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Study notes for EC104: the industrial revolution
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The Industrial RevolutionWhat and when
● An industrial revolution is rapid significant technological change
○ Usually refers to technological innovations which substitute machines
for humans and bring about a modern economy
● A redeployment of resources from agriculture
Why was Britain first?
● Britain had a series of revolutions that paralleled the IR
○ High agricultural productivity allows the generation of surplus and
individuals to move to other sectors
○ Proto industrialisation
○ Good institutions - Glorious Revolution (1688), property rights
○ Labour characteristics - applied technical knowledge, high wages
○ Population - fertility, urbanisation
○ Policy - banking / finance, taxes, infrastructure
○ Geography - resources (coal), isolation
○ Speculative - war, religion
● Allen (2009a) - emphasis on factor prices
○ High labour costs meant inventions were only cost-effective in Britain
● Mokyr (2009) - institutions
○ British science was better and more connected
○ Physical and intellectual property rights
● Crafts (1977) - luck and macro invention
○ Random component matters
○ Geography - separated from Europe by the channel, availability of coal
○ Religion, monarchy
● Ogilvie (2007) - no main emphasis
○ No single factor that every other country lacked
○ Britain brought all possible factors together for the first time
Why was it a revolution?
● Structural change (agriculture to industry)
● Substitution of labour for machines
● Use of non-organic materials - fossil fuels, minerals, synthetics
● Increase in the scale of production
● Regional specialisation
○ Concentration of industry near inputs (Newcastle)
● Integration of markets due to transport / communication inventions
● Capital accumulation (high investment: GDP)
, ● Emergence of general-purpose tech (steam)
● Social and institutional change
○ Nature of work, increased inequality
● Rapid technological change and total factor productivity growth
Technological change
● Growth of output = residual (TFP) growth + growth of K + growth of L
○ Y = A K α L1−α
○ A - technological shock has dynamic effects
○ A affects output and labour through capital (SEE SLIDES)
Tech change was concentrated in:
● Steam
○ Savery pump (1698) to the Corliss Engine (1849)
○ Capacity of steam engines increased from 3 to 2060 (1760-1870)
● Textiles
○ Flying shuttle (1733) to the Power Loom (1785)
○ Mechanisation increased labour productivity
○ Real cost of cotton decreased from 7d/lb to 2.33d/lb (1760-1775)
○ Technological change was driven by the cotton industry
■ Trade prevented the price of cotton falling as it made demand
more elastic
■ Raw cotton was bought from Turkey, Brazil and the New World -
increased the slave trade
● Iron and steel
○ Derby coke smelting (1709) to the Bessemer process (1856)
○ More developed processes use higher temperatures, allowing the
production of steel which is higher quality than iron
● Supported by watchmaking (gears), transport and communications
● Modernised sectors increased British TFP growth by 0.34% per year between
1780-1860 (total increase was 55%)
What drove technological change in Britain?
Allen - it paid to invent in Britain (2009)
● Britain had high wages but cheap capital and energy
● “Macro inventions” were expensive and needed
R&D
● Britain was the only country with the right factor
prices / market size for macro inventions
● RoW focused on “micro inventions”
−w
● The slope of a country’s isocost curve is
r
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