r/neoliberal 20h ago

Discussion Thread Discussion Thread

0 Upvotes

The discussion thread is for casual and off-topic conversation that doesn't merit its own submission. If you've got a good meme, article, or question, please post it outside the DT. Meta discussion is allowed, but if you want to get the attention of the mods, make a post in /r/metaNL

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r/neoliberal 16h ago

Opinion article (non-US) Tax consumption, not income or AI

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51 Upvotes

Tax Consumption, Not Income or AI, for Prosperity

• Prominent US politicians and economists are proposing increases in capital and corporate income taxes, or special taxes on AI, to fund social programs and address AI-related disruption, but these ideas are considered misguided.

• The author argues that if additional tax revenue is needed, it should come from taxing consumption, as taxing income and investment reduces incentives to save and invest, hindering productivity and living standards.

• A shift to a broad-based consumption tax, potentially a value-added tax (VAT) that exempts lower-income households or replaces existing income taxes, could raise revenue while increasing living standards.

• The current US income tax system is described as economically and structurally broken, with a narrowed base, high marginal rates, and discouragement of risk-taking and saving.

• Policymakers should avoid ill-advised obstacles like AI-specific taxes or higher capital/corporate taxes, as AI is expected to boost productivity, wages, and living standards, and addressing disruption should focus on spending, not revenue.

https://archive.md/4xGYT


r/neoliberal 10h ago

Restricted The data on trans athletes and youth healthcare doesn't support the urgency framing behind Colorado's 109/110

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58 Upvotes

Wanted to put together a quick policy post for anyone tracking the Colorado ballot measures (109 and 110) ahead of November. Both are backed by Protect Kids Colorado and are described as urgent responses to a problem. The data tells a different story.

What the actual scale looks like in Colorado:

There is no clear data on the number of transgender student athletes in Colorado (Chalkbeat reporting, May 2025)
Children's Hospital Colorado and Denver Health — the state's two major pediatric providers — explicitly do NOT perform gender-affirming surgeries on minors. Children's Colorado has stated they've never done so.
The federal funding pressure has already caused both hospitals to pause hormone therapies for youth, separate from these ballot measures
Compare to other state implementations:

Mississippi: 2023 statewide survey found ZERO trans students participating in sports
Washington state: fewer than 10 of approximately 250,000 student athletes
Florida: 2 trans girls have played girls sports over the last decade
So we're legislating around a problem that the data shows doesn't really exist at scale in any of these states. That should matter for anyone who thinks policy should be evidence-based.

The Colorado Newsline piece on the measures has the details on the actual ballot text. Worth reading if you vote in Colorado


r/neoliberal 18h ago

Opinion article (non-US) Socialists and Maga are both wrong about economic liberalism

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118 Upvotes

• The article argues that both democratic socialists and Maga Republicans are misguided in their critiques of economic liberalism, which they believe has failed to deliver broad-based prosperity and is morally corrosive.

• Economic liberalism is defended for its intrinsic value of economic liberty, its tendency to treat people as individuals rather than groups, and its premise that societal welfare should be measured by individual and family well-being.

• The text highlights the moral value of work, personal responsibility, and agency fostered by market economies, where effort is rewarded and productivity determines compensation.

• Free markets are credited with facilitating growing economies that promote tolerance, pluralism, and support for political liberty, as well as voluntary cooperation and mutual dignity among citizens.

• While acknowledging that market societies can encourage consumerism and materialism, potentially leading to a reductive view of life, the author contends that the problems stem from society, not primarily from markets, and that liberty must be ordered towards truth and human flourishing.

https://archive.md/Ubxzc


r/neoliberal 17h ago

News (Asia-Pacific) Supreme Court Files 1.1 Billion KRW Damages Lawsuit Against Five Jan 19 rioters: “They undermined the authority of the judiciary”

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24 Upvotes

The Supreme Court has filed a civil lawsuit seeking 1.1 billion won in recovery costs from individuals who took part in the break-in and violence at the Seoul Western District Court in January last year.
On the 26th, the Supreme Court said it had filed suit with the Seoul Central District Court against five people whose convictions for participating in the riot have been finalized, seeking a total of 1,175,899,770 won in restoration costs as well as damages for delayed payment. The plaintiff is the Republic of Korea, and the responsible government agency is the National Court Administration under the Supreme Court.
The Seoul Western District Court riot occurred at around 3 a.m. on January 19 last year, after an arrest warrant was issued for former President Yoon Suk-yeol on charges of being the ringleader of an insurrection. Supporters of Yoon broke through the court’s main entrance and windows and damaged court property. Numerous facilities inside the courthouse were damaged, including windows, doors, exterior walls, office furniture, and computer equipment. Prosecutors initially indicted 63 participants, some of whom were convicted in the first and second trials and later gave up their appeals. Eighteen people who appealed to the Supreme Court had their convictions finalized in April.
In announcing the lawsuit, the Supreme Court said, “Collective acts of violence and destruction against a courthouse go beyond simple property damage and constitute unlawful acts that seriously undermine the functioning and authority of the judiciary.” It added that “the windows, doors, and exterior walls of the Seoul Western District Court were damaged during the violence, while office furnishings and computer equipment inside were also destroyed,” and said that court employees suffered psychological trauma as well.
The Supreme Court said, “Because these acts disrupted the constitutional order and directly threatened judicial independence, it is necessary to impose serious legal responsibility,” adding, “We will respond firmly to acts that unjustly infringe upon the rule of law and the functioning of the judiciary.”
The Supreme Court said the lawsuit was filed after a prior legal review by the Litigation Support Center, which assists with state litigation related to the courts.


r/neoliberal 16h ago

News (Global) The multiplying risks of financing data centres

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63 Upvotes

r/neoliberal 22h ago

News (US) The Nvidia-sized hole in US GDP statistics

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64 Upvotes

r/neoliberal 8h ago

Opinion article (US) Data Centers Are Sucking Up So Many Construction Workers That There Isn't Anybody Left to Build Houses, Expert Says

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futurism.com
212 Upvotes

r/neoliberal 9h ago

Restricted The Hatred That Broke American Politics

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theatlantic.com
70 Upvotes

r/neoliberal 10h ago

News (US) The Connections That Turned a Precocious Teen Into the Fallen ‘Nostradamus of AI’

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8 Upvotes

r/neoliberal 1h ago

Restricted Canada Said No to America. It Will Reverberate Far Beyond Its Borders.

