Joel Mokyr on Clans, Corporations, and a Culture of Growth

Conversations with Tyler is produced by the Mercatus Center at George Mason University, bridging the gap between academic ideas and real-world problems. Learn more at mercatus.org. For a full transcript of every conversation enhanced with helpful links, visit conversationswithtyler.com. Hello everyone, and welcome back to Conversations with Tyler. Today I'm chatting with Joel Mokyr. Joel is a professor at Northwestern University. He has a wonderful new book out called Two Paths to Prosperity: Culture and Institutions in Europe and China, 1000 to 2000. And he is one of the Economics Nobel laureates from this past year. Joel, welcome.

Thank you, Tyler.

Start by telling us, in the book, your thesis, it's about European corporations versus Chinese clans and the importance of that difference. How would you explain it?

Well, the difference is basically the kind of organizations that produce what we call local public goods. So things like poor relief and education, religious service and things like that. I would think that if you look at the world, say around 800 at the time of Charlemagne, the difference between Europe and China isn't very large. But at some point during the Middle Ages, you can see this divergence getting started. And what's happening is that in Europe, there is more and more of a decline in the extended family or the, extended kinship group, or we call it clan. And instead, people get together and cooperate with other people to whom they are not related and with whom they do not share an ancestor. Whereas in China, it moves exactly in the other way, in the other direction. In China, you get more and more people getting organized by their extended family. The reasons for that are fairly complex. In Europe, it's particularly, I think, the Catholic Church that played a major role here. This was argued quite a while ago by a guy, an anthropologist called Jack Goody, but your own colleague Jonathan Schultz wrote what I think is one of the best papers on the subject, who pointed this out in great length and actually provided a fair amount of systematic evidence for this. In China, there is no Catholic Church, and the imperial bureaucracy is more and more in cahoots with local clans, to whom they actually outsource a fair amount of the things that they were supposed to do. And so as you move on out of this sort of period of the Song Dynasty into later dynasties, you see this thing growing. The problem in Europe is that the nuclear family, which became the fundamental building block of society, is too small to provide local public goods. You need to cooperate with others. And so what emerges in Europe quite spontaneously is a bunch of things that provide these local public goods that you just don't see in China. So for instance, we have something called universities, we have monasteries, we have autonomous cities. And so all of those things are what we call corporations. What it is, is —people who are not related, but what they share is not an ancestor. Guilds have one kind of objective, universities have another one, and so on and so forth. And that divergence in social organization turns out to be, in our view, to be one of the key components of the divergence between Europe and China.

And do you take that change in policy from the Catholic Church as exogenous, or that is rooted in earlier features of Western society, such as the ideology of Christianity itself, or maybe earlier Roman times? What is causing what? What's the most fundamental driver here in the West? Well, there's some debate about that.

They don't, of course, tell you. There's, I think, two components about this, and I would not know how to weight them. But there's two sort of things happening here. The first is that the Catholic Church really becomes quite obsessive about certain sins that they consider to be particularly egregious. And one of those sins is incest. And so, you know, every society in the world prohibits marriage between siblings, but other, you know, more remote relatives is more ambiguous. And the church becomes quite obsessive about this. And at the end, you know, there are places where they where they actually prohibit the marriage of fifth-degree cousins. Now, how anybody in the Middle Ages would know who his fifth-degree cousins is, is unclear. I don't know who my fifth-degree cousins are. Maybe you do. The other thing, which is also sort of Goody's argument, and I think there's a great deal of truth to that, is that the church wants to weaken any kind of organizations that compete with it for power and control, you know, in the local communities. But they also have figured out that if you organize society by nuclear families, then a certain proportion of people died without heirs. And if they die, you know, intestate, without heirs, that in many cases the property that these people owned reverted to the church. And so pure naked greed by the church, which was not unknown in the Middle Ages, I think was a driver here. And so Goody sort of convinced me that that actually is a substantial factor. There are other arguments that have been made in this context, but I think these are the two that are most striking. The other question is, why is it that the clan in China is so convenient for the imperial bureaucracy to rely on? So both of those things happened in parallel. And I would think maybe if I made one observation, In both cases, this is historical outcomes as the unintended and unanticipated consequence of very different actions. So there's no question that the Church never, I think, foresaw the emergence of corporations in Europe, nor do I think that the Chinese Imperial Service ever seriously considered the possibility how this would change life in China. But that's what happens. You know, you try to follow one objective and then something very different emerges over, over time. That's what history is all about.

