Ideas, not capital, transformed the world

Deirdre Nansen McCloskey in Reason:

Contrary to economists from Adam Smith to Karl Marx to Thomas Piketty, our riches cannot be explained by the accumulation of capital, as the misleading word capitalism implies. The Great Enrichment did not come from piling brick on brick, or bachelor's degree on bachelor's degree, or bank balance on bank balance, but from piling idea on idea. The accumulation of capital was of course necessary. But so were a labor force and the existence of liquid water. Oxygen is necessary for a fire. Yet it would be unhelpful to explain the Chicago Fire of October 8–10, 1871, by the presence of oxygen in the earth's atmosphere.

The modern world, in other words, can't be explained by routine brick piling, such as the Indian Ocean trade, English banking, canals, the British savings rate, the Atlantic slave trade, the enclosure movement, the exploitation of workers in satanic mills, or the original accumulation of capital in European cities. Such routines are too common in world history and too feeble in quantitative oomph to explain the 30- to 100-fold enrichment per person unique to the past two centuries.

Hear again that amazing fact: In the two centuries after 1800, the goods and services made and consumed by the average person in Sweden or Taiwan rose by a factor of 30 to 100—that is, a rise of 2,900 to 9,900 percent. The Great Enrichment of the past two centuries has dwarfed any of the previous and temporary enrichments. It was caused by massively better ideas in technology and institutions.

More here.