How Did We Get So Rich?

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00:03 Paul Matzko: Welcome to Building Tomorrow, a show about how innovation and entrepreneurship can create a fairer, freer and more prosperous future. I’m your host, Paul Matzko. The coronavirus has highlighted the best and worst of modern society. It’s exposed incredible dysfunction in our public institutions, from the mendacity of our politicians to the risk aversion of public health organizations. It’s also highlighted the wisdom of the crowds, as most people voluntarily began changing their behavior in response to the virus days or weeks before the government even told them to. We’ve seen medical personnel risk their health and lives to save others. I’ve also been reminded in this crisis of an attribute of modern society that we tend to take for granted. Despite all the kvetching about social distancing, arguments about when, where and how to respond to the virus, there is a bedrock assumption that the overwhelming majority of people have shared from the earliest stages of the pandemic.

01:04 Paul Matzko: It is the solid belief that we will fix it, that there will be a vaccine, that if we just bend the curve, take precautions and throw money and smart people at the problem, eventually we’ll solve it. This belief operates on the level of assumption. We’re barely even conscious of it. And you know what? We probably will. But this belief, so ingrained in our modern culture, had to itself be created, innovated, inculcated. For most of human history, it would have been assumed that the virus was the judgment of a vengeful deity or an improbable, imponderable mystery of nature. But it’s so very modern that we just assume that we’ll figure it out. And it’s that belief itself that means we probably will. Progress begins as an idea, and that idea then begets progress. It is this proposition that I wanted to dig into today.

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02:07 Paul Matzko: I decided to talk with Joel Mokyr, an endowed Chair of Economics and History at Northwestern University, as well as the author of A Culture of Growth: The Origins of the Modern Economy, which came out with Princeton University Press. Welcome to the show, Dr. Mokyr.

02:23 Joel Mokyr: Hello.

02:25 Paul Matzko: This book began as part of a famous lecture series, the Graz-​Schumpeter Lectures, named for the influential 20th century economist, Joseph Schumpeter. Our listeners may have heard of Schumpeter for coining the phrase “creative destruction.” I think ordinary, non-​economist folks are familiar with that concept. Do you consider yourself a Schumpeterian? And what would that label mean in lay terms?

02:51 Joel Mokyr: It’s a very good question. Do I consider myself a Schumpeterian? And the wise guy answer is that you first have to tell me exactly what a Schumpeterian is because it’s not clear that Schumpeter was a Schumpeterian. And there is a Schumpeterian society of which I’m a member, and I have many colleagues who have written papers on various aspects of Schumpeterian economics, Schumpeterian competition, Schumpeterian growth, and I’m not totally sure these papers share a lot. Schumpeter was one of those wide-​ranging, but somewhat vague intellectuals. Very different, for instance, from somebody like, say, Keynes or Hayek who always you knew where they stood. With Schumpeter, it was always more complicated where he stood. And he could very often quite surprise you.

03:51 Joel Mokyr: I’ll give you my definition, and I would argue that in that regard, I am indeed a Schumpeterian but the definition itself may be controversial. What I see as Schumpeter’s main contribution to the way we think about economics today is he was one of the first people who… Maybe he, together with Karl Marx, with whom he obviously shared not much, but in this regard, they really saw… Both of them saw something that other people missed. And that is that economic growth can take place in sort of two different type of modes or mechanisms. And one of them I would call Smithian and the other I would call Schumpeterian. And Smithian growth is basically the kind of growth that we see through most of history. It’s growth that occurs because of the gains from trade. If for one reason or another, trade starts to occur between two regions or two nations or two areas that weren’t trading before, as we all know and understand, both of these traders normally gain from the exchange. It’s not like if we’re doing well, you must be doing poorly, this nonsense about zero-​sum. We understand that trade is a positive-​sum game and that by creating the conditions for trade and the division of labor, which is one of its consequences, you can get something for nothing, and this is how Smith starts his book.

05:36 Joel Mokyr: I’ve written a lot of economic history that points out that this was a major player in much of the economic growth that we see through much of history before the Industrial Revolution. What I think Schumpeter pointed out is that the Industrial Revolution or the period after it really created a different kind of growth, which we call in his honor, Schumpeterian growth, and that is growth that is essentially driven by human knowledge, or what I call useful knowledge. We can argue about what’s useful, what’s not, but it’s basically things that the society knows. And clearly, the most important thing that we know is what we call today science and technology, and what I have called in an earlier book propositional and prescriptive knowledge. So this is essentially our understanding of natural regularities and phenomena that we can harness for our material needs.

