Saturday, September 15, 2007

A Darwinian Conservative Joins the Debate on Gregory Clark's New Book

Larry Arnhart (Darwinian Conservatism Blog) contributes a most interesting post to the debate over Gregory Clark’s A Farewell to Alms’ (Princeton University Press), here.

My interest in the book comes from its Darwinian theory of the Industrial Revolution.

"Explaining why the Industrial Revolution emerged first in England, beginning around 1800, is one of the great questions in the social sciences. Throughout human history up to that point, all societies were caught in what Clark calls "the Malthusian trap." Clark shows that the average person in 1800 did not enjoy better material standards of living than the average person of 100,000 BC. This was because short-term increases in income due to technological improvements would bring growth in population, which would eventually force income down as greater numbers of people would divide up the limited resources. In the long run, birth rates would have to equal death rates. This was the natural economy of all animal species as subject to natural selection, including human beings. But then something happened in England around 1800, so that average incomes rose without falling, and this has spread to the most prosperous societies over the last 200 years.

The common explanation from many economists is that the institutional incentives for productivity--private property rights, free markets, low taxes, rule of law, limited government--developed first in England. The human preferences for accumulating material wealth had always been there throughout history, but the cultural evolution of institutional incentives in England was necessary to direct and channel these preferences. Before reading Clark's book, this was my position.

Against this, Clark offers some powerful empirical evidence that many, if not most, of these institutional incentives were already present in England in the Middle Ages, when private property was protected, taxes were low, markets were free, and so on. So there must have been something else at work to explain the emergence of the Industrial Revolution in the 19th century

Clark's answer is that from 1200 to 1800 in England, there was a Darwinian process of "survival of the richest" by which the richest families had the highest fertility rates, so that their offspring spread through the population of England. This evolution favored the spread of middle class or bourgeois values. "Thrift, prudence, negotiation, and hard work were becoming values for communities that previously had been spendthrift, impulsive, violent, and leisure loving" (166). "The bourgeois values of hard work, patience, honesty, rationality, curiosity, and learning" were embedded "into the culture, and perhaps even the genetics" of the English (11).

I would suggest that Clark's position needs to be reformulated slightly. He has shown that explaining the English Industrial Revolution as a product of institutional incentives is not sufficient. But by implication those institutional incentives are still necessary conditions for the "survival of the fittest" to bring about the cultural evolution of bourgeois values over hundreds of years. The crucial point, then, is that introducing capitalist, liberal institutions into a poor society is not going to immediately bring prosperity. That might require a long period of cultural evolution.

Larry Arnhart’s contribution is particularly interesting. Especially his concluding sentence: ‘The crucial point, then, is that introducing capitalist, liberal institutions into a poor society is not going to immediately bring prosperity. That might require a long period of cultural evolution.’

This goes to the heart of the current concern with poorly developing and non-developing societies today. Despite billions entering their economies via aid and trade, they stubbornly rest not very far from whence they started from, except in small pockets of opulence, surrounded by vast numbers of desperately poor people.

Which returns me to Gregory Clark’s explanations of the ‘survival of the richest’ in England. More rich parents’ children survived than poor parents’ children, therefore, rich families values spread widely. It is plausible on grounds on the inheritance of traits, with the proviso that this would need to work over very long periods, and that behavioural traits could be inherited, assuming they are strong enough formed in all rich children.

But the poor did not disappear totally, or even close to totally. There were more of them proportionally and absolutely. Despite the culling of the generations, their traits (however defined) were strongly represented in each successive population. There was also upward mobility – not from peasant to duke, but from serf to overseer, from foot soldier to cohort leader, from hewers of wood to carpenter, from blacksmith’s labourer to blacksmith, and so on.

Considering that by the 18th century all the food consumed was produced by the labours of half the population, leaving the other half in search of employment, or idly consuming their rents. Accepting occasional dearth and the odd local famine, the non-farming half somehow found some level of means of subsistence within growing economies.

And as Gregory Clark’s focus is on the per capita consumption and not the gross output, which he concedes was steadily growing, it follows that something was driving that growth. I have suggested it was Adam Smithian growth.

The mechanism for Smithian growth was set out in Wealth Of Nations. The ‘great wheel of circulation’ turned, and maintained and created employment from the masters’ circulating capital (the ‘maintenance’ of labour – subsistence wages) and the purchases of raw materials for labour to add value upon. Other capital stayed with the masters and took the form of Fixed Capital, which remained idle unless labour was hired and materials were bought.

Both capitals were from masters’ savings from their revenues earned from sales. A large proportion of the annual revenue from markets was for immediate consumption, joining labour’s wage spending, but even a small proportion ending up as savings for employment-creating capital generates growth, which, over the long run increases gross annual output, the most important event in human history.

All this happens no matter how long per capita consumption remains steady. In this context, Gregory’s focus on per capita income since Roman times (or since 100,000 years ago) is not the relevant phenomenon in economic history. In fact, it obscures what was actually going on, in my opinion.

Smithian growth focuses on what is important in economic history: growing GDP from widening and deepening markets, which when aligned to innovation and new technologies leaps to unprecedented levels. And behind growing GDP is not just the output or trade in specific products wool, coal, wheat, and so on, but the developing interconnections in, between and among, more and more complex products, that is complex in how they are put together by the increasingly widespread trading links at all levels and over long distances, each contributing to the foundations of the commercial economy, the prelude to what some people call the industrial revolution.

Wealth Of Nations is about these processes. Everybody knows of the pins example of a division of labour within a production process. Fewer realise the importance of the example of the common labourer's coat, later in Chapter II of Book I. This is of greater importance to the questions raised by Gregory Clark and his suggestions about ‘survival of the richest’ (interesting and plausible as it is). Look for market linkages, their complexity, their breadth and depth, after several hundred years from the 14th century. In Britain, these linkages of multiple markets in many locations and in many countries, are where the answer to the questions of AFTA reside, in my opinion.

The cumulative affect of the slow and gradual evolution of markets overcame the Malthusian Trap, which was about food subsistence (diminishing returns), which when joined with consumption goods (not subject to diminishing returns!), broke the trap, in this case, perhaps forever.


Post a Comment

<< Home