When three of the world’s most formidable economic historians collaborate on a single volume, the result commands serious attention. Two Paths to Prosperity, published in 2025 by Princeton University Press, brings together Avner Greif, Guido Tabellini, and Joel Mokyr, the last of whom, it should be noted, is a Nobel Prize winner. Together, they have produced a sweeping, rigorously argued, and at times dazzling account of why the modern world looks the way it does: wealthy in the West and long stagnant in much of the East, before China’s remarkable twentieth-century reversal. The book’s central question is deceptively simple: why did Europe and China, two of history’s greatest civilizations, diverge so dramatically in their economic trajectories between roughly 1000 and 2000 AD? The answer the authors construct is anything but simple. It weaves together culture, religion, family structure, law, political fragmentation, and the sociology of knowledge into a single, interlocking explanatory framework. It is a major work of historical social science and one that deserves to be read widely.
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One of the book’s most important contributions is its insistence on a point that popular discourse too often forgets: China was not simply behind Europe, which then raced ahead. China was, for much of the first millennium AD and into the early second, decisively ahead of Europe. Around 1250, for example, Chinese technology was far more advanced than in many dimensions. China under the Song Dynasty (960–1279) was in the midst of a Golden Age, and by any measure, the nation was far ahead of Europe, which was only slowly recovering from dramatic economic and political backwardness.
The capital city of the Northern Song Empire, Kaifeng, had reached one million inhabitants by the turn of the millennium. China had invented printing, gunpowder, the compass, cast iron, and paper money centuries before Europe. Its agricultural productivity, its bureaucratic sophistication, and its commercial networks were the envy of the world, to the extent that the world beyond China’s borders was paying attention at all. The great industrialists of the later Industrial Revolution would make it their goal to outdo Asia in producing pottery and fine cotton, and they only barely succeeded.
What the authors call the “Great Divergence” is perhaps better understood, they argue, as a “Great Reversal.” Europe did not merely catch up with China; China stagnated and then declined in relative terms while Europe surged. Understanding why requires digging deep into the institutional, cultural, and organizational foundations of each civilization, and that is precisely what this book does.
At the heart of the book’s analytical framework lies a fundamental institutional contrast: the Chinese clan versus the European corporation. During the European Middle Ages, both China and Europe faced similar challenges of sustaining local cooperation, providing public goods, and managing economic life. They solved these challenges in radically different ways, and those differences, the authors argue, had consequences that echoed across centuries.
In China, the clan, the extended kinship network organized around ancestral lineage, filial piety, and ancestor worship, became the paramount institution of social life. Clan trusts owned as much as a third of cultivated land in provinces like Guangdong. Clans funded schools, arranged apprenticeships, supported candidates for the Civil Service Examination, provided poverty relief, and managed local conflicts. The clan was, in effect, the primary unit of social insurance and collective action in Chinese society. Its moral basis was the Confucian emphasis on loyalty to kin and obligation to ancestors, which had hardened into orthodoxy during the late Tang and Song periods and remained dominant for nearly a millennium.
In Europe, by contrast, something distinctive emerged: the corporation. Not in the modern sense of a joint-stock company, but in the broader historical sense of a legally chartered, self-governing body of persons united by common purpose rather than common blood. Monasteries, guilds, universities, municipalities, and eventually trading companies—all of these were corporations. They were built around impersonal membership, formal rules, legal personality, and the enforcement of contracts through courts rather than the moral authority of elders.
The consequences were profound. Corporate structures supported impersonal markets—exchanges between strangers, backed not by kinship obligation but by contract law and reputation. European merchants could form partnerships with people outside their family networks, pool capital from unrelated investors, and trade at a distance without relying on the web of personal trust that kinship provides. Chinese clans, for all their sophistication, were fundamentally closed and particularistic: their moral and financial obligations ran along bloodlines, not across them. This made the building of large-scale, impersonal economic institutions far more difficult.
Chinese cities illustrate this contrast starkly. While European cities produced citizens—people with legal rights, political standing, and identities tied to the urban commune—Chinese cities were fundamentally different in kind. Urban residents in China were organized not by the city but by their native-place associations: groups of migrants who managed their affairs based on preexisting group ties from their home regions. City authorities in Shanghai, for example, held native-place associations responsible for the behavior of their own members. There was no civic identity in the Western sense, no concept of the citizen that transcended clan or region of origin. As the authors put it, European towns “succeeded in launching a set of social and legal constructs” that Chinese cities simply never produced.
