Silicon Valley of the 14th Century: What the U.S. Can Learn From 1386 Germany

Venice was pretty hoppin' as well.*
First posted April 2012.
From the Atlantic: 

This is a story about how innovation happens. It begins with the Papal Schism of 1386 (seriously), demonstrates the ability of universities to foster capitalism, and concludes with a surprising hero of the modern world: lawyers.

Reuters

If you want an illustration of just how crucial a role education plays in economic development, there are any number of modern case studies to choose from. You can look at India's flourishing IT industry, or China's inexhaustible supply of manufacturing engineers. You can look at the U.S. after World War II, where the G.I. bill brought college, and middle-class prosperity, to the masses.

But why stop with this century, or the last? For a dose of seriously retro economics, you can look back to the dawn of the Renaissance, where the introduction of higher education helped make possible the efflorescence of trade that built Europe's early modern economy, according to a new working paper from researchers at the University of California, Berkeley, and the University of Munich.

INNOVATION IN THE 14 CENTURY
Let's step back in time for a moment to the late Middle Ages and early Renaissance, a period from about 900 to 1500 AD when plate armor was in vogue, and Europe was transforming itself from an illiterate backwater into the world's dominant economic and military power. As authors David Cantoni and Noam Yuchtman write, the time was defined by an economic revolution, as trade expanded, local markets flourished, and workers moved from farms into small cities, where they could specialize in new occupations.
This was also the era when the continent's first institutions of higher learning were founded, starting with the University of Bologna in 1088. But did schools create thriving economies, or did thriving economies create schools? To find an answer, Cantoni and Yuchtman looked at modern-day Germany.

14th CENTURY RHINE VALLEY VS. 21st CENTURY SILICON VALLEY
Though it would one day become the mecca of dour philosophers and the Ph.D. students who love them, Germany was actually a bit late to the game when it came to establishing universities. Before the 14th century, Germany youths had to travel abroad for an education, often to modern-day France. hat changed with the Papal Schism of 1386, when rival popes from Rome and France both lay claim to the leadership of the Catholic Church. German students loyal to the Roman faction were expelled from their French universities.

Suddenly, Germany had to build itself some colleges.

This bright line between Germany's pre- and post-college eras makes it an ideal test case. These schools weren't founded as the result of a hot economy. They were founded to educate students kicked out of their study abroad programs...MORE

*See Harvard Business Review:
HBR: "Why Innovators Should Study the Rise and Fall of the Venetian Empire" 

or the FT's Undercover Economist:
Another Post On Glass, This Time With "The Alchemist's Fallacy" (And Professor Nordhaus)