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17 16 There is wide agreement among economists that most of the enormous increase in living standards that took place over the past century and a half — often referred to as “the Great Enrichment” — is due to the happy effect that science and tech- nology have had on productivity and the range of goods available in the economy. What often does not get emphasized is that in many cases new tech- nological knowledge can only have economic sig- nificance if it is embodied in capital goods, often quite expensive. It is therefore not always sensible to measure the contributions of technological progress and investment separately: they are often strongly complementary, much like two wheels in a bicycle. Does the front wheel matter more than the rear? Infrastructural investment differs from other forms of investment in that its social costs and benefits differ from their private costs and benefits, and hence they often require some form of government intervention or correction. Infrastructural capital often involves spillovers, or what economists call “externalities.” For example, building a road will affect local res- idents even if they never drive on it. It is also in general lumpy, involving large fixed costs from the outset, and thus often involves what economists call some form of “natural monopoly”: it rarely makes sense to build more than one airport in a city, or to build two parallel railroad tracks. Natural monopo- lies are natural targets for regulation. This is not to imply that infrastructural investment projects always and everywhere demand government intervention in one form or another. Rather, most infrastructural projects often find themselves in the murky gray area between the free market economy and the public sector. When they were run by private enterprise, they have often been regulated and subsidized by governments. Historically, infrastructural projects have moved back and forth between the public and the private sector through nationalization and priva- tization. In other cases they have generated collab- oration between government and private firms. Infrastructure has always been part of economic civilization: Greek and Hellenistic societies built harbors, and Romans added their famous road network, aqueducts, and amphitheaters. In China, the imperial government invested in defense infra- structure (the Great Wall), transportation (the Grand Canal), and flood control. But it is fair to say that the new technologies that came on line after 1750 with the Industrial Revolution increased the importance of infrastructural investment in all economies in large part because many of these new techniques were Joel Mokyr KNOWLEDGE AND INFRASTRUCTURE: THE GREAT SYNERGY Joel Mokyr (1946) is a professor of the History of Economics at Northwestern University in Chicago and the Eitan Berglas School of Economics at Tel Aviv University. He has held teaching posts at Stanford, Harvard, Yale, Jerusalem and Manchester. His research focuses in particular on the history of technology and the Industrial Revolution.