Economics Links, 7/19/2026

Joel Mokyr on the great divergence; Mokyr on apprentice learning; Cochrane and Seru on financial regulation; Economists petition concerning AI

Interviewed by Tyler Cowen, Joel Mokyr says,

if you look at the world, say, around 800, at the time of Charlemagne, the difference between Europe and China isn’t very large. At some point, during the Middle Ages, you can see this divergence getting started. What’s happening is that, in Europe, there is more and more of a decline in the extended family or the extended kinship group, we call it clan, and instead, people get together and cooperate with other people to whom they are not related and with whom they do not share an ancestor.

Recall that Mark Weiner’s Rule of the Clan made a very strong impression on me.

On Great Britain and the industrial revolution, Mokyr emphasizes a sort of freedom of apprenticeship.

Every young lad who’s looking for a master, can go around and choose the master that he likes best and that is most suitable to him. What you get is that because this market is competitive, you get a quality of education to these people, which is vastly better than it is in continent. People are more diverse. They’re more flexible. They’re better trained. Certainly, by the middle of the 18th century, this is what everybody is saying. The French and the Germans and the Dutch and the Austrians and the Spanish, all know that if you want to build a sophisticated piece of equipment, you need an English engineer to run it.

John Cochrane and Amit Seru write,

Risky investments should be funded by equity and long-term debt. Deposits and other runnable liabilities should be backed by safe, liquid assets or much larger capital cushions. Such plans can end private sector financial crises forever.

This sounds good, but I think it is simplistic. My view is that the public wants to issue risky, long-term liabilities (a mortgage, for example) and hold riskless, short-term assets (a bank deposit). Financial intermediaries have a balance sheet that takes the opposite side. No matter how you structure it, unless you can completely outlaw financial intermediation, somewhere in the system you will have runnable institutions and the potential for crisis.

Many economists write,

1. Economists, policymakers and technology leaders must act now to understand the economics of transformative AI and to build the incentives, guardrails, and institutions needed to steer AI in a direction that complements humans and benefits society.

I suggest that you apply a small reduction in the respect that you had for every economist who signed this “We must act now” petition. How could Daron Acemoglu sign it, when his main claim to fame concerning AI is his view that it does not amount to much? How could Tyler Cowen sign it, when any libertarian could tell you that this is not an effort that will end well? I think he was just expressing mood affiliation about AI.

I give credit to Noah Smith for not signing.

substacks referenced above: @

Why I didn't sign the "We Must Act Now" statement (yet)

@

Warsh's Challenges, Financial Regulation