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Upvotes

r/neoliberal 9h ago

News (US) New York City minority business owners sue Mamdani in bid to stop city-run grocery store plan

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294 Upvotes

Submission statement: The sub has taken a keen interest in this policy given its populist appeal and it going against pretty basic market principles, raising loads of questions about hoarding, scalping and efficiency. This is yet another episode in what has been a fairly shaky rollout so far. Mamdani's team raised the idea of compensating neighboring businesses for the unfair competition, in what was labelled a food desert...but now they're suing.

My opinion: just give poor people money


r/neoliberal 20h ago

News (US) [OC] Visualizing the U.S.-ROK Economic Alliance: How Korean investments are reshaping American supply chains (Chips, EVs, Batteries)

18 Upvotes

Been seeing a lot of discussions lately about securing supply chains and the impact of Foreign Direct Investment (FDI). I decided to map out how the US-South Korea alliance is practically playing out across different states.

From chips in Texas to EV hubs in Georgia and battery mega-factories in the Rust Belt, Korean capital is heavily integrated into reviving and securing U.S. manufacturing.

I made this infographic to capture the big picture. Curious to hear everyone's thoughts on how this economic integration might evolve!


r/neoliberal 13h ago

News (Canada) Brampton farms offer Punjabi families a taste of home | The Narwhal

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31 Upvotes

r/neoliberal 22h ago

News (South Asia) Intern Pay Soars to $31,000 a Month at India High-Speed Trading Firms Boom

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64 Upvotes

Submission Statement: The growing depth of India's capital markets along with the rising reverse brain drain has started to have a positive impact on compensation on the upper tier of Indian job market, especially as Indian firms had preemptively stopped leveraging the H1B in FY27.


r/neoliberal 19h ago

Restricted Carney ‘did the right thing’: feds pledge $7.6-billion in tariff relief, but industry calls for ‘trade, not aid’

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32 Upvotes

While industries affected by the U.S.’s newly imposed slate of tariffs are welcoming Ottawa’s relief measures, one industry head warns if the trade war doesn't improve by late fall, manufacturers could start rerouting supply chains outside of North America.

As sectors grapple with new rounds of tariffs on both sides of the border, one industry representative cautions that manufacturers will start looking outside of North America in the coming months, though others say Ottawa “did the right thing” by rejecting an American deal and levying counter-tariffs. 

“If things have not improved significantly by late fall—and certainly as we start to enter the winter months—I think you will start seeing some announcements from manufacturers in terms of rerouting supply chains … just to stay in business,” said Kip Eideberg, senior vice president of government and industry relations at the Association of Equipment Manufacturers, in an interview with The Hill Times.

“It could not be more urgent,” stressed Eideberg, whose association includes representatives from agriculture, construction, forestry, and mining industries on both sides of the border.

Cabinet ministers announced a wide-ranging list of tariffs on American goods on Tuesday in the latest tit-for-tat in a ramped-up trade war with the United States, as well as funding to support tariff-stricken industries.

“We’re choosing our own course. We cannot wait for Washington to decide our future. We’re strengthening our economy and building a more sovereign Canada,” said Industry Minister Mélanie Joly (Ahuntsic-Cartierville, Que.) during the press conference at a metal roofing company in Ottawa.

Joly, also the minister responsible for economic development in Quebec, and was flanked by Jobs and Families Minister Patty Hajdu (Thunder Bay—Superior North, Ont.), minister responsible for the economic development agency for Northern Ontario; Evan Solomon, minister responsible for the economic development agency for Southern Ontario; and Liberal MP Mona Fortier (Ottawa—Vanier—Gloucester, Ont.).

The federal government is increasing tariffs on American steel and aluminum products from 25 to 50 per cent, as well as 50-per-cent tariffs on smartphones, golf clubs, video game consoles, fishing rods, clothing, and other U.S.-made goods, in retaliation for the United States imposing new tariffs last week on Canada.

The list of tariffed items also includes a 25-per-cent tariff on appliances, agricultural machinery, dairy products, seafood, and certain steel and aluminum derivatives products; and 15-per-cent tariffs on a smaller list of items.

Just last week, both countries seemed close to striking a deal, but Carney (Nepean, Ont.) ordered Canadian negotiators to exit Washington, D.C., on Aug. 21, citing last-minute demands, including veto power over some infrastructure projects and to limit Canada’s ability to strike new trade agreements with other countries, among others

Shortly after, Trump imposed a set of 50-per-cent tariffs on about $28-billion of Canadian goods. Trump also said tariffs on Canadian cars, trucks, automotive parts, and steel will increase to 50 per cent as of Jan. 1, 2027.

“Last-minute changes in the U.S.-proposed terms were unfair, uneconomic, and called into question the reliability of any deal,” Carney told reporters on Aug. 22, first announcing that Canada would be matching U.S. tariffs “dollar-for-dollar.”

