1. Introduction
There has been a recent shift of attention among economists towards the role of ideas in economic development. Economists of diverse backgrounds have come to argue that ideas originating in religion, philosophy, the arts, science, public debates or policy discourse are important causes of economic growth or decline.Footnote 1 This has led some scholars to argue that intellectual ideas play a more fundamental role than institutions in economic history. However, ideas are also formed in institutional contexts. They emerge in intellectual debates sustained by social ‘rules of the game’ (North, Reference North1990). So the real lesson for institutionalists may be, not that institutions matter less, but that different institutions (also) matter. The study of institutions governing production and exchange should be supplemented by an analysis of institutions of intellectual debates.
Which debates matter for the economy? On the one hand, a long line of scholars have followed Weber ([1923] Reference Weber and Knight1927) in pointing to intellectual debates whose institutions – e.g. those in religion, science or the arts – are largely independent of and exogenous to the economy. On the other hand, economists have long emphasised the importance of information, communication, learning and diffusion of knowledge but have ignored intellectual debates within a market economy. What emerges from these two traditions is a truncated view of intellectual life and its institutions in a developed economy. In reality, intellectual debates also take place among economic actors, and institutions supporting these debates develop, wholly or partially, endogenously in the economy. The latter are no less important than the above-mentioned exogenous institutions. I shall argue that they are crucial for the functioning of production and exchange processes in any advanced economy and especially for innovation.
In this article, I undertake three tasks. First, to identify specific institutions of intellectual debates, we need to know what to look for. The best guide would be a general theory of such institutions. I outline such a theory based on Michael Polanyi's concept of an ‘intellectual order’. I propose that economic exchange and intellectual debate must be distinguished as two fundamental forms of voluntary cooperation. While exchange requires the rules of property and contract, intellectual debate has general social rules of its own. These rules are most obvious in their most articulate forms, such as science or law, but are functionally the same even for the simplest and most ad hoc of intellectual debates. They comprise what Polanyi ([1951] 1998) called ‘intellectual orders’. While Polanyi's analysis of the scientific community has deeply influenced the economics of science (Tarko, Reference Tarko2015), his more general concept has not been utilised. I suggest that it is well worth reviving as it grasps the institutions of intellectual life in a comprehensive yet nuanced way.
Second, I discuss theoretical reasons for the endogenous emergence of intellectual orders in a developed market economy. As economic actors pursue production and exchange, they must also reflect upon these activities and engage in intellectual debate. Debated knowledge is an especially important economic input under uncertainty due to adaptation or innovation. Therefore, actors must develop not only catallactic institutions but also intellectual orders. Most of the latter remain diffuse and informal. As the value of intellectual debate increases, however, they tend to become more articulated and formalised. Professional communities and public intellectual spheres represent their most developed forms.
Third, I illustrate the institutional logic and economic importance of (partly) endogenous intellectual orders using three examples: (1) the role of professionalisation in the creation of industrial capitalism in the United States, (2) the role of professional communities in the innovative region of Silicon Valley, and (3) the intellectual public sphere of ‘Industrial Enlightenment’ in the 18th and 19th centuries that contributed to the Industrial Revolution.
2. An institutional theory of intellectual orders
Intellectual debate as a fundamental form of voluntary cooperation
Economists have a tendency to view all social arrangements as exchange. Intellectual life also lends itself to being conceived as a ‘market for ideas’ (Coase, Reference Coase1974) or a ‘market process’ (Walstad Reference Walstad2002). Even those who reject the market analogy, arguing that the quid pro quo of trade is often missing, as it is in science, for example, tend to focus on exchange in more attenuated forms, such as reputation-based rewards for publications (Dasgupta and David, Reference Dasgupta and David1994; McQuade and Butos, Reference McQuade and Butos2003).Footnote 2 This approach seems justified to the extent that intellectual discourse is an ‘exchange of ideas’. Although the latter metaphor has merit, it disregards a fundamental aspect of intellectual life. People do not merely provide one another with ideas but engage in a common endeavour: the search for truth (Buchanan, Reference Buchanan2001; Tarko, Reference Tarko2015). In science as well as philosophy or any public discourse, participants pursue this goal not by exchanging ideas like goods but by pitting arguments against each other. This suggests that intellectual debate, rather than exchange, should be taken as the fundamental interaction of socially organised intellectual life.