06:43 Joel Mokyr: And the point that is critically important to understand, I’m not gonna pontificate about this too long, but the point that is really critical to understand is that Smithian growth is essentially bound from above. It is going to start running into diminishing returns because the division of labor can give you something for nothing, but as you take it further and further, at some point it’s gonna start to level off because essentially labor is already as divided as it will ever get. The same is true about trade. Suppose you have two nations that were trading and that they weren’t trading because, say, somebody put up a big tariff or something. And if somebody comes and removes the tariff, voila, trade occurs, everybody is better off. Wonderful.

07:33 Joel Mokyr: But then, once you’ve removed the tariff, it’s hard to get more growth because trade is already taking place at a high level. And so a good example I will give you from a contemporary world is the creation of the European Union. The European Union basically facilitated trade within the nations of the European Union, and it was wonderful. They all benefited from that. But now at this point, all the trade that’s going to take place is probably already taking place. You may be able to squeeze a bit more, but it’s obviously gonna run into diminishing returns. And so any kind of Smithian growth is going to be bound from above, which is why much of classical political economy was so pessimistic and always talked about the stationary state. And Schumpeter basically pointed out that if it was driven by knowledge, that there is no obvious upper limit to that, and we can always know more, and there’s no evidence that whatever is knowable about nature is in some sense bound from above.

08:44 Joel Mokyr: And so Schumpeterian growth is the form of economic growth that does not run into diminishing returns. And on my view in that regard, I am a Schumpeterian. I really believe that we will continue to experience growth in science and technology, and that economic growth from that point of view does not have ever to end because there’s really no limit to what’s knowable. But people… At least not no limit that I can think of or have ever perceived. Now whether, I don’t know, if in the year 2500 perhaps we will reach that, but it’s not like Smithian growth, which is, as we say in the lingo, concave, meaning it’s gonna run into diminishing returns. And that is really critically important because one of the critical components of modern economic history is that growth was sustainable, whereas in the past, growth always took place but then it petered out, it sort of vanished. I mean you look at… I’ll give you one example I like very much, and that’s the Dutch Golden Age.

09:56 Joel Mokyr: The Netherlands was a very poor place in, say, 1350, 1400. And then you sort of start seeing that they become commercially more sophisticated, their fishing techniques improve, even in manufacturing, they start to live in cities. By 1650, they are the richest place on the planet, and we have the Amsterdam merchant houses and the Rembrandt paintings to prove it. They could afford these things. But then a strange thing happens. It ends. By the second half of the 17th century, all the evidence that we have shows that growth comes to an end. And in the 18th century, it’s basically a stagnant place. It’s stagnant at a high level, but it stops growing. And that is because basically… Well, there’s one more reason I should add to be precise, but one of the main reasons is that basically they had exhausted the opportunities of growth. And so, that would not have happened if there had been more of a technological engine driving it. There was a little bit, but not enough.

11:05 Joel Mokyr: Whereas the Industrial Revolution really is the age at which technology replaces trade and the gains from it as the main engines of economic growth. Now, I should add that there always have been dual engines. It’s not true that Smithian growth ended with Industrial Revolution. In fact, the two… You can think of all kind of clever ways, and I have spent many boring lectures to my students pointing this out, how the two sort of reinforce one another. So they were kind of obvious. Like if you invent a steamship, you’re gonna have more trade because the transportation costs are going down. That kind of thing. Or railroads or airplanes. So they affect one another and they reinforce one another. But in the end, I think the main engine of economic growth is technological change and the growth of science. And I think that is how I see Schumpeter’s main contribution, and I buy into it. So in that regard, I am a Schumpeterian. Well, that was a long answer to a short question.

12:13 Paul Matzko: [chuckle] No, no. That’s a great answer. And well, it leads into a couple of other observations I had. I like the framing that you put on this concept. One of the things you do, you root the distinction of games between people and games against nature, and you actually root that in the Talmudic tradition…

12:32 Joel Mokyr: Yes.

12:32 Paul Matzko: And how we have to appreciate both. Is that what you’re talking about here in the Smithian versus Schumpeterian tension?

