666. This Is How Progress Happens

(dramatic music) - I am sometimes surprised at how quickly we humans habituate to progress. We're given something wonderful and we immediately want more of it and complain that we don't get it quickly or cheaper. How do you think about it? - Well, as an economic historian, I think it is my mission to tell people how good they have it. The good old days may have been old, but they weren't good. They were terrible. Joel Mokir is the professor at Northwestern University who recently won the Nobel Prize in economics along with Philippe Aguial and Peter Howett. Mokir was awarded the prize for having, quote, identified the prerequisites for sustained growth through technological progress. - It is quite clear that progress is driven by a very small proportion of the population. I would say something around maybe two, two and a half, maybe 3% of the labor force are driving all the progress. - And what exactly do those two or three percent do? - These people change culture quite drastically. - Wait a minute. - Is Mokir saying that technological progress is driven by culture? - That is not the story a typical economist would tell us, but as you will hear today, Mokir rarely sounds like a typical economist. - It's one of the great, unforced errors in history. - I mean, what we are doing is absurd. Today on Freakonomics Radio, tips from a Nobel laureate and a new way to tell the old story of progress. (upbeat music) - This is Freakonomics Radio, the podcast that explores the hidden side of everything with your host, Stephen Dubner. (upbeat music) - Joel Mokir, in addition to his regular professor duties at Northwestern and Tel Aviv University, has served as editor-in-chief of the Oxford encyclopedia of economic history and editor of the journal of economic history. His argument that economic progress is heavily reliant on culture has not always been a popular argument. - The economics profession has changed in the 50 years that I've been a card-carrying member. When I was a graduate student and you mentioned the word culture, you would be accused of being a closet sociologist and that's the worst insult you could come up with. - Mokir is 79 years old. When we did this interview, I was in my studio in New York and he was in a studio near Chicago. We had thought about rescheduling because a big winter storm was moving across the country, but technology prevailed. - I just drove into this studio and minus four degrees Fahrenheit. - You asked yourself, how did people cope with the cold in the past? And you realized how good we have it. - And suddenly we have slid right into Mokir's own research. - In the old days, he explains. - It was very, very hard to stay warm in the winter. You had one fireplace in your house and if you're lucky enough and rich enough, you could afford to buy the lumber or the coal and heat yourself. The whole family was clustering around the fireplace, breathing in smoke. And today, we just flip a button and it's not warm enough for you, dear. Okay, I raised the temperature by two degrees. - I asked Mokir how surprised he had been to get that famous early morning call from the Nobel Committee in Sweden. - Oh, I was completely flabbergasted, you know, stupified. I mean, run down the Sizzores. Every year before the announcement comes along, you know, people have lists and they argue about it and they're betting and there's all kinds of stuff. I had my list and I wasn't on it. In fact, I wouldn't have voted for me. - Why not? - For a variety of reasons. First, I know my work, of course, built on anybody else. So I know all the flaws and all the weaknesses and all the places where I've cut corners and so on. I'm not gonna tell you, but I know where they are. But the other thing is the last two Nobel prizes before me were Claudia Golden and then I was my friends Darryl and Jim, they got it for their work in economic history. So I figured, last two years, economic history and a role that's too good to be through a third year and there's no prayer for that. And so I was really stupified when this all happened. My wife said, "Well, stupified or not, we take the cash." - When I first heard that you won the prize and I read your work about the importance of what you call culture in economic progress, I immediately compared it in my mind to the work of Daron, Osmo, Gluten, Jim Robinson, who argue that institutions are the main driver of progress. I'm not saying culture and institutions are mutually exclusive at all, but I do wonder if your argument is generally that, yes, institutions are important, but that institutions arise out of culture rather than vice versa. In other words, was your Nobel a commentary to some degree, maybe even a corrective to some degree to that Nobel? - I would hope not because I'm a great fan of Daron and Jim and their very close friends, but yes, I would argue, of course, that there is a great deal of truth and institutions and culture have to be in some sense mutually consistent, but the causality probably runs as much from institutions to culture as from culture to institutions. So the notion that we can easily say, well, institutions arise out of culture, leaves out the fact as a great deal of feedback, going from institutions to culture and that cultures are very often conditional on the kind of institution that a country like that has. - This kind of conversation can start to feel abstract, but the way Mo Kier explains things, it's really not. Let me read a bit from his best known book. It's called a culture of growth, the origins of the modern economy. He writes, "The proposition I put forward here is that the explosion of technological progress in the West was made possible by cultural changes. Culture affected technology both directly by changing attitudes toward the natural world and indirectly by creating and nurturing institutions that stimulated and supported the accumulation and diffusion of useful knowledge." Mo Kier puts that in quotes, useful knowledge. He first started