Intellectual debate is a fundamental form of voluntary cooperation, which is comparable to but clearly distinct from economic exchange. People engage in both an exchange and a debate on their own initiative and with the expectation of deriving mutual benefits. However, the nature of these benefits and the way they are achieved are different. In an economic exchange, each party offers a service or a good to assist another person in pursuing his subjective goals and expects the same in return. The exchange is successful if each party thinks that it has helped him further his goal. Interaction is based on the premise that each participant makes his own intellectual judgement about what goals to pursue and by what means. This involves answers to both positive (what is?) and normative (what ought to be?) questions. Indeed, a celebrated achievement of a catallactic order is that it enables people to pursue goals and use means according to their best positive and normative judgements of reality, i.e. their subjective concept of truth (Hayek, Reference Hayek1945). Although other parties as well as knowledge emerging in the order (e.g. through prices) help them form these intellectual judgements, they ultimately and emphatically remain in the subjective realm.
In an intellectual debate, each party puts forward an argument (i.e. a reasoning) to contribute to advancing towards a common intellectual judgement of what is or what ought to be. That is, the very aim of cooperation is something that is clearly not the purpose of an economic exchange: to bring intellectual judgement into the common or intersubjective realm. A debate is deemed successful if it has helped the participants form an improved common intellectual judgement of reality.Footnote 3 An argument need not lead to agreement. Indeed, it rarely does. However, the parties must expect that the validity of arguments or the lack thereof according to some commonly accepted standard will become more apparent as a result of the debate. Otherwise, there is no point in engaging in it. Hence, an argument and a debate that links arguments only make sense if all parties agree on an intersubjective concept of truth and fruitful ways of approaching it through reasoning.
Intellectual orders
Such concerted behaviour needs to be supported by institutions in the sense of social ‘rules of the game’ (North, Reference North1990) or ‘prescriptions that humans use to organise all forms of repetitive and structured interactions’ (Ostrom, Reference Ostrom2005: 3). All human debates rely on language. However, sustained debates about some circumscribed subject matter that transcend ad hoc situations and personal interests also need the support of specialised institutions. What are these institutions? Considering the immense versatility of ideas and debates, can we detect a unifying pattern in their rules?
Although many sociologists and economists have explored institutions that support specific types of intellectual debates, in science, the arts or political discourse, there have not been many attempts to offer a general theory of such institutions. In sociology, Habermas’ theory of ‘structures of communicative action’ (1984) and Bourdieu's concept of ‘intellectual fields’ (Reference Bourdieu1983, Reference Bourdieu1990) come closest to offering a unifying theory. However, these authors developed their analyses against the backdrop of a Marxist view of capitalism, which makes the reconciliation of their views with institutional economics especially difficult. At least, I do not venture such an attempt. For the purposes here, I consider Michael Polanyi's equally general theory of ‘intellectual orders’ (Polanyi, [1951] Reference Polanyi1998; Polanyi and Prosch, Reference Polanyi and Prosch1976) as a more secure foundation.
Polanyi's analysis of ‘the republic of science’ (Polanyi, Reference Polanyi1962) has been influential in the economic analysis of science (see e.g. McQuade and Butos, Reference McQuade and Butos2003; Stephan, Reference Stephan1996; Tarko, Reference Tarko2015), but his broader concept of intellectual order, of which science is only the most prominent example, has been little used. One reason is that he elaborated his theory only for two cases – modern science and the common law.Footnote 4 Nonetheless, he did propose it as a general institutional theory of intellectual orders:
Literature, and the various arts, pictorial as well as musical; the crafts, including medicine, agriculture, manufacture and the various technical services; the whole body of religious, social and political thought – all these, and many other branches of human culture, are fostered by methods of spontaneous order similar to those described for science and law. (1998: 203)
Although he stopped short of discussing these other spheres of intellectual life, I believe that a general and consistent theory of intellectual orders can be reconstructed from his writings on science and law.
