Raico on the European Miracle

24 December 2006 at 12:29 am Peter G. Klein Leave a comment

| Peter Klein |

Ralph Raico, in a 1994 essay that has just been put online, offers a concise summary of the New Institutional explanation for the “European miracle,” the unprecedented, long-term rise in living standards beginning in late-medieval Europe.

[A] number of scholars concerned with the history of European growth have tended to converge on an interpretation highlighting certain distinctive factors. For the sake of convenience, we shall, therefore, speak of them, despite their differences, as forming a school of thought. The viewpoint may be referred to as the “institutional” — or, to use the title of one of the best-known works in the field — the “European miracle” approach.

The “miracle” in question consists in a simple but momentous fact: It was in Europe — and the extensions of Europe, above all, America — that human beings first achieved per capita economic growth over a long period of time. In this way, European society eluded the “Malthusian trap,” enabling new tens of millions to survive and the population as a whole to escape the hopeless misery that had been the lot of the great mass of the human race in earlier times. The question is: why Europe? . . .

The contributors to the [new institutional] model . . . have sought for the origins of European development in what has tended to set Europe apart from other great civilizations, particularly those of China, India, and Islam. To one degree or another, their answer to the question, why Europe? has been: Because Europe enjoyed a relative lack of political constraint.

It was Europe’s political decentralization, and the presence of a powerful trans-national organization (the Church), that restrained the growth of the state and allowed the market economy to flourish. This thesis is well established among new institutional economists and historians. Raico cites North and Thomas (1973), North (1981), and Rosenberg and Birdzell (1986) as key representatives of this school of thought. We could add Joel Mokyr, Barry Weingast, Avner Greif, and other prominent historians and economists to this list. One of Raico’s main sources is less well known today: Jean Baechler’s Origins of Capitalism, (French edition 1971, English translation 1975). Baechler’s work deserves to be better known among contemporary New Institutionalists.