12:40 Joel Mokyr: To a large extent that’s true, although you gotta be careful about this. It is true that Smithian growth depends entirely on what people do. And so whereas in Schumpeterian growth, at the very basic level, it’s a game against nature. We have a natural problem which we need to solve, how to make the soil more fertile or how to prevent smallpox or use electricity, whatever. And so nature is not cooperative unless we force it to. Nature is full of little germs and viruses that want to kill us, and nature makes us cold in the winter and hot in the summer and dark at night. And we’re trying to harness natural regularities to essentially control nature. Whilst you say that, however, you realize that the game in which we control nature is in some sense a social game. So no inventor works entirely in a vacuum. An inventor connects to other people, he gets ideas from other people, he needs skilled workers to build his models and his machinery. We can go on and on and on. But at the very fundamental level, I think, yeah, it is us against nature.

14:07 Joel Mokyr: We as human beings are trying to understand how nature works and what the laws are and what the phenomena are. Some of them are simple, some of them are complicated, and some of them we get wrong for a long time and then somebody comes around and says, “Hey, wait a minute.” And then there are some areas, we basically admit that we don’t know what’s going on. And I don’t have to tell anybody living in the age of COVID that we’re looking around us and we say, “Gee, this virus keeps surprising us.” Well, what that tells you is, “We don’t know enough.” But it’s us against this thing that nature throws at us. Now, obviously we make more progress if we cooperate, if we divide the labor, if we have immunologists and virologists and epidemiologists all sort of each doing their thing and talking to each other and collaborating with each other, and that’s how we solve the problem. But at some level, you’ve got somebody whose cranium, so to speak, whose brain produces Newton’s law or Einstein’s Relativity Theory or Maxwell’s equations. That happens between James Clerk Maxwell and his paper pad in which he solves his equations. And so in that sense, yes, it is a game against nature.

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15:51 Paul Matzko: You were talking about progress, and I am struck by the extent to which when you read… And I’m a historian by training. So when you read older sources, people didn’t assume that progress would just happen in the same way that people operate from this kind of assumption today. If you go and survey the ordinary person, they expect that next year their cell phone will get faster, their car will get safer, their homes will get bigger and better over time, they just assume progress. Or even with COVID, people have assumed that, “Oh, we’ll just set smart people to go do some science at it. Go find a vaccine, find the cure. And they’ll do that eventually.” A progress is assumed. But I don’t think that folks in the Middle Ages would have thought that same way. They didn’t say, “Oh, the Black Plague, we’ll figure it out, we’ll fix it.” No, it was just a divine curse or judgment or just inexplicable, an inexplicable phenomenon. So this idea of progress is a thing that had to be created and invented itself. Have you seen that… How is that idea of progress and how it’s shifting attitudes towards it, how does that show up in your work?

16:56 Joel Mokyr: Well, it is my sincere belief that what I show in my book, A Culture of Growth, is how this concept was essentially born in Europe. Now, if you dig deep enough, you can find earlier sources in the Middle Ages, even in antiquity, of people who said, “Maybe there could be some progress,” and so on and so forth. But the raining paradigm is just as what you said, it’s what it says in the book of Ecclesiastes, “Generation comes and generation goes, and there is nothing new under the sun.” And that history may move in cycles as the Romans believed, but once it goes up, it goes down again, it goes up, it goes down again, but it is basically, as the statistician says, a stationary process. And that’s something that people start to abandon in the early modern Europe. And it’s striking, and I hope I don’t sound Eurocentric, you’re a historian, so if you’ve run into the term, I don’t wanna sound Eurocentric, but this is something that’s very difficult to see in other civilizations. You do not see it in, say, Islamic civilization in the Middle East, you do not see it in China, but you start seeing it in Europe. Now, mind you, it’s not a consensus.

18:26 Joel Mokyr: There are lots of people who say, “Progress? What progress?” or, “Well, we’ve had a little bit of advances, then it’s gonna come to an end, and in the end, it’s gonna go down.” And so this is a struggle. But I would say that by about, say, the last third of the 17th century, maybe by 1700 depending on… The people who believe in progress become increasingly influential. And what comes out of that is something which we call the Enlightenment, and I think the Enlightenment by and large, although not entirely, is committed to a concept of progress. You see that in Smith, you see it in a different way in Hume and you see it very strongly in some French thinking like Turgot and Condorcet, even in Diderot and the Institut Paris. This is something that becomes increasingly dominant in European culture.