Polanyi argues that intellectual debates are only fruitful and indeed meaningful when they take place within intellectual orders. These are spontaneous orders in the same sense as the catallactic (i.e. exchange-based) order of the market economy is spontaneous: ‘order is achieved among human beings by allowing them to interact with each other on their initiative – subject only to laws which uniformly apply to all of them’ (1998: 195). The institutions of intellectual debates are the ‘laws’ of intellectual orders. These rules must enable and support three processes which Polanyi (Reference Polanyi1998) calls consultation, competition and persuasion. First, debaters must be able to consult an intellectual heritage, which provides them with a means of mutual understanding, an already existing body of knowledge as well as methods for moving beyond it. For example, ‘a scientist, wrestling with a problem, accepts as his premise a great mass of previously established knowledge and submits to the guidance of scientific standards’; or a judge refers ‘to precedent and statute and interpret[s] them in the light of contemporary thought’, while he sticks to standards of legal reasoning (1998: 201). Second, debaters must be able to compete in the sense that they must be free to pursue their conjectures and lines of reasoning and should be rewarded for their contributions. While Polanyi initially ([1951] Reference Polanyi1998) stressed the element of motivation, he later (1976) clarified that what is truly indispensable is the freedom of intellectual discovery, without which no advancement of common intellectual judgement is possible. For example, in common law jurisprudence ‘the interest of the ruling class . . . may result in limiting the extent to which justice can be actualised [but] these results do not determine what shall be thought at any time justice ideally. Judges determine this through the long line of mutual adjustments in legal thinking’ (1976: p. 210). Intellectual judgement by fiat is a self-contradiction. Third, those who advance competing arguments must persuade the participants of a debate. Their lines of reasoning must be pitted against one another in a sincere and fair controversy, which compels participants to adjust their ‘arguments to what has been said before and thus all divergent and mutually exclusive aspects of a case are in turn revealed’ (1998: 202).
How are the processes of consultation, competition and persuasion institutionalised in an intellectual order? They take the form of ‘associations of free, self-governing persons’ committed to the pursuit of certain intellectual ends (Polanyi and Prosch, Reference Polanyi and Prosch1976: 211). These associations build up ‘disciplining traditions’ that provide standards for acceptable arguments. They may develop formal collective bodies, such as in modern science, jurisprudence and some professions, or remain informal communities as we often see in the arts and among public intellectuals.
Although Polanyi does not provide a taxonomy of the rules of such associations, we can reconstruct it from his extensive analysis. Three sets of rules can be distinguished, corresponding to the three processes of the order they must support. One set of rules defines the recognised methods of articulating an argument. Thereby, they regulate the process of consultation. For example, scientists follow the accepted methods of science in setting their problems, choosing the ways to pursue them and reaching conclusions. Common law judges refer to precedents and legal principles, steadily re-applying, re-interpreting and expanding the same set of fundamental rules. Another set of rules concerns who may participate and how in a debate, regulating the process of competition. Formal or informal credentials about education, apprenticeship and proven expertise may be required for participation. The rights or opportunities to voice an argument may depend on positions based on recognised reputation. Reputation-building itself may be regulated through specific rules, such as prizes or citation counting in modern science. A third set of rules organises the forums of controversies where persuasion takes place, such as journals, books, conferences, trials or other forms of personal discussion.
The three sets of rules are interrelated and must be consistent. They reflect shared intellectual convictions about the subject matter of the debate and the nature of knowledge to be discovered. To take one of Polanyi's examples, common law jurisprudence is founded on the belief that the law can only be ‘found’ through the application of precedent-based reasoning to ever newer cases (cf. Hayek, Reference Hayek1982: Chapters 4 and 5). By contrast, a discourse of bureaucratic regulation and its attendant institutions reflect the conviction that the relevant knowledge is to be discovered through debates among specialised experts.