Now, why are these cultural trends so persistent? So I recall in the 1990s reading Frank Fukuyama's book Trust, and he argued that large Chinese corporations were going to be very difficult to establish because China did not have enough trust. Unlike Japan. Now, a few decades later, that seems obviously wrong. There are many quite large Chinese corporations and the large Japanese corporations, they've maintained a foothold, but they actually haven't done that well. Things changed quickly. So why so much persistence here?

Well, that's a very good question. There's some debate about how much persistence there really is. Particularly the communist regime under Mao did all they could to erase the influence of clans and replace it, of course, with communist functionaries, there's some evidence and some research recently shown that that wasn't 100% successful. And so I think what you get, particularly in societies such as China, but in other places as well, where corporations were largely absent and where your society was organized by family, is that it actually changes people's culture and people's values. And so if you look at all the work that's been done by economists like Steven Enke and anthropologists like Joe Hendrick, they all show a very tight correlation between attitudes and cultural values and kinship, whether that's extended kinship or nuclear family. So I think What you could do in China and in Europe is you could maybe change the organizations, but you cannot change the state of mind. And an interesting fact is that many of the corporations that we talk about that were established during the Middle Ages eventually disappeared or became very unimportant. So for instance, guilds became, you know, eventually got abolished after the French Revolution on the continent, and they were weakened in England much earlier. Monasteries still exist in Catholic countries, in the Protestant countries and in England, they were completely abolished. But the frame of mind and the cultural values that growing up in a nuclear family imbues, that kind of thing sticks around. Corporations, of course, remain, but they change their form very much. The one most persistent of all those corporations, interestingly enough, were universities. And effectively, the form of universities with the fact that they are self-governing and they're sort of self-contained organizational units that write their own rules and their own bylaws. That thing, despite a lot of pressure on them, is still surviving, which I find very striking. But we should think about a world that consists of lots and lots of different organizations like that, in which cities, for instance, were self-governing and made their own rules. And again, you see cooperation between people who share a location, but not necessarily an ancestor. So these things tend to be very persistent precisely because of institutions interacting with culture and culture feeding back into institutions. So they evolve or co-evolve, I should say, together. And that makes them, I think, much more persistent, Tyler.

Why is it so late in history that Chinese cities still have more people than say London or Paris? If the Chinese model is economically inferior. No, I didn't.

I mean, it isn't economically— we never say in the book anyway, you will not find this, that it was economically inferior. That's a way of thinking that we have long abandoned. It's different. And in many ways under the empire, the Chinese got what they wanted. What we think, what Europeans think of being inferior The Chinese actually, I think, that was their objective. What they wanted above all was stability and internal peace rather than what the Europeans wanted, which was progress and growth. And so these huge cities in China, well, remember it's an incredibly populated place, but in fact, urbanization in China, say if you look at 1850 or 1900, is much lower than is Europe. The urbanization that you see now is really all post-imperial. And in fact, a lot of it is the consequence of the last 20 and 30 years. But also you should keep in mind that since the First Opium War, Europeans have been penetrating China and many of the European values and ideas were being mixed in with the Chinese culture. And what you get is some kind of mixed product. Which produced many of these cities. For instance, many of these cities were what's known as treaty ports, you know, Hong Kong and Shanghai and so on. And so they grew in large part because the Westerners that came there and settled there and actually ran their own show. But I think China in the last, certainly, you know, since the death of Mao in 1976, it's adopted many of the European ideas and many of the European cultural values. And as a result, what you get today in China is sort of a weird mixture of a persistence of things that were around during the empire and through thousands of years, Confucian beliefs and so on, with Western values. And so I'll give you one example, which I find particularly striking. One of the great insights of Western society over the years has been the idea of intellectual property rights. You don't really actually see anything like that anywhere in the world. You know, the combination of a patent system and copyright and all these things, that's a very Western European thing. The Chinese never had anything like that. The whole concept of intellectual property, right, was alien to Chinese thinking until about 30 or 40 years ago. And now if you look at the data, Chinese patents have just skyrocketed. And clearly that idea has now penetrated Chinese society. But the idea, for instance, of having self-governing autonomous universities still hasn't quite gotten there because Chinese universities are very much run and managed by politicians, unlike, I hope, most American universities.