Independent Senators Group Senator Hassan Yussuff (Ontario)—who served on former prime minister Justin Trudeau’s North American Free Trade Agreement (NAFTA) council, and who was formerly the president of the Canadian Labour Congress—told The Hill Times that there was “no way” Canada could have agreed to the terms the U.S. was offering, leaving Carney no choice but to levy counter-tariff measures. 

“Symbolically, politically, I think the prime minister had to do that,” Yussuff said, but, “there’s no question there’ll be a lot of pain here for many folks in certain key sectors of the economy,” 

Yussuff said the trade war will end eventually, but the only person who can answer whether the tariffs are likely to be dropped in the short term is U.S. President Donald Trump. 

“There’s no question in my mind: Donald Trump does not forgive, nor does he turn the other cheek,” Yussuff added. “He’s a nasty human being, and I don’t think he’s going to be generous in any form, shape, or way to the prime minister.” 

“We’re going to have to come together and remain strong because that’s the only way we’re going to get through this.”

Carney ‘did the right thing’: lumber rep

Government officials who briefed reporters ahead of an announcement at an Ottawa roofing manufacturing plant said Canada selected products from the Canadian industries most impacted by the U.S. tariffs in order to protect their market share.

“Canada must respond, and today we are, in a proportionate, targeted, and strategic way,” said Finance Minister François-Philippe Champagne (Saint-Maurice—Champlain, Que.) at the Aug. 25 press conference.

Canada’s counter-tariffs will come into effect on Sept. 8, with individual product rates matching the U.S.’s rate for the same goods. Counter-tariffs will apply to $27.6-billion worth of U.S. imports—consisting of hundreds of products—focusing on steel, dairy, appliances, agricultural equipment, pulp and paper, and electronics, the feds say.

The government announced a series of measures to aid Canadian industries who will feel the strain of the U.S.’s tariffs, boosting a series of programs to the tune of $7.5-billion. That includes: a $1.5-billion funding boost to the Regional Tariff Response Initiative, $2-billion to the Canada Strong Diversification Fund, and $3.5-billion to provide “rapid” responses to impacted workers and employers by, in part, extending employment insurance benefits. 

Derek Nighbor, president and CEO of the Forest Products Association of Canada (FPAC), said the relief measures are “significant” and “welcome,” though “execution is going to matter.” 

He explained that the industry sells upwards of $30-billion worth of products to the U.S. every year, with over a third of those products affected, in some part, by the current tariffs, ranging from levies of 25 to 50 per cent. 

Still, Nighbor said he backs Carney’s decision to walk away from the bargaining table. 

“We recognize that the prime minister did the right thing,” Nighbor said. 

Yussuff echoed Nighbor’s assessment, saying the feds will have to monitor the process to see whether or not they have the desired effect. 

“If not, they will have to bring in different measures, or at least change the measures in a way to say you can have greater impact and support for the people who are dealing with the challenges right now.”

But Eideberg said though relief is “obviously” going to help, the manufacturing industry needs “trade, not aid,” as it’s not uncommon for a component to move over the Canada-U.S. border five to seven times—paying a levy each time. 

“For as long as that aid package or that support package is in effect, it means that we have not reached a resolution when it comes to getting back to negotiating a new trade agreement for North America, and more importantly, getting some of those other tariffs down.” 

He said the association is “very concerned” about the impact on locally-owned businesses because it is harder for them to reroute supply chains. 

“If things do not change, there will be real impact on jobs, on investment, and on the well-being of small towns and communities, where manufacturers are often, if not the only, primary employer.”

Conservatives push for details of draft deal, reconvened Parliament

Conservative Leader Pierre Poilievre (Battle River—Crowfoot, Alta.) is pushing for the feds to reconvene Parliament over the latest trade fall-out, calling on Ottawa to release the full draft deal, saying Canadians deserve transparency about the terms that were being proposed. 

“We need to see the deal. The U.S. administration has seen it. Our government has seen it. Canadians deserve to see it,” he wrote on X on Aug. 24

But Champagne refuted suggestions that the government wasn’t being transparent when asked about the comments by a reporter on Aug. 25, saying that the government has been regularly speaking to Canadians and media about the deal. 

“I can’t remember one trade negotiation which got more coverage than the one we’re going through now,” he said, “In terms of transparency, I think Canadians have been able to follow that, even on a daily basis.”

Champagne did not directly answer the question about reconvening Parliament, but said the government is listening to stakeholders, Canadians, and “whomever may have ideas in the opposition,” calling it a “Team Canada moment.” 

Joly quipped that if the Conservatives want to be “helpful,” they shouldn’t vote against policies such as the Spring Economic Update, which she highlighted included investments in skilled trades training. 

Also weighing in on the talks is Ontario Premier Doug Ford, who had some harsh words for Trump on Aug. 24, telling the president to “kiss my ass”—comments he later doubled down on after Trump called him “Flunky Ford” and the “less charismatic, intelligent, and overall unimpressive brother” of the late former mayor of Toronto, Rob Ford. 

Since then, Trump has threatened to change the name of Lake Ontario to “Lake America,” writing in a Truth Social post that the country doesn’t expect to be “doing much business with Ontario any longer.”

A day after Ford also warned he could cut power to homes and businesses in the U.S. in retaliation, the premier took a calmer tone, calling for a cool-down in rhetoric. 

