Full 10 weeks of Economic History (ECON0121) lecture notes including tips for the mid-term essays.
Using these notes, I scored 88% and 75% on the two essay assessments. I think these notes have been organised and condensed well enough to help other students revise efficiently for good results as...
ECON0121: Economic History
TABLE OF CONTENTS
1 Industrialisation Before 1870 ...............................................................................................................2
2 Industrialisation After 1870 .................................................................................................................7
3 Demographic Transition (19th and Mainly 20th Century)................................................................... 11
4 Capital Accumulation & Technological Progress (Why some countries industrialised and others got
left behind)................................................................................................................................................. 15
5 Structural Change .............................................................................................................................. 21
6 Reading Week ................................................................................................................................... 26
7 State-led Industrialisation ................................................................................................................. 26
8 Political Institutions ........................................................................................................................... 31
9 Income Inequality.............................................................................................................................. 36
10 Natural Resources ............................................................................................................................. 43
11 Support for Essay Writing.................................................................................................................. 48
12 Support for Final Coursework ........................................................................................................... 49
,1 INDUSTRIALISATION BEFORE 1870
Timeline:
Britain's Higher Higher
Enabled Cheaper Substitution of
Mercantilism / success in demand for innovation =
education and energy than energy for
Imperialism international labour = High New
training wages labour
trade wages technologies
When technology was first invented, it was only profitable to use in Britain, but eventually became
efficient enough to use abroad.
Lecture 1: The British Industrial Revolution
• When did rich countries become rich?
o Feudalism was born at the birth of agriculture 10,000 years ago.
o Merchant capitalism was around the 1500s.
o The Industrial Revolution started in the mid-1700s.
o GDP per person exploded around the 1900s.
• Merchant capitalism:
o International trade was the main activity.
o Birth of first corporations :
▪ Invisible technology – a way of pooling resources and risks together.
▪ E.g., banks (essentially working as a time machine for money), insurance, the
City of London.
o First wave of colonialism.
• Technological advancement:
o E.g., Traditional weaving → “Spinning Jenny” → Powered by engines (GPT)
o James Watt invented the steam engine in the early 18th century; but this did not fully
take off until the 19th century. It takes a long time for a GPT to take off.
▪ E.g., traditional ploughing → steam engine tractor (led to improvements in
labour productivity in agriculture).
▪ It also led to lower cost / higher quality of transportation via steam ships →
modernised trade.
What was the difference between the Industrial Revolution and all other technical advancements
happening before it?
• The Industrial Revolution led to the Scientific Revolution.
• Allowed for continuous improvement in technology – an accumulation of new technologies:
one technology output was the input for a new technology.
• This opened the door for systematic innovation.
Growth Accounting for Britain:
• Growth accounting: decomposing the economic growth of a country into the contribution of
increases in capital stock, labour input, and technological progress.
, •
o Capital grew – more machinery.
o Labour grew – more people working.
o GDP continued to grow.
o Residual = TFP growth – more innovation.
• Sources of Power (energy):
o Steam became a GPT a dominant source for power in 1870 across all sectors (50 years
after invention). Why?
▪ Technical infrastructure: there is a lag between invention, innovation, and
adoption (requires complementary technology).
• Making the steam engine cheaper and more applicable.
• Redesigning the ecosystem around
the steam engine (factory and
infrastructure).
▪ Political / Social infrastructure – people
may be more resistant to change.
o Redesigning the ecosystem:
▪ GPT = new technology.
▪ Factory/firm = require redesigning firms.
▪ Political / economic institutions = require
redesigning institutions to manage conflict
(soft/social infrastructure).
Distribution of Gains
• Both capital owners (entrepreneurs, etc) and labour grew over time.
• Landowners were the only losers.
Why did wages start to grow after 1860?
1. Economic factor: Surplus labour running out.
, a. As the economy continues to grow, the demand for labour starts to grow, the surplus
labour starts to shrink, leading to higher wages.
b. E.g., modern day China – labour left farms to work in cities. This led to surplus labour in
cities, depressing wages. As growth increased, a shrinking labour surplus has led to
higher wages.
2. Political factor: Rise of unions.
a. Trade unions were an institutional innovation.
b. Threat of revolution forces the elite to concede to the common folk.
3. Others:
a. Ownership of new skills made workers more valuable to owners (more of an impact –
higher wages → more spending on education → higher skilled workers).
Why did the Industrial Revolution end up producing more jobs?
• Income effect – the demand factor outpaced automation. So, the overall market grows.
Effects on the demand for labour:
1. Negative effect:
a. Displacement effect – jobs are destroyed.
2. Positive effect:
a. Composition effect (new tasks) – complementary tasks are created as technology
grows. E.g., engine engineers, factory cleaners, ticket checkers.
b. Productivity effect (spending effect) – cost of things goes down → more people buy it
→ you produce more (income effect).
Effect of automation in 𝑖 on aggregate labour demand = Productivity effect + Displacement effect +
Composition effect.
• Overall, the AI revolution will not reduce employment and wage growth because there is a
mismatch between the technological and physical world (our resource limit).
European “Followers” & the “Rest”
• The Followers (1815-1870) (through imitation and adoption):
o France
o Germany
o USA
• What happened to the rest?
o Colonialism (slavery, cotton plantations).
o Net exporter of raw materials (minerals, commodities).
o Net importer of industrial goods.
Why did the Industrial Revolution start in Britain?
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