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The Gifts of Athena: Historical Origins of the Knowledge Economy

In The Gifts of Athena, Joel Mokyr argues that the growth explosion in the modern West in the past two centuries was driven not just by the appearance of new technological ideas but also by the improved access to these ideas in society at large - as made possible by social networks comprising universities, publishers, professional sciences, and kindred institutions. He shows that changes in the intellectual and social environment and the institutional background in which knowledge was generated and disseminated brought about the Industrial Revolution."

Review by William F. Shughart

Joel Mokyr, The Gifts of Athena: Historical Origins of the Knowledge Economy. Princeton and Oxford: Princeton University Press, 2002. xiii + 359 pp. $35.00 (cloth), ISBN 0-619-09484-7.

Reviewed for EH.NET by William F. Shughart II, University of Mississippi.

The causes and consequences of economic prosperity have occupied economists since the time of Adam Smith. After all, answering the question why some nations are rich and others poor engages debate on first principles. While it should be obvious to anyone who was awake to witness the collapse of centrally planned economies at twentieth century’s end that unfettered market processes are superior engines of growth, throngs of Rip Van Winkle academics, environmentalists, animal rights advocates, critics of globalization, opponents of modernization and their fellow travelers remain in thrall to socialism’s fatal conceit. Nostalgia for the nasty, brutish and short life of the noble savage dies hard. Like the age-old dispute between protectionists and free-traders, the wellsprings of economic progress apparently must be revisited by every generation.

In The Gifts of Athena, Joel Mokyr, Robert H. Strotz Professor of Arts and Sciences and Professor of Economics and History at Northwestern University, focuses attention on the contributions of technological progress to the wealth and health of nations. Long one of two neglected stepchildren of growth theorists—institutions being the other—technology is an unexplained residual in standard empirical models of economic growth. Technology, in other words, is assumed to be one of the omitted variables accounting for time-wise or cross-sectional variation in economic growth rates which cannot otherwise be explained by a nation’s endowments of productive resources. Technology’s relegation to the error term is the product partly of the palpable difficulties of measuring either the level of technological achievement or its rate of change, and partly of economists’ failure adequately to understand the underlying sources of innovation. The measurement difficulties have not yet been overcome. But The Gifts of Athena takes significant strides toward solving the latter mystery. Setting himself no less a task than explaining the expansion of human knowledge, Professor Mokyr sheds new light on why the Industrial Revolution happened when it did and, to a lesser extent, why Britain led the way forward.

Divided into seven chapters, The Gifts of Athena begins by laying out a theory of “useful knowledge” which underpins economic progress. Useful knowledge is of two types, “propositional” and “prescriptive.” The former category, labeled omega- knowledge, consists of the stock of “beliefs about natural phenomena and regularities”; the latter (lambda- knowledge) includes the set of instructions or techniques for applying propositional knowledge in economic production (p. 4). “What” (omega) is logically prior to and serves as the epistemic base for “how” (lambda): for a technique to exist, it must be supported in omega (p. 13). The evolution of useful human knowledge thus involves, first, additions to omega (making discoveries), second, mapping omega into lambda (inventing applications) and, third, selecting “best-practice” techniques from among the set of feasible ones.

Mokyr’s two-way classification of useful knowledge differs from more familiar distinctions between pure science and applied science or between theoretical knowledge and practical knowledge. To be sure, formal scientific knowledge is a proper subset of omega, but omega also includes “practical informal knowledge about nature…; an intuitive grasp of basic mechanics…; regularities of ocean currents and weather; and folk wisdoms….” What others have called “engineering science” or “technological science” finds its way into the stock of propositional knowledge as well (p. 5). Hence, the evolution of useful knowledge is not unidirectional. A positive feedback loop exists through which serendipitous additions to lambda, once they have been shown to work, get “registered into the realm of omega” (p. 20).

Classifying useful knowledge in this way allows Mokyr to avoid taking a stand on whether pride of place should be assigned to “science” or to “practice” in spurring technological development, especially so before 1850. That debate, he argues, “has been a source of confusion to economic historians concerned with the roots of economic change…” (p. 6). It is undeniable that new compounds, such as aspirin, have been discovered and new technologies (e.g., the steam engine) invented in the absence of a basic knowledge of how and why they work. While “it is obvious that people can do things they do not understand” (p. 30, n. 1; emphasis in original), the key point is that techniques resting on narrow epistemic bases, even if of great practical significance, are unlikely to evolve far beyond their promising beginnings. Progress will tend to fizzle out - diminishing returns will be encountered quickly - until such time as the propositional knowledge underlying the technique has been widened and tightened (p. 19).