Why does it take so long for the wealthiest parts of Western Europe to surpass Chinese living standards? Say that's happened by 1700 or 1720. That's many centuries after this medieval divergence. If it takes so many centuries, is the medieval divergence really the relevant factor? Why is it such a slow process?

Yeah, I think it is. I think it's a main factor. And I think the idea of looking at standard of living, for one thing, I'm very skeptical about how standard of living are actually measured. I know that this is what Pomeranz and other people have, and Jack Goldstone and other people have argued that the living standards in China were comparable to the West as late as 1750. I'm not 100% sure that that is true. But certainly for my money, what really defines the divergence is that technologically the gap between the two countries starts to become visible at the time of the Renaissance, you know, in terms of a whole bunch of things that you see growing in Europe, you know, and stagnant in China. Now keep in mind, of course, that part of the European growth is due to the fact that they borrowed ideas from China. And then the Industrial Revolution consists to some extent of imports institution by Europeans trying to mimic the goods that they were importing from China, so, or for, not just from China, from India as well. But, you know, pottery is a good example. So one of the things they really wanted from China was chinaware, which is why it's called chinaware. And it took them a while to be able to match the Chinese capability in the ceramic industries, but they do so eventually, and then they stop importing the stuff from China. The same is true, you know, for, say, cotton and other products that we're getting from the East. And so European living standards, I think, should be measured in part by the fact that when the Europeans start their voyages across the globe in the late 15th and early 16th century, they are able to bring in a whole bunch of new crops and new techniques from other areas, which they merrily adopted. You'll see Europeans here very soon growing tobacco and potatoes and corn and other things like that. They are the agents of global change. And not only that, they change their own diets, they change the Chinese diets because the Europeans bring from the New World things like peanuts and sweet potatoes and things like that. And they change the Chinese diets, but the Chinese themselves are not agents here. They are accepting the stuff that the Europeans did to some extent, and they're rejecting others. But it's the Europeans who are the agents of change here. They are the entrepreneurs. They are the people who bring about the changes, Tyler. And so my sense is that this is going to typify the difference between Europeans and the Chinese. The Europeans are more aggressive. They are more outward looking. In the end, what you see by the 1830s and 1840s, you see that the gap, the technological gap is huge. In some ways much larger than the living standards gap, even in the 19th century. You know, in terms of food, the Chinese were capable of producing enough food, but the number of famines in China is probably not a lot worse than in Europe. But when you see what happens during the First Opium War, how do you— one English ship is blowing all of this mighty empire to pieces, and the Chinese have to accept this terribly humiliating peace, you can also see how the technological gap has grown between the two. For me, that is much more telling than the living standards. The other thing that I should like to point out is that when you look at Europe in the 16th and 17th century, you can see that the capability of expanding the set of useful knowledge, including science, is just growing very rapidly. You know, whether there is a scientific revolution or not, is a debate that I want to get into. But certainly by 1700, Europe is on the verge of really changing our understanding of how creation works. And that's not just Newton and Galileo, you know, there's a whole body of work that is emerging. And there's really nothing like, nothing parallel like that in China. China is a very sophisticated society in many ways. The literacy rates are high. They have a a well-funded and well-organized system of education, but they don't really continue their earlier forays into science and into new technology. Somebody actually went out and looked at Joseph Needham's many volumes on Chinese technology and science, or Science and Civilization, as he called it. And he discovered something which I guess we all knew, but they put numbers on it, almost nothing that Needham pointed out as an innovation happens after 1400. I mean, there's almost complete stagnation setting in, and some of the things that they knew how to make in earlier times, like the sophisticated clocks that they built in the 11th century, they disappear. And so for me, that's more telling. —then how many calories of carbohydrates were consumed on average, if we could ever calculate that correctly.

Now, there's another problem in Chinese history, as you well know. So, for instance, Song China falls to Kublai Khan, even though Song China is relatively wealthy for its time. And there are other cases of so-called barbarians coming down from the north, taking over parts of what we now call China. Why is that happening? Is that also because of the clan system? No, no, no, no, no.