19:27 Joel Mokyr: But what is important to realize is that this idea is proposed, and it’s probably proposed at some point in the 16th century, in something called the Market for Ideas, which is I think a terribly important concept. And in the Market for Ideas, people can propose this notion of progress, and they think about progress in science, and they think progress in what we would call technology which they would call the useful arts. And then there are other forms of progress that people start thinking about; progress in institutions, maybe rulers will become less unruly, so to speak, or maybe war will become less devastating, maybe we can get rid of war altogether. People started thinking about international co-​operation, even some kind of supranational bodies like the United Nations, so you see these ideas floating around in the 17th century. Hugo Grotius, for instance, would be establishing concept of international law. So people really think that we can make the world a better place, and that once we have made it into a better place, it will stay a better place, which is critical because then that sort of removes the cyclicality from the story.

20:50 Joel Mokyr: And I think those notions of continuous progress lie at the heart of the social and political and cultural development of three of the main countries that drive this: United States, which becomes the United States, France, and Britain. United States and France, of course, have a revolution, and essentially the concepts of the revolution are built on a notion of continuous progress. Britain avoids the revolution, but you look at the sort of reforms that are happening in Britain and the way people talk, and you start seeing that even conservatives increasingly become committed to a concept of progress. Now, just to make quite sure, there are serious doubts whether it can be sustained, because of what I talked about earlier about the notion of Smithian growth essentially running into diminishing returns. They didn’t use this terminology, but that’s what it boils down to. But there is another element that threatens progress, or a concept of progress, and that’s Malthusianism.

22:00 Joel Mokyr: So what you see happening is people say, “Well, yeah, some progress is possible, but in the end it will all go to naught, and it will go to naught because population growth will swamp everything.” And so if you read not just Malthus, but Ricardo and Mayer, the whole notion is, “Yeah, well, it’s been great and we’ve had all this machinery, but all it will do is it will encourage people to have more babies, and then eventually we’ll run out of food.” And once people started realizing, “My golly, that’s not gonna happen,” I think the concept of progress becomes much more deeply entrenched and rooted, because this was the big threat to progress in the 19th century. And I think by 1900, that concept is slowly being pushed out the door, and so progress becomes much more of a pervasive notion. And then something happens, which I think casts a very different kind of doubt on it, and that’s World War I. And people start realizing that progress can be threatened not by nature… Not by, sorry, diminished returns, but what we do to one another. And then of course once you get World War II, and the awareness of nuclear weapons, this becomes all the more acute.

23:34 Joel Mokyr: And so this continuous tension between people who think progress is possible and progress is desirable, which is not the same, of course, and here’s how we bring it about. And then there are three groups of people who oppose it. There are those who say it’s not possible. There are those who say, “Maybe it’s possible, but it’s not desirable for a variety of reasons.” And finally people say, “Well, it’s possible and it’s desirable, but I don’t think we can bring it about. I think it will fail.” And we’re still there, Paul. You have a lot of people who oppose one particular aspect of progress, but there is a whole sort of lobby that basically argues against economic growth, that economic growth is a bad thing because of what it does to the planet, and that it causes more inequality, and all we’re doing… There’s a whole school of thought that says, “All we’re doing is producing goods that we don’t need.”

24:39 Joel Mokyr: Now, I’m not totally sure how anybody knows what we need or we don’t need. But this debate is sort of neverending, and it goes up and it goes down. It’s fascinating to watch how belief and this kind of optimism. And if you look at the 1950s and 1960s, it’s very powerful. Everybody says, “Oh, we’re doing great, we’re gonna grow. We just invented antibiotics and we’re making more automobiles and we’re making… Everything’s better.” And then you start people saying, “Wait a minute… ” And this is sort of what’s happening in the late ’60s, and then it goes back and forth, back and forth. And it’s fascinating to watch because clearly this is somehow deep wired in us, this notion that generation cometh and generation goeth and there is nothing new under the sun. And if anything we are learning from modern economic history is, in all due respect to the Good Book, that’s just bloody nonsense.

