|Author(s):||Norberg, Johan |
|Reviewer(s):||Mokyr, Joel |
Published by EH.Net (January 2021)
Johan Norberg, Open: The Story of Human Progress. London: Atlantic Books, 2020. 440 pp., $25 (paperback), ISBN: 978-1786497161.
Reviewed for EH.Net by Joel Mokyr, Department of Economics, Northwestern University.
Johan Norberg is a Swedish writer of books aimed at an educated and curious but not specialized audience, in the tradition of writers such as Matt Ridley, Robert Wright, Steven Pinker, Carl Sagan, and Daniel Dennett. He wears his opinions on his sleeve: some of his previous books have titles such as In Defense of Global Capitalism and Non ce n’était pas mieux avant [No, it was not better in the past]. Historians of capitalism, looking for a politically-correct whine about the evils of modernization and a denouncement of triumphalism, please stay away. This is the Cato Institute speaking. He has written a sprawling, wide-ranging, ambitious book with a powerful message. It contains little new information, but the argument it advances is worth restating as he does in this eloquent volume, even if one suspects that the book will be read mostly by people who are already in his camp.
Norberg has read widely, if perhaps a bit with a broad brush. He has a message based on his interpretation economic history, as well as from evolutionary and experimental psychology, with smatterings of political science, sociology and anthropology. He has no time for ambiguities, qualifications, and nuance. There is little in this book in the style of “on the one hand … but on the other.” The message can be expressed succinctly: open-ness leads to progress, and progress is what we want. He defines “open-ness” in its widest sense. In Norberg’s view, it is not just trade in goods and services that matters, but the free movement of people, knowledge, ideas. Moreover, he points out that openness also implies pluralism, diversity, and a competitive, open-access market for ideas. When those were in place in the past, economies thrived. When societies closed up, chased out strangers, terrorized dissenters, and suppressed innovation, their economies stagnated.
Most economic historians would agree with him, if perhaps a little more cautiously. The gains from trade and specialization (“Smithian Growth”) and the long-distance diffusion of ideas were clearly engines of growth of the most successful pre-industrial revolution economies, and even today, globalization is a major driver of modern growth. There are costs to trade, and there are inevitably losers when mobility increases, but Norberg is convinced correctly that the benefits outweigh them. Few economists would dissent, although the benefit/cost ratio of 20:1 that he asserts (p. 270) is not documented, and this reviewer could find no support for such an estimate.
Norberg draws heavily from many of the most influential scholars in economic history that support his views — not least from Deirdre McCloskey, by far the most influential and deepest-thinking libertarian in our profession. I suspect that she would find little to disagree with the message of this book. It is especially refreshing to read a book that almost axiomatically accepts the notion that attitudes and ideas mattered to economic outcomes in the past. Economic historians are increasingly realizing that pure materialist interpretations of history just won’t do. “Cultural beliefs” in one form or another determine economic performance, not just the other way around. The rise of Christianity, the Sunni revival in medieval Islam, the Enlightenment, the rise of neo-Confucianism in Song China, the emergence of socialism — all were in one way or another critical to the economic fate of societies.
Norberg reads history to find support for his ideology. That may be a bad reason to study history, but it helps you to make your point. Norberg’s book makes no pretension of analytical depth: it is a series of ideological arguments connected by well-chosen examples, vignettes and quotes. But it has two great merits. First, it is very well written. Norberg, like all popularizers, writes with great clarity and wit, and the book is full of bon mots, some borrowed, most original. My favorites are “zero-sum is the myth that launched a thousand economic mistakes” and “nostalgia is a necessary human psychological trait, but it cannot be a governing philosophy.”
Second, the book may have the further advantage of being correct, at least in broad lines. Norberg cites with approval a book by the Austrian-Irish physicist Erwin Schrödinger [yes, he with the cat, as Norberg reminds us] attributing the flourishing of Greek science and philosophy to three factors: pluralism, trade, and tolerance. For Norberg, being open to trade and movement is the key to everything, and that includes openness to heterodox and foreign ideas. Much like other libertarian thinkers, he has no interest in current views that explain economic progress in history by the rise in state capacity. Market failures, collective action, and public goods are of little interest to him. When governments pick winners, things go wrong. For him the key to prosperity is free and open markets that bring out the creativity and cooperativeness in humans.
