The Birth of Plenty by William Bernstein
The Birth of Plenty by William Bernstein
Bernstein wants to follow up from TheBirthOfTheModern and Diamond's Guns, Germs, and Steel to answer why the 1820's saw a huge increase in standards of living ( the Plenty ). He identifies the following four concepts that must be baked into a culture in order for it to generate a drastically higher GDP growth rate: Private Property, the Scientific Method, Capital Markets, and fast Communication / Shipping.
These four measures aren't binary; there are gradations to each, and unfortunately Bernstein doesn't try to create a metric for the permeation of each concept into a society. Which is kind of funny in a book that extols the Scientific Method.
Since the book deals with an increase in production, an economist would look for either a reduction in supplier costs or an increase in demand. Bernstein's four concepts can be seen as cost-reducing, so we wonder about the un-mentioned demand side.
Additionally, it's curious how non-intuitive two of the cost reductions are. It's not obvious to a sovereign that they can increase their tax revenue by lowering tax rates and applying it evenly, instead of just taking whatever's needed as needed.
The Scientific Method is also strange in that we learn about experimentation as a child ( "fire is hot! do not touch!"; really? i go touch! ), and in doing so, we learn to trust our senses. While the Scientific Method tells us to not trust our senses and to try to measure something, then make a guess and see whether the result is predictable.
These advances have been huge in lowering costs of production. It's bad that some countries have not realized the power unleashed by cost reduction, and it's even worse to witness the learned few start to backslide.
The nineteenth-century steel industry was the first to make routine use of a modern industrial scientific laboratory that was staffed by full-time researchers who continuously monitord the relationship between ore quality and the final product. Steel baron Andrew Carnegie exulted in the advantage his lab gave him over the competition. "Years after we had taken chemistry to guide us, [competitors] said they could not afford to employ a chemist. Had they known the truth tehn, they would have known that they could not afford to be without one."
Far worse than war is the corrosion of property rights. Twice in the twentieth century, eastern Germany recovered within a few decades from the physical effects of devastating world war. It will take her generations to recover from communism.
The history of technology investing in England was one of fraud, woe, and loss, starting with the diving companies of the 1600s, through the canal companies of the 1700s, and culminating in the spectacular railway bubble of the 1840s. Consequently, (J P) Morgan financed only well-established technologies.
In Edison's case, he made an exception.
Around AD 1150, a three-hundred-year-old water mill in Bazacle, in southern France, divided its ownership into shares. Nearly continuous records of the company's share price are available from about 1400. The company traded on the Paris Bourse until 1946, when the French government, lacking an appreciation of the capital markets as well as a sense of history, nationalized the mill.