I think China is simply located in a very different kind of geographical and demographic neighborhood. It is essentially, it remains for all practical purposes unified since the rise of the Song in 960. I mean, there's a splitting of the southern and northern Song for a little while, but it's basically a unified society which shares a language, particularly a written language, which is very important. But what happens is there's these wild people on their border that every once in a while they invade China. And that happened more than once. I mean, it happens during the Mongols, of course, in 1279. And the Mongols actually establish a dynasty, the Yuan Dynasty, that lasts about 80 years, if I recall correctly. But what is interesting, Tyler, is that when these, you know, these people from the steppe And some of them were Mongols, some of them were Turkmen, some of them were actually partially Chinese. But if they are not full-blooded Han Chinese and they come in and invade, very often they become Sinified. They start speaking Chinese, they start dressing like Chinese, they behave like Chinese, they adopt Confucianism, and they accept most of the Chinese institutions, such as the imperial examination. And they get absorbed into the clan system. And so there's nothing like that in Europe. Europe really, since the early Middle Ages, is not invaded effectively by any other non-European power. I mean, the Ottomans try a couple of times and they get defeated. The Mongols try once in 1240, and then if they had taken over Europe, history would have been very different. But they turned around and go back. For internal reasons. And so what that really means that if the Europeans are mostly confronting one another, whereas the Chinese in most cases are worried about people from the outside, which is that they have this wall and they have this military that's posted on the outer boundaries of China to keep the savages out. That creates a very different kind of world. And interestingly enough, again, one of your colleagues, at George Mason, Mark Koyama, has a bunch of papers that describe this in great detail and quite, I think, elegantly and ingeniously, how that sort of geographical differences created the difference between the Chinese government, which remained a unified state, and Europe, which remains fragmented basically until the present day.

How does historic India fit into your schema?

If I may admit it, I know my knowledge of India and Indian history is probably not up to par, certainly not. I'm a Europeanist who spent the last 5 or 6 years familiarizing myself with Chinese history. In our last chapter, there is a discussion of India. My sense is that India is a different version of the Chinese clan system. It's organized differently because you have to sort of combination of clans and caste in India, but basically they too are unable to create the kind of unique system that you see in Europe, in which you see these nuclear families living in a society which is organized mostly by corporations. In that sense, I would say all, if I may add to that, all the three great Asian civilizations, Middle Eastern Muslim civilization, Indian Hindu and Muslim civilizations, and China, share something, which, and it's Europe that is the weirdos, it's Europe that are the exceptions, and that's essentially the tenor of Joe Hendrix's book called The Weirdest People, in which he points this out, that book is, I think, had a big influence on us, because it really shows in great detail how organizing people by nuclear family creates not only a different set of social organization, but the culture that goes with it. Now, I don't want to draw the analogy between India and China too far, but it's kind of striking that many of those European corporations are woefully missing in India as well, until the Brits show up and in a way show them how to do it. But even there, I think, It is fairly rare until, certainly until 1948 and India becomes independent. But the truth is, I did not really want to get too deeply into India because, you know, it's, you know, pretentious enough for me to sort of spend a couple of years reading Chinese history, but other people spend their entire lives, you know, on one village or one county. I mean, it's just a huge ocean. And I can't really say that I did more than sort of dipping my toes in it. But we wanted to sort of take a step back and look at these two great big civilizations and try to see why they differed. And I want to stress again, we don't make the argument that India or China failed or— what they did was, you know, they were doing what their preferences and their institutions in some sense dictated. But, you know, I find it always telling that the British establish an East India Company that trades with India in London, but that in Delhi you don't see, you know, a Western European company or an England company that does to the Europeans what the Europeans did to them. So that asymmetry is already there in 1600.

Why was there no industrial revolution in the Roman Empire?

Oh God, that's a huge question.

Is it coal? Is it human capital? Is it something else?