Advantage over the market analogy
The concept of intellectual order recognises crucial institutional elements that the metaphor of ‘market for ideas’ ignores. The process of competition is a common trait of a market order and an intellectual order (Polanyi, [1951] Reference Polanyi1998: 195–207). In both cases, there must exist rules to secure freedom to participate and rewards for success. However, an intellectual order also requires rules to govern consultation and persuasion – two processes that are not constitutive of markets. The ‘market for ideas’ is therefore too narrow a concept for the institutions of intellectual life.
Recent scholarship in the economics of science confirms that all three processes are essential: the ‘competitive polycentric ensemble’ of the scientific community is held together by rules and norms ensuring consultation with past research as well as transparent and fair processes of persuasion ‘in search for consensus’ (Tarko, Reference Tarko2015: 77). On the institutions of other intellectual spheres, there is very limited reflection in economics. Although several authors emphasise the role of institutional context for ideas, such as medieval Catholic universities for rationalism (Stark, Reference Stark2005), the European world of arts and letters for humanism (Phelps, Reference Phelps2015) or coffeehouses, newspapers and salons in early modern Europe for the bourgeois ethic (McCloskey, Reference McCloskey2010), they stop short of offering a theory of these institutions. Those who take this step, however, follow more or less closely the market analogy.
Discussing the origins of policy ideas, Leighton and López (Reference Leighton and López2012) argue that they emerge as the results of entrepreneurial action by academics, intellectuals and policy makers. Rodrik (Reference Rodrik2014) adds that political actors may also derive new ideas from purposeful experiments or unplanned ‘policy mutations’. All these activities are seen as purely competitive. Actors develop ideas on their own or copy them from others. In their account, the debating of ideas does not contribute to their development.
Analysing the sources of innovative ideas needed for economic development, Coase and Wang (Reference Coase and Wang2013) argue for the need of a general ‘market for ideas’. Again, this is understood as the free competition of innovative ideas, whose main institutional requirements are constraints on political interference. They do add that a certain ‘habit of thought’ supporting such competition is necessary but do not consider how such a habit may come about or be maintained by institutions. Mokyr (Reference Mokyr2007) comes closer to the Polanyian perspective. He offers a similar argument for a ‘market for ideas’ view but stresses that the generation of ‘useful knowledge’ requires not only the contestability of ideas but rules to support their accumulation and the reaching of consensus.Footnote 5
The concept of intellectual order clarifies what is ignored or only partially grasped by these market-based theoretical accounts. The entrepreneurial and competitive invention of ideas (as well as their accumulation and consensus-seeking) can only take place within existing systems of thought. Even highly original and disruptive ideas can only be articulated against the backdrop of existing knowledge and need to be defended vis-à-vis existing ideas. The crucial point is that any living system of thought requires institutions that regulate how to consult previous ideas and persuade other people by arguments. Competition among entrepreneurs of ideas is essential. However, it is made meaningful and, at the same time, constrained by the rules of consultation and persuasion.
3. Endogenous intellectual orders in the economy
The neglect of intellectual debates in economic theory
Polanyi makes a sharp distinction between intellectual orders and the economic order of a market economy ([1951] Reference Polanyi1998: 195–205). This leads him to deny the existence of intellectual debates in the economy. He argues that economic activities are driven by consumers’ satisfaction and producers’ striving for profit, and that they ‘cannot be guided by professional standards [formed in intellectual debates] because there exists no system of thought from which such standards could be derived in respect to this field’ (204). This view reflects a common view among economists: intellectual debates have no place in the economy: homo oeconomicus does not engage in common pursuits of truth. I shall argue that Polanyi and the received economic theory is wrong on this point. Intellectual orders do emerge in the economy and are crucial for its development.
