Here’s some clear thinking about the causes of the Industrial Revolution

For some reason, there has been a spate of commentary recently about the Industrial Revolution on the economics blogs I follow. From my perspective this has been great: I am an enthusiastic if amateur reader of economic history, and putting together a comprehensive account of this event is one of the great, incomplete projects of social science.

Dietz Vollrath’s excellent Growth Economics Blog sets up the discussion very nicely by contrasting two canonical and competing views of the drivers of the Industrial Revolution: Joel Mokyr’s idea-centric argument that an English culture of innovation laid the groundwork for an explosion of new technologies, and Robert Allen’s hard-nosed factor prices argument that high wages in England simply created stronger incentives to adopt new technologies. For me his great contribution is pointing out that these two arguments are not in fact in contradiction:

There are two different questions about the IR in Britain that we want to answer. First, why did several particularly important innovations take place in Britain, and not in other places? Second, of all the innovations available, why were they adopted first (or with greater speed) in Britain than in other areas of Europe?

Ultimately, Mokyr’s thesis is an answer to the first question, and Allen’s thesis is an answer to the second question. This is more or less the same point made independently by Anton Howes on his very good blog:

Allen’s theory is therefore one that best explains bias in the adoption of Britain’s numerous inventions (both in Britain, and abroad). … For a fuller explanation of the IR, though, we need to go right to the inventive source – why was there so much more invention in Britain to be adopted in the first place?

Well, that’s a shocker all right: one of the most complex and important historical events of all time turns out not to have a single cause or a simple explanation. And to complete the roundup of recent blog posts, inequality guru Branko Milanovicpoints out that the England-had-high-wages explanation is itself incomplete, because we still need to know why England had higher wages than other places. He links to a recent paper that argues the root cause is “the difference in the response to the Black Death-driven increase in real wages.” In other words, that it goes back to social and political institutions. The details are interesting but I won’t repeat them here. At any rate I now feel much better equipped to tackle some more Industrial Revolution scholarship.

Does any of this have contemporary relevance? Sure. The problem of explaining how modern economic growth came to pass in the first place two hundred-plus years ago is of course a very different problem than that of explaining how  economic growth can be sustained and replicated in today’s world. But there are some obvious parallels that arise: is it more important for China, say, to develop a Mokyr-style “culture of innovation,” or should we focus instead on Allen’s relative prices?

One could for instance make an Allen-style argument that the sharp rise of labor costs in China in recent years has created a much stronger incentive for companies to adopt labor-saving technologies. In that case, higher labor costs would not be the death knell for China’s international competitiveness that some say they, but rather the trigger needed to push productivity and income to the next level. I haven’t decided whether I believe this or not–there are some complexities given that China has had cheap capital as well as cheap labor–but it’s not obviously absurd and bears thinking about.

 

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