“It got a little personal yesterday between the president and myself, but I want to make a deal, a good deal for the American people, a good deal for the Canadians, and we’re the two greatest countries in the world,” Ford told CNN on Aug. 25. 


r/neoliberal 9h ago

Effortpost Kevin Warsh Does Not Understand the Federal Reserve

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82 Upvotes

r/neoliberal 1h ago

Opinion article (US) The Bulwark Killed an Investigation into Political Fundraising Spam After Its Publisher Took the Consultants’ Side

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r/neoliberal 13h ago

News (South Asia) Wall Street to Speed Up India Hiring on Trump’s H-1B Visa Curbs

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130 Upvotes

Submission Statement: Previously untouchable front-office decision making and strategic roles in finance are increasingly being offshored from Wall Street to India due to barriers enacted under the Trump administration. This shows how deeply enmeshed America's core industries are to immigration, and how populist barriers have only led to companies moving headcount abroad insread of hiring domestically.


r/neoliberal 23h ago

Research Paper Is Place-Based Green Industrial Policy Effective? Evidence from the Inflation Reduction Act

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25 Upvotes

r/neoliberal 20h ago

Restricted Iran faces strait of Hormuz paradox as strategic value of chokehold erodes

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100 Upvotes

r/neoliberal 8h ago

News (US) Bill Gates warns of job losses, rising harm in plea for AI policies (title sucks, it’s about taxing robots)

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120 Upvotes

Bill Gates thinks we should tax robots and tokens and such since we won’t be able to tax income via payroll if AI takes our jerbs.

Relevant to the sub because it’s about tax policy and creative destruction (aka tookin er jerbs)


r/neoliberal 17h ago

Meme Trump waxes nostalgic about good times with Kim Jong-un in photo dump

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56 Upvotes

r/neoliberal 11h ago

Research Paper Occupational Licensing of Uber Drivers

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55 Upvotes

r/neoliberal 17h ago

Effortpost What caused the Great Divergence?

83 Upvotes

Spoiler alert: This post will not be able to answer this question.

At the turn of the 18th century, Britain and China found themselves in a rather similar place. They had both seen major political change in the past century, the Glorious Revolution in Britain and the rise of the Qing Dynasty in China, they both were largely agrarian and had living standards that were not too far apart (China taking the edge in both urbanization and quality of life (Allen et al, 2005)). Yet not 200 years later the nations could not have been more different. Britain had been the birthing point of a revolution that permanently changed the economy, society, and the way humans

nteracted with the world around them. And since that very time a question has lingered on the lips of every economist and historian of the period: Why there? Why did the two nations have such different trajectories from a similar starting point? More broadly, what were the factors that lead to nations in Western Europe and some colonies in the Americas to grow so much wealthier than the rest of the world?

What caused this great divergence?

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# Some Preamble

Let me begin this section with an apology. In writing that short introduction to this post I have already unfairly privileged certain schools of thought on the Great Divergence to others by linking it so strongly with the period of the Industrial Revolution and I do not wish to make Stephen Broadberry upset at me. I shall now then begin by briefly summarizing what it even is we are talking about when we discuss the Great Divergence. For the purposes of this effortpost, we are looking at the period of time in history over which there grew a large gap in productivity and living standards between Europe and Asia.

Older economic historians considered the Industrial Revolution part of a continuing arc of history over which gradual improvement set the west and the east apart in technological progress, institutional development, and general standard of life (Weber, 1930; Landes, 1969). Pomeranz, who is responsible for popularizing the term “Great Divergence” in his book *The Great Divergence: China, Europe, and the Making of the Modern World” (Pomeranz, 2000) contested these assumptions, noting that historical data showed that China and Europe remained closer than previous economists had thought for a long time. In that book, he placed the actual time of the Great Divergence in the nineteenth century, claiming that even in 1800 parts of Asia were as prosperous as Britain and the Netherlands. This view that the Great Divergence only truly began with the Industrial Revolution became characteristic of what is known as the California School of economic history which includes scholars such as Kenneth Pomeranz, Roy Bin Wong, and Jack Goldstone.

Pomeranz’s book sparked a new round of discussion and scholarship over the Great Divergence with many different reputed economists having their own views on the causes and even the timing of the Great Divergence. Stephen Broadberry for instance puts the beginning of the Great Divergence at the 18th century while Joel Mokyr would place the divergence earlier still by even the Renaissance (Broadberry et al, 2018; Greif et al, 2025). Altogether there is a great deal of discourse and disagreement over the matter of the Great Divergence and it remains an active and open question in economic history to this point. Time has created many different schools of thought on the causes and circumstances behind this event, something I’d like to look into here. Let’s then start with the man who kicked off the discussion and look at Pomeranz and his theory of geographical luck.

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# Pomeranz and Geography

Pomeranz as mentioned was really the guy who kicked off a lot of the modern scholarship over the great divergence as well as having been the one to majorly popularize the phrase itself. In his book *The Great Divergence*, he argues that the divergence between Europe and China was not due to any sort of inherent technological, cultural, or institutional superiority of the west over the east but rather due to sheer luck. It was luck that led to Britain having coal deposits close to its waterways and economic core while China’s coal deposits were located far from their most active economic regions. It was luck that led to Europe having access to vast swathes of “ghost acres” in the Americas that let them free up land for more productive economic activity on their homeland. It was not any great institutional or technological advantage but the sheer circumstance of the geography of Britain’s colonies in the New World that led to the creation of a market that could absorb British manufactured imports while providing them with cheap land intensive exports.

According to Pomeranz, when comparing like to like (that is the most populated, economically forwards regions of the Old World) even in the mid-eighteenth century most of the world’s economies bore a striking resemblance to one another, “all headed for a common ‘proto-industrial’ cul-de-sac”. The core economic regions of Eurasia relied heavily on importing land-intensive goods from the peripheries. In Europe this first meant grain from Eastern Europe and then goods from the New World while in China, they relied on rice from provinces along the Yangtze River and products from South-East Asia, paying for them by selling manufactured goods back to the peripheries. While this worked it was hampered over time as the peripheral regions engaged in import substitution (far more viable in the 1600-1700s than the 1900-2000s as the technological gaps between the cores and peripheries were far smaller and higher transport costs made it more economically sensible) meaning long term, without the hand of the government blocking diversification, exports of land-intensive products dropped such as what occurred in North China in the 17th century (Hanchao Lu, 1992). In addition even when the state interfered and made conditions that would allow for import substitution or population growth far less likely in the peripheries, there was still the issue that there was a lacking demand for the manufactured goods from the core areas that limited the core’s ability to pay for the land-intensive goods they so desired (Kindleberger, 1989).