Norberg full-well understands that openness is constantly threatened by dark forces: tribalism, zero-sum thinking, xenophobia, cultural arrogance, and other nasty features that were perhaps useful for most of humanity’s evolutionary past but are now atavistic. Historically, protectionism, aggressive economic nationalism, and intolerance have been tenacious obstacles to economic growth, though identifying and measuring their impact has been harder than Norberg thinks. He stresses correctly that the contributions of openness to growth go well beyond the standard static gains from trade based on comparative advantage. They encompass the flow of ideas, of migrants, and capital as well as undermine monopolies and enhance competitiveness. Openness, as enlightenment writers such as Edward Gibbon stressed, restrained rulers from silencing their most creative citizens, as doing so would just make them go elsewhere.
What the book misses, however, is a good understanding of what was needed for societies to commit to pluralism and engage in trade beside the absence of the benighted troglodytes that threaten it. Here institutions mattered. The book does not bother much with the work of the “institutional bend” in economic history pioneered by Douglass North, Avner Greif, and their colleagues. That work emphasizes the importance of the institutional underpinnings making markets actually work. Norberg does not stress that in order to have a thriving trade, a society needs institutions that reduce transaction costs. Trade and markets require contracts and some kind of certainty that disputes will be settled fairly. Merchants need to be sure that opportunistic and dishonest behavior will not be so rampant as to make markets unravel. They need to spread risks and obtain reliable information. Trust is one critical element in reducing transaction costs in long-distance commerce. Formal commercial organizations built on it were essential to what Ron Harris has called “going the distance.” If we are to explain the achievements of Smithian Growth in history, such institutions must be part of the story. Openness is hard to achieve, and the relationship between the “state” and open-ness is more complicated than Norberg thinks.
Another example of where specialists may raise eyebrows is the question of the gains from openness. Norberg understands full-well that there are always losers in the bargain. Because the benefits are widely spread and the losses are usually concentrated, there is stiff and effective resistance to openness and globalization. One solution is to somehow find a way to transfer part of the gains to those who are immiserized by trade. This is one of the reasons why the Welfare State is so essential to the survival of the open free-market economy and why it can be a free (or at least a bargain) lunch. For Norberg, transfers are the result of rent-seeking and encourage zero-sum mentalities (p. 280), but a good safety net may well be what is required for openness to survive.
Norberg could be criticized for having read too much psychology and too little economics. In his discussion of zero-sum concerns he submits that despite all evidence showing that the world is not zero sum, many people cannot shed the belief that if one party gains from trade, the other inevitably loses. “We changed the world,” he writes, “but our brains did not notice” (p. 265). This is at least debatable. Our brains are perhaps more nimble and adaptable than evolutionary psychologists tend to suppose. Two hundred fifty years of political economy arguing the opposite have not entirely been in vain, even if it has not fully stamped out the primitive economics of zero-sum isolationists. Somewhat surprising, the book makes no mention of the enlightened idea that trade “sweetens” people’s behavior as Montesquieu pointed out thirty years before Adam Smith. Prosperity and commercialization may have changed people’s behavior, and usually in ways that led to more prosperity and tolerance, as a recent contribution by a psychologist to the economic history of the Industrial Revolution has argued.
Norberg’s view of economic history is unabashedly Manichean: a struggle between enlightened open-minded and tolerant pluralists, fighting for cosmopolitan and progressive values, and the dark forces of racism, neophobia, and “America First” demagoguery. The real danger to prosperity and growth is not foreign threats, he submits, it is the reactionary and bigoted enemy within. Any perceived threat — economic or natural — to the status quo could call out unenlightened nationalist populists from beneath their rocks to unleash a search for scapegoats. These scapegoats conveniently are “others” and persecuting them was accompanied by an attack on openness. Some recent research in economic history confirms that at least for anti-Semitic outbursts, this was indeed the case. Less convenient for a libertarian writer, it also turns out that stronger state capacity attenuated this scapegoating.
All the same, whether or not the economic history community will find that past experience invariably supports his views, Norberg’s book is a valuable message for our troubled times.
Joel Mokyr is the Robert H. Strotz Professor of Arts and Sciences and Professor of Economics and History at Northwestern University, and Sackler Professor, (by special appointment) at the Eitan Berglas School of Economics, Tel Aviv University. His most recent book is A Culture of Growth (Princeton University Press, 2017).
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|Subject(s):||Economic Development, Growth, and Aggregate Productivity|
Markets and Institutions
|Geographic Area(s):||General, International, or Comparative|
|Time Period(s):||General or Comparative|