there for Europeans to discover (Alexander, Reference Alexander2002).
The 17th century in England, Hodgson thinks, was a highly creative period because it was a period of war, and created ‘compulsive attempts to understand the disturbing predicament’ resulting in a flourishing of original thought. Whether this really explains the long list of thinkers and scientists in Britain in the age of Newton is moot. Europe's history is full of wars, and many of them indeed led to a flourishing of arts and science (e.g. the Dutch wars of independence from Spain) whereas others did nothing of the sort (e.g. the Thirty-years War in Germany or the French wars of Louis XIV). The Scottish Enlightenment, one of the more remarkable outbursts of intellectual creativity in European history, seems to have occurred in a fairly placid land. Without further elaboration, the argument can be overdone: one searches in vain for a triggering ‘exogenous shock’ in the decades before 1760 that might account for the British Industrial Revolution, whereas the highly disruptive French Wars between 1793 and 1815 did little on balance to stimulate the British Industrial Revolution and in all likelihood slowed down economic progress on the European Continent.
What is perhaps more satisfying as an explanation for technological progress is Rosenberg's notion of a focusing device (Rosenberg, Reference Rosenberg1969). The idea is simple: an exogenous crisis or shock will increase the salience of a technological bottleneck and concentrate the creative firepower of a society on solving the problem. One classic example is the shipwrecking of Admiral Cloudesley Shovell's ships at the Scilly Islands (1707), due to the inability of navigators to calculate their exact longitude. It focused the British admiralty on the problem of longitude determination. Another one was the cotton famine that forced Britain to import inferior-quality raw cotton from India, and design new equipment to process it (Hanlon, Reference Hanlon2015).
Does this idea hold for institutions as well? I fully agree with Hodgson that books like mine cannot be written without paying attention to institutions and that voices such as Deirdre McCloskey's and Gregory Clark's, who dismiss institutions as factors in the historical development of economies, are missing a big part of the puzzle. The problem is, of course, that any comprehensive theory for institutional change (which my book was not primarily concerned with) is still far from developed. Major and moderate shocks lead to institutional changes except when they do not. Not only that we do not know precisely why in some cases such shocks lead to institutional changes and in others they fail to do so, we also cannot predict in what direction such changes will go. The Great Depression of the 1930s led to catastrophic institutional changes in Germany, but in neighboring Czechoslovakia and Belgium, which as heavily industrialized nations were equally affected by the depression, democratic and pluralistic institutions held up. Contingency and the role of pivotal individuals played a big role – but what else?
On the whole, I remain yet to be convinced that an evolutionary approach can shed much light on the historical dynamics of institutional change as Hodgson suggests. Institutions display interesting evolutionary dynamics such as punctuated equilibria, but the selection mechanisms seem to be difficult to identify even if we allow for multi-level selection. Societies do not ‘select’ their institutions, and it is still far from clear why some societies get one type of institution and others a different one. Again, the outcomes clearly depend to a great extent on historical contingency. There seems to be no one-size-fits-all kind of theory that provides a satisfying explanation of the variance of institutions in cross section and their changes over time. History mattered, so did geography and culture – but how precisely remains largely mysterious. Intuitively, it seems that somehow the culture of a society and its institutions should be aligned if society is to be in equilibrium. But if they are not, at what margin does the adjustment take place? Do institutions change to adapt to the culture, or is it the other way around? And how fast is the equilibrium reached if ever? Moreover, given the feedbacks between institutions and culture, how likely are multiple equilibria? How do societies end up in one equilibrium or the other? (Alesina and Giuliano, Reference Alesina and Giuliano2015).
The one thing we know for sure is that unlike technology, where we can safely speak of technological progress, it is safer to speak of institutional change, which would not imply any non-stationarity. In a world like the one we find ourselves in today, any thoughts of institutions or the people who manage them getting ‘better’ in any definable sense seems illusory. Given that technology keeps advancing, the growing gap between the trajectories should worry anyone closely observing the history of the 21st century. Perhaps, after all, research on the ‘big questions’ has its uses.
Although Professor Hodgson and I may disagree on details, debates such as this exchange are enlightening and useful – this is precisely what the market for ideas is about.