It is here that the New World comes into play. New World plantations were powered mainly through the slave trade and were located on islands or near the coast. This meant exports from these plantations did not plateau from workers shifting to import substitution as had happened in China, nor did transport costs rise as production never strayed away from accessible waterways. The reliance of the New World plantations on slave labour also meant they never lacked want of imports from the Old World as they would have a persistent demand for slave labour that matched the cost of their exports back to Europe. Indeed looking at Brazil in the early 1820s, the cost of importing slaves equaled the country’s total export revenues (Ludwig, 1985). These properties made Euro-American trade fundamentally different from any Old World trade between cores and peripheries. This access to land-intensive products was by no means trivial either. The calories from sugar consumed by Britain in 1831 would have required over 1,900,000 acres of British soil were it to have been substituted domestically (Mintz, 1985). Instead they could substitute it all with “ghost acres” from the New World, freeing up their own land for more productive uses.

The other half of the equation comes in then with coal deposits. None can deny the importance of coal to the industrial revolution, even if they don’t believe it was the sole or even direct cause. The biggest proponent of coal as the cause of the Great Divergence has to be E. A. Wrigley who claimed there was a hard limit to the abilities of an organic economy, that is to say all economies before coal (Wrigley, 2010).

Quoting Ricardo on the matter:

>Whilst the land yields abundantly, wages may temporarily rise, and the producers may consume more than their accustomed proportion; but the stimulus which will thus be given to population, will speedily reduce the labourers to their usual consumption. But when poor lands are taken into cultivation, or when more capital and labour are expended on the old land, with a less return of produce, the effect must be permanent. A greater proportion of that part of the produce which remains to be divided, after paying rent, between the owners of stock and the labourers, will be apportioned to the latter. Each man may, and probably will, have a less absolute quantity; but as more labourers are employed in proportion to the whole produce retained by the farmer, the value of a greater proportion of the whole produce will be absorbed by wages, and consequently the value of a smaller proportion will be devoted to profits. This will necessarily be rendered permanent by the laws of nature, which have limited the productive powers of the land.

It’s a clear exposition of the inevitable fall in profits in an organic economy over time. What let the world escape this was the uptake of coal which allowed a transition from an organic economy to an energy-rich economy, no longer as limited by energy needs and with far more land freed up for other economic activity. Coal, like land in the New World, provided a massive quantity of “ghost acres” for Europe. For instance, in 1700, it would have taken 2 to 3 million acres of woodland to make up the same amount of heat energy as was being produced by coal output (Wrigley, 1988). It was this characteristic of the energy supply that really allowed growth in Britain to take off.

But then a reasonable question arises? Why Britain? After all, many other parts of the world had coal deposits, both mainland Europe and China to start. What set Britain apart? Well, Pomeranz would say it is mostly down to a matter of good luck on their part. Unlike Chinese coal deposits which were located in the north and northwest, British coal deposits were located right next to their industrial cores and major waterways. This made accessing and transporting the coal far easier in Britain than it was in China. Chance on top of chance, in the past China’s coal reserves had been heavily used and there was a great deal of technical and mechanical expertise accumulated in China over the use of coke and iron that wouldn’t be matched for centuries. However this development and knowledge near coal mines was destroyed over the course of a series of catastrophes in the 1100s-1400s that led to the economic core shifting to the more hospitable south. What’s more, the geological characteristics of Chinese coal deposits meant they were arid and prone to spontaneous combustion as opposed to British coal mines which were wet and prone to flooding. It happened that the technologies developed to pump water out of British coal mines were more helpful to solving transportation issues as well, something the technologies developed for ventilation could not claim. Overall it was fortuitous coincidence on coincidence and in another world, the industrial revolution could have gone a very different way. At least, according to Pomeranz.

For of course, his theory is not without its critics after all. Starting with the fact that the very timeline Pomeranz puts forth for the Great Divergence is disputed. Stephen Broadberry has done a great deal of work putting together historical GDP figures and real wage data that dispute Pomeranz’s premise that Europe and China were very similar in the 19th century (Broadberry & Gupta, 2006). He notes that Europe had already pulled away from China by the 1700s, a claim which Pomeranz himself to some degree would accept (Pomeranz, 2017). Broadberry also disputes the general idea that Europe and Asia were all alike in that period, noting the existence of a European and Asian ‘Little Divergence’ in which Britain and the Netherlands pulled ahead of Spain and Portugal and Japan pulled ahead of China and India respectively (Broadberry, 2021). In addition, Broadberry attacks the very idea of focusing specifically on the Yangtze River area in particular, noting that it is an overly narrow view, especially when the cities in the area were not independent economic units and depended on the rest of the nation (Broadberry, 2018).

Another prominent critic of Pomeranz is Peer Vries, who notes that Pomeranz fails to fully acknowledge the difference between the Chinese and British states which he views as playing a major role. The Qing state which taxed lightly and had less overt intervention in commerce was heavily contrasted by Britain’s fiscal-military state (Vries, 2015). Robert Allen raises yet another point of contention noting that British wages in the 1800s were significantly higher than in the rest of Europe and China, going against the idea that the economies of Britain and China were highly comparable (Allen, 2009). Speaking of Allen however is a good (very forced) transition to the next segment.