thinking about this kind of connection when he was young. Mo Kier was born in 1946 into a Jewish family in the Netherlands. They had survived the war, but Mo Kier's father, Solomon, died when Joel was a baby, and when he was nine, he moved to Israel with his mother and sister. - I arrived in Israel as a boy in the mid 1950s. It was poor. It was poor in almost every dimension. The infrastructure sank. The apartments were allowed. The food was barely edible. People were really struggling. You go to Israel now. GDP per capita in Israel in purchasing power parity terms. It's higher than it is in Italy and in Spain. The food is amazing. People live in beautiful homes. You can see how living standards have improved. And it is to a great extent, not entirely, to a great extent due to this incredible success of the high tech sector. And the high tech sector, the way it emerged, is in part due to better policies. Israel has encouraged this sector in all kinds of ways, not least by singling out the best and the brightest minds and giving them special treatment and encouragement and incentives to innovate. But beyond that, what Israel has is a culture in which failing is allowed as somebody once that, famously, it's not that in Israel people think outside the box. It is that there is no box. Now, it also has absorbed a very large number of immigrants. Israel in the 1990s and 1980s, absorbed a huge number of immigrants from Russia. And a large number of the successful people working in that high tech sectors are the sons and daughters of these immigrants. These are people who believe in education, who believe in human capital, who believe in innovation. So I see Israel as in many ways illustrating some of the arguments that I made what brings about success. But it also has the concerns that I have about institutional deterioration. I'm not going to get into that, but everybody listening to this show knows what I'm talking about and that there are concerns that this miracle may not be sustainable unless the institutions move in a different direction. For someone who doesn't think about this kind of thing at all, someone who doesn't think about economics, economic history, whether culture or institutions or whatever is driving progress, how would you describe your view of prosperity and how it differs from other mainstream views or explanations? You and others have argued that your description of economic progress over the centuries is a bit of a corrective to the mainstream history. What is the mainstream history though? How does it differ? And maybe I'm barking up the wrong tree here. No, I think you're up to something, Steve. And I'll tell you exactly where I am on this point. So there's two ways you can look at economic progress. The most common way is just to look at GD. GDP per capita or some proxy to that. And I have become in my waning years more and more as kept of using GDP in long-term economic analysis. It's a concept that was designed to measure business cycles in year to year fluctuations under the assumption that the structure of the economy doesn't change all that much from year to year. So comparing 2025 with 2024 was a kosher thing to do. But when you're comparing the GDP in England under Richard I with GDP under Queen Elizabeth and you compare that with GDP under Queen Victoria, I mean, that becomes very, very questionable. And the reason is that a whole bunch of new things appear on the market that is weren't around before and so the comparison becomes quite hard to make and in terms of economic welfare, the thing you have to worry about is something we call consumer surplus. Consumer surplus may have very little to do with GDP. I'll give you one example. Before the middle of the 19th century, essentially all surgery was taking place without anesthesia. They didn't know how to do anesthesia. So they made you bite a bullet. That's where the term comes from. The surgeon had about two minutes to get in and do whatever he needed to do. And if he'd lasted longer, the patient would probably die of shock. Now you go today and you think about anybody having any kind of surgery without anesthesia and it's sort of the sum of barbarism, right? So you'd ask somebody, this is the standard definition of consumer surplus. How much would you have to be paid in order to have your appendix taken out without anesthesia? You'd get a laugh. I mean, nobody's willing to do that. So anesthesia made a huge difference. Two people's consumer surplus. But if you look at GDP, it has no impact at all. It's a drop in the ocean. That's the kind of thing that I think we miss when we talk about economic progress. Think about all the things that we have today that cost nothing all the way from your GPS in your car, to all these other things that we get free of charge, phone calls, photography, all these things that used to be expensive or unaffordable and now are free. Here's the sort of paradox. If it's free, it doesn't enter GDP because since enter GDP only when they have a positive price. Eric Prenielsen makes this argument. Yeah, I'm not the first one to make this, but I'm the first one to argue with my fellow economic historians that comparing the GDP of England in 1200, was that in 1800 or anything similar, is just not making a lot of sense. So I look at your work and I see these charts of GDP per capita in Europe from around 1300 to 1800. It's relatively flat. And then as we all know, and as we're all grateful for, there's this hockey stick. Yes. Just takes off. If I didn't know better, I could make up a bunch of theories, but I'd rather hear your explanation. So what caused the hockey stick? And what I really want to know is how much or how well you think those drivers are still in place today. There's no single driver of economic progress. But clearly over time, this interactive joint effect of science and technology becomes larger and larger. There's some debate how big it was at the beginning of the Industrial Revolution, but clearly over the time of the Industrial