Arnold Kling  

North on Adaptation

My Tax System... More on the Height of Bravery...

My second essay on Douglass North is now up.

To most economists, the agricultural revolution and the late Industrial Revolution are technological events. That is, the technology "arrived" and spread, leading to social change.

Douglass North instead suggests that these revolutions were institutional in nature. The technological capacity existed and went unused prior to the major economic revolutions. What was missing was the impetus to develop the rules and norms of behavior needed to incorporate the technology.

Think of the steam engine, which was first designed over 2000 years ago by Hero of Alexandria. North argues that until the 19th century, most of industrialization rested on existing scientific knowledge. The dependence on scientific discovery is a very recent phenomenon. As I read it, he implies that if intellectual property rights and other institutional arrangements had provided the necessary incentives, the industrial revolution could have taken place hundreds of years earlier.

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COMMENTS (3 to date)
dearieme writes:

"Think of the steam engine, which was first designed over 2000 years ago by Hero of Alexandria." Oh come now, a toy steam turbine is not the same thing. Don't spoil a good case by such petty acts of journalism.

Matt writes:

He said the industrial revolution could have begun hundreds of years earlier, not thousands.

Did North ever look at the two Germanies? I believe East Germany was the most efficient Communist bloc country. No matter the economic system, modern Germans rise to the top.

Fundamentalist writes:

dearieme: a toy steam turbine is not the same thing.

From what I've seen on the history channel, the steam engines of two thousand years ago weren't toys. They were large, complicated devices used in temples to fool worshippers into believing they had witnessed a miracle. The abundance of slaves and fear of unemployment prevents the application of steam and hydraulics to production.

But steam engines weren't necessary for development. The Dutch used wind power for saw mills, iron forges, seed crushing and other work. The Dutch made the first leap to a modern free market economy and enormous wealth. The use of wind power, and water power, had been known for millenia, but institutions and tradition kept people from using them.

Historians such as Harvard's Israel credit the Dutch with a revolution in building the first rational institutions, free markets, and sound private property rights.

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