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25:52 Paul Matzko: This basic argument reminds me very much of Deirdre McCloskey’s Bourgeois trilogy, the emphasis on the importance of culture rather than looking at, I don’t know, simple accumulation. Like, if you just pile up enough stuff, eventually it hits critical mass and you get rich and the society takes off. So it fits in McCloskey vein. I am struck too as I’m listening to you talk about the 1950s, my father is a chemist by trade and grew up in the ’50s. And I remember one time as a teenager going with him on a trip, he was so excited to go see the museum, I think it was the American Chemical Society. And so we go in here and it’s like this wonderland for chemists. It’s all very like ’50s paraphernalia, like chemistry sets for every little kid under the Christmas tree, and all this 1950s “chemistry’s gonna save the world.” And how different that attitude felt in, I don’t know, I guess I was there in the ’90s versus how… So you can see that shifting attitude in one lifetime, which is quite striking. And folks have observed, we are in something of… People like this call it the techlash today, a bit of a backlash against technology.

27:10 Joel Mokyr: Absolutely.

27:12 Paul Matzko: Now, I don’t know how far you would take that. We had economic historian Carl Frey on the podcast last year to talk about his book The Technology Trap, and he took it to a point where he said that techlash isn’t just a passing, fleeting phenomenon, but that we’re actually in an Engels’ pause, a period when the gains from productivity go to capital instead of the labor, and that leads to political backlash, like Marx and Engels. Do you agree? Would you take that observation that far?

27:41 Joel Mokyr: I do. I’m not only… I agree with Frey on some things and disagree with him on some other things. I think we are living in a different era, and as a professional, an economic historian, I’m actually very lukewarm to say, “Hey, it’s just like it used to be in this other episode which we know well and we know how it ended,” because our age is quite different. And notions of inequality and of struggles between if you want labor versus capital, which is kind of a Marxist concept, but I think are very different from what they are today than what they were in the 19th century. So I’m not all that hot on Engels’ pause. What is to some extent true is that there seems, in a superficial way, to be a sharp increase in inequality, which is a great concern. There is also a school of economics led by Thomas Piketty, which everybody was talking about, and there was a bunch of his followers at Berkeley following this who worry about inequality. And I think there is sort of a social movement, which is personified in peoples like Bernie Sanders, who basically think that this is the highest priority in what’s happening today in capitalist societies.

29:16 Joel Mokyr: And so I have a bunch of footnotes to that, none of which completely refutes it, but which we don’t have to worry about. The first is this is very much an Anglo-​Saxon kind of phenomenon. We see this rising inequality happening in a fairly small subset of countries but not in others, and so perhaps there is a reason for that, and perhaps we’re doing something right that they’re doing wrong or vice versa. But clearly this is not a law of nature or a result of the technology, it’s a result of other institutions. And we kind of know what they are: Declining unions, and various modes of corporate governance, and so on and so forth. So that’s one thing. The second thing is that on a global level, it’s not true. That is to say, the world is becoming more equal largely because two very large and formally poor countries, India and China, are growing faster than the West. And so if you look at the world as a whole, inequality is declining simply because the weight on China and the weight on India, if they’re growing faster than the United States, that shrinks the gap between the two societies and reduces global inequality. So that’s a concern, and that’s very much inconsistent with Engels’ pause.

30:38 Joel Mokyr: The third thing, and that’s I think the most… It’s the most interesting one, is that I think we’re not measuring inequality correctly. And for one thing, people keep confusing inequality of wealth with inequality of income. And clearly, inequality of wealth is much worse that inequality of income, everybody understands that, but it’s odd how people jump from one to the other depending on what they need for their argument, and it’s very important to keep those apart. And then when you start talking about inequality of wealth and inequality of income, you’ve gotta specify precisely what you mean. And here, precision and detail are really critical. What wealth is exactly counted?

31:23 Joel Mokyr: Well, Piketty for instance counts mostly financial wealth, he’s not interested in human capital, but human capital is the major asset of what most people have. I as a college professor with a PhD and 45 years of experience, I embody a certain amount of human capital for which my university pays me. That’s how I make my money. My wealth is my pension fund, which is kind of nice, but that’s not where the inequality is. The inequality is in my income and debts, and the asset that I’m being paid for is my human capital. Now, human capital, almost by definition is not going to be as unequally distributed as physical capital, simply because there are limits to what you can do. So the max you can reach is maybe a PhD with tenure at some university, and that’s much better than somebody who hasn’t finished high school. But the gap between those two is much smaller than the gap between your immediate income and Mark Zuckerberg or Sheldon Adelson, where the ratio is measured in many, many millions.