Well, I think my sense would be that both Roman and Greek civilizations were in many ways creative, but the creativity did never really extend very much into the technological realm, and insofar that they did science, they were mostly uninterested in applying that science to day-to-day problems, and that insight, that the kind of knowledge that we have about nature, you know, physics, chemistry, biology, astronomy, and so on and so forth, that that should be applied toward material improvement, that's not an immediate and obvious insight, nor is it an immediate and obvious insight that progress, as we understand it today, is feasible and/or desirable. These are all insights that arose in Europe in the 16th and 17th century. I have referred to these things, as you surely know, as what I call the Industrial Enlightenment. Okay, so there is this change of mind in European thinking after maybe 1450, or 1500, maybe because of the printing press, maybe because of other reasons, but in which Europeans essentially start to convince themselves that they are smarter than anybody that came before them, that, you know, a lot of these great Hellenistic and Greek scientists were wrong about many things, and that they could do better. And once you have that belief, and Francis Bacon and a whole bunch of other people We're all in that tradition. In Rome, what you see is a whole bunch of clever people, but they're not that interested in technology. Let me give you one specific example, Tyler, that I have always found particularly intriguing, although I don't have a good answer why it happened. But if you think about human needs, one of the constants of human needs above all is that at some age we need glasses, right? We start, you know, at age, I don't know when you start wearing glasses, but I started wearing glasses when I was in my early 40s in order to read and things like that. That's not, you know, a cultural feature. That's something that's hardwired in us, okay? Now the Romans were, certainly the upper class, were literate people, and they had glass, but they never invent spectacles, and there is, you know, and, you know, they don't have optics, and they're not interested in optics. There's this passage in Seneca in which he sort of thinks, you know, that he looks at a glass that has water in it and says, hey, it's interesting, the stuff that's after, behind the glass actually is magnified, but they never take the step of coming up with eyeglasses, and you wonder why, because clearly, if necessity is the mother of invention, this was a necessity, They never do it. The sort of only thing that you see happening in Rome, and even that was very constrained, is they do come up with watermills. But the watermills remain, by and large, tools for grinding wheat, wine, and corn. They don't actually take it to the kind of extremes that Europeans did in the Middle Ages, turning it into sawmills and fulling mills and, you know, kind of an industrial, sort of a little factory, which is why factories were known as mills. They never do that. And I think the reason is because the people who made things, okay, the artisans, the workmen, and the people who knew things and studied things, which is the scientists and the mathematicians and the teachers, never talked to each other. And what's more, the scientists essentially looked upon hard work and manual labor with a great deal of contempt. Both Plato and Aristotle make these points, but the Romans took it over, you know, and it was a slave society. Slave societies often look at manual labor labour with a great deal of condescension. So that's, you know, in the end, I think that's what stopped them. But the other thing is, I think that if you don't have a concept of progress, and you don't think that by studying things and investigating things and doing what we would call research, in order to make the world a better place, at least from a material point of view, if you don't have that concept, there's not going to be an industrial revolution. And the Chinese don't have that concept either. You know, coming back to China, I looked, you know, quite a long time for this. And basically, all the Chinese experts that I have read essentially said that the concept of progress is basically absent. Now, that's a concept that's emerging in Europe in the 15th and 16th century. And by 17th century, it's quite commonplace. And once you have that, you can sort of see all those smart guys trying to solve practical and pragmatic problems. So scientists, many scientists, almost all scientists, I would think, there's some exceptions, almost all of them said, look, I want to do science, not only because I'm curious and not only because I want to illustrate the glory and the wisdom of the creator, I want to do science because I want to make life better. Now, Whose life is a different question, but that is what really emerges in Europe, and no other civilization does that, Tyler.

The Romans are very good at infrastructure. You can go see the aqueduct in Segovia or the waterworks in Istanbul, the Roman system of roads. Isn't there some notion of progress behind those developments? Or Caesar encountering what we now call Britain, right?

No. Now, I think the idea that they had a concept of progress, they were practical people and they needed to bring water from here to there and they did that and they needed to build roads so that their soldiers could march and occupy the world or the world as they knew it. But I don't think there is a concept of progress the way we would think of it. And it's sort of an interesting little book that I published in my series, which you may want to look at, about Pliny. And you look deep and this is somebody who really knows Pliny and he really points this out that Pliny, you cannot find anywhere and Pliny was sort of the, tried to summarize essentially every, like a little encyclopedia of what was known. Basically, there is no concept that things were getting better over time. And this is a book by Richard Saller. So he was one of the great classical scholars of our time. And essentially, There is no concept of progress in there. There is no concept of progress in any of the Roman writers. Now, some of the engineers obviously were trying to make things work better, but it is not really a social movement. And as soon as a problem has been solved, they say, okay, we solved that, and that's it. Whereas in Europe, it's never good enough. You make watermills more efficient, you want to make it even more efficient. And on and on and on. And that is the engine that drives sustainable growth. Okay. The idea that whatever we have today, we can make it better. And that's maybe not a natural insight. Maybe it's not hardwired in us.

You've argued that during the Industrial Revolution, the British have a notable advantage in human capital over, say, the French. What are the ultimate roots of that advantage? Where does it come from? Is it Protestantism? Something else? No, no.

