June 23, 2006

Instapundit and the Medici Lesson

[cross-posted on Chicagoboyz]

Instapundit has a post up on a book about the Medici and Italian banking:

SO I'VE BEEN READING TIM PARKS' Medici Money: Banking, Metaphysics, and Art in Fifteenth-Century Florence. It's a pretty interesting book, with a juxtaposition of prejudices against sodomy and usury (both seen as "against nature") as a background for the Renaissance.
It's mostly a history of the Medici banking empire, though, and it's interesting to see how the bank declined. The problem was the passing of a generation of bankers who loved the work -- Cosimo Medici said that he'd remain a banker even if he could make money by waving a wand -- and its replacement by those who weren't terribly interested in the actual work, but rather in the opportunity their jobs provided to hang around with kings, queens, and cardinals. Not surprisingly, things went downhill fast once that happened.
I think that's a metaphor for politics and journalism today -- and a cautionary example for the blogosphere.

Economic historian Joel Mokyr believes that these periods of innovation in technology (hard and soft) can be spotted repeatedly back to the Greeks (see his Gifts of Athena: Origins of the Knowledge Economy reviewed here, and the The Lever of Riches: Technological Creativity and Economic Progress). The distinction, finally, with the Scientific/Industrial Revolution was that the inevitable rent-seekers couldn't get an adequate grip and the Malthusian caps were breached. The widening of the "epistemic base" (which Mokyr represents with the symbol omega) was creating usable knowledge (symbol lambda) faster than it could be controlled or stamped out by antagonistic parties. To quote Mokyr: "The broader the epistemic base, the more likely it is that technological progress can be sustained for extended periods before it starts to run into diminishing returns." A virtuous cycle rather than a negative feedback loop gets established. He's got a great article on Why was the Industrial Revolution A European Phenomena? available in .PDF format .

When you look at where the Medici financial innovations came from, and ended up, (per Alfred Crosby's The Measure of Reality: Quantification and Western Society, 1250-1600 reviewed here) ... first northern Italy, then the Lowlands, then England, then back to the Continent and over to America by the second quarter of the 19th century, it sure seems like a pattern. Wherever the Republics appeared, bankers and prosperity were sure to follow. Fortunately for us, the English and American republican influences endured into the 20th century.

The most readable pocket summary I've found of the movement of economic dynamism from northern Italy (Genoa/Florence/Venice) to the Lowlands is in Rodney Stark's The Victory of Reason : How Christianity Led to Freedom, Capitalism, and Western Success. His overall hypothesis is a bit more aggressively retrofit that I think is warranted but his chapters on how prosperity moved from Italy to Holland to England are very well done.

And speaking of how innovation escaped the religious and political authorities, for a wonderfully well-written little book on the impact of Newton on English and Continental life, you can't get better than Jacob and Stewart's Practical Matter : Newton's Science in the Service of Industry and Empire, 1687-1851 As Holland's Golden Age came to an end, Newton's mathematical masterpiece was championed by a bizarre blend of Anglican clerics, provincial "engineers," showboating lecturers, and French intellectuals. By the time that the higher-ups realized what Newton's "action at a distance" might mean, it was too late. His ideas (including his own adherence to Baconian research principles) were woven throughout the English (and ultimately Continental) economy, and fueled an entirely new era of "public science" that continues to this day. The first Army of Davids actually attended lectures in coffeehouses on Isaac Newton's laws of motion. The book wraps with the Great Exhibition of 1851, which both confirmed British dominance of the science and industry of the day and stimulated Continental and American appetites to catch up and surpass Great Britain.

I hope to have a review up shortly.

As for Instapundit's warning of blogosphere co-option, I hope to poke around that question a bit during my review of his latest book (Army of Davids) -- "The Army of Fagins versus the Barnicle Folk." I think the "wisdom of crowds" effect pertains whether the crowd is civic, indolent, or criminal. And that's an important part of the equation in sorting out how the Anglosphere will make use of its great freedoms. What you talk about is as important as the fact you're talking. There's an argument for hyper-empowered crabgrass Jacksonians -- shades of the feared Norstrilians.

Posted by jmccormick at June 23, 2006 03:29 PM

I looked at the Mokyr essay. It is good. But after starting to read Gellner on civil society, and recent immersion in Macfarlane's videotapes (I've listened to the ones on Gellner and Maitland), as well as reading Macfarlane's Modern World books (Riddle and Making), I see that Mokyr leaves out an overarching question which Macfarlane, following Gellner, takes on.

Even if the new technology arises from new useful knowledge, so what? The big question is, why were these new sources of wealth not just seized by predatory actions on the part of government, choking off the further development? That is the universal story of prior history. Why not in the 1700s, in England and to a lesser degree in a few other places? How was it that capital was accumulated, technology progressed, useful knowledge was allowed to grow -- for a virtuous cycle to develop?

Mokyr does not really deal with this. Merely explaining the technology leaves out the final, critical factor -- how is possible for the inventors and developers and employers of the new science and technology were able to go about their business freely, without being pounced upon and looted? How did they escape being victimized by predation?

Macfarlane attributes this extraordinarly and strange development largely to the appearance of civil society, founded on strong cultural and legal foundations -- again, first, in England -- primarily the law of trusts. I know this is hard to choke down. But listen to the Maitland lecture for the short version.

You need both pieces of the puzzle -- technology and institutions. Mokyr is very sound on the former, superficial on the latter.

Also, I agree re: Stark. He fails to make a good case for his larger thesis -- one which I agree with, actually. But his brief economic history of dark ages, medieval and renaissance Europe -- especially, as you note, the critical role of the Italians -- is beautifully done. His other compelling point is that England from very early on had the freedom and security and civic spirit and legality associated with Continental city republics -- but it was immensely larger than any continental and could take advantage of economies of scale and a much more minutely subdivided division of labor. The rise of a vast number of water-driven mills in England during the medieval period and thereafter is a critical factor in developing the skill base that led to the rapid spread of steam-driven mills in the industrial revolution. Stark, then, falls short of his overarching goal, but provides a superior education on many important points nonetheless.

Posted by: Lex at June 23, 2006 04:45 PM
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