Revolution between say 1760 and 1830 and in the subsequent century, the importance of technology becomes greater and greater and greater. And so you think about what happens between 1850 and 1914, okay? It's when electricity comes online. People knew basically what electricity could do, but I didn't know how to do it. Very much like nuclear fusion, right? We know it can be done, but we don't know how to do it yet. So they had the same thing with electricity. And then in the late 1860s, early 1870s, they crack it. Once they start generating electricity fairly cheaply, then you get the light bulb and heating and cooking and appliances and so on and so forth. The same is true for steel. So steel becomes a major, major component of economic growth in the sense that steel allows us to build much larger ships, which then of course can make transportation much cheaper. People knew how to make steel since days in memorial, but it was expensive. The trick was not just to make steel, but to make steel that was of acceptable quality cheap. And that's what the best summer process basically made possible. And that comes around 1860. The third thing I think is chemicals. Once more, you can see how this slowly emerges in the decades before. So modern chemistry is essentially invented in France in the 1780s and 1790s. And then slowly people start to discover what they can do with this knowledge of chemistry that keeps expanding. And particularly when organic chemistry is developed in Germany in the 1830s and 1840s, again, a whole bunch of applications become feasible. So it's this convergence of a whole network of flows of knowledge that come online, roughly speaking at the same time, because people, A, have convinced themselves that as Francis Bacon told them the application of science of technology is the way to make us rich. But they also learn how to do science, which is non-trivial. I mean, sure, we talk about the scientific revolution of the 17th century. We talk about Galileo and Newton and the cartoon people like that. But the truth is that the application of systematic physics, chemistry, biology, physiology, and on and on, all of these things start converging together in the second half of the 19th century and that's when you get your explosion. It isn't just technology because once you got better technology, you have more trade because the ships get better and faster and safer. Once you get faster and safer ships, transportation gets better. That means that you can trade more. And so all of a sudden, the price of food falls in Europe, sometimes known as the grain invasion. Huge amounts of cheap grains transport from the US and from Canada to Europe. Refrigerated ships start bringing in beef from Argentina and mutton from Australia and all of a sudden, Europeans start eating meat because the price of meat falls. The same ships that bring meat from Argentina can bring butter and eggs from Denmark. By 1914, people discovered that they eat so much better than they did in 1850. Now, you would say, well, people get used to this fairly quickly and therefore they're taking this granted. And that isn't a little bit how humans are. And that's something that we economists can change. Diminishing returns aren't just financial. They're also entased and appetite aren't they? Don't you think that what you're describing? Like I called it habituation, but it is diminishing returns, isn't it? So yes, once you have your belly full, your appetite has declined. And once you have nice clothes on your body, by more clothes isn't going to keep you any warmer. But there's still a whole bunch of things that the human race really needs and that are still in the future that require technological solutions. I think people don't quite realize that. All the people say, well, we've grown enough and maybe we should stop growing and you know, what else do we want? But we are facing incredible challenges in the next 50 years. And if we don't solve them technologically, we won't solve them. Let's talk about those challenges. Climate change, I know is something you consider a legitimate, potentially existential threat. I think climate change is an existential threat, not that the human race is going to be wiped out the way dinosaurs were wiped out. But because of the side effects of climate change, can we really move, you know, 50 million people from Bangladesh to Manitoba? The answer is probably no. That is where I'm really concerned that climate change not only will make life more difficult, but will disrupt international relations and make conflicts between those who get better from it and those who suffer from it more likely. So I am really, really worried about that. On the other hand, I've heard you say that if the past is any indicator, we will arrive at the technology and in fact a lot of the technologies will arrive at a already well underway that will for stall or blunt that problem, yes? Well, it will mitigate it and it will allow us to adapt. But I don't think given how much CO2 we are releasing in the atmosphere that we could actually stop it. Now, what is true, one of my co-winners this year of the Nobel Prize, there were a bunch of chemists there who pointed out that what they had discovered actually allowed the storage of enormous amount of carbon dioxide from the atmosphere and put it in what they call the empty spaces between molecules. I'm not sure how that would exactly work. And they didn't wear all that sure either, but they just knew it was possible. Some people seem to see AI as an existential threat as well, although the opinion on that changes from day to day, depending on who you're speaking with, from what I've heard you speak about AI, you seem to. I don't want to say you're sanguine about it, but you seem to embrace it as another technology that will lead to gains that we can't even imagine. Now, with some sure some downsides, but what's your overall view as of early 2026 of AI? Every technology has a downside. When early humans made their first hammers and