The economic evolution in Western Europe and North America in the past 200 years is exceptional. Technological progress has always been very limited. That changed dramatically during this exceptional episode. As a consequence Western Europe and North America became very wealthy and global inequality exploded (the great divergence). Why did this happen there and at that time? We explore four factors: institutions, population density, agglomeration in cities, and human capital. The institutional factors were: the political control of the military, the rule of law for elites, enduring organizations, and looser kinship ties. The rule of law and the political control of the military allowed for a stronger commitment to not abuse violence than could be achieved by just relying on the condition for cooperation discussed in Chap. 1. Throughout history, cities played a pivotal role in transferring ideas, boosting human capital, and enabling innovation.