------------ EH.NET BOOK REVIEW --------------
Published by EH.NET (August 2006)
Richard G. Lipsey, Kenneth I. Carlaw, and Clifford T. Bekar,
_Economic Transformations: General Purpose Technologies and Long-term
Economic Growth_. Oxford: Oxford University Press, 2005. xxi + 595
pp. $45 (paperback), ISBN: 0-19-929089-X.
Reviewed for EH.NET by Joel Mokyr, Departments of Economics and
History, Northwestern University.
Richard G. Lipsey is one of the most distinguished general-purpose
economists of his generation. This reviewer used his introductory
textbook as an undergraduate, and in graduate school read many of his
path-breaking papers in monetary theory, international trade, and
industrial organization. Later in life Lipsey seems to have
discovered his true love, namely Big-think economic history, and as
if to make up for the time spent doing other things, has summarized
his thoughts and ideas in a large, ambitious, sprawling book
coauthored with two of his former graduate students. With apologies,
this review partly subsumes them under the Lipsey name.
The book is hard to summarize because it is unusually rich and
diverse. It contains long discussions of technological change, its
nature, sources, and consequences. Lipsey maintains that technology
is at the heart of modern economic growth and asks -- once again --
what the sources of Western success are. Among other things, the book
also treats at length the economics of technological change, the
history of science, and population dynamics. It is part grand
synthesis, part textbook, part statement of the author's
idiosyncratic views, and throughout an excellent read -- informed,
curious, unafraid of being unconventional or politically incorrect.
The book reflects both the unfailing deep economic intuition and the
intellectual curiosity that are the hallmarks of Lipsey's scholarly
persona. Dick Lipsey, it might be said, has never met a black box he
has not demanded be opened. With his coauthors, he makes a valiant
attempt to do so in this book and offers us many brilliant new
formulations.
Lipsey joins a large number of economists who, when thinking about
the long run, feel that evolutionary models are more appropriate than
standard neoclassical ones. No more than anyone before do the authors
propose a satisfactory evolutionary model of technological progress
that will explain all of history. Instead, they tell a theoretically
informed tale that will join the growing literature on the topic of
long-term growth, based on a number of interesting, if not wholly
new, points of view on modern economic growth.
Arguably, this big volume contains at least two substantive books.
One of them is about General Purpose Technologies (GPT), a theme that
briefly rose to prominence a decade ago in the literature of the
economics of technological change (of which Lipsey was one pioneer).
The second is the "Rise of the West" and the beginning of sustained
economic growth in Europe in the eighteenth and nineteenth centuries.
If there is a connection between the two, however, this book does not
stress it. GPT's, it asserts, were not the driving force behind the
Industrial Revolution, and the only GPT we can associate with the
period 1760-1830, steam power, was a relatively minor factor in the
Industrial Revolution. The absence of a direct link between the
emergence of GPT's and the book's theories about the rise of the West
reduces the coherence of this volume a bit, but does not diminish its
�lan.
Some will argue that GPT is just another name for events and
phenomena we have always known about. The term does not, as the
authors are the first to admit, constitute a theory. A GPT is in fact
a technique that is complementary with a lot of other techniques. How
many is a lot the reader must decide, and the nature of the
complementarity is left a bit mysterious. A screw, one would think,
is complementary to almost any mechanical construct one can think of,
but the screw is not included in their list of GPT's. Ships, on the
other hand, are. As the authors argue, ships may seem to have only
one use (to move objects from A to B) but they qualify as GPT's, as
do automobiles, because they can be used to transport almost anything
and are thus complementary to nearly any other technique. The same is
true for printing, presumably on the argument that almost any kind of
information can be printed. But this seems somehow different from,
say, electrical power or microprocessors, which are a direct _input_
into the production of many other goods (whereas the printing press
only reproduces information). Internal combustion engines do seem
rather obvious GPT's, but ships and printing presses only produce one
final output, even if that has multiple uses. If the engine and the
wheel are GPT's, why not the ball-bearing, the pulley, the lever etc?
The confusion between multiple-use inputs and multiple-use outputs
weakens an otherwise tight and informed analysis. At the same time
the idea of "factory production," which they classify as an
organizational GPT, may seem a bit too vague to qualify for GPT
status. Is "factory production" a technique?
The interesting conceptual �innovation proposed here is to
differentiate GPT's from what the authors call General Purpose
Principles (GPP's) which are not embodied in a specific technique.
Thermodynamics or Galilean mechanics qualify as such GPP's and they
form the basis of much subsequent technological advance, though the
connection is not always fully explicated. Here the authors might
have found some use for the distinction proposed by this reviewer
between prescriptive knowledge (which would include GPT's) and
propositional knowledge (GPP's). Furthermore, the authors feel (pp.
189-90) that mechanization should also count as a GPP. This is
something on which reasonable people could differ.
