Arnold Kling  

Gavin Kennedy, Adam Smith, and Gregory Clark

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Kennedy writes,


In the extreme, I have suggested that economic history of the last 10,000 years (and for long enough before that) the history of the poor is not the decisive factor in economic development: it is the history of the rich (all those above subsistence), plus the history of the politically powerful who diverted some proportion (from taxation, levies, duties, and oppression) of the annual production of wealth into stone built cities, infra-structure, cathedrals, harbours, canals, routes for trade, shipping, and the instruments of war.

The growing commercial exchange economy below a society, gradually accumulating capital stock (Smithian growth), with all the associated knowledge, literature, natural and moral philosophy, science, invention, and technologies, prepared the ground for the eventual invention and application of power-driven machinery that constituted what some call the industrial revolution.


Read the whole thing.

Let me summarize various ideas to explain what we call the industrial revolution, and problems with them:

1. Gradual accumulation of capital. Then why such a sudden, sharp rise in the average standard of living?

2. Better institutions. Rather than accuse Adam Smith of taking this view, let me accuse Meir Kohn, who I recall giving a talk in which he said, in effect, you don't need anything special to get economic growth. You just need government to stop being predatory. The problem with this view, according to Clark, is that England's government (and perhaps that in other countries) could be described as not severely predatory long before the industrial revolution.

3. Better interaction between science and applied technology. I associate that view with Joel Mokyr. The problem with this view is that it is difficult to explain why the industrial revolution was so concentrated in England.

4. A more industrious work force. Clark's view is that harsh conditions killed off the less industrious people in England, leaving a race that was easier to train, educate, and discipline.

There is nothing about any one of these explanations that excludes the other. I like (3), because ideas have increasing returns. A story of capital accumulation alone runs into the problem that diminishing returns should cause growth to fizzle out at some point.

I like (2), because it is very hard to explain international differences without looking at institutions. Clark himself has pointed out that the same worker can have higher productivity by immigrating to the United States. Bryan and I have both argued that this implicitly suggests a role for institutions.

There is something to be said for (4), also. Clark makes a good point that it is remarkable that the cotton industry was organized so that raw cotton was shipped at great cost to England, turned into cloth, and then shipped at great cost back to India. If India's work force had been amenable to training and discipline, then presumably most of the manufacturing would have taken place in India.


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CATEGORIES: Economic History



COMMENTS (9 to date)
D. F. Linton writes:

Aren't there also networking effects that you are ignoring? Perhaps just a small random increase in the density of better ideas, institutions, and work habits is enough to start a virtuous circle. And perhaps, once the concentration increases beyond a certain point enough rent-seekers and other predators arrive to dampen things down again.

Matt writes:

The rapid rse in wealth is measured as the rapid rise in the ability of markets to hold value. Or, wealth is pricing power; the ability to hold a price over time, or the ability to execute a market trade over a given price range.

WHat happened in the industrial revolution is that the spectrum of the wealth in society peaked and narrowed as the middle class gained the ability to hold prices over time, or transact over a given price range.

Or, the peaks in the income distribution filled in, more productive specialization, longer term capital assets, smoother investment instruments.

All of that lowers the noise level of the economy because the economy has fewer sharp spectral peaks in X and in t. In order to operate at the proper risk allocation, (minimum energy), the economy no longer had to suffer as large of estimation noise.

Why? Better estimation, simply put, better estimation because we looked longer and harder. We looked longer and harder because we simply lived and worked longer.

We simply started taking more bathes and eating better balanced diets.

Matt writes:

Let me give you an example, Thomas Edison. What was his contribution? He lived another 30 years after his first invention. He had one data point and 30 years to look forward to. He, correctly predicted, that he could, on average, continue inventing for 30 years.

Prior to longer life spans, any given invention was only as good as its amoritization cycle, which was much lower when buyer and inventors had only had a 15 or 20 year work cycle. If life spans got longer sooner, than someone else, earlier than James Watt, would have automated steam.

Brandon Berg writes:

I'm just throwing this out there--I don't even know whether my premise is true--but could England's break with the Catholic Church have played a role here? That is, could it be that prior to the schism, the Church soaked up all the intellectual horsepower and channeled it into stuff like studying scripture and designing cathedrals?

If the schism were to break the Church's monopoly on intellectuals, and if the Anglican Church were to refrain from re-establishing it, this would free the nation's intellectual stock up for more secular pursuits, and set the stage for the agricultural and industrial revolutions.

Or maybe it was the agricultural revolution that made the industrial revolution possible, and the enclosure movement that made the agricultural revolution possible.

Troy Camplin writes:

The answer to 1 is simple: all natural growth is exponential growth. With exponential growth, you always get what looks like an "explosion"

dearieme writes:

Some role for the Reformation? You radical you, Brandon.

Matt writes:

I went internet surfing to try and find indications of lifespan canges in geography and time, mostly relative to the plague era.

I find, census data gets accurate in 1750. Northern scandanavian countries are reporting 38 years in 1750, up from 20 something in medieval europe. Sweden was industrialized with steel making before Britain. Soap and sanitation also became popular again around 1750-1800. Genetic markers for plague resistance, in geography and time, is still in dispute. The real effort to fight germs started in 1850.

So, I modify my theory. I now believe either plague resistance or sanitation, starting in Nothwestern Europe, around 1750-1800 led to longer outlook; and that led to the IR.

Mr. Econotarian writes:

There were, however, real institutional changes in England around the time of the industrial revolution that did not happen in many other countries (the "Enclosure Movement", for example).

http://en.wikipedia.org/wiki/Enclosure

John S Bolton writes:

The enclosure movement was well underway in the 1200's, and never went to completion. Why is the term race used for a subgroup such as gentry of a national population, unless the idea is attempted smearing, but in the place where a rational argument was to be expected? English institutions, law courts, capitalism of the 18th and 19th century types were established in India and many tropical jurisdictions where incomes today are still in the hundreds of dollars. If cultural institutions with high achievement levels occurring in situ even at the far edges of their advance, cannot go five miles in five hundred years off almost any tropical coast, but can go thousands of miles where they have the same population to ride along on, as in the IR, it has to be something the people have which does not 'radiate' to use Sarkozy's term. in a sense everyone knows this, since they do not propose the same customs for tropical peoples as for several rich ones. That is, except sometimes in the case of neocons dreaming up Islamic democratic capitalism, or imperialists setting up parliaments as if English customs were practical everywhere.

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