Where Ideas Come From: Experimenting on the “Spirit of Capitalism” in Medieval China

This paper studies the formation of elite ideological preferences by investigating an intellectual competition in China from the tenth to fourteen centuries. We quantify the popularity of Utilitarian Confucianism, an innovative Confucian theory that emphasized economic rationality, against orthodox Confucianism, which upheld moral traditionalism. Our results, including instrumental evidence, show that Utilitarian Confucianism was more popular in regions with higher levels of commercial prosperity. However, the connection was weaker where imperial bureaucracy posed more influence on either the commercial sector or the literati community. These findings point to the ideological consequence of economic activities: different economic sectors can foster ideas that are conducive/detrimental to economic growth, thereby broadening our understanding of externalities. They also highlight the role of institutions in shaping ideology, which we argue helps explain why China followed a more conservative ideological trajectory despite experiencing a medieval commercialization miracle.