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It may seem churlish to argue at length with a generous and thoughtful review of my Culture and Growth such as Professor Hodgson's (Reference Hodgson2021). Yet, the candid exchange of ideas on topics that actually matter is an inextricable part of what intellectuals do, and many of the points made by Hodgson are valuable even if we do not see fully eye to eye on every matter.
In the 5 years since the publication of my book, the issues it raised have been discussed at some length in journals, conferences, and seminars. This is gratifying, not only because the book obviously hit a nerve with some scholars, but also because there has been a tendency among scholars in economic history – especially young scholars – to eschew ‘bigthink’ issues and to work on fairly small pieces of the puzzle that lend themselves to cleaner econometric identification. In the trade-off between saying less and less about more and more, or saying more and more about less and less, the tendency has been in recent years to move to the latter. Better data due to technological advances, and more user friendly econometric software, as well as better training of economists in leading research universities have led to a flourishing of economic history, working on highly specific topics. Almost inevitably, this has resulted to some extent in a search for lost keys under the proverbial streetlight. More ‘senior’ (I mean old) scholars, who no longer have to worry about tenure and promotion committees can afford to raise more ambitious questions, and they have done so in spades.
Hodgson raises a number of such ‘big-think’ issues, not all of which I can deal with in the detail they deserve. But, he makes a number of important points that could use some clarification. First and foremost, there is the concept of a ‘market for ideas’, which plays a big role in the book. It is a metaphor he clearly does not approve of, and he is not alone. Ideas, he says, are not traded and have no market-clearing price mechanism. Of course not. They suffer from classic public-good features: non-excludability, non-rivalrousness, and negligible marginal cost of reproduction being the more obvious ones. As a result, ideas are rarely traded unless there is some kind of institution that artificially excludes others from utilizing them – as in a patent. As economists have known for many decades, such non-appropriability will lead to a socially suboptimal production of new ideas.
So, what accounts for intellectual and technological innovations? One answer I suggest in my book, is the ‘credit-without-profit’ incentive. Coming up with an idea first and being awarded priority rights (which does not always follow) has benefits: as every economist knows, fame and fortune awaits those who have an idea associated with them: the Solow-model, the Lucas-critique, and Tobin's q all led to desirable outcomes for their propagators, even if the monetary component of those outcomes were relatively modest. In the book I discuss priority rights at some length because they clearly became more common in the period under discussion. To this day, priority rights remain a major component of the Republic of Letters (which is still alive and well even if we no longer use the terminology). Who among us scholars has not opened a new paper in their field and checked if their name appears in the references? It is of course about more than pride: priority rights correlate with reputation, and in the market for ideas reputation rather than material benefit is the coin of the realm.
What then is a transaction in the market for ideas? By presenting a new idea to others in a seminar or paper, I try to persuade them (although the meaning of ‘persuasion’ requires more elaboration than I can provide here). If they accept in some form my idea, I have made ‘a sale’. This kind of logic applied to Martin Luther and Spinoza as well as to Galileo and Newton. It even applies to economic historians writing overly ambitious books. They may not have paid me, as Hodgson points out, but all the same I will be made better off and this incentive compensates in part for the non-appropriability issue.
What do we gain from the concept of a ‘market for ideas’? It is not just a nice metaphor. Quite a few of the features of markets carry over. For one thing, both can entertain the idea of competitiveness: in some societies there were virtual monopolies in the market for ideas – think of the ones that practiced orthodox Marxism or Islam. Closely related is the question of barriers to entry. All societies put up some barriers to entry: in 16th-century Europe, being literate was a minority feature, and without being able to write Latin, the market for ideas was almost inaccessible. Over times, these barriers came down, and by 1750 outside Sweden almost nobody wrote in Latin. Today, social media have essentially eliminated these barriers for entry with mixed results, since such barriers obviously served some social function of weeding out misinformation and bogus science.
Another concept that carries over in part is market integration: do good ideas accepted in one location spread to other parts of the market? William Harvey's idea of the circulation of blood was accepted within the (medical circles of the) Republic of Letters within a few decades (Grell, Reference Grell, Smith and Schmidt2007). Copernicus's ideas took a bit longer to be accepted, but in the end they too became part of the consensus. In other aspects, too, the metaphor works: for instance, we have taboos in the ‘real’ market: human beings and their body parts cannot be sold legally, nor can controlled substances. Similarly, the market for ideas has taboos, and we all know what they are.
