------------ 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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