ashes, They had it down, so I make a bashed on his head, and then they did. The first two brothers, right? It doesn't end well. Oh, absolutely. I've cited Abel and Cain repeatedly. I am fully aware of the fact that AI could be misused, and it probably is already being misused. At the same time, it's also quite clear that in terms of its potential in speeding up scientific development, AI is going to be one of the greatest revolutions, maybe since the invention of the printing press, or certainly since the invention of the computer. I'm not sure if I live to see it, but one of my great hopes is that education will become personalized, and that instead of having this one size fits all, teaching that I still engage in, I'm standing in front of a class and I lecture to them, and I'm sure that the top 10% of the class are bored out of it, or which because they know it all, and the bottom 10% are bored out of their which because they have no clue what's going on, and I'm talking to the people in the middle, but I don't know if I'm talking to the middle, 60% or the middle, 20%, I have no idea. I just talk and hope for the best. What AI will allow us to do is to customize the teaching to every student according to her needs and her capabilities. The same will be true for medicine. So again, lots of medicine is built on the idea that one size fits all, so we all give people a medication depending on their disease and say, well, this works for 70% of the population. Well, am I in the 70% or am I not? Well, let's try to see what happens. That's not optimal. I've heard a variety of people in healthcare especially, and some in education say that medicine and education are the two fields that have been almost impervious to technological progress. What is it about those systems that have led them to be so sclerotic? Let me first of all disagree with you slightly. What you're saying is far more true for education than for medicine. The progress in medicine has been mind-boggling. In 1850, doctors were still bleeding patients for infectious disease. And if you look at the things that people died of, even as late as 1890, by far infectious disease was the highest cause of death. But today, infectious disease is 4/5 in the list. I mean, we're dying of cancer, we're dying of heart and circulatory disease. So we have made enormous progress. You are correct about education. And here I would invoke what knows, Bommel's laws. Will Bommel, with a famous economist, a Princeton and a good friend, will point it out that there's certain areas that are almost impervious to technological change because they're essentially dependent entirely on labor with very limited tools. And his example was a string quartet. How can you have technological change in a string quartet? Well, people play faster. That doesn't make it any better. It still takes, you know, 40 minutes to play a bit of a string quartet in education. Yeah, we use tools and we use instruments. But fundamentally, it's a labor-intensive field in which the interaction between students and the teacher is very hard to substitute for. Presumably, AI could be a big help in that if AI can be used to take care of wrote knowledge, right? We don't have to sit in a classroom. It remains to be seen. Of Carl Popper said, you know, if I could predict the course of invention, I would be the inventor myself. Looking up, Joel Mokir may be an optimist that doesn't mean he is not concerned. I get really, really worried that I have brought grandchildren to this world. And if you want to learn more about how Bommel's Law works in theater, check out the series we made last year called How Is Live Theater Still Alive? Episodes 629, 630, and 631. I'm Stephen Dubner. This is Freakinomics Radio. We will be right back. Joel Mokir is a lot of fun to talk to if you like economic history. You can ask him pretty much anything, and he will summarize and then lead you down a very nice rabbit hole. For instance, I'd ask him about the market for potatoes during the Great Famine. One of the things that was problematic in Ireland is that the markets for potatoes are very thin. And one reason for that is that potatoes are very expensive to transport because raw potatoes are 82% water. And so when you move them from one place to another, you move them mostly water, which is heavy. And remember, this is an agent which land transportation was still quite expensive. It's the beginning of the railroad age to be sure. But the other thing about potatoes is that the way they were moved in these big bags, they bang against each other. And when they do, they start going bad. And so in fact, the vast bulk of the potato crop in Ireland was actually eaten by the people who grew them. They weren't traded at all. They weren't bought in the market. This was still to a very great extent, a subsistence food grown by the people who ate it. All this descriptive conversation we're having is fantastic and fascinating. I love it. I wonder if you care to try to be a little bit prescriptive, like if I would ask you what the US and others around the world can do right now to encourage the kind of culture that you write about to produce more innovation, more invention, more prosperity, more peace. Do you have any tips Joel? I have many tips. Let's have them. One of my big gripes against the Western world today is the attitude to immigrate to immigration. I tend to be something of a libertarian about immigration. I want people to be able to migrate across international boundaries, not entirely unlimited, but certainly far more freely than they have been so far. I would for instance, I seriously propose this. I thought there would be a fantastic opportunity when millions of Syrians fled the Syrian civil war to let them go to Russia. You can't say there was no space in Russia. The Russians are not actually replacing themselves. Their fertility rate is quite low. They are suffering from manpower shortage. These Syrians actually wear many of them were well educated, trained, you