In order to understand how the market for ideas works, it is critical to deploy the evolutionary concepts that both Hodgson and myself have a weakness for. The market for ideas shares an important feature with evolutionary biology: evolutionary systems reflect the twin phenomena of superfecundity and selection. Any epistemic system produces more ‘variants’ than society can absorb, and so some form of selection is crucial. Long before the tsunamis of bad ideas emanating from social media in the 21st century, people came up with new ideas and narratives, many of which were simply rejected and vanished without a trace. They thus resemble mutations in that they are throwing up many potential variants that for one reason or another do not make it. The place where this happens is in the market for ideas. A neglected or rejected idea is one that does not persuade enough people to catch on.
Selection of ideas, of course, differs from what happens in the natural world. In biology, ‘natural selection’ is purely metaphorical. The selection mechanism is driven exclusively by differential survival and reproduction. In contrast, in the market for ideas people actually make conscious choices, choosing one cultural element over another from a menu of options. The book relies heavily on a classification of so-called ‘biases’ that make people choose one idea or belief over another. Of those, I would single out perhaps confirmation bias as the one that deserves more emphasis. People reject ideas that conflict with their priors, even if objectively the evidence may seem persuasive to an outsider. In the age of climate-change deniers and vaccination objectors, this observation seems particularly apposite. Confirmation bias is not all-powerful – or else we would not see cultural change at all. We are living in an age in which new ideas sometimes overcome confirmation bias: we have seen the moral acceptance of gay marriages, transgendering, and the legalization of marijuana. Why some intellectual innovations overcome confirmation bias and other do not remains one of the prime questions in this field.
Despite the differences, there are enough similarities that make evolutionary concepts useful in this context. Like species, some widely held ideas may eventually go ‘extinct’ in the face of a powerful new competitor (e.g. geocentric astronomy or miasma theories of disease), but in other cases new ideas may coexist with the old ones in some kind of mixed equilibrium in which the competitive environment is insufficiently stringent to bring about a complete domination of the innovation. This happens most often when knowledge is ‘untight’ so that it is hard to come up with smoking-gun type evidence to support or refute an idea. Much of the relevant history of ideas is not so much about the first occurrence of new ideas as much as about how over time they became tighter as more evidence poured in. An example is the idea that small organisms are the cause of infectious disease. The idea of germ-caused infection was first proposed by Girolamo Fracastoro in his De Contagione (published in 1546). In 1687, another Italian doctor, Giovanni Bonomo, explicitly argued that some skin diseases were transmitted through minute living creatures that he had observed through a microscope, and that he believed were passed from person to another (Connor, Reference Connor2004: 227–230; Reiser, Reference Reiser1978: 72). Yet, it is not until the last third of the 19th century that the germ theory became tight enough to completely revamp humanity's understanding of infectious-disease medicine. This tightening of knowledge was made possible in part by the invention of new instruments that revealed more of nature's secrets, much like the telescope had done two centuries earlier and laser-based instruments are doing today, and in part thanks to the growing prestige and influence that cutting-edge scientific research had acquired in the century before Pasteur.
What makes the story interesting then is that exactly because the selection among competing ideas is conscious and direct rather than the unintended consequence of differential population growth, it is affected by technology. Technological progress has provided new tools for what Price (Reference Price and Laudan1984) famously called ‘artificial revelation’, aiding scientists struggling to choose between competing hypotheses. Thus, a positive feedback loop is created that may well be the foundation of modern economic growth: technology feeds back into science just as much as science provides a base for technology (Mokyr, Reference Mokyr2002). Again, there was nothing inevitable here: giving society the right tools does not guarantee they will do anything with them. China had access to telescopes fairly soon after Europe, but did little to deploy them in exploring the universe (Huff, Reference Huff2011). The cultural environment mattered no less than the tools available.
Evolutionary analysis, by its very nature, is better at explaining the past than at making clean and testable predictions in large part because both innovation and selection depend on so many contingencies. The same is true for the market for ideas. It is hard to know which ideas will emerge at all, and once emerged, which ones will prevail through the selection process. It simply seems hard to accept Morris's (Reference Morris2010: 476, 568, 621) pithy statement that each society ‘gets the ideas it needs’. Clearly being ‘correct’ may help an idea find acceptance, but historians of science insist that what may seem correct to one generation may seem wrong to another. The best we can do here is that it is more likely to be accepted if it conforms to the rhetorical standards of the age.