Indeed, “a central argument of [Mokyr’s] book is that much technological progress before 1800 was of that nature” (ibid.). The argument is advanced in Chapter 2, where the roots of the Industrial Revolution are traced to intellectual developments of the seventeenth and eighteenth centuries that both expanded the overall size of omega and, what is more important, reduced the costs of access to it. These intellectual developments, which Mokyr collectively calls the “Industrial Enlightenment” (p. 34), were characterized by the co-evolution of “three closely related phenomena: scientific method, scientific mentality, and scientific culture” (pp. 36-37; emphasis in original). Experimentation and verification displaced appeals to authority. “Open science” emerged. Useful knowledge amenable to codification was cataloged, famously so in Diderot’s Encyclop?ędie, and disseminated widely by way of popular lectures, the activities of numerous learned societies—“by the middle of the nineteenth century, there were 1,020 associations for technical and scientific knowledge in Britain with a membership of roughly 200,000” (p. 66) - and informal networks of scholarly communication—the “invisible colleges” (p. 45). Although prescriptive knowledge tended to be guarded more jealously than propositional knowledge (p. 37), the Industrial Enlightenment paved the way for sustainable technological progress by creating institutions that generated self-reinforcing feedback loops between omega and lambda. The flourishing of the Baconian conviction that man can understand and conquer the physical world thus supplies an answer to what Mokyr considers to be the “true question of the Industrial Revolution,” which is not why it took place at all but why it persisted once it had started circa 1820 (p. 31). Economic growth became sustainable thereafter because the stock of useful knowledge expanded in ways not possible “in earlier days of engineering without mechanics, iron-making without metallurgy, farming without organic chemistry, and medical practice without microbiology” (p. 33).

Chapter 2 stresses that the Industrial Revolution which followed hard on the heels of the Industrial Enlightenment “was not a British but a Western phenomenon” (p. 76; emphasis in original). Indeed, “Britain’s success…was to a remarkable extent based on French inventions” (p. 74). As Mokyr moves his story forward in Chapter 3 to the Second Industrial Revolution, which began about 1860, and beyond, technological leadership passes to the Continent and then to the United States. The establishment of the industrial R&D lab, which made its first appearance in Germany in 1868 (p. 85), comparative momentum in the development of institutions that create bridges between omega-knowledge and lambda-knowledge and facilitate the transmission of useful knowledge both horizontally and vertically, such as “universities, polytechnic schools, publicly funded research institutes, museums, agricultural research stations…” (p. 102), and relative rates of return to rent-seeking versus profit-seeking (a theme to which Mokyr returns in Chapter 6) all play roles in explaining these historical shifts. Chapter 3 ends with a discussion of the possibility that the invention of the semiconductor and the ensuing explosion in information and communication technologies have launched a third industrial revolution.

Chapter 4 turns the reader’s attention to the rise of the factory system of production, offering a revisionist interpretation of that development that emphasizes the “relative costs of moving people as opposed to moving information” (p. 120). The expanding stock of useful knowledge promoted ever finer degrees of specialization owing to the limited capacities of the human mind. As Mokyr observes in the early pages of his book, “knowledge resides either in people’s minds or in storage devices (external memory) from which it can be retrieved.” Moreover, “from the point of view of a single agent, another’s mind is a storage device as well” (p. 4). The factory therefore served as an institution within which dispersed bits of useful knowledge in the possession of various experts could be collated, shared and profitably exploited in economic production. Physical proximity is especially important in transmitting production-relevant knowledge that is tacit rather than explicit and, hence, must be communicated orally or by means of hands-on instruction. Mokyr’s explanation for the rise of the factory system, treating it as “inseparable from the growth in the knowledge base of production” (p. 131), usefully complements alternative theories that highlight the importance of capturing scale economies, of monitoring and coordinating labor effort in a continuous-flow production setting and of aligning the incentives of the members of productive “teams.” Whether or not production will continue to favor large units in an era when the cost of moving information is falling dramatically relative to the cost of moving people is addressed in Chapter 3’s closing section.

