Lecture 2 The Industrial Revolution Was There One? Se Yan

1. Lecture 2 The Industrial Revolution Was There One?Se Yan

2. Introduction What actually happened 1750 and 1850 in Britain? Certainly, tremendous increases in industrial output. Apparently, a break from the Malthusian trap as well.

11. Traditional View The Industrial Revolution was a true revolution. Tremendous changes in the economic, political, and social fabric of Britain. All of which were generated by a wave of innovation in key industries (again coal, cotton textiles, iron and steel) and could be physically seen in the move to machine/factory production and urbanization.

12. Traditional View of the Industrial Revolution “It is well known that, during the last half century in particular, Great Britain, beyond any other nation, has progressively increased its powers of production, by rapid advancement in scientific improvements and arrangements, introduced more or less, into all the departments of productive industry throughout the empire.” —Robert Owen, 1820

13. Traditional View of the Industrial Revolution “Inventors, contrivers, industrialists, and entrepreneurs : it is not easy to distinguish one from another at a period of rapid change – came from every social class and from all parts of the country.” “It was not only gadgets, however, but innovations of various kinds – in agriculture, transport, manufacture, trade, and finance – that surged up with a suddenness for which it is difficult to find a parallel at any other time or place.” —Ashton, “The Industrial Revolution”

14. New View Looking at the production figures, something definitely happened. In particular, industrial sectors were too small of a share of total output to really affect the whole economy. Consequently, the British experience has been de-emphasized.

15. Questions raised by the new school How big were the “revolutionized” sectors? • The key here is the relation of sector shares and productivity growth to aggregate productivity growth

16. Questions raised by the new school What was the geographical pattern of the “revolution”? • Many areas saw little change. • So maybe we should not talk about a British industrial revolution, but rather a distinctly regional one.

17. Questions raised by the new school Looking across Europe and indeed across the globe (to China especially), why was England first? Or what was special about the English economy/policy/society? Short answer…maybe nothing.

18. Questions raised by the new school Finally, was the movement in population and wages the real break from the Malthusian trap or simply a shift in the technology curve?

19. Causes of the industrial revolution? One of the older explanations has been the scientific revolution of the 17th & 18th centuries. The argument is that basic research as well as the application of the scientific method helped the English transform industry via mechanization, the factory system, etc.

20. Causes of the industrial revolution? Problem is that almost none of the critical innovations of the industrial revolution period were achieved along “scientific” lines.

21. Causes of the industrial revolution? Some have argued (North especially) that the Glorious Revolution—a successful implementation of limited government— sparked the development of public and private capital markets, eventually paving the way to the Industrial Revolution.

22. Causes of the industrial revolution? The evidence used to support this argument is the decline in interest rates in England around 1690. However, North’s evidence is fragmentary, and his good quality data only start after 1720 at which time the rates decline.

23. Causes of the industrial revolution? Recently, Ken Pommeranz has suggested that the reason England experienced an industrial revolution was “coal and colonies”.

24. Causes of the industrial revolution? The problem with this argument is that: • it is not apparent how necessary coal really was (substitutes available and only a few industries actually relied on coal) • the location of industry is endogenous, or at least it was in England (iron and steel industries located near coal deposits)

25. Implications of the new view “While odds favored Britain, the stochastic element in this event was large enough to make another outcome easily plausible.” Crafts, “Industrial Revolution in Britain and France”

26. Source: Robert E. Lucas, Jr., Lectures on Economic Growth (Cambridge: Harvard University Press, 2002).

27. Source: N. F. R. Crafts, “British Economic Growth, 1700-1831: A Review of the Evidence,” Economic History Review, 36 (May 1983): 187.

28. British Industrialization Before 1841: Evidence of Slower Growth During the Industrial RevolutionC. Knick Harley, JEH 1982 New indices of industrial production show that Britain's industrial growth in the last decades of the eighteenth century and the first decades of the nineteenth century was about a third slower than currently available estimates indicate. Therefore, mid-eighteenth-century industrial output was nearly twice as high as previously assumed

29. Source: C. Knick Harley, “British Industrialization Before 1841: Evidence of Slower Growth During the Industrial Revolution,” Journal of Economic History, 42 (June 1982): 277.