know, engineers, pharmacists, doctors and so on. But they would learn Russia, and I'm sure, well, they should be basically embraced them and let these people come in, but they didn't. They did let Assad in eventually. But I think we in the United States, I think, are current attitude to immigration. It's simply disgraceful, but it is worse than disgraceful. It is self-defeating. It's one of the great, unforced errors in history. I mean, what we are doing is absurd. The people who want to move to America, from Central America, or from the Middle East, or from Africa, are people we should want. They are people who want to work and want to send their kids to college. They will pay taxes. They will pay social security. We want these people instead of chasing them, you know, down the streets. And Minneapolis and putting them in camps and deporting them to God knows the remote places. Who would support that policy? And it isn't just us. The same is happening in Britain, same is happening in France and Germany, and certainly in smaller countries. There is this sense against immigrants. I guess in that sense, I'm a multiculturalist. I'm perfectly comfortable living in a place where people look different, talk different, eat different, and living in Skokie, Illinois. Half the people in my streets speak Arabic or Hebrew or some various African languages. It doesn't bother me at all. It's kind of nice. I mean, I don't have to. I necessarily have them all for dinner, but live and let live and they create jobs. The notion that, by the way, immigrants commit more crimes than native born is a complete falsehood. Oh, the statistics show the opposite. It is also true that lots of proportion of them belong to that right tail of the distribution. I just saw the fair amount of research that showed not only that immigrants file more patents, but their patents are better by all kinds of mentions of patents like citation and how many of them actually carried out. Their average patent made by somebody who's not born in America is twice as good as a patent found by an American born person. You argued that for new ideas to thrive, you need a culture where failure is allowed. I'm curious how you would assess the US over the past 100 years in that regard. To me, being an amateur, I would think we might be at the top of the heap there. I've heard people describe how US bankruptcy laws, for instance, contribute to a high level of innovation because if you try something in failure, you can start over. Many places you're done. You remind me of the famous interview given by Thomas Edison when he was working on the Indicandescent Lightbulb. Some journalists ask him if he had the results and he says, "Yes, man, I got lots of results. I know 5,000 things that don't work. You need a society where people are allowed to fail. Here is an interesting footnote to that. One of the reasons why the industrial revolution succeeded in England, not the only one. The most important one, particularly the contributing one, is in fact that in Britain, even if you fail, you will not starve. Beg a Britain has a poor law that's in force until 1834. If you look like you're going to starve, you're a local community, your local parish is in charge of making sure that you don't starve. So you are more willing to take risks simply because if you fail, at least your kids will not starve to death. I think that is a really important component of technological dynamism to allow people to fail. That is a great feature of the American economy, but it's true for many other countries as well. Do you feel though that the runway has gotten shorter in this country? - I don't know. It's a very good question. I don't really know that. What is true is that technological change is accelerating. That actually worries me a little bit. In the past, technological change has accelerated as well, of course, but it was always slow enough to allow institution to adjust. This actually, in some ways, another parallel with the theory of evolution. What the theory of evolution essentially says that changes in the environment will induce adaptation. And so species can adapt to changing environments, provided the changed environment aren't abrupt. If they're very abrupt and very radical, then the species will go extinct. When an asteroid hits the earth, then all the dinosaurs will go extinct because the environment changes enormously in a very short time and a lot of time. But mammals in the subsequent period adapted to a lot of changing environments. And here we are, we're still around. - Yeah, so what's the asteroid today for humans? Is it AI, is it social media, is it climate change? - No, nuclear weapons. Nuclear weapons, absolutely. That is a threat that is going to get increasingly serious over the next years because I don't actually think they were doing a very good job at stopping proliferation. This is a world that is now nuclear armed and you can see why I sometimes wake up in the middle of the night and I go, oh, you know, what the hell, things don't look good. That's what really scares me. That wasn't the case in the 1980s, particularly, you know, you're worried about a nuclear confrontation with the Soviet Union, but deep inside as we knew, if we survived 1962, we're gonna survive anything. Never gonna happen. It didn't. But this is a different world. And people talk about the dangers of multilateralism and the kind of, you know, world-ordered, we created after 1945 and my response to that is, man, you're gonna be nostalgic for that world because that was a world in which we prospered and in which the bulk of humanity lived in peace and the guy like Steve Pinker can write a book in which he points out, you know, violence is on its way out because it's uncivilized and it's the brilliant book, but it is a little bit naive. So what's something that you believed for a long time to be true that you changed your mind about? The last 15 years perhaps have tempered some of my optimism about the future. For a long time, I believe that