All that said, one idea that caught on in the market for ideas in early modern Europe was the belief in the possibility and desirability of human progress (although different thinkers meant somewhat different things by progress). One can see why many people at the time came to believe in it: between 1450 and 1550 Europeans had experienced a great deal of progress on a number of dimensions. They had sailed to practically every region on the planet, learned to print and disseminate the written word like never before, and experienced considerable advances in a range of technologies, including metallurgy, music, painting, and mining. Cities and commerce had grown, and new consumption goods were becoming available through the Columbian Exchange. By the late 17th century more and more people felt that social and economic progress were possible and that they could do something about it. The so-called ‘battle between the ancients and moderns’ was a landmark event in the market for ideas, and by 1700 the moderns had won the battle decisively. Believing in progress in itself may not have been sufficient to bring about economic growth and technological advances, but it may have helped to overcome resistance to them.
On a different matter, Hodgson feels that I place a bit too much weight on too few extraordinary people. In all fairness, I did spend a fair amount of space on two pivotal figures in the market for ideas, Newton and Bacon – in large part because of their influence on 18th century thought. But, unlike what he claims, the analysis does not really depend on ‘successive, fortuitous cultural mutations’ and it surely is not quite true that I argue that ‘Bacon's influence greatly contributed to the eventual industrial take-off…it is almost as if without him the Industrial Revolution would not have happened’. My argument (p. 67) is more nuanced. My approach does not imply that individual cultural entrepreneurs were, in some sense, indispensable, nor the other extreme that individuals did not matter because they and their work were inevitable products of their environment and times. But within those limits, there remained many degrees of freedom, and much like other great entrepreneurs in history, the details, if perhaps not the main tale, would have read differently in the absence of the Vital Few. Equally important, like any well-functioning market, the success of able and lucky entrepreneurs was like the proverbial canary in a coal mine. The proliferation of successful entrepreneurs is a telltale sign of well-functioning markets. That, too, may be a feature common to both markets for goods and markets for ideas.
But, if the question is whether I think that intellectual elites were critical to the outcome, I plead guilty as charged. Yes, progress was driven by a small group of intellectuals – not a few individuals such as Bacon or Newton, who placed major new items on the agenda, but a small number of intellectuals, physicians, engineers, highly skilled artisans, mathematicians, and natural philosophers, what is becoming known as upper tail human capital (UTHC). The motto for my 2002 book Gifts of Athena contains the statement of the English natural philosopher and master inventor Robert Hooke that the difficulties of ‘natural knowledge’ would be conquered by a ‘Cortesian army, well-Disciplined and regulated, though their numbers be but small’. Subsequent research has validated the importance of small minorities in steering economies forward (Dittmar and Meisenzahl, Reference Dittmar and Meisenzahl2020; Squicciarini and Voigtländer, Reference Squicciarini and Voigtländer2015). It is important to stress that the UTHC hypothesis pertains not only to natural philosophers and medical doctors, but also to high-skill artisans and applied arithmeticians (Kelly et al., Reference Kelly, Mokyr and Gráda2021; Kelly and Gráda, Reference Kelly and Gráda2021).
Finally, Hodgson feels that one should pay more attention to the possibility that exogenous shocks and environmental changes may trigger innovation and economic development. As he sees it, these shocks cannot be too disruptive (such as the pandemics wrought upon the populations of the New World with the arrival of Europeans). Moderately-sized shocks, such as the Glorious Revolution or the arrival of American warships at Tokyo Bay in 1853 fit this goldilocks view of historical change. Such exogenous shocks, indeed, can be argued to have played an important role in institutional change. For instance, nothing seems to have been as good for rapid institutional reforms as losing a war – think of the Stein-Hardenberg reforms after the defeat of the Prussian armies in 1806 or the abolition of Russian serfdom after the Crimean War, to say nothing of post-1945 Germany or the Soviet Union post-Afghanistan. In terms of the issues I was concerned with in my book, perhaps the main ‘shock’ was the European overseas voyages after 1480, which drove home the belief in a great and mysterious world that was there for Europeans to discover (Alexander, Reference Alexander2002).