In most economic models, even ideas are missing. It is assumed that that individuals must solve an optimisation problem with given preferences, constraints and choice variables. As Rodrik (Reference Rodrik2014) notes, such models ignore that the components of a problem always rely on a set of ideas held explicitly or implicitly by the decision-maker. However, when he goes on to consider where ideas come from, he considers several processes, as we noted, but not intellectual debate. Some economic theories of innovation and economic growth likewise acknowledge the role of ideas and even the importance of conversation and interchange of ideas (Allen, Reference Allen1983; Dahl and Pedersen, Reference Dahl and Pedersen2004; Jacobs, Reference Jacobs1985; Phelps, Reference Phelps2015), but also ignore debates. A disciplined pitting of arguments against each other in search of truth is not mentioned among the processes by which proximity and communication are transformed into ‘knowledge spillovers’ (Glaeser et al., Reference Glaeser, Kallal, Scheinkman and Shleifer1991) or ‘increasing returns to information’ (Jones, Reference Jones, Aghion and Durlauf2005).
A deeper reason for the neglect of debate is suggested by McCloskey and Klamer (Reference McCloskey and Klamer1995) who argue that the concept of judgement is missing from much of economics. They ascribe this lacuna to the mistaken equation of knowledge with information, while the other component of knowledge – judgement – is ignored. If information does not have to be judged, i.e. critically discerned and appraised, there is no need for arguments or debates either. However, there are at least two important strands in economic thought that do emphasise judgement but still ignore intellectual debate. Behavioural economists argue that under uncertainty, people ‘reduce the complex tasks of assessing likelihoods and predicting values to simpler judgmental operations’ (Tversky and Kahnemann, Reference Tversky and Kahneman1974: 1124). In entrepreneurship theory, making judgements when no obviously correct answers to problems have been described is a key function of the entrepreneur (Casson, Reference Casson1982; Foss et al., Reference Foss, Foss and Klein2007). A common feature of both approaches, which they share with the rest of economics, is that they relegate judgement completely to the subjective sphere. I believe this is the most fundamental reason for the neglect of intellectual debate in economic theory. If judgement is entirely subjective, there is no point in arguing or debating. There may only be information sharing and manipulation.
I cannot attempt here to account fully for this puzzling feature of economic theory but would like to point to what I believe is one of its main sources. Ever since Adam Smith, a highly praised characteristic of the market order is its capability of coordinating myriads of individual judgements about goals and means without compelling people to agree on these judgements. As I noted, in an economic exchange, each party can remain agnostic about the correctness of the other's judgement. Moreover, any third party can remain agnostic about the contracting parties’ subjective judgements. In a catallactic order, ‘non-enquiry’ into other people's choices prevails. This has led economists to theorise individual action as if it were based on ‘fixed preferences’, i.e. judgements made outside the scope of social scientific enquiry, somewhere in the purely subjective realm.Footnote 6 The central statement of economics that a voluntary exchange is mutually beneficial (i.e. a Pareto-improvement) is based on this assumption. While this approach has served economics extremely well, it seems to have blinded economists to the fact that the judgements on which preferences are based are often formed in or influenced by intellectual debates.
The importance of intellectual debates for economic activities
Economic actors are likely to engage in an intellectual debate if (1) making a personal judgement has a high expected economic value for them, and (2) this judgement can be improved by engaging in common deliberation. As clarified by the theory of entrepreneurship, judgement will in general be valuable ‘when no obviously correct model or decision rule is available or when relevant data are unreliable or incomplete’ (Casson Reference Casson1990). Such uncertainty is especially likely when economic activities are characterised by continuous adaptation or innovation (Phelps, Reference Phelps2015: 28–36). Debates are likely to improve individual judgements when many actors face similar problems across several situations. In an economy based on a sophisticated division of labour, such linked situations will most often occur for people who perform similar functions (e.g. entrepreneurs, managers or employees) or engage in similar specialised activities (e.g. sectors or lines of occupation). A specialised debate can only be sustained if an intellectual order emerges that is dedicated to improving judgements in the relevant economic field. I propose that these orders will be institutionalised as professional communities in a broad sense. These include professions organised in fully fledged formal bodies but also partly informal communities of trades, crafts, lines of business or industries.Footnote 7
Specialisation and innovation are about both technology and devising specialised rules – contracts, governance structures, and market regulations – that support exchange relationships. Professional communities can provide forums for intellectual reflection on technology and the rules of exchange. They help participants answer such questions as: Under what conditions shall a specialised person offer his service to others? How shall its production process be properly organised? And so on. Moreover, specialisation also changes the range of possibly meaningful goals people may follow. The professional community can also debate the norms and attitudes (the ‘ethos’) guiding economic action in the specialised field. What counts as professional excellence? What is the weight of moral considerations? What broader social purposes are to be served?