humanity, remember I was born after World War II, I was born in an age of multilateralism in an age in which things like, you know, xenophobia and anti-Semitism were confined to a few small corners of the world. The world finally had learned its lesson from two world wars and they realized that cooperation, collaboration between nations would bring about prosperity and you see these successful multilateral organizations like the EU or NATO or even to some extent United Nations and you say, well, you know, the age of barbarism is over. And you economists were talking about what you called the great moderation that all that volatility was gone. We'd never seen other crash and other depression. Absolutely. And that technological change was going to continue and then we would get richer. And basically, you know, we were moving towards some kind of utopian world that people in the past could only dream about. The person that always was skeptical that was my great teacher, mentor and friend, Douglas Norse, who always used to say, you know, "Jolt, there's a reason why we in economic history talk about technological progress but institutional change." The implication is that technology really moves more or less monotonically better because it's cumulative but institutions sometimes get better and sometimes they get worse. For a while, they got better, particularly in the years after World War II and again, after 1989, with the collapse of the Soviet Union, but certainly the 21st century has shown us how institutions can degenerate fairly quickly. And I'm not saying anything about the current government in the United States, but you look at certain characters who have emerged in the last 20 years and who really show you, you know, that we've made probably very little progress compared to the days of Julius Caesar or Jingu's Khan. In that sense, I think I have tempered my optimism about humanity's future. You couple that with the continued technological progress and you start worrying about the growing gap between the quality of our capabilities and the quality of our preferences and our drives, particularly among politicians and rulers. I get really, really worried that I have brought grandchildren to this world and that this world may not be necessarily as good as I had hoped it was going to be in the first 30 years of my career. If I listen between the lines a bit to what you just said, what I'm hearing is that for all the importance of culture in driving progress for all the importance of institutions in driving progress, that human nature itself may be the barrier to perennially overcome. It may well be. I don't know enough about human nature. I've never studied anything like anthropology or psychology or anything like that. The economist Luke at Homo economicus and somebody who is maximizing utility or maximizing income or profit or something like that. And that's really a very small sliver of what we humans are like. But it's not just human nature. It's the structure of society and the nature of power. And why is it that we are so unable to create a state that seems to be what enlightenment thinkers had in mind? Why is it that we continuously see people rising to positions of power who have no business being there? I don't know if you've followed or read much about Sati Nadella, the CEO of Microsoft. But one thing that really impressed me about him is that when he took over that company, that was a company that was built on what people described as a sort of ruthless competitive practice, right? Any competitor in any arena, they either wanted to beat them or avoid that arena. And instead he came in and said, you know, history may be competitive, but the future is collaborative. He changed the nature of the way Microsoft did their business and it's succeeded wildly. I sort of maybe naively read that as a microcosm of the world, which is that yes, of course, we used to all compete for scarce resources, but resources aren't scarce anymore. They're just not as you noted about food, clothing, et cetera, but it feels as though we're trying to run modern software but our hardware is still old-fashioned competitive. Have you seen anything in your studies that might shed some light or give some hope on that front? So here's something to think about. Competition that is beneficial needs to play by rules. Firms, for instance, compete with one another on price, and on quality and on advertising. And as long as they do that, they're fine. What is not allowed is dynamiting your competitor's premises, right? The rules exclude that. So as long as everybody plays by the rules, that's fine. The problem is that the rules have become a more and more vague and people violate them left, right, and center. And that, I think, is where institutions really come up. Do we play by the rules how much are these rules enforced? We had a rule in the international community that thou shalt not invade another country that's smaller than you in order to annex them to your country. And now comes a guy like Vladimir Putin and he blatantly breaks the rules and he gets away with it. And that is a bad signal. And so I don't know what is going to happen with Taiwan. I don't know what's going to happen in other places in which this kind of thing threatens. But those rules, all of a sudden, are no longer enforced or enforced very poorly. And that is what I call institutional deterioration. It happens at the state level, it happens at the federal level, it happens at international level. We no longer compete by the rules. I mean, you're pointing out the negative possibility. But let me go back maybe a thousand years. This is about what you've written about, what you call the great divergence. If you look at China, the Indian subcontinent, the Ottoman Empire, they were way ahead of Europe in many ways. And then the script flipped. You've spent most of your career explaining why the script flipped. So if you could take a step back from today, which is a chaotic period in part, because we hear about