The Wealth Of One Nation

For almost all of human history, mankind has been poor. Our incomes were spent on bare necessities, and we often died because we couldn’t afford enough food. Over the past 200 years, a large share of our species has achieved prosperity almost without precedent. Middle income Americans today enjoy a standard of living that is in many material ways superior to that of Louis XIV. How did this happen?

Gregory Clark’s new book “A Farewell to Alms” is an investigation of both our nasty, brutish, and short past and our more prosperous present. Mr. Clark first makes the case that we owe our current prosperity to the gifts of the Industrial Revolution. He then attempts to explain why that revolution happened in 18th-century England.

Mr. Clark ably illustrates the Malthusian world that preceded the spinning jenny and the steam engine. He reminds us that in those pre-modern times, a brief burst in prosperity was more likely to lead to more people than more prosperity. Safety and prosperity created larger families who then ate up the extra prosperity produced by a limited supply of land.

Over the course of the 18th and 19th centuries, a wave of technological innovations made us far more prosperous. Adam Smith wrote in the midst of the process and marveled at the English innovations that made clothing far more affordable. American innovations in the 19th century, such as Swift’s refrigerated rail cars, sped the mass production and delivery of food.

While Clark is on firm, even conventional, ground arguing that the Industrial Revolution was a watershed, his forays into explaining the Industrial Revolution are more courageous. He seeks to augment the three great theories that have dominated debate about industrialization and economic growth in recent scholarship: market demand, institutions, and human capital.

The market demand theory posits that it does not make sense to build factories that exploit returns to scale unless you have a lot of customers and large-scale suppliers. According to this view, growing globalization in the age of worldwide sailing and English investment in turnpikes and canals created the markets needed for the Industrial Revolution.

Institutionalist economic historians emphasize rule of law and argue that there is little investment unless property is protected from despotic whim. This view suggests that the Glorious Revolution laid the ground for the Industrial Revolution by giving England constitutional monarchs.

Those who hold the third conventional view, the human capital explanation, argue that the spread of literacy and learning yielded entrepreneurs capable of producing the ideas that made us rich. According to this twist on Weber, the Protestant Reformation was important because it supported literacy. (An aggressive variant of this hypothesis suggests that the spread of education also enabled the collective action that gave us democracy.)

Mr. Clark is unconvinced by these theories. He argues correctly that England wasn’t the only place in the world with secure property rights, literacy, or large markets. He then provides us with a new hypothesis based on natural selection that is both bold and highly debatable.

Mr. Clark documents that wealthier Englishmen had more children for many centuries before the Industrial Revolution. He then argues that the positive genetic attributes of wealthy Englishmen, such as patience, spread throughout the population by natural selection. In this view, human capital was responsible for the Industrial Revolution, but the relevant human capital was a product of genes and not schoolbooks. This is quite flattering to the tens of millions of Americans whose proximate middle-class ancestors had more elite English antecedents, but that alone doesn’t make it a good theory of the Industrial Revolution.

While Mr. Clark documents that richer Englishmen had more kids, the same process was surely going on in much of the world. Indeed, the connection between wealth and progeny is generally much stronger in polygamous countries, like those in the Muslim world, which didn’t make the same leap towards industrialization and widespread prosperity. Furthermore, I am also unconvinced that England’s medieval elite of Norman barons were well endowed with crucial commercial virtues such as patience, numeracy, and salesmanship.

The English did have lower interest rates on the eve of the Industrial Revolution and Clark claims this as evidence for greater English patience. I find this unconvincing. Low English interest rates are more likely to reflect better English legal protection of creditors’ rights (institutions) than something genetic. Even if the English were more patient, patience could come just as easily from nurture as from nature, and although Clark’s emphasis on genetics is provocative, he does not provide convincing evidence that genes alone could offer a plausible explanation for the English commercial revolution.

So why did the Industrial Revolution happen in England? I think that the right answer is messier and less satisfying than Clark’s natural selection hypothesis: The Industrial Revolution required market demand, institutions, and human capital. All of them were necessary, but together they still did not guarantee the chain of transformative ideas that made us rich. New ideas are fairly random events, and the history of innovation shows again and again that one or two initial entrepreneurs can serve as a catalyst for a wave of inventions. It is very hard to predict those initial breakthroughs, and nearly as hard to trace their provenance. England was blessed by a small number of smart people who figured out modest ways to improve the country’s ancient wool industry. Those smart people learned from each other, and a small initial intellectual advance turned into a torrent of innovation. The Industrial Revolution could have happened in any country with demand, institutions, and human capital, but as luck would have it, it didn’t.