30. Basic Method of Estimation • Choose one or more benchmark years for which reasonably good data is available to estimate both total output and the shares of the different sectors. • Use what data are available to project quantities backward and/or forward in time. • The various estimates differ in their choice of benchmarks, in the sources and techniques used to estimate output and shares, and in the data used to project backwards and forwards.

31. Building a New Industrial Output Index: Constructing Weights of Industrial Sectors

33. Increase in Output (%) Source: C. Knick Harley, “British Industrialization Before 1841: Evidence of Slower Growth During the Industrial Revolution,” Journal of Economic History, 42 (June 1982): 268-69.

34. Indices of Output by Industry Source: C. Knick Harley, “British Industrialization Before 1841: Evidence of Slower Growth During the Industrial Revolution,” Journal of Economic History, 42 (June 1982): 269, 272.

35. Source: N. F. R. Crafts, “British Economic Growth, 1700-1831: A Review of the Evidence,” Economic History Review, 36 (May 1983): 180.

36. Assume:1. total industrial output is £10,000 in year T22. output of cotton textiles grows 2,200% from T1 to T2 and 400% from T2 to T33. all other industrial output grows 80% in both periods Heuristic calculation:

37. Source: C. Knick Harley, “British Industrialization Before 1841: Evidence of Slower Growth During the Industrial Revolution,” Journal of Economic History, 42 (June 1982): 277.

38. Harley’s conclusion • The growth of industrial production was much slower b/t 1770 and 1815 than previous estimates • The industrial sector in the 18th century was nearly twice as large as previous estimates • Subsequent transformation was less dramatic

39. British Economic Growth, 1700 – 1831a Review of the EvidenceN. F. R. Crafts Present some further revisions in respect of industrial output growth from 1700 to 1831 and of agricultural output growth after 1760 and to integrate the revisions of various authors to reveal their implications for the description of macroeconomic growth during the classical industrialization phase.

40. Source: N. F. R. Crafts, “British Economic Growth, 1700-1831: A Review of the Evidence,” Economic History Review, 36 (May 1983): 181.

41. Source: N. F. R. Crafts, “British Economic Growth, 1700-1831: A Review of the Evidence,” Economic History Review, 36 (May 1983): 187.

42. The Crafts-Harley Bottom Line • The British economy grew more slowly before the second quarter of the nineteenth century than previously thought. • Major increases in productivity were confined to a few industries, most notably cotton textiles, whose weight in the overall economy and even in the manufacturing sector was quite small.

43. Two Views of the British Industrial RevolutionPeter Temin, JEH 1997 • Two views of the IR • A test of these views using the Ricardian model of international trade with many goods. British trade data are used to implement the test and discriminate between the two views of the IR

44. Source: Peter Temin, “Two Views of the British Industrial Revolution,” Journal of Economic History, 57 (Mar. 1997): 65.

45. “Instead of banging our head against the stone wall of unavailable data, I propose to shift the terms of the debate to a different kind of data. … Trade data are available in great detail; can they help us disentangle the nature of the Industrial Revolution?” —Temin, “Two Views,” p. 68.

46. Hypothesis • The traditional view implies that Britain should have been exporting other manufactures: other than cotton textiles and iron bars • The modern view implies that Britain should have been importing these same goods in the early 19th century

47. Source: Peter Temin, “Two Views of the British Industrial Revolution,” Journal of Economic History, 57 (Mar. 1997): 74.

48. Source: Peter Temin, “Two Views of the British Industrial Revolution,” Journal of Economic History, 57 (Mar. 1997): 74.

49. Source: Peter Temin, “Two Views of the British Industrial Revolution,” Journal of Economic History, 57 (Mar. 1997): 75.

50. Source: Peter Temin, “Two Views of the British Industrial Revolution,” Journal of Economic History, 57 (Mar. 1997): 77.