Perhaps the most counterintuitive and intellectually stimulating argument in the book concerns the role of the Catholic Church. The Western Church, the authors argue, was not merely a religious institution: it was the “mother of all European corporations,” a transformative organizational force that deliberately dismantled the extended family networks that had previously dominated European social life and replaced them with something new.
Starting in the early medieval period, the Church pursued what scholars have called the Marriage and Family Program—a set of prohibitions on cousin marriage, polygyny, concubinage, and adoption, combined with rules governing inheritance that made it nearly impossible to preserve large patrilineal lineages across generations. Why? Partly for theological reasons, but also because the Church benefited materially from weakening family networks: individuals without heirs to leave property to were more likely to bequeath their wealth to the Church. The result, unintended in its full scope, was the gradual erosion of the clan-like structures that had prevailed across much of the world, including in early medieval Europe.
In their place, the Church promoted universalistic values: the idea that all human beings are equal before God; that moral obligations extend beyond kin to all fellow Christians and, ultimately, to all human beings. This universalism was, the authors argue, the cultural soil in which impersonal markets could grow. If your moral obligations do not end at the boundary of your clan, you can do business—and enforce contracts—with strangers.
The Church also played a crucial political role. After the Investiture Conflict of the late eleventh century and the great struggle between Pope Gregory VII and Holy Roman Emperor Henry IV over who had the right to appoint bishops, the Church deliberately enhanced European political fragmentation by strategically undermining the centralization of secular power. It could do so because it had organized itself as a corporation, giving it an institutional independence from secular rulers that no equivalent religious body in China could claim. Buddhist monasteries in China, isolated and self-reliant, did not survive as a political power once the Tang emperors turned against them. The Church, by contrast, endured.
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One of the book’s most significant empirical contributions is its careful dating of China’s intellectual and scientific decline. The conventional narrative places China’s technological stagnation somewhere in the fifteenth or sixteenth century—around the time that Europe’s Scientific Revolution was gaining momentum. The authors push the clock back considerably further by suggesting that innovation declines emerged as early as the sixth century.
The intellectual conservatism of Chinese culture was not merely a matter of tradition or aesthetics. It was deeply structural. The civil service examination system, the keju, was the gateway to social advancement and political power in imperial China. Mastery of the Confucian classics, not scientific inquiry or technological innovation, was what the exam rewarded. As the authors note, the keju bred “conformism and obedience rather than inspiring independent thought and originality.”
European human capital formation took a fundamentally different path. The university, another corporate institution, chartered by papal or royal authority, was Europe’s distinctive contribution to the organization of knowledge.
One of the most elegant arguments in the book concerns the relationship between Europe’s political fragmentation and its intellectual dynamism. Because Europe was divided into dozens of competing states, principalities, and city-states, no single ruler could suppress an idea across the entire continent. The market for ideas was, in the most literal sense, competitive.
China offered no equivalent. The unified imperial state could, and did, impose intellectual conformity across the entire empire. The examination system ensured that those who sought advancement had powerful incentives to master and perpetuate the orthodox canon rather than challenge it.
A recurring theme throughout the book is the unusual nature of European family structure. Western Europe was, and remains, a striking civilizational exception in this regard as in so many others, giving rise to what scholars call the European Marriage Pattern.
The authors trace this peculiarity back, in substantial part, to the marriage prohibitions of the Catholic Church.
The economic consequences were significant. Britain, which led Europe and the world into industrialization, had also created the most generous and reliable public poverty relief system in the centuries before the Industrial Revolution.
The final act of the book’s main historical narrative is the Industrial Revolution, which the authors treat not as an isolated British miracle but as the culmination of centuries of divergent institutional development across the whole of Western Europe.
The relevance of this work for American readers is direct: the same institutional questions that explain Europe’s rise over China—how societies organize talent, reward innovation, and convert ideas into economic worth—are precisely the questions that determine whether the United States retains its position as the world’s leading innovative economy.
The Great Divergence between China and Europe is not a story about the United States. Yet the American case is instructive: despite what many would consider mediocre PISA scores, the United States remains a global leader in innovation, largely because it excels at commercializing inventions and scaling them into widely adopted technologies.
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Lipton Matthews is a researcher and podcaster. His work has been featured in Mises, The Federalist, Chronicles, American Thinker, Epoch Times, and other publications. He is also author of Busting African Delusions: Institutions, Human Capital, and the Path to Progress.
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