32:36 Joel Mokyr: And so in some sense, if you measure it correctly and you specify how you measure it, you can see there’s a deep ambiguity there. In addition, I think there is the further qualification that I have, which is that a lot of the fruits of progress of the last, say, 40 or 50 years, which benefit mankind are distributed very equally by their very definition. I’ll give you an example, something that I actually detest, but basically illustrates my point. You take social media. Access to Twitter has changed a lot of people’s lives. We could argue whether it’s for the better or for the worse, I would argue it’s for the better, even though there’s some things about Twitter I don’t like, and I actually don’t like Twitter at all. And there’s some issues with it which we all know about, politics and so on. But let’s face it, Twitter has made people’s lives better because sort of review preference. People like it. Certainly in this age in which social contact has been reduced so drastically, social media has been people’s window to the rest of society. And so it’s cheap, it’s accessible. In fact, it’s so cheap it’s free.

34:04 Joel Mokyr: And that makes my point. The point is that Sheldon Adelson and my neighbors have the same access to Twitter. The fact that he’s a million times richer than they are doesn’t give him any advantage. And now when you start looking at that example, you realize that’s basically all over. There are lots of things in which having more wealth at some point doesn’t buy. He probably flies on a private plane whereas I fly to Europe on United, when I did at least. [chuckle] It’s sort of come to an end right now, but you know what I mean. He’s more comfortable, but we both get there in the same time, and the gap between the comfort that he enjoys and what I enjoy is not proportional to the gap in our income. And that’s true if he needs an MRI or that’s true if he needs to use his cell phone or if he needs to… At some point, those gaps stop mattering. And so inequality of wealth… It’s not clear why it matters.

35:24 Joel Mokyr: Now, having said that, of course if you have no cushion at all, if you have nothing to fall back on, you’re more vulnerable and of course that’s what’s been happening during the current crisis, and that’s bad, but that could be easily alleviated. In fact, we did that the first time around and now we’re… Political institutions have just screwed up. But basically, I’m not convinced that the people who are in some sense at the losing end of this growing inequality, that that is actually such a major issue. During the first Industrial Revolution, most of these conditions did not hold. That is to say, money really did buy a very different lifestyle. It bought you another 10 years of life expectancy, it bought you access to a whole bunch of things that poor people didn’t have, and in that sense, it made a much bigger difference. And I think it was also true that at that point, global inequality was raising, not falling, because the West was growing and the rest of the world was not. And so I am, shall we say, suspicious of these facile historical analogies, and I will tell you what I tell my students, which is something that I dub very modestly “Mokyr’s theorem”. And Mokyr’s theorem says, “Every sentence that starts with the words ‘History teaches us’ is false.”

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37:05 Paul Matzko: Yes, the grand capital H history, the…

37:09 Joel Mokyr: Yeah, history doesn’t teach us anything. Any kind of conclusions or policy recommendations that are based on some kind of historical analogy is really wrong. And so I have seen this in my lifetime many times. And I’ll give you the example that I like, which is not from economic history, but it’s the argument about appeasement in the late 1930s. And everybody said, “Chamberlain and Halifax appeased Hitler and it was a terrible idea and Churchill was right, and so given what happened then, we should now invade Iraq.” I’ve seen that argument. In fact, I think I’ve heard Dick Cheney make it or maybe Rumsfeld, one of those clowns. And that was a terrible, terrible thing to do. The notion that in some sense Saddam Hussein was a threat the way Hitler was is just ridiculous, but the argument sounded very convincing. “Appeasement is bad,” and then you quote Winston Churchill, and there’s all this… It’s wonderful, but it’s misleading. And that, I think, is true in economic history as well. We are living in an age unlike any kind of age.

38:38 Joel Mokyr: And right now, I’m actually preparing a lecture on the 1918 flu epidemic, and people sort of try to draw lessons from the 1918 flu epidemic, Spanish flu so called, and our own COVID crisis. And that’s terribly dangerous because the people in 1918 really had no idea what the flu was and what caused it. And so you realize that the realization or the discovery that the Spanish flu was caused by a virus only happened in 1933, 15 years after? Whereas we not only had within days we knew it was a virus, but within weeks we had its genomic sequence. There’s still a lot we don’t know, but you can’t compare that. And then you can look at the Black Death in the 14th century, which you mentioned earlier, people were totally clueless. At least in 1918, they realized that it was contagious, and they had certain means of minimizing contagion, even if they didn’t know exactly why they worked.