every piece of chaos immediately. And that's because our communication has changed. Can you try to overlay that script flipping onto today and describe or envision a way in which the path forward is actually a more positive one? Oh, sure. I don't know if the current setbacks are a blip or a trend. You never know that until you actually go throw it. I mean almost nothing in history is really inevitable. In that sense, I'm very much opposed to Marxism, which really sees history as being driven by this huge, impersonal, powerful forces, glass struggle. I think very few things are inevitable. Certainly World War One. I mean, there's really no debate here. It was a war that could have been easily averted. We've always played these games of one who had been in the Gabbriel, Prince Gunt would have misfired or the Archduke's car hadn't made this fatal U-turn on the streets of Stereo-Yev, or you know, I mean, it's quite possible that the world would never have happened and then we'll be no Hitler, no Stalin, no Holocaust. I think the same is true for lots and lots of other things. History is contingent and not only in their things that were not inevitable, but even more powerful, lots of things did not happen that could have happened. When you think of an example in history where we were in a similar situation where rules began to be ignored, but then the rule bound order was recaptured. Maybe the best example is to look at the long 19th century between the Battle of War and the beginning of World War One. You have 100 years in which basically the European powers decided, and this is for Europe alone, they decided that we would essentially collaborate and solve problems by going to Congress. Now, it's not a perfect world because the world was enforced only between European nations, the non-European world, of course, was free game and so European essentially divided Africa between them and imperialisms of the name of the game. So, I mean, in that sense these things can turn and be reversed, but there are many other times in world history in which that doesn't happen and many decades of misery ensued. In the example Mokir just gave, you will notice that the reward for collaboration was that the European powers got to divvy up Africa for colonial conquest. This was obviously a win for the Europeans, for the Africans? No. So, are the new models of economic collaboration more fair-minded? We'll talk about that after the break. I'm Stephen Dubner and this is Freakonomics Radio. You are what's called a university professor at Northwestern, which I gather means that you basically don't have a boss and you're nobody else's boss. It reminds me a little bit of what I've heard you talk about in the economy from five or eight hundred years ago. Most people did work for themselves essentially, but these days your situation is a bit of an outlier. We rely most of us heavily on the corporate world to provide our goods and services. So I wanted to ask you what you think are the positive and negative attributes of having an economy so driven by corporate culture as opposed to individual or artisan culture? Well, I would like to point out of the words that people who are working hierarchical structures, that's not just the corporate world, it's the same as the government. And it's so, and if you work for a non-profit, so it's true that at Northwestern, the professors basically are almost self-employed. You design your own courses, you do your own research, you do your own publication. So yeah, I'm a lucky guy because life isn't college professors. It's probably the best job in the world. I would say you're part of what you economists call upper-tailed people. I think some people would find this a little, you know, difficult to swallow. You write that economic growth isn't driven by the masses. It's driven by a pretty tiny segment of the population. And these are in the knowledge and technology parts of the economy. The share of people in any population who devote themselves to pursuing knowledge is very small. So I wonder how you think about that if you compare 400 years ago to today. So many things have changed. The university systems have changed. The digital revolution has made the pursuit of knowledge so much more accessible to so many people. Do you still feel that most growth comes from, you know, a subset of a subset of upper-tailed people? No, absolutely. It is quite clear that progress is driven by a very small proportion of the population. This is true for almost every field of human endeavor. I mean, is literature created by the masses or is it written by the few who actually write novels? And music is driven by the masses. No, it's driven by a very small proportion who write music in a slightly larger proportion of people who play it in symphony orchestras. It is true for painting. It is even true for sports. Everybody maybe plays some football or basketball in their backyard. But, you know, the sports of yoga, the watch is run by the guys who are in the upper tail of the distribution. And then if you look at people writing 300, 400 years ago, they were saying actually the same thing. But when you're describing sports and the performing arts and so on, these are what you economists like to call tournament models, right? There's a pyramid many people pursue. But when we're talking about something as important and long-lasting as progress, innovation, invention, and so on, my sense is that a lot of people like to think that we're all contributing. All 80 or 90% of us who are really putting our shoulder to the plow every day in some way. But what you're saying is that without the knowledge industry is interacting with the technology and the structural ecosystems in whatever industry we're talking about, it just wouldn't happen. And I find that that argument rubs against a sort of anti-elitist argument that's in the wind these days, whether it's in the socialist leaning politicians in the Democratic Party right now, whether it's some of the far right of the Republican