Flow of Ideas: Economic Societies and the Rise of Useful Knowledge

Abstract Economic societies emerged during the late eighteenth century. We argue that these institutions reduced the costs of accessing useful knowledge by adopting, producing and diffusing new ideas. Combining location information for the universe of 3,300 members across active economic societies in Germany with those of patent holders and World’s Fair exhibitors, we show that regions with more members were more innovative in the late nineteenth century. This long-lasting effect of societies arguably arose through agglomeration economies and localised knowledge spillovers. To support this claim, we provide evidence suggesting an immediate increase in manufacturing, an earlier establishment of vocational schools and a higher density of highly skilled mechanical workers by the mid-nineteenth century in regions with more members. We also show that regions with members from the same society had higher similarity in industrial production and patenting, suggesting that societies facilitated spatial knowledge diffusion and, to some extent, shaped the direction of technological progress.