While economists tend to view professions as organisations providing self-regulation to mitigate contracting problems (e.g. moral hazard, adverse selection) or provide collective goods (e.g. cartelisation, lobbying) (Matthews, Reference Matthews1991; Ogus, Reference Ogus, Bouckaert and de Geest2000; Shaked and Sutton, Reference Shaked and Sutton1981), these are arguably secondary to their more fundamental role of providing an intellectual order that makes such collective actions meaningful in the first place.
Economic actors may also turn to existing intellectual orders, such as science, to obtain intellectual support for their judgements. However, they are likely to need to ‘translate’ ideas that emerge in intellectual debates with non-economic purposes. For example, scientists may discover a new scientific law but its technological relevance may still need to be discovered. A ‘hybrid’ intellectual order that combines scientific and economic considerations and mediates between scientists and economic actors may then emerge.
Intellectual orders and economic development
It is hardly possible to imagine a modern economy without a great number of institutionalised intellectual orders. However, a concrete order that has emerged in the economy need not be beneficial for its development. It depends on the ideas the order produces. Does it support innovation or help preserve the status quo? Is the innovation it brings socially productive or wasteful? Since the generation of ideas is disciplined by the rules of the intellectual order, the question for institutional analysis is whether these rules support the emergence of the ‘right’ kind of ideas. This is a very complex issue that is beyond the scope of this article. Nonetheless, the theory presented here suggests a number of possible normative distinctions.
First, do the rules of consultation prescribe criteria for arguments that favour innovative and socially productive ideas, or the opposite? Second, do the rules of competition allow free participation in debates constrained only by a person's likely ability to contribute to it, or do they restrict access to incumbents? Are there net benefits or costs to presenting valuable ideas? Third, do the rules of persuasion create forums of debate where diversity of opinion is praised while consensus is sought? Or is there a lack of such forums?Footnote 8 As a negative case, one may think of a professional community focused on preserving ancestral knowledge and protecting social status in a changing world. A positive example may be a profession that has created institutions for debates to pursue the ideals of continuous improvement in technology and competitive risk taking.
4. Three examples of intellectual orders (partly) endogenous to the economy
I present two examples of professional communities whose intellectual order was initiated and institutionalised by economic actors. In other words, they can be seen as institutions that are endogenous to the economy. In addition, I consider a ‘hybrid’ case in which economic actors and scientists jointly created a public intellectual sphere. All three examples are positive, illustrating the potential of intellectual orders to contribute to economic development.
The role of professionalisation in the creation of industrial capitalism in the United States
The formation of large-scale business enterprise that took place between the 1850s and 1920s in the United States was a crucial step in the creation of modern capitalism. In his pioneering account of this period, historian Alfred Chandler (Reference Chandler1995) vividly described the role of professionalisation in permitting the quick development and rapid adoption of organisational and technological innovations. At each important stage of industrial advancement, new fields of activities and new occupational roles appeared, which almost instantly called forth the desire to meet and discuss common problems. For example, ‘the 1880s and early 1890s witnessed the culmination of technological as well as organisational innovation and standardisation’ in railroad transportation. This was made possible by the professionalisation of railroad managers, who formed their associations, organised meetings where they ‘listened to papers and discussed technical problems of mutual interest’, ‘developed a sense of professional expertise’ and reinforced it ‘by reading the same journals and by following the same career lines’ (131).