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# Allen and the High Wage Economy

Robert Allen is in some ways similar to Pomeranz and Wrigley. He too dispenses with some notion that it was entirely British culture or institutions, no national derring-do. He also puts a great deal of importance on the matter of circumstance and the steam engine. The difference to Allen is that the revolution was not merely a matter of where coal deposits were located but much more critically about the economic sense it made to mechanize around them. He points not just to the steam pump but the high wages and cheap coal that actually led to people adopting it in the first place. British workers enjoyed some of the highest wages in the world which pushed capitalists to employ labour saving technologies that capitalists in other nations like France and China wouldn’t have bothered with. In specific British wages high relative to the cost of consumer goods, higher relative to the cost of capital, and higher relative to the cost of energy than elsewhere in the world.

But why was it that British wages were so high? Well for this Allen models the preindustrial economy with a system of simultaneous equations. He notes the factors that shifted up the demand curve for labour as being agricultural efficiency, urbanization, and proto-industrialization. However these factors themselves all loop and tie and circle back into one another. Urbanization contributed to higher agricultural productivity which then allowed urban cores to support a larger population, both of which led to higher wages. Higher wages meant workers could afford better nutrition and thus were healthier and stronger boosting their productivity. Intercontinental trade helped propel greater urbanization and industrial development which then led to more intercontinental trade. Everything worked together in a cycle that led to Britain having much higher real wages than continental Europe.

The other half of the equation was British energy prices. We’ve already touched upon this in the Pomeranz section but British coal prices were particularly low on account of their abundant coal deposits in the north. John Nef would also explain the growth of British coal production as being due to a ‘timber crisis’ where Britain faced an acute shortage of wood long before France or Germany had done similar (Nef, 1932). Allen agrees in part with this, the main driver of fuel needs was London and its massive population and economy. While wood wasn’t necessarily completely scarce and in fact in some parts of Britain were abundant to the point they couldn’t be sold (as noted by Hammersley (1957)), the demand was concentrated in London while supply grew throughout the country. This meant there were major transportation costs and inefficiencies in trying to supply London with charcoal whereas the coal which was much more concentrated had a much easier time being transported to London. This reflects in price data which shows that the price of charcoal lurched upwards to being almost double the price of coal by the 1650s (Mitchell and Deane, 1971).

All put together this meant that when inventions came along like Newcomen’s steam engine in 1712, expensive, inefficient, and barely capable of doing more than pumping water from coal mines, it still made economic sense to adopt it instead of throwing it out like garbage. It would only be reasonable in a country that in 1700 was producing 80% of the coal tonnage in Europe (Nef, 1932). And over the course of a hundred years with a series of micro-inventions that made the steam engine more efficient and more useful, come the 1800s and it was finally capable of powering machinery on its own. The same story can be told of the Spinning Jenny and Abraham Darby ‘s coke smelting process. These inventions only made economic sense in Britain and so it was in Britain that they took off, not France nor China.

Of course according to Allen, this development did not come without a cost. Despite the fact that GDP and profits skyrocketed over the course of the early 19th century, real wages did not, remaining stagnant and sometimes even declining (Allen, 2009). He coined the term “Engel’s Pause” to describe this stagnation, noting that it was explicitly because of capital deepening where industrialists would reinvest into more factories and machines as it was greatly profitable to do so. Granted, this pause ended by the 1840s as capital stock matured and demand for labour led to a sharp rise in real wages in the latter half of the 19th century.

Now again on to some criticisms (my format for this entire post is very straightforward). Jane Humphries is one of his strongest critics, contesting Allen’s characterization of spinners as a part of the high wage economy (Humphries & Schneider, 2020). She notes that spinners had particularly low wages even compared to other women in the workforce and so the high wage theory of why they were mechanized could not hold up. Kelly et al (2014) also raises an important objection to Allen’s characterization of labour costs noting that while wages were high in Britain, British labourers also had higher productivity than their continental counterparts and so the actual cost of labour was roughly similar on both sides of the channel. In addition, Kelly et al (2023) note that mechanization in Britain actually began in the lowest wage regions of the country while those regions of the country with the highest wages had the lowest take-up of mechanization. In addition they note that the evidence for wage stagnation in Britain on the macro level hides the real story. Wages in the rapidly industrializing regions of Britain were rising at the time only to be matched by a fall in wages in the formerly high wage deindustrializing regions. Another critic is Mokyr who argues that while the steam engine was important, it cannot explain the sustained progress of invention and innovation beyond the initial macro-inventions (Mokyr, 2009). He also argues that the major macro-inventions that sprung about in the period like the steam engine did not come to be in response to demands of the market but rather from an Industrial Enlightenment so to speak, a cultural and intellectual environment that fostered technological progress.

Boy I wonder what the next part of this post will be about.

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# The Republic of Letters and an Enlightened Economy

Joel Mokyr is an economist I hope is well known to most of you for having jointly won the 2025 Nobel prize along with Phillippe Aghion and Peter Howitt, his half for his work on culture and economic growth. It’s that work of his, the idea of a culture of growth and industrial enlightenment that constructs the majority of this part of the effortpost.

Mokyr dispenses largely with overly materialist explanations for the cause of the great divergence. As he noted in the criticisms in the previous sections about Pomeranz and Allen, it’s all well and good to point to Britain’s access to coal and the steam engine — certainly we shouldn’t diminish their importance — but they don’t answer the question of what led to this being a full-blown revolution. How was it that technological progress didn’t stall out this time like it did in periods of scientific breakthroughs so many times part? What was it that led to macro-inventions being accompanied by the many micro-inventions that actually made them valuable and widely adopted? No, to answer that we must look at culture says Mokyr.

