Two Paths to Prosperity

Two Paths to Prosperity follows on the heels of several economics Nobel Prizes honoring work in or closely related to economic history, including the 2025 Nobel Prize, shared by one of the book’s authors, Joel Mokyr. Fittingly, the book reminds readers that economic history has much to offer the profession, including an answer to one of the central questions of economics—Why are some nations rich and others poor?—and essential context for understanding the economic competition between East and West that is defining the twenty-first century.

The book’s central puzzle is the divergence between China and Europe over the past millennium. A thousand years ago, an outside observer trying to predict where the Great Enrichment would originate would have little reason to bet on a fragmented and technologically backward Europe. A better guess would have been China, which as the authors note, was “a technological powerhouse and arguably may have been on the verge of an Industrial Revolution of sorts”:

At the time, it was developing industries that appear very similar to what we see in Britain after 1760. The widespread cultivation and manufacturing of cotton, the heavy use of iron and steel, the reliance on coal as a source of heat, and the mechanical aptitude revealed by sophisticated hydraulic and astronomical devices, to say nothing of a large upper tail human capital of literate and educated officials, coupled to a commercial, monetized, and market-oriented economy—all suggest many of the preconditions for a Chinese Industrial Revolution during the Song Dynasty [960–1279 AD]. (pp. 412–13)

Yet China would then suffer a slow process of technological decline, while Europe would later surge ahead. Why?

The book’s subtitle, Culture and Institutions in Europe and China, 1000–2000, provides the authors’ answer. They distinguish between culture and institutions, for example with a chapter on social organizations followed by one on political divergence. However, it is often difficult while reading to know where culture ends and institutions begin, as is often the case. Ultimately, the authors recognize that culture and institutions coevolved and reinforced each other.

The authors reject the view that China and Europe were roughly equal as late as 1750, on the eve of the Industrial Revolution. Instead, they argue that small cultural differences a thousand years ago compounded over time, eventually giving rise to a profound economic divergence. The die, in the authors’ view, had been cast much earlier, long before differences in living standards became apparent.

Specifically, China and Europe diverged because of different social foundations. “Strong kinship loyalty, patrilineal traditions, and kin-based morality made the clan more attractive in China, while in Europe, a universalistic value system and the diffusion of nuclear families gave a comparative advantage to the corporation” (p. 70). Both clans and corporations performed similar functions, including the provision of local public and club goods, but they operated differently, setting these societies on distinct paths.

Cooperation with kin is arguably the default form of human social organization. We achieved evolutionary success by cooperating in small groups of related individuals for most of our existence. This form of cooperation was highly effective, as trust and collaboration are easier within close relationships, but it was also limiting, confining exchange and collective action to a small, intimate circle. China’s reliance on kinship ties is therefore unremarkable. Even so, the authors carefully show how clans, or patrilineal groups organized around descent from a common ancestor, became foundational to Chinese society.

The key to modern development, however, is figuring out how to sustain cooperation beyond immediate kin. Europe is exceptional in the degree to which it moved away from close kinship ties. The Catholic Church, through prohibitions on cousin marriage and incest and the promotion of universalistic moral values, eroded the importance of kinship. Over time, Europeans became more willing to interact with strangers, enabling large-scale trade and cooperation.

Europe’s rise, according to the authors, was powered by its growing reliance on corporations, loosely defined as voluntary associations of unrelated individuals who join forces for specific purposes. After the fall of Rome, corporations such as fraternities, monasteries, guilds, universities, and urban communes provided education, defense, dispute resolution, and infrastructure in the absence of effective states. The Church was the “mother of all European corporations,” providing a template for a self-governing association of individuals not bound by kinship, with perpetual life, which secular bodies would adapt (p. 106).

Corporations offered many advantages. Built on formal agreements among consenting parties, they could be scaled up to enable large-scale cooperation among unrelated individuals with shared interests. Unlike clans, corporations could not rely solely on moral obligation or social pressure; they required formal rules, legal enforcement, and explicit procedures for collective decision-making. These requirements in turn created a demand for functioning legal institutions. In many cases, legal institutions emerged before consolidated state authority, giving the rule of law a foundational role in European society. Corporations also developed governance practices, such as majority voting, that were later adapted into constitutional forms of political decision-making. The principle of consent within corporations created an expectation of consent in politics.

Corporations also served as a countervailing political force, helping to constrain the absolutist power of the state and limit governments’ ability to interfere with private economic activity. They controlled sufficient resources, and often specific territory, to become powerful interest groups, so that weak rulers in a fragmented Europe had little choice but to bargain and concede formal political rights in exchange for military, financial, and political support.

These arguments are persuasive but incomplete. The authors stress that the Industrial Revolution was not uniquely British but rather (Western) European—consistent with their emphasis on the Western Church’s role—but they largely ignore variation within Western Europe itself. They invoke a “convergence club” of industrialized and economically advanced nations that emerged in the “West” by the late nineteenth century to justify treating “Europe” as a coherent unit, yet they do not adequately account for regions within Western Europe that failed to converge until much later, particularly Spain and Portugal. It is as if “Western Europe” is implicitly defined as those countries that did converge to Britain in the nineteenth century. The authors acknowledge this at the outset, noting that much of what they say about “Europe” may not apply to parts of the Mediterranean (p. 5), but they do not explain why.

This does not necessarily undermine the book’s thesis, as much of Iberia was under Muslim rule during the Middle Ages, for example. In fact, Jonathan F. Schulz (2022, “Kin Networks and Institutional Development,” Economic Journal 132) makes precisely this argument: Longer exposure to the medieval Western Church is associated with less intensive kinship, and the peripheral parts of Western Europe were less exposed. But such an argument must be made explicitly, not assumed.

The book highlights the thirteenth to sixteenth centuries as the pinnacle of European economic and political associationism. Yet by the thirteenth century, most of Spain had already returned to Christian rule. The authors themselves mention the spread of monasteries and communal institutions in Spain and cite Spain as an example of a European monarch bargaining with strong political groups in the twelfth century. They even reference the founding of a royal advisory council under the Visigoths. Does it really make sense then to cut Spain out of the argument? The book does not provide a clear answer, and it is unclear why variations in exposure to the medieval Church would produce lasting effects when even the less exposed regions were Christian for most of the past millennium.

The concluding chapter briefly situates India and the Middle East within the framework, yet Western Europe’s poorer regions are left out of discussion. Even Eastern Europe might have merited discussion, given major religious similarities such as the concept of a universal human brotherhood in Orthodox Christianity. While space constraints are understandable, these omissions are significant, as they concern cases that are both closely related to the book’s argument and arguably more directly relevant to it than India or the Middle East.

Nonetheless, the book is essential reading for economic historians and development economists. Though its emphasis on corporations is novel, it ultimately reinforces the field’s leading view: Europe’s distinctive institutions and culture enabled a growth take-off. The authors are happy to describe the advantages of Western culture and institutions in facilitating technological and economic progress but avoid a triumphalist narrative of inherent Western superiority; small historical changes could easily have led to very different outcomes. This approach should broaden the book’s appeal. The book will be of interest to social scientists and would serve well in an economics course, complete with formal models and econometric discussion. Though nonspecialists may find these sections less engaging, they are not essential to the book’s main arguments.