Such squabbles are inevitable, and the authors are wise to argue that
the definitions are less important than the use to which they are
put. At many junctures this reviewer found the categories and terms
helpful and enlightening. Thus, the book vastly enriches the concept
of macro-inventions by pointing out that there are two kind of
"radical" inventions, what they call use-radical and
technology-radical. The printing press was use-radical: it relied on
principles and ideas that had been around and recombined them to
produce an output in a way very different from previous techniques.
The minting of coins, for example, was one of its identifiable
ancestors. Technology-radical inventions produce a technology that
has no obvious parents and is based on entirely new principles and
components (such as mechanical clocks, hot-air ballooning, smallpox
vaccination, or x-rays). The authors also point out that the
importance of a GPT should not be measured just by its
contemporaneous effect on productivity. Many of its applications can
lie far in the future, and it might be important even without many
externalities. The distinction between a positive externality (which
is a "free lunch") and a spillover effect (which involves the
application of the GPT in another use) is one of the many important
insights in this book, and the authors apply it well to their
historical case studies. Electrical power is not an "externality" in
the sense that its users pay for its use, but it has endless
spillover effects, producing huge producer and consumer surpluses by
making other techniques possible altogether, which, they maintain, is
quite different than the standard treatment of complementarities.
The middle part of the book is devoted the question why the
Industrial Revolution and modern growth began in the West and nowhere
else. The authors have few doubts or qualms about being
"teleological," "Whiggish," or "Eurocentric." For them, the
difference between the West and the Rest is that Europe created
"modern science" and others did not. They dismiss the possibility
that China or Islam could have created something similar or perhaps
generated economic growth from a very different kind of science. They
proceed to describe the rise of Western Science from its medieval
roots and explain its absence in other societies. In so doing they
rely heavily on the work of Toby Huff and Margaret Jacob, among
others, and describe in considerable detail the special circumstances
that led to these events. This reviewer differs with the authors on
some of the details, but not on the essence of their message: that
the Industrial Revolution without the continuing growth of useful
knowledge in the West would have fizzled out and become just another
efflorescence. Whether this knowledge was "modern science" or
something more complex and subtle needs to be hashed out in more
detail in future work.
Much of this account will make as much good sense to economists with
an interest in economic history as it will annoy and irritate
professional historians of science and technology and China experts
who refuse to regard China's "case" as one of failure and abhor
Western "triumphalism." It would be easy to point to lacunae in the
arguments, especially the finer details about the interaction between
science and technology in the Industrial Revolution. For the
specialist, a sense of puzzlement keeps popping up here and there,
especially about the pivotal role the authors attribute to "Newtonian
mechanics" in the Industrial Revolution. Institutions matter to
growth, in their view, largely because they facilitated the emergence
of modern science. Western universities were self-governing
semi-autonomous corporations, and the creation of a self-perpetuating
but autonomous body of scholars helped create what they call "an
institutional memory," which assured that useful knowledge would be
cumulative. There is little in this book that connects economic
growth to institutional change as it has figured in the modern theory
of growth -- the rise of commerce, contract enforcement, the role of
government, implicit codes of behavior and social norms, and so on.
Technology is everything. Perhaps this is just as well: the book is
long enough as it is, and others like it, with greater emphasis on
institutions, will doubtlessly be written.
After all, whether one agrees with the main points made this book or
not, it and books like it fill a need. The questions it poses so well
are too important to be left alone as taboo by post-modern social
constructivists. If historians of science and technology consider
these issues to be politically incorrect, economists will do the work
for them. Scholars in the vein of Dick Lipsey, David Landes, and
Nathan Rosenberg will continue to ask "Why the West Grew Rich?" and
"Why not Elsewhere?" As Robert Lucas once put it, once you have
thought a bit about that question, it is hard to think of anything
else.
References:
Helpman, Elhanan, ed. 1998. _General Purpose Technologies and
Economic Growth_. Cambridge, MA: MIT Press.
Huff, Toby E. 1993. _The Rise of Early Modern Science_. Cambridge:
Cambridge University Press.
Jacob, Margaret C. 1997. _Scientific Culture and the Making of the
Industrial West_. New York and Oxford: Oxford University Press.
Landes, David S. 1998. _The Wealth and Poverty of Nations: Why Some
Are So Rich and Some So Poor_. New York: W. W. Norton.
Lucas, Robert E. 1988. "On the Mechanics of Economic Development,"
_Journal of Monetary Economics_, Vol. 22, pp. 3-42.
Mokyr, Joel. 2002. _The Gifts of Athena: Historical Origins of the
Knowledge Economy_. Princeton: Princeton University Press.
Rosenberg, Nathan and Birdsell, L.E. 1986. _How the West Grew Rich_.
New York: Basic Books.
Joel Mokyr is the Robert H. Strotz Professor of Arts and Sciences and
Professor of Economics and History at Northwestern University. His
_The Enlightened Economy_ will be published by Penguin Books in the
near future.
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