In subsequent phases of industrial development, the same processes could be observed among mechanical engineers in heavy industries and functional managers in finance, marketing and production as well as general top managers in large industrial enterprises. Each time, ‘professional societies were formed, professional journals published, and professional courses established in major colleges and universities’ (464). A common outlook as well as common interests and concerns were formed. As industrial firms grew, the division of labour within firms became more sophisticated and increasingly specialised groups of actors embarked on the road of professionalisation.
The emergence of industrial and managerial professions was clearly endogenous to the economy. Each time, the institutionalisation was initiated and driven forward by engineers and managers. Their creation was precipitated by the challenges of new economic tasks but the professionals themselves decided how these tasks would be performed. In Chandler's evaluation, their contribution to economic development is clear: ‘One reason for the spread of the modern enterprise was that the new professional associations, journals, training courses, and consultants made possible a rapid diffusion of the new managerial and administrative procedures’ (469).
Professional communities in Silicon Valley
An important observation about technological innovation is that it tends to cluster geographically. In the past half-century, Silicon Valley has perhaps been the best-known example of an innovative cluster. Scholars tend to agree that dense social networks across firm boundaries have been critical for learning and innovation in the region (Kenney, Reference Kenney2000; Saxenian, Reference Saxenian1994). While few researchers analysed the processes by which social learning took place (Benner, Reference Benner2003), at least two studies reveal the presence and outstanding importance of intellectual orders institutionalised as professional communities.
In a captivating account, one of the ‘founding fathers’ of the semiconductor industry (Silicon Valley's first high-tech industry) in the 1950s argued that the key to understanding the creation and success of the economic region was the development of a new professional role: the ‘technologist-manager’ (Moore and Davis, Reference Moore, Davis, Bresnahan and Gambardella2004). A group of scientists and engineers realised that the science-based idea of semiconductors presented a technological opportunity with a potentially very large economic payoff. However, they had to transform science into profitable technology. This presented new types of problems for which no recipes existed. The challenge was threefold: (1) aligning the goals and incentives of a personnel of talented individuals with those of a business enterprise (2) building internal firm structures in which scientific exploration had a place, and (3) guiding innovation in firms that were both technically feasible and profitable (13–14). Neither the norms and attitudes of science, nor those of industrial management (as identified by Chandler) proved adequate. There was an economic impetus to form a new intellectual order based on novel intellectual convictions. These centred on the belief that ongoing scientific discoveries are possible in business enterprises and depend crucially on proper management by technologist-managers who ‘need to be able to plot the shortest path to workable discovery’ (14).
Interestingly, the emerging professional community remained informal for a long time. The Semiconductor Industry Association was formed only in 1977. Intellectual debates that formed the profession initially took place within the founding firm of the industry, often referred to as ‘Fairchild University’ (after the company's name). Subsequently, they were extended informally as former employees started new ventures and began circulating among a growing number of enterprises. A possible explanation is that the professional role of the technologist-manager was not strictly sector-specific but a broader and ultimately informal concept.
Fast-forward to the late 1990s when Internet firms came to the forefront of technological progress. By this time, Benner found ‘dozens if not hundreds of professional associations and similar users groups that make up the dense network of occupational relations in Silicon Valley’ (2003: 1819). This reflects not simply the region's size but also the proliferation of professional communities, echoing the logic observed by Chandler in another epoch. Benner showed that these communities extended beyond the highly visible group of entrepreneurs or engineers to such ‘semi-professions’ as Internet designers and developers. One of the reasons he gave was that even people in such mid-level occupations were affected by swift technological and economic changes and had to update their skills continuously. A case study of an association of women in Internet design and development occupations revealed that its formalised organisation functioned first of all as a ‘learning community’. Besides networking, its activities centred on discussions of general and specific technical problems and questions of career and business development. Overall, participation in the community contributed not only to problem solving but also to ‘sense-making (meaning) and identity formation’ (1813). Meanwhile, the secondary functions of quality assurance and self-regulation, often observed in more traditional professional associations, were entirely absent.