39:51 Joel Mokyr: We know so much more than they do and so we already think we’re gonna get a vaccine. Well, I think there has been some debate about when it’s gonna be ready, but at some point, we will overcome this thing. And we will do it much faster than anything in the past. The Black Death first occurred in Europe in 1347 and it really disappeared only in 1720. So we had 350 years of that thing, and we’re not gonna have to wait that long to find an answer to COVID. And so these analogies strike me as really facile and misleading. And my sort of intuition as an economist and I’m trained as both, my intuition as an economist says, “Sweat the details, look at the models, write down what you think is really going on and then make sure the differences between the two situations don’t dominate over the commonalities.” And I think that’s true for almost every historical analogy that we’re drawing. So that was sort of one of my main complaints about Frey’s book.

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41:20 Paul Matzko: So speaking of Twitter and essentially costless or near costless communications technology today, and everyone gets that communications technology was a vital part of the Industrial Revolution, from the movable type printing press to the telegraph. We get that kind of intuitively. You write at one point in the book, “The prediction of this model,” which you call interconnectivity, “Is that the veritable explosion of communication technology in the late 20th century will lead to an acceleration of technological progress as social interactions and information exchanges have become essentially costless, regardless of distance.” And yet, I’ve read that many economists think we’ve entered a period of economic stagnation. Tyler Cowen calls it the “Great Stagnation.” And usually we see a coupling that technological innovation leads to productivity growth, and yet productivity growth seems to have slowed over the last half century, precisely as this communication revolution took place. So what gives?

42:24 Joel Mokyr: But remember, productivity is driven by a lot of things, and a notion that we can sort of… This is one of the first things I teach, sorry to sort of sound like a professor but…

42:37 Paul Matzko: No, I like it.

42:38 Joel Mokyr: When I teach it, look, we have two different things. We have technological progress, which we know more or less how to define, and then we have productivity growth. And people merrily jump from one to the other and say, “Ah, look, productivity growth has been, so what’s happening to technology?” Productivity growth depends on lots and lots of other things. And I’ll say, I have developed over the years a very healthy suspicion of these sort of total factor productivity statistics that my colleague, Robert Gordon, who is one of the great economists who has been spending his life studying productivity, basically doesn’t disagree with me on this. And that is that there are many issues with the productivity statistics.

43:24 Joel Mokyr: In fact, the problem with technological progress in general, and I think this is a statement that your listeners will agree with, is it’s awfully difficult to measure it. And this is very counterintuitive because economists want to measure things. We like numbers, we like quantification, this is what we do. But technology is kind of hard to quantify. So there are basically two schools, there are those who look at total factor productivity growth and say, “Well, let’s hope it’s all driven by technology and not by other things like changes in competition or changes in things that we can’t measure or this, that or the other.” And then there are people who say, “Let’s count patterns.” So patterns are a reflection of technological creativity. And if, under the same circumstance we get more patterns or fewer patterns, they will tell you something. And that’s problematic too, as we both know.

44:21 Joel Mokyr: And the problem with inventions and any kind of technological progress is they don’t obey the laws of arithmetic. And anything that doesn’t obey the laws of arithmetic, it can’t be counted by definition. And so the fact of the matter is that sometimes one invention and another invention don’t add up to two inventions because they complement each other. And so one of them is worthless without the other. Think of the internal combustion engine and the steering wheel. So if you have an internal combustion engine without a steering wheel, you don’t have an invention, you’ve got something useless. If you have a steering wheel without an internal combustion engine, it’s useless.

45:05 Joel Mokyr: So sometimes they complement each other, so one invention plus one invention equals more than two inventions, it equals something bigger. Sometimes they replace each other, okay? So if I have a sharpie and a ballpoint pen, they’re close substitutes, if I invent both of them, I may have one and a half inventions, and that’s true across the board. They don’t… And then, of course, you have to weight them by quality, some inventions are important, some are not important. So this is really hard to do. And so after I’ve done all of those, but in the end, I think there is no substitute for just good old narratives, so I tell… And yeah, if you’ve seen my book, “The Lever of Riches” or my later book, “The Enlightened Economy” I basically say, “Look, I’m in favor of technological progress, but because I can’t really count it here’s a bunch of stories.” And so I talk about electricity, I talk about steel, I talk about chemical fertilizer, you could talk about nuclear power, and we can talk about genetic engineer, you name it.

