Industrial Revolution and Economic Growth

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Questions and Answers

What is a key factor contributing to modern economic growth according to economic theory?

Labor force size

Natural resources availability

Population density

Total Factor Productivity (TFP) growth (correct)

What was a significant outcome of the Industrial Revolution in Britain around 1750?

Technological progress-driven economic growth (correct)

Increased reliance on agricultural methods

Decline in coal production

Return to Malthusian land constraints

How did the Glorious Revolution influence the British Industrial Revolution?

Strengthened the power of parliament and courts (correct)

Increased competition between monarchs and parliament

Expanded the British Empire's territories

Lowered taxation on the working class

How did the use of coal influence the economy during the Industrial Revolution?

It allowed for energy and iron production independent of land area. Signup and view all the answers

Which factor is NOT commonly associated with TFP growth?

Increased birth rates Signup and view all the answers

What role does culture and ideology play in modern economic growth?

They shape trust, work ethics, and entrepreneurial spirit. Signup and view all the answers

Which technology played a crucial role in expanding the use of coal during the Industrial Revolution?

The Newcomen steam engine Signup and view all the answers

What was the state of iron production in Britain by 1850?

Over 2,000,000 tons Signup and view all the answers

What critique does Epstein make regarding secure property rights?

They can stifle economic progress. Signup and view all the answers

What role did coal play in unshackling the economy from Malthusian constraints?

It allowed industrial energy sources to not rely on farmland. Signup and view all the answers

Which of the following was a caveat regarding the British Industrial Revolution?

There was a significant 60-year lag after the Glorious Revolution. Signup and view all the answers

Which geographic factor is highlighted as a contributor to modern economic growth?

Coal deposits Signup and view all the answers

Which statement best describes the trends in horsepower from 1800 to 1907 in British industry?

Horsepower grew dramatically from 170,000 to almost 10,000,000. Signup and view all the answers

What does TFP growth commonly represent?

A summary of various contributing factors Signup and view all the answers

What was the primary material driving the industrial changes in Britain during the Industrial Revolution?

Coal Signup and view all the answers

In what year was the significant breakthrough in technological progress in Britain noted?

1750 Signup and view all the answers

What does the Cobb-Douglas production function express in its basic form?

Y = A * K^α * L^(1−α) Signup and view all the answers

What component is used to decompose output growth according to the growth accounting framework?

TFP growth and capital deepening Signup and view all the answers

During the British Industrial Revolution, what initially hindered the widespread application of new technologies?

Technologies were only applied in a few small sectors Signup and view all the answers

What was the significance of expensive labor and cheap energy in driving TFP growth in Britain?

It necessitated innovations that substituted cheap energy for expensive labor. Signup and view all the answers

How is TFP growth calculated in relation to output growth?

∆log(A) = ∆log(y) - α∆log(k) Signup and view all the answers

Which statement best describes the 'induced innovation' thesis?

Innovations are driven by high factor costs leading to technological advancements. Signup and view all the answers

What role did the rental price of capital play in technological innovation during the Industrial Revolution?

It incentivized firms to invest in capital-intensive technologies. Signup and view all the answers

What does the variable α represent in the Cobb-Douglas production function?

The capital share of income Signup and view all the answers

What is the main consequence of a high price of labor in a manufacturing and commercial country?

Decline in local commerce without mechanical innovations Signup and view all the answers

How did micro-innovations impact low-wage firms?

They made new technology cost-effective. Signup and view all the answers

What was a critical factor that allowed the Industrial Revolution to spread beyond Britain?

Development of railway transport Signup and view all the answers

Which region was most impacted by the availability of coal in relation to industrial development?

Northern France and Belgium Signup and view all the answers

What was the relationship between the efficiency of steam engines and industrial growth?

Improved steam engine efficiency reduced operational costs. Signup and view all the answers

What restricted heavy industry development before the railways were introduced?

Inaccessibility to coal supplies Signup and view all the answers

Which factor is least likely to have influenced the spread of the Industrial Revolution?

Government regulations on commerce Signup and view all the answers

What term best describes the type of innovation that addresses challenges posed by high labor costs?

Induced innovation Signup and view all the answers

What primary function does the patenting system serve in relation to innovation?

To address underinvestment in knowledge as a public good Signup and view all the answers

Which statement accurately reflects the status of patenting during the Industrial Revolution in Britain?

Less than 16% of inventions were patented by the mid-19th century Signup and view all the answers

What advantage did factory workers have compared to non-factory workers, according to self-control theory?

Increased productivity and higher pay Signup and view all the answers

By 1815, what percentage of the cotton textile sector's output was exported?

<blockquote> 60% </blockquote> Signup and view all the answers

What role did scientific societies play according to Mokyr's view on the Industrial Revolution?

They facilitated interaction between scientists and engineers Signup and view all the answers

What percentage of cotton goods were exported to America and Australia by 1800?

50% Signup and view all the answers

What was identified as a significant barrier in the British patenting system?

It required extensive legal documentation and costs Signup and view all the answers

What was a significant contributor to GDP increase from 1780 to 1801, according to Crafts (1985)?

Export increase Signup and view all the answers

What trend was observed regarding patents and inventions during the Industrial Revolution?

There was a clear trend break in patent filings Signup and view all the answers

What factor contributed to higher Total Factor Productivity (TFP) growth according to the content?

The imperfections in the patenting system Signup and view all the answers

What was a misconception about British colonial trade in the late C18th?

It became a significant outlet for Britain's industrial produce Signup and view all the answers

What economic theory explains the productivity of factory workers despite their resentment towards discipline?

Self-control theory Signup and view all the answers

Which of the following statements is true regarding inventions during the Industrial Revolution?

The machine building industry saw a concentration of patents Signup and view all the answers

What factor led to a boom in British colonial exports in the late C18th?