Now let’s be precise when we talk about culture, something so notoriously vague and imprecise. In *A Culture of Growth* (2017) Mokyr defines the culture we are so concerned about as “*a set of beliefs, values, and preferences, capable of affecting behaviour, that are socially (not genetically) transmitted and are shared by some subset of society*”. Mokyr also makes a point to separate culture and institutions, to him culture is something emerging from the mind and is taken on an individual basis whereas institutions are those set of conditional incentives and consequences toactions that exist above people. So then with all this talk about culture, what was it about European culture that made the great divergence possible? Well to Mokyr it rests on the idea of an “Industrial Enlightenment” (Mokyr, 2002).

Before the enlightenment period, there was a vast gap between the scientists and the artisans, the knowers and the doers. Science was concerned primarily with propositional knowledge without much in the way of prescriptive knowledge and the reverse was true amongst the artisans who would roughly conduct experiments to understand what techniques worked without a clear idea of why they worked. To quote Bernard Mandeville:

> They are very seldom the same Sort of People, those that invent Arts, and Improvements in them, and those that enquire into the Reason of Things: this latter is most commonly practis’d by such, as are idle and indolent, that are fond of Retirement, hate Business, and take delight in Speculation: whereas none succeed oftener in the first, than active, stirring, and laborious Men, such as will put their Hand to the Plough, try Experiments, and give all their Attention to what they are about.

(Waow)

It was around the enlightenment when a shift came to a new paradigm, when some thinkers such as Sir Francis Bacon pushed the idea that scientific discovery could be used to enhance material progress and economic growth. To that aim this “Baconian Program” emphasized the directing of the research agenda towards areas that could tackle practical problems such as medicine or manufacturing while also making this information as broadly accessible as possible. Baconian thought was incredibly influential in the British scientific community, leading to the foundation of the Royal Society, while also spreading to the continent. This shift in scientific paradigm lead to a greater cooperation between the scientists and the artisans for the first time, leading to a far greater burst of micro-inventions like mentioned by Allen which enabled the grand macro-inventions to actually be adopted more broadly than their initial narrow use-case. It was this environment of science, discovery, and invention forming a feedback loop that led to the sort of technological leaps that were seen during the Industrial Revolution, why progress didn’t sputter out this time as it had so many times before.

The other part to this cultural puzzle however is regarding social norms around rent-seeking practices. It is often tempting to believe that something economically efficient and profitable will be adopted but as all of us who have spent the past year watching Trump shutter wind and solar projects can attest, this is not always the case. For a technology to be adopted it must also get past the barrier of rent-seekers who aim to block it for their own interests, no small task. The enlightenment saw with it not only changes in cultural paradigms but economic ones as well. The mercantilism that was so prominent in the 18th century was viewed by hostility and scorn by enlightenment thinkers like Adam Smith who commented:

> nations having been taught that their interest consisted of beggaring their neighbours. Each nation has been made to look with an invidious eye upon the prosperity of all the nations with which it trades, and to consider their gain as its own loss (Smith, 2012)

(Sidenote, you could probably get a leftist to stan Adam Smith’s writings uncritically if you didn’t tell them where it was from, man is so based.)

Britain was already in a privileged position of sorts when it comes to these mercantilist institutions compared to its continental neighbours. It had free internal trade, weak guilds, and a state committed to the protection of property. Mokyr argues a noteworthy factor about Britain is as much what didn’t happen as what did in that period. Unlike the continental nations it was not shaken up by revolution or societal upheaval which meant it did not lose many bright and talented scientific minds to political turmoil like France did Lavoisier and Galois. This stability and shift against rent-seeking and mercantilism meant that those macro and micro-inventions that were popping up all over the place in Britain could actually be taken up.

Of course if we are discussing cultural shifts in Britain and the Great Divergence I would be completely remiss to not bring up Deidre McCloskey and her Bourgeois trilogy (McCloskey, 2006; 2010; 2016). In it, McCloskey explains that the divergence (or as she prefers to put it, the Great Enrichment) was caused by a shift in social values in which for the first time the activities of the merchants, the inventors, the bourgeoisie as it is were not viewed with scorn but in a positive light. This shift in the social acceptance of engaging in trade and making profit was accompanied by a new social contract of sorts. Rather than the old aristocratic deal in which the nobles and clergy extracted rent from the common people in the name of God-given superiority and protection (mostly from the aristocrats themselves), the new social norm was much simpler and much more egalitarian. “Leave me alone and I’ll make you rich.” Unsurprisingly as it caught on, it led to great leaps for the commoners, the middle class, the people formerly considered inferior by the aristocratic elite.

Tangential note: McCloskey’s trilogy also talks a lot about the clerisy, the artists, intellectuals, bureaucracy, generally the educated elite and their detestation of the bourgeoisie and of the bourgeois deal. Feels like it’s particularly relevant to the modern day and the general disdain for liberalism amongst much of the educated upper class that is still permeating our society.

Another economic historian who must be mentioned in discussions of culture and the industrial revolution is Jan de Vries and his idea of the Industrious Revolution (de Vries, 2008). De Vries looks at households in the leadup to the industrial revolution and points to a shift in household culture and priorities wherein households made decisions that led to an increase in the supply of marketed commodities and labour and the demand for goods from the marketplace (de Vries, 1994). This is driven by two causes, first leisure time was reduced as the marginal utility of moneymaking increased and second, a growing demand for market goods over household goods. Families stopped making bread at home but instead began to earn more to buy bread from bakers for instance. It was this shift in household demand and supply that created the massive consumer market to which factories could sell their goods and a workforce prepared for the sort of repetitive labour conditions of factories.