46:15 Joel Mokyr: But these tell you, hey, we are making fabulous progress, and so I’m looking around me, okay? And I am looking at what’s happening in genetic engineering, and I’m looking at what is happening in material science, and I’m looking what’s happening in nano technology, and I’m looking what’s happened in energy generation and distribution. And there’s no question that there is an enormous amount of innovation going on. And it’s not spread equally over the economy, and my colleague Bob Gordon, his argument is, “Look around your kitchen,” he says, “What do you see there that’s new?” The microwave has been around 40 years, your gas stove has been about 100 years, your refrigerator has been around 60 years, so you know, more than 60 years now, and I don’t know I’ma say, “Well, where’s the technological progress?” And so I just sent him the other day a picture of my Eufy. So my Eufy is this robot that goes around my house and cleans the floor.

47:33 Joel Mokyr: And it’s not something that’s gonna change my life, but you look at this machine and you go, “Holy cow, this thing is smart, it avoids falling down the stairs, and if it can’t go on because it hits a chair, it keeps trying and trying until it finds a different way. When it’s done, it finds its base and it sits on its base and it recharges by itself. And you go, “Man, this is ingenuity.” So that ingenuity obviously does not change my life, but the same ingenuity, Paul, is going to help us overcome the biggest existential crisis that the human race has ever faced, which is what we’re facing, that’s not COVID but it’s climate change. I know this is not always accepted by everybody, but I belong to a huge majority of people who can read the numbers and basically say, “Look, this is upon us,” and my view is that the solution will be technological, it will not be political.

48:47 Joel Mokyr: We will never get our act together, not just because many countries the government is lukewarm to do anything but international cooperation, which will be necessary, unfeasible, what is feasible is techniques that don’t emit and that are cheaper. And we are getting to that point. And then the market will do it. We don’t need subsidies, we don’t need anything, maybe a little bit just to get us over the hump, but by and large, we can… The technology will do it, we will come up with new techniques that will solve this, because this is what people want, and so how that will show up in the productivity statistics is not at all obvious, but it will be progress because we will have averted a major danger. So that’s where I stand.

49:42 Paul Matzko: I am struck when I talk to people who… Engineers, entrepreneurs and economists, the difference… Versus folks in public policy, in the political class, the difference in their optimism or pessimism on the subject, the optimism about being able to innovate our way through the challenge, whether it’s people coming up with all kinds of fascinating ways of mitigating carbon emissions. Carbon sequestration, or…

50:11 Joel Mokyr: Oh man, capturing, Geo-​engineering.

50:14 Paul Matzko: All kinds of cool, fascinating stuff, but there’s such a stark divide, cultural divide between that segment of society and the political class. And that’s great.

50:24 Joel Mokyr: I know. I know. And it’s totally fascinating, and it’s also interesting to study how the dynamics of that work, because the odd thing is that we have had for 75 years technology, which is essentially zero emissions, but the people who are doing emissions are even more against the technology than they are against hydrocarbon burning and that’s nuclear technology, and so they grab… So a few things have gone wrong with nuclear technology, we all know about Chernobyl and Fukushima, but compared to the damage caused by the burning of fossil fuels these things are a small change. Now, I’m not saying that nuclear will necessarily be the solution, it will probably be part of the solution, and to some extent it can make up the gap between what solar and wind can provide, and back it up in some way when these other things have very seasonal or other problems. But that technology, much of that technology is basically available, we just have to refine it and tweak it, which we will do, and so I’m a great optimist in that, I am not sure that that will affect productivity in any way that we’ll be able to measure, because in some sense it’s just replacing something else.

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52:05 Paul Matzko: I hope you found Dr. Mokyr’s thoughts as interesting as I did, there’s much more in his book that we encourage you to check out, like using cultural evolution as a framework for understanding the dissemination of ideas about progress or case studies of cultural entrepreneurs like Francis Bacon and so on. But until next time, be well.

52:30 Paul Matzko: This episode of Building Tomorrow was produced by Landry Ayres for lib​er​tar​i​an​ism​.org. If you’d like to learn more about libertarianism, check out our online encyclopedia or subscribe to one of our half dozen podcasts.