The 17th century in England, Hodgson thinks, was a highly creative period because it was a period of war, and created ‘compulsive attempts to understand the disturbing predicament’ resulting in a flourishing of original thought. Whether this really explains the long list of thinkers and scientists in Britain in the age of Newton is moot. Europe's history is full of wars, and many of them indeed led to a flourishing of arts and science (e.g. the Dutch wars of independence from Spain) whereas others did nothing of the sort (e.g. the Thirty-years War in Germany or the French wars of Louis XIV). The Scottish Enlightenment, one of the more remarkable outbursts of intellectual creativity in European history, seems to have occurred in a fairly placid land. Without further elaboration, the argument can be overdone: one searches in vain for a triggering ‘exogenous shock’ in the decades before 1760 that might account for the British Industrial Revolution, whereas the highly disruptive French Wars between 1793 and 1815 did little on balance to stimulate the British Industrial Revolution and in all likelihood slowed down economic progress on the European Continent.
What is perhaps more satisfying as an explanation for technological progress is Rosenberg's notion of a focusing device (Rosenberg, Reference Rosenberg1969). The idea is simple: an exogenous crisis or shock will increase the salience of a technological bottleneck and concentrate the creative firepower of a society on solving the problem. One classic example is the shipwrecking of Admiral Cloudesley Shovell's ships at the Scilly Islands (1707), due to the inability of navigators to calculate their exact longitude. It focused the British admiralty on the problem of longitude determination. Another one was the cotton famine that forced Britain to import inferior-quality raw cotton from India, and design new equipment to process it (Hanlon, Reference Hanlon2015).
Does this idea hold for institutions as well? I fully agree with Hodgson that books like mine cannot be written without paying attention to institutions and that voices such as Deirdre McCloskey's and Gregory Clark's, who dismiss institutions as factors in the historical development of economies, are missing a big part of the puzzle. The problem is, of course, that any comprehensive theory for institutional change (which my book was not primarily concerned with) is still far from developed. Major and moderate shocks lead to institutional changes except when they do not. Not only that we do not know precisely why in some cases such shocks lead to institutional changes and in others they fail to do so, we also cannot predict in what direction such changes will go. The Great Depression of the 1930s led to catastrophic institutional changes in Germany, but in neighboring Czechoslovakia and Belgium, which as heavily industrialized nations were equally affected by the depression, democratic and pluralistic institutions held up. Contingency and the role of pivotal individuals played a big role – but what else?
On the whole, I remain yet to be convinced that an evolutionary approach can shed much light on the historical dynamics of institutional change as Hodgson suggests. Institutions display interesting evolutionary dynamics such as punctuated equilibria, but the selection mechanisms seem to be difficult to identify even if we allow for multi-level selection. Societies do not ‘select’ their institutions, and it is still far from clear why some societies get one type of institution and others a different one. Again, the outcomes clearly depend to a great extent on historical contingency. There seems to be no one-size-fits-all kind of theory that provides a satisfying explanation of the variance of institutions in cross section and their changes over time. History mattered, so did geography and culture – but how precisely remains largely mysterious. Intuitively, it seems that somehow the culture of a society and its institutions should be aligned if society is to be in equilibrium. But if they are not, at what margin does the adjustment take place? Do institutions change to adapt to the culture, or is it the other way around? And how fast is the equilibrium reached if ever? Moreover, given the feedbacks between institutions and culture, how likely are multiple equilibria? How do societies end up in one equilibrium or the other? (Alesina and Giuliano, Reference Alesina and Giuliano2015).
The one thing we know for sure is that unlike technology, where we can safely speak of technological progress, it is safer to speak of institutional change, which would not imply any non-stationarity. In a world like the one we find ourselves in today, any thoughts of institutions or the people who manage them getting ‘better’ in any definable sense seems illusory. Given that technology keeps advancing, the growing gap between the trajectories should worry anyone closely observing the history of the 21st century. Perhaps, after all, research on the ‘big questions’ has its uses.
Although Professor Hodgson and I may disagree on details, debates such as this exchange are enlightening and useful – this is precisely what the market for ideas is about.