The public intellectual sphere of ‘Industrial Enlightenment’
Mokyr (Reference Mokyr2005) traces the most important intellectual roots of the Industrial Revolution back to the Baconian programme of empirical science and the Enlightenment's support of scepticism and emphasis on useful knowledge for the sake of social improvement. While the origins and role of these philosophical ideas remain matters of debate (Jacob, Reference Jacob2006; McCloskey, Reference McCloskey2010; Tunzelmann, Reference Tunzelmann1995), Mokyr documents in detail the emergence of institutions devoted to the generation and diffusion of useful knowledge in the 18th and 19th centuries (Mokyr, Reference Mokyr2005). There emerged a public intellectual sphere with its common standards of consultation, intellectual competition and persuasion, which favoured experiments, measurement, a focus on ‘what worked’ rather than ‘what is true’ and social utility. Mokyr stresses the flow of ideas from scientists to craftsmen but acknowledges reverse causality. There was a ‘close collaboration and interaction between natural philosophy [i.e. pure natural science] and highly skilled craftsmen’ (2005: 323). Meetings often took place informally in coffeehouses but learned societies and Masonic lodges increasingly provided more formal organisations (see also Jacob, Reference Jacob2006). Pure science was a major inspiration for this public intellectual order and their institutions remained intertwined. Nevertheless, they are more properly seen as distinct orders following different rules of intellectual debate. In England, their difference is perhaps best illustrated by contrasting two of their most famous organisations: the scientific Royal Society and the Birmingham Lunar Society, which was a dinner club and learned society attended by industrialists, scientists and intellectuals. The perceived needs of craftsmen and entrepreneurs to reflect on their economic activities was as much of an impetus for the creation of the latter as scientific advances.
5. Conclusion
In a fast-changing and innovative market economy, economic actors need to reflect continuously on their decisions in the course of production and exchange. They must form difficult judgements and often need the support of intellectual debates to improve their judgements. An intellectual debate is much more than information sharing: it is a disciplined common search for truth. As such, it requires specific institutional support in the form of an intellectual order. Specialisation in the economy implies the need for debates that can be sustained across many similar decision-making situations. Therefore, specialised intellectual orders – in the form of professional communities – will emerge in the economy. There is a strong case for including these among the fundamental ‘institutions of capitalism’ (cf. Hodgson, Reference Hodgson2015; Williamson, Reference Williamson1985), besides the catallactic institutions of property and contract.
This proposition does not deny the possibly immense influence of intellectual debates that are largely exogenous to the economy, such as religion, public discourse, science or the law. Intellectual order is a unifying concept for analysing diverse institutions of intellectual debate. By examining in which intellectual orders (of whatever origin) economic actors participate, we can better identify which sets of ideas influence their decisions and how. The historical example of the public intellectual sphere of ‘Industrial Enlightenment’ illustrates a ‘hybrid’ intellectual order originating in both science and the economy.
Based on the work of Michael Polanyi, I identified three general types of rules that make up any intellectual order: the rules of consultation, intellectual competition and persuasion. The challenge for institutional economists is to explore the different specific forms in which these rules appear in different intellectual orders of the economy and the consequences of these forms for economic development. While I focused on ideas that support value creation, intellectual orders may have the opposite effect as some professional communities, religions and public discourse arguably had at various times. By exploring which intellectual orders had positive or negative effects in which contexts and through what mechanisms, we can better understand the conditions of economic development.
Acknowledgements
The author is grateful for financial support from the Hungarian Academy of Sciences (Bolyai postdoctoral scholarship), the Hungarian Scientific Research Fund (grant PD 113072) and Corvinus University (EFOP 3.6.1 research project on Smart Specialisation). He also wishes to thank the anonymous reviewers of this journal for valuable comments and suggestions.