In fact, are the British Protestants? I mean, the Anglican Church is sort of a weird mixture of a lot of Protestant belief minus the Pope, right? I mean, I'm not sure that you could call them Protestant. They're kind of Anglican, but no, it's not religion. I think that's a whole load of nonsense. What happens in Britain is, and this is something worth pointing out because this is the sort of new book that I'm writing right now, it's based on some articles if you've seen, but the new book is basically arguing that the main thing that gave Britain its advantage over other things was that they had more skilled and that their skilled workers were better than everybody else. And the question is, where do these skills come from? And the answer is only one answer, that is apprenticeship, because there's no engineering schools, there's no technical schools. Basically every skilled engineer, artisan, you know, mechanic, shipbuilder, whatever you are looking at, they are all trained by other people like them. They're trained, their apprentices trained as masters. That's how it works. It works like that everywhere. But the difference is that in England, the system is market-based, you see. In Europe and on the continent, until the French Revolution came around, this is controlled by guilds and it's very heavily regulated, it's very heavily scripted. And so in England, it's a much more free system and every Young lad who's looking for a master can go around and choose the master that he likes best and that is most suitable to him. And so what you get is, you know, that because this market is competitive, you get a quality of education to these people which is vastly better than it is in the continent. People are more diverse, they're more flexible, they're better trained. And certainly by the middle of the 18th century, This is what everybody is saying, and the French and the Germans and the Dutch and the Austrians and the Spanish all know that if you want to build a sophisticated piece of equipment, you need an English engineer to run it, and that's what they do. And these people are all over the continent, and of course Britain is worried about this, so they passed these laws prohibiting the emigration of artisans, which of course they couldn't enforce. But that's the fact that that is by now, I think, not really disputed. And the argument that we're making is that, you know, inventors are all good and nice, but if you don't have the people to scale it up and maintain it and install it and operate it, it's not going to do you any good. And that's where the skills are, and that's what they had. And, you know, and so we have, you know, hundreds of pages of evidence of that, and we're looking at every industry you can imagine. And it pops up over and over and over again.

Several years ago, you had a piece in the Journal of Political Economy with Morgan and Cormack on living standards, and you give a somewhat more optimistic perspective on the Industrial Revolution living standards. Could you explain what you find in that piece?

Well, the piece really deals about, if you talk about the JPE article that we published in 2023, and that peace, the main argument about that, well, the main argument that Pete wasn't about so much about living standards, it really was about the sort of regional distribution of Britain, Britain's industry, and how the sort of center of gravity of the economy moved from the south to the north of England, at least temporarily, I should say. But it was really mostly about skill. But what is true, in that argument is not so much that the living standards were increasing, but that they were just higher. And that basically the quality of life in Britain as early as 1700 was higher than anywhere on the continent with the exception of the Netherlands. And so Britain, there's very good evidence that the British were better fed, better educated, better housed, and on and on and on. And as a result, the reduced form of looking at that is height. The data show that on average British soldiers, which are the people that are getting measured, were 2 inches taller than the French. And that the reason for that is, is because as children they experienced better living standards. I think that is the way of thinking about it. Now that sort of feeds back again into the fact that the quality of workers in general is substantially higher than it is on the continent. And that's why their wages are higher. So the notion that they were innovating because people were trying to save labor because wages were so high in England, you know, misses sight of the fact that the reason wages were higher was because British workers on average were more productive. But I would be hesitant to say that I've ever convinced myself that living standards were rising during the sort of heyday of the Industrial Revolution. That turns out to be a complicated issue because at the same time that Britain was developing technologically very quickly and establishing factories, you have very rapid population growth. And it's population growth that's driven by higher birth rates rather than by lower death rates. And what that means, of course, that you have a very large chunk of people who are young and still not productive but need to be fed. And so the rise And the dependency ratio, in addition to the fact there's more people around, is essentially putting a constraint on the rise of living standards. And that abates at some point in the middle of the 19th century, and then you see living standards rising very rapidly. During the Industrial Revolution, I think the evidence that things were getting better is very mixed. And so there are, I know there are optimists and there are pessimists about this. And I would count myself as probably as somewhere in between. Things weren't getting a lot worse. Things weren't getting a lot better. A lot depends on for whom, you know. So there's groups that are gaining clearly. There are groups that are losing clearly. There are groups that were, where we don't know. On balance, I would say probably overall living standards in Britain in 1840 were not much better than they were in 1760, but they were different. Because people, you know, one of the reasons that people don't do well is they live in cities, which are terrible at the time, right? This is sort of widely described and it's fully, you know, the most famous book about that was, of course, Friedrich Engels' Condition of the Working Class in England, which was largely plagiarized from a whole bunch of doctors living in the Midlands and observing these places. But that is, I think, a complication. In the history of living standards during the Industrial Revolution, that really means that it isn't so obvious that this was good for the people living through it. It was very good for their grandchildren.

