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What came first, the chicken or the egg?
Published online by Cambridge University Press: 20 November 2019
Abstract
Current empirical evidence does not seem to confirm that an improvement in living conditions is the cause of the shift in the human mindset toward innovation and long-term risky investment. However, it may well be one of the conditions for greater tolerance of income inequality in exchange for a steady increase in average income.
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References
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Related commentaries (24)
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Baumard proposes a neurocognitive model, inspired by the results of the Life History Theory (LHT), to explain the strong acceleration of innovation dynamics – considered as the engine of modern economic growth – in England and then in continental Europe since the Industrial Revolution. Baumard explains this acceleration by a change in neurocognitive processes of humans, that is, their preferences, resulting from an improvement in people's living conditions.
The explanations of the Industrial Revolution can be classified according to three approaches: the incentive-based approach, the idealistic approach, and the hybrid approach (Clark Reference Clark2012). Baumard's model belongs to the latter approach whereby the Industrial Revolution has its roots in a particular set of values dependent on materialistic or demographic forces (e.g., Clark Reference Clark2007; de Vries Reference de Vries2008; van Zanden Reference van Zanden2008). His model can be related to the idealistic explanations of the Industrial Revolution proposed by Mokyr (Reference Mokyr2016) and Wootton (Reference Wootton2015; Reference Wootton2017; Reference Wootton2018), where cultural change takes place within the elite, which, through its innovations and investments, is transforming technologically and economically society as a whole. Their explanations are therefore top-down and do not depend on the average standard of living of the population. Baumard admits that most innovators are rich and literate individuals but considers that the improvement of living conditions for the average individual has allowed this elite to be more numerous and the rest of the population to be more tolerant and optimistic in the future. Baumard's top-down explanation implies a greater penetration of neurocognitive and cultural change in society.
We agree with the thesis that a change in the mindset of the English and European elites is a determining cause of the Industrial Revolution. The crucial question is what caused this change in mindset. The explanation proposed by Baumard is not specific to England or Europe but is universal. Once living conditions are sufficiently high, the mindset changes. However, the causal chain of his model can only be accepted …
If the living conditions actually improved in pre-industrial England and Europe, as well as in all countries that have experienced the Industrial Revolution
Whereas recent studies confirm the existence of some growth of GDP per capita in both England and The Netherlands before the Industrial Revolution – an evolution labelled as the “Little Divergence” by early modernists – the empirical literature provides less support for significant economic expansion in the rest of Europe during the pre-industrial period. In addition, the causal chain of Baumard's model implies that the early improvement of living conditions in England must be translated into European and global leadership in innovations to explain English leadership in the takeoff of economic growth. The empirical literature does not seem to confirm the English domination in inventions at that time, particularly macroinventions (e.g., Meisenzahl & Mokyr Reference Meisenzahl, Mokyr, Lerner and Stern2012; Mokyr Reference Mokyr and Mokyr1999). For example, Mokyr (Reference Mokyr and Mokyr1999, p. 24) notes:
Britain seems to have no particular advantage in generating macroinventions; a large number of them were generated overseas, especially in France. Steampower and cotton technology were British inventions, but many of the other [macroinventions] were imported: Jacquard looms, chlorine bleaching, the Leblanc soda-making process, food canning, the Robert continuous paper-making process, gaslighting, mechanical flaxspinning.
If the relative prosperity of pre-industrial England reached a level never reached by a country before to explain an event, the Industrial Revolution, which had no precedent
Although it is now widely accepted that England experienced a growth of GDP per capita during the pre-industrial period (1650–1700), England's unprecedented wealth before the Industrial Revolution is not well established in the literature. Recent estimates by Maddison (Reference Maddison2007) and Broadberry et al. (Reference Broadberry, Campbell, Klein, Overton and van Leeuwen2015) show that The Netherlands was seemingly the most affluent country before the onset of the Great Divergence. Goldstone (Reference Goldstone2015), moreover, contends that the episode of growth observed in England during the pre-industrial period, especially between 1650 and 1700, was not very different from the earlier pre-modern efflorescences like those of Song China or Renaissance Italy, with impressive per capita growth that then shows a tendency to peter out. Why did the Industrial Revolution occur in eighteenth-century England, and not earlier in Song China or Renaissance Italy?
If reverse causality can be dismissed
Baumard's causal chain can be completely reversed by assuming, for example, that the invention of printing has made it possible to disseminate knowledge at a much lower cost than before, allowing the emergence of a common culture and a broader educated elite (Mokyr Reference Mokyr2016; Wootton Reference Wootton2015; Reference Wootton2017; Reference Wootton2018). This culture, more open to science, creativity, and innovation, would have enabled this elite to aspire to change by investing in commercial and technological entrepreneurship rather than war or land ownership. The improvement of living conditions is not a necessary prerequisite but is the consequence of the investments and innovations of the elite. Economic growth accelerates when investment returns reach the macroeconomic scale.
In light of the empirical information currently available, it is very difficult to conclude where the causal chain starts. Perhaps there is even a two-way causal relationship between a change in the mindset and living conditions. In fact, Mokyr and Wootton's elite-based and Baumard's average man based-explanations are not incompatible. Better living conditions of the average man in pre-industrial society pacifies social relations allowing respect for property rights and, in particular, the ownership of future earnings from long-term investments and innovations. North (Reference North1990) makes respect for property rights one of the institutional determinants of economic development. Baumard's thesis helps to explain the advent of and respect for this institutional environment. Although the acceleration of economic growth has been accompanied by rising inequality and social protest, the dynamics of innovation and economic growth have never been stopped, let alone reversed. Baumard's thesis would be convincing if it can be shown that the enrichment of an elite, even a larger one, could percolate into the whole society thanks to the greater patience and tolerance of the rest of the population resulting from the affluent mindset. For the moment, this chicken-and-egg problem with the source of the Industrial Revolution has not been solved.