Why did the modern economic revolution in production and trade first happen in north-western Europe?
At the APEE conference, Deirdre McCloskey delivered a plenary address based on her new book, Bourgeois Dignity: Why Economics Can’t Explain the Modern World. 
Her argument is that neither material resources nor technology nor capital accumulation nor geographical factors drove the transformation. Rather, it was a change in ideas and attitudes: the producers, merchants, and traders who make up the bourgeoisie came to be respected. They got dignity, in marked contrast to the traditional disparaging in cultures dominated by the otherworldly, ascetic values of religion and the predatory martial values of tribal warriors and feudal aristocrats.
Respect for the bourgeoisie meant that they went on to develop the institutions of modern capitalism, they became a political force that undermined traditional feudalism and paved the way for modern democratic-republicanism, and the resulting more free political economy became wealthy, generating the science, the technology, and the educational institutions that we are now familiar with. A virtuous cycle was created.
Note that McCloskey’s explanation is in terms of ideas rather than reductive material forces, and in terms of ethical ideas in particular. That is to say, she is arguing that philosophical ideas are the key causal power.
Ludwig von Mises and Ayn Rand had earlier argued for ideational over materialist causes of history. Here is Mises in Planned Chaos (1947):
“The history of mankind is the history of ideas. For it is ideas, theories, and doctrines that guide human action, determine the ultimate ends men aim and the choice of the means employed for the attainment of these ends. The sensational events which stir the emotions and catch the interest of superficial observers are merely the consummation of ideological changes. There are no such things as abrupt, sweeping transformations of human affairs. What is called, in rather misleading terms, a ‘turning point in history’ is the coming on the scene of forces which were already for a long time at work behind the scene. New ideologies, which had already long since superseded the old ones, throw off their last veil, and even the dullest people become aware of the changes they did not notice before” (p. 62).
Here is Rand in For the New Intellectual (1961), focusing more narrowly on philosophical ideas as decisive: “Just as a man’s actions are preceded and determined by some form of idea in his mind, so a society’s existential conditions are preceded and determined by the ascendancy of a certain philosophy among those whose job it is to deal with ideas. The events of any given period of history are the result of the thinking of the preceding period” (p. 27).
McCloskey has been influenced by Israel Kirzner, who was one of Mises’s students. McCloskey’s importance is her is singling out of ethical ideas as fundamental. (Though see also Roark’s courtroom speech in Rand’s The Fountainhead (1943) for the mid-career Rand’s focus on a culture’s moral evaluation of innovators and creators as a key determinant of the course of history.)
I wrote earlier about McCloskey’s wonderfully ambitious Bourgeois Virtues:
* Why life is 255 times better now than in 1800.
* Capitalism versus the good old days.
Also relevant here is the work of Nimish Adhia on India’s recent transformation as a case study in the power of a culture’s moral ideals. Adhia was one of McCloskey’s doctoral students.