Now, in mid to late 19th century, German science starts doing incredibly well. What is behind that?

Well, Germans start— I think there is a major revolution in Germany after, during and after Napoleon. And you get a whole bunch of reforms. Most famous are the reforms, of course, in Prussia, which is the main country in the northern part of Germany, in which they completely rejiggered their administration. The Stein-Hardenberg reforms basically creates the world's first really effective civil service. But at the same time, what the Germans do, they invest very heavily in human capital. And the evidence suggests that German universities and German schools were much more geared toward giving people a background in the kind of knowledge that helps creating the basis for a sort of second-generation manufacturing technology. And so lots of this is associated, of course, with the reform of the German university. System associated with Wilhelm von Humboldt, who essentially created what one might call the sort of modern, the idea of the modern research university. But there's also these technical universities, called Technische Hochschule, which the Germans founded. And there's a recent paper by a former graduate student of mine, Ralph Meisensahl, at Chicago Fed, who shows that the closer you were to a university in the middle of the 19th century, the more likely you were to be in advanced manufacturing. So I think here it really is to some extent improvement in human capital, but also the fact that the state in Prussia and in other places as well, the little statelets, basically convinced themselves that this was the way of the future. If Germany was going to be playing with the big boys and not being wiped out by Napoleon, as they were in 1806, They should build economy based on science. And the odd thing is that Britain, even so it was the leader, really were actually late in catching that on. So the British universities really, by the middle of the 19th century, people start worrying about this. Look, the Germans and the French have these more advanced institutes of higher education and our universities are still way behind. And so in the second half of the 19th century, there's this sort of of supposed decline of Britain, because they're still based on skills, whereas the Germans more and more get committed to the application of scientific research to their economy. And that takes a long time, and it's not an easy thing. So, you know, the two Germans invent things like organic chemistry, right? Justus von Liebig and Friedrich Wöhler. And they make major contributions to electricity, to internal combustion engine, to a whole range of industries. But a lot of that is based on science, and it's striking, not just that German universities produce these scientists, but that businesses, particularly manufacturing, hire these people as consultants and put them on their board of governors and their board of trustees. And so that's, I think, a striking thing. The Germans really, more than the British, realized the potential of science. And certainly by 1900, they're leading the world, certainly in chemical, in electricity, in food processing industries. And so it is, I think, above all human capital, but also the policies that were there to support it.

How much of a burden on your life has your new Nobel Prize been, or is it just fun?

No, I mean, it is a lot of fun and clearly a lot of warm glow. I mean, I'm still waking up every morning and say, you know, was I dreaming this? What the hell am I doing here? It has obviously disrupted my life. And, you know, I'm going to turn 80 this summer. So I'm sort of settled in my ways, so to speak. And this has disrupted it to a great extent. And I'm still trying to cope with that. But I'm One of the things that's working to make that worse is because I refuse to retire. See, so Peter Howard, my friend and my colleague, who's almost exactly my age, retired 12 years ago from Brown. So, you know, he's living in a life of leisure, and I have to go to faculty meetings and supervise 10 graduate students and teach an undergraduate course. So that, plus all the other things that are demanded of me, has has been, shall we say, disruptive. And I sleep relatively poorly now because I wake up in the middle of the night and I go, oh shit, I forgot to reply to that email and I haven't yet committed to that invitation and I forgot. These things happen. And so I hope that that will fade eventually and then I'll settle into a new pattern, but it will be probably quite different from the previous pattern, Tyler, I think. I mean, my wife is looking at me with some concern, shall we say. About how I'm having 10 balls in the air and every once in a while I drop one.

We're about out of time. So Joel Mulcair, thank you very much. Again, I'm a big fan of your new book with Greif and Tabellini, Two Paths to Prosperity: Comparing Europe and China. Keep advertising it, Tyler. Thanks for listening to Conversations with Tyler. You can subscribe to the show on Apple Podcasts, Spotify, or your favorite podcast app. If you like this podcast, please consider giving us a rating and leaving a review. This helps other listeners find the show. On Twitter, I'm @TylerCowen, and the show is @CowenConvos. Until next time, please keep listening and learning.