Party right now, I feel like your argument about the drivers of economic progress over the centuries might smell wrong to them. And I'm curious if you ever run into that. It is a historical truth that a lot of people find somehow hard to accept because it really says that the vast bulk of humanity didn't really contribute all that much to progress. My answer to that is, well that's fine. As long as they are made to enjoy the fruits of progress, why would they care that the germ theory was invented basically by two Europeans and not by millions of them, we all benefit from the inventions of Louis Pasteur and Robert Koch. I don't really care that maybe 90% of all the classical music that I listen to was written by 50 composers, every member of the human race can enjoy it. And so if life expectancy, which is a measure of everybody, right, that's an average on the entire population, if life expectancy increased from 35 in the beginning of the 19th century to 82, which it is today in Europe, you know, the fact that it's generated by small people and enjoyed by everybody else, that may just be one of the constants in history that's going to always be with us. I see nothing wrong with it. As long as the fruits of these efforts are spread to everybody and shared alike and they are not. That is a much bigger concern. If you look at Nobel Prize winners over the past century, the share of Jewish winners is wildly disproportionate to the share of the population. On the other hand, as you point out, Jews are under represented in the pantheon of great inventors. Why do you think that is? When I first discovered it many decades ago, I really found this amazing. There's something really paradoxical about the history of the Jews, particularly in Europe. If you look at the evolution of science and technology in Europe, between 1415, 1750, there are no Jews. There's no Jewish Galileo, there's no Jewish livenants, there's no Jewish Newton. The only Jew who made a real impact was Pinosa and of course the Jewish community ostracized him because he was thinking too much out of the box. This is society that's totally backward looking. They were intellectuals, they were learned, but they were learned in the wisdom of the past, not the present. They're certainly weren't pushing the envelope. Their contributions are no. That starts to change in the 19th century and in the 20th century you get the Einstein's and the Airelecs and all these people. At that point, not only the Nologam behind everybody, but they climb ahead. You look at the contribution of Jews, say to the German supremacy in chemistry and medicine, both before and after World War I. It's totally amazing. And then in 1933, the idiot Nazi regime kicks all these Jews out and German scientists never really recovered from that. Good for the US though. Good for the US, but it was an unbelievably stupid thing for the Nazis to do and they should have known better because they didn't gain anything from kicking these Jews out except some kind of feeling of satisfaction than we got rid of people we don't like. But there were major Jewish inventors who served Germany extremely well. The most famous example of that is this man called Fritz Haber. So Fritz Haber cracked one of the greatest problems of the 20th century which is how to essentially fix nitrogen and turn it into ammonia from which then can be used to manufacture fertiliser and explosives and the whole body of other things. And it was thanks to his invention that Germany could stay in the war. In the acknowledgments to your book, A Culture of Growth, you write that much like Rabbi Akiva, you learned the most not from your teachers or peers, but from your students, I find that personally to be an inspiring idea. Well, thank you, Rabbi Akiva. I'll thank you a little bit because you're transmitting it from generation to generation. Can you talk about that? What have you learned from either your students or teaching how has it changed you? Oh, I can't even start to list these. I mean, it's huge. For me, I'm very fortunate. I've had really, really brilliant students. Okay. I have students who are incredibly smart, who knew literatures that I didn't know, composed ideas that I never thought about. It's been mind bogging. And then the ones that come to economic history, they come and talk to me, they're not the mathematicians, they're not the technicians, but they have true intellectual interests that are wide ranging, history is an infinitely large ocean. So they know lots of things I don't know. And so I learn enormous amounts from them. And I still do every day. I really consider myself unbelievably lucky to have had that opportunity. This was a lot of fun and I learned a great deal and I feel like I should let you get home and have some hot chocolate. The main thing I have to do now is actually make sure my car starts in minus four degrees. We heard later from Joel Mokeer, the car started and he made it home fine. We will be back next week until then take care of yourself. And if you can, someone else too. Freakonomics Radio is produced by Renbud Radio. You can find our entire archive on any podcast app also at Freakonomics.com where we publish transcripts and show notes. This episode was produced by Zach Lipinski with help from Dalvin Abouagie and it was edited by Ellen Frankman. It was mixed by Jasmine Klinger with help from Jeremy Johnston. Thanks also to Dan Wong and Chad Severson for their help with research. The Freakonomics Radio Network staff also includes Augusta Chapman, Elinor Osborne, Elsa Hernandez, Gabriel Roth, Elaria Montenacort and Teo Jacobs. Our theme song is Mr. Fortune by the hitchhikers and our composer is Luis Guerra. As always, thanks for listening. Everything I say will be fact checked. Well, within reason, I mean, if I make up Iceland and Greenland, will you catch it? Oh, no, no, no, no, we leave that. We amplify that. And then next year, you get invited to Davos. The Freakonomics Radio Network, the hidden side of everything. Stitcher.