The impact of the expanding stock of useful knowledge on household production is the subject of Chapter 5. The focus here is on the diffusion of medical knowledge, the corresponding declines in infectious disease and infant mortality, and rising life expectancies. (References to the important contributions of Robert William Fogel oddly are absent from this discussion.) A neoclassical model in which imperfectly informed households choose optimal rates of consumption of two goods, one of which (possibly) enhances health, sets the stage for discussion of three scientific revolutions: the sanitarian and hygienic movement of the Victorian era, the acceptance of the germ theory of disease and the emerging consensus that “small traces of certain substances are crucial to human health” (p. 186). Because “medical knowledge is notoriously untight” (p. 181), Mokyr shows how a combination of expanding statistical knowledge and “the paternalism of the educated classes and the greed of commercial salesmen” worked to create “an apparatus that diffused the new knowledge rapidly among the working classes in the industrialized West” (p. 188). Mokyr also argues that the propagandistic channels through which the new knowledge was disseminated distorted the “recipes” households adopted and, in particular, helps explain the paradox of homemakers working longer hours in the century after 1870, despite the growing capital-intensity of household production (pp. 198-99).

Mokyr explores the causes and consequences of resistance to technological change in Chapter 6 (“The Political Economy of Knowledge”). A private-interest theory, in which individuals rationally engage in collective action to stave off the loss of rents threatened by technological progress, is the centerpiece of the argument. Applying that model, Mokyr argues that the relative political weakness of British guilds in the eighteenth century explains why the Industrial Revolution happened there first rather on the European continent, where such groups were still quite powerful (p. 269). He then builds on the work of Mancur Olson to propose a mechanism explaining the operation of “Cardwell’s Law,” an empirical observation about the ephemeral nature of national technological preeminence (p. 276).

“The rise of the western economies based on economic growth and technological progress is the central event of modern history” (p. 285). In concluding and summarizing his case for the “unassailable” importance of technology to the wealth of nations in Chapter 7, Mokyr does not deny that culture and institutions also mattered. Indeed, he emphasizes throughout The Gifts of Athena that “technological progress has a better chance in the long run in free, self-organizing market societies than [it does in] command economies” (p. 223). He makes a persuasive argument however, that understanding economic growth requires understanding the processes by which new useful knowledge is generated and diffused. The book’s rich catalog of examples illustrating the interaction of pure science and engineering science in promoting technological progress decisively lays to rest sterile debates about which came first. Useful knowledge is the union of both sets.

The existence of strong feedback loops between propositional knowledge and prescriptive knowledge does, however, lead Mokyr to downplay one crucial aspect of the modern debate over the primacy of pure science versus applied science, namely, the need for—and impact of—public funding of basic research. Much propositional knowledge is of a public good character, as Mokyr in fact recognizes. During the Industrial Enlightenment, as noted earlier, science was “open” and freely shared. Indeed, many of the contributors to the expanding base of scientific knowledge refused to patent their discoveries. Inventors, by contrast, took advantage of the patent laws and exploited other means (secrecy) of appropriating the returns to investments leading to new prescriptive knowledge.

The vibrancy of the Industrial Enlightenment and the Industrial Revolution casts serious doubt on justifications for government funding of research grounded in market failure arguments. The pure scientists shared their knowledge freely in part because they were able to capture returns by other means—in the form, for example, of professional accolades associated with priority of discovery, prizes awarded by learned societies, fees charged for public lectures and so on (p. 44). Incentives for adding to the stock of prescriptive knowledge were in large part provided by the profit motive. Where is the market failure? What externality remains uninternalized? Although Mokyr mentions that government funding of R&D, most of which has a national defense component, may have altered the mix of ongoing research programs, he does not address the more fundamental question whether public funding of research is warranted in the first place.

But this is a minor quibble. The Gifts of Athena is a masterful addition to literatures of economic history and economic growth. The product of a lifetime of scholarly study and reflection, Mokyr’s book plainly did not spring full-blown from the head of Zeus. It merits a wide readership.

William F. Shughart II is F.A.P. Barnard Distinguished Professor of Economics and holder of the Robert M. Hearin Chair at the University of Mississippi. He is, most recently, the co-editor of The Economics of Budget Deficits (Edward Elgar, 2002) and a member of the advisory board and major contributor to The Encyclopedia of Public Choice (Kluwer Academic Publishers, 2003).

Subject : M
Geographic : 4
Time Period : 6, 7


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Citation: William F. Shughart, II, “Review of Joel Mokyr The Gifts of Athena: Historical Origins of the Knowledge Economy” Economic History Services, Mar 15, 2004, URL : http://www.eh.net/bookreviews/library/0748.shtml

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