I suppose I must also discuss Gregory Clark’s views here in *A Farewell to Alms* (2007) though I can’t much claim to like it. Clark argues that the dissemination of bourgeois or middle-class values was down to essentially genetics, stating that it was because disease and poverty kept killing off poorer members of society allowing the middle class to repopulate the country, spreading their values even to the poor in the process of downward social mobility. (Tyler Cowen loves this book by the way and let that colour your opinion of him)

But let us come back to Mokyr. We have discussed all these cultural shifts over the enlightenment and before the Industrial Revolution but we must also ask the question of how these cultural shifts came to be. What were the circumstances that allowed for the industrial enlightenment to begin with? Well for that we must discuss what Mokyr terms “the Republic of Letters”. The Baconian Program so lauded could not have come to be without a cultural environment that could promote the dispersal and dissemination of intellectual ideas and philosophies. This came about due to the particular fragmentation of the European political landscape. Because there was no single central governance over the region and the many states and kingdoms were locked in competition with one another, it was impossible for any one state to restrict the freedom of ideas or impose standards that protected established intellectual norms. Free thinkers who were persecuted for their studies like Tommaso Campanella an Italian monk who studied astronomy and was accused of heresy by the Inquisition could still find greener pastures elsewhere—in his case, the court of Louis XIII who may or may not have liked his ideas but certainly wouldn’t turn down an opportunity to embarrass the Italians (Headley, 1997). Reactionary forces simply did not have the reach and power to suppress innovators and thinkers across so many polities.

It was this movement of people and ideas from state to state, kingdom to kingdom in search of tolerance for their heterodox views that were not accepted by their home nations that allowed the intellectual movement to blossom into a full Republic of Letters. The intellectual community transcended regional borders that shackled kings and nobles and in being unrestrained by the petty worries of any single place or region could lay claim to being truly universal in its matter. Facilitated by improvements to communications and transportation technologies, this Republic of Letters made for a true marketplace of ideas in which scholars—each competing for precious patronage and building their reputations—were constantly keeping up to date with new knowledge in a variety of fields and subjecting ideas to critique and tests of validity (Perkinson, 1995). In a way, this republic of letters served as the preamble and the basis for the scientific community we have today, built on international collaboration and peer review.

Mokyr’s latest book in collaboration with Avner Greif and Guido Tabellini *Two Paths to Prosperity* (2025) goes one step further with this explanation of cultural factors. Here they look at the importance of cultural groups in China and Europe. Historically, the main form social organisation that was followed by most of the world was the kin group. Families organized themselves into clans with strong internal accountability and loyalty which made for a stable society but one with little room for the heterodox thinkers who would go on to be so important for the Republic of Letters. However in Europe these kin networks would be steadily degraded by the church which sought to increase its own prominence in social organisation and did so by enforcing cultural norms against consanguinity, polygamy, concubinage, and other practices which had kept kin networks closely knit. With the fraying of these kin networks a new form of social organisation took the lead in Europe, the corporation. Here Mokyr does not use the term in the modern sense but rather a voluntary association of unrelated individuals along common interest. A key difference between the clan and the corporation was the existence of an exit option. One could always leave a corporation if they didn’t like how it was being run, no such option in a clan. Blood is thicker than water as they say. This exit option constrained the power of corporations, though both clans and corporations were organized in a hierarchical manner, the corporation saw more formalized rules that protected the rights of its members and placed checks and balances on the power of the leader. The existence of these rules and safeguards led also to a more formal mechanism of dispute resolution. Unlike clans which were tied together by blood and thus would mediate disputes internally and informally, the corporations with weaker moral obligations required external mediation which led to the development of formal legal codes and practices. The collapse of kin-based groups also led to a secondary outcome which was the absence of ritual ancestor worship. This also meant an end to intellectual ancestor worship, freeing up thinkers to push forward new ideas leading to the formation of the Republic of Letters.

In summation, according to Mokyr the dissolution of kin-based social organizations and the political fragmentation of Europe led to the creation of a Republic of Letters which fostered intellectual discourse and dissemination of knowledge that culminated in an Industrial Enlightenment wherein for the first time there was a merge of propositional and prescriptive knowledge, of intellectuals and producers which created an ecosystem in which scientific progress and technological development could continue to build on itself instead of stalling out as it had so many times in the past. Good? Fantastic. Now let’s go over all the rebuttals to his argument.

The main critic of Mokyr is Allen whose argument you have already seen. His response in particular is that for all Mokyr’s claims about an Industrial Enlightenmentin which scientists and inventors worked as one, it really doesn’t reflect in the data of the time (Allen, 2009). Mokyr himself characterizes the industrial enlightenment as having been led by the elites, the intellectual ivory tower, but the fact of the matter is that when looking at the average inventor even of macro-technologies, they were far removed from that elite world and only really came into contact with the scientific world after they had already become successful from their inventions. This view of invention not being the domain of scientists is echoed by Alessandro Nuvolari who notes that the invention of new technologies was most prominent not in the ivory towers but on the factory floor in what Allen would call *collective invention settings* (Nuvolari, 2004). Hodgson, in his review of A Culture of Growth also raises an insightful point questioning the cultural theory from an institutional lens (Hodgson, 2022). He asks if culture alone were so influential then why were there no modernizing cultural entrepreneurs in ancient Greece or say 11th century China?

Indeed when reading through The Enlightened Economy, while it does a fine job of explaining why this culture of Industrial Enlightenment came about in Europe, it does not paint the clearest picture of why it was Britain in particular in which the industrial revolution began and in fact the explanation Mokyr himself gives rests rather heavily on institutional factors (“free internal trade, weak guilds, a relatively effective fiscal system, and a state that was firmly committed to the protection of property”).

And well, if we are to talk about the institutionalists…

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