Growing global demand Signup and view all the answers

How did the Baconian program contribute to the Industrial Revolution?

It emphasized generating useful knowledge Signup and view all the answers

Which of the following statements is true regarding the approach of workers to factory contracts?

Workers continually signed factory contracts due to higher pay Signup and view all the answers

Study Notes

Economic History: Transition to Modern Growth

The transition to modern economic growth occurred in Northwest Europe between the mid-18th and mid-19th centuries.
A decisive breakthrough occurred in Britain around 1750, marked by the adoption of new technologies, and their subsequent continuous improvement.
Britain was the first to experience technological progress-driven economic growth, thus escaping the Malthusian trap.

The Industrial Revolution: Role of Coal

Coal was already used in Britain before the Industrial Revolution for various purposes (heating, brickmaking, ceramics).
New technologies, like coke smelting (Abrahm Darby, 1709) and the Newcomen steam engine (Newcomen, 1712), dramatically increased coal's usage.
Coal use freed economies from constraints imposed by land, eliminating the need for charcoal and allowing for increased horsepower without needing more farmland.
By 1800, Britain had 170,000 horsepower accessible through its industry; by 1907, this figure increased to almost 10,000,000.
Iron production in Britain rose from 12,000 tons in 1700 to over 2,000,000 tons by 1850.
The distribution of coalfields significantly influenced the geographical spread of the Industrial Revolution.

From Malthus to Solow

Pre-modern production function: Y = AL^1-α (Output = Total factor productivity * Fixed land input^{1- α} * Labor input)
Modern production function: Y = AK^βL^1-β (Output = Capital input^β * Labor input^{1 - β})
α and β represent capital shares of income, approximately 1/3.
The pre-modern function shows a negative relation between population and per-capita income.
The modern function depicts that population growth doesn't necessarily lower per capita income if the capital stock grows.

Escaping Malthus

The graph of English real wages and population demonstrates rising incomes that continued to rise even with a growing population.

Modern Economic Growth - Solow

Per capita income growth can stem from capital accumulation (short-term growth or transitory growth) or technological progress (long-term growth or steady state growth).
Sustained per capita income growth necessitates sustained technological progress.
The Solow model emphasizes external or exogenous TFP (total factor productivity) growth.
Endogenous growth models focus on factors like research and development (R&D) to explain sustained growth.

The Onset of Modern Economic Growth (UK)

A graph of real GDP per capita in the UK (2011 international USD) showcases the sustained growth of the British economy post-1700.

Growth Accounting

Cobb-Douglas production function: Y = AK^αL^1-α, where α is the capital's share of income (~1/3).
Calculating the change in output (∆y) , one decomposes this growth into TFP growth and capital deepening.

TFP Growth during the British Industrial Revolution

Technological advancements initially impacted only a few specific sectors.
TFP growth in aggregate became evident slightly later.
Initial TFP improvements were modest.

Induced Innovation: Factor Prices

A key driver of TFP growth is the "induced innovation" thesis wherein expensive labor and cheap energy drive innovation to reduce labor costs.
The creation of new technologies is a cost-minimizing response.
The high demand for new technologies encourages innovation, particularly those that substitute expensive labor for cheap coal-based energy, and this resulted in more efficient technologies.

Induced Innovations as Seen by Contemporaries

Contemporary accounts noted that technological advancements became crucial in countering the increasing cost of labor.
They recognized that nations needed to improve labor-saving machinery to maintain or improve their competitive advantage.

Technology in Induced Innovation

Technological advancement is heavily influenced by labor costs and the price of energy.
Cost-effective technology is more likely to be adopted in regions with higher wage costs.

Spread of the Industrial Revolution

The spread of steam engines became integral to cost-minimization as wage levels rose.
Access to coal and water transportation influenced the establishment of industries.
Industrial development in areas lacking domestic coal supplies was slower.
The industrial revolution spread further with the advent of railway transport.

Coal Geography in Europe

Maps illustrate the correlation between coal deposits and initial development of industrial activity in Europe.

Modern Economic Growth Across Europe

The extension and wide adoption of the Industrial Revolution led to sustained per capita growth across Europe.

Deep Roots of Modern Economic Growth Beyond Factor Prices

TFP (Total factor productivity) growth is a vital aspect of modern economic growth.
TFP signifies technological advancements, but encompasses other factors like human capital, institutions, culture, and geography.

Institutions and the British Industrial Revolution

The Glorious Revolution (1688) strengthened parliament and reduced monarchical power, making British tax policies more reliable, and thereby attracted capital.
Securing property rights and reducing risk was a central factor in the Industrial Revolution.

Intellectual Property Rights and the Industrial Revolution

Intellectual property rights resolved the underinvestment problem in knowledge creation, encouraging innovation and its wider and faster application. However, the patent process itself was expensive and cumbersome.
Many important inventions were not patented initially.

The Scientific Revolution

The Scientific Revolution played a role in facilitating interactions between scientists and engineers along with the creation of useful knowledge.
This fostered continued innovation.

Human Capital and the British Industrial Revolution

The initial stages of the industrial revolution diminished the skills needed to perform certain jobs as machines were integrated into the labor process.
While initial human capital development was low by European standards, high-skill workers were crucial to initial technological advances.
Mass education was a more important driver of technological adoption.

Higher Education Trends

Data shows declines in higher education during the British industrial revolution.

Culture and the Industrial Revolution

A shift in cultural values, valuing enterprise and innovation played a key role.
Engineering became a recognized way for individuals to achieve social recognition.

Factory Discipline and Coordination Theory

Factory production demanded intensive work structures, with penalties for conduct deviations (e.g., being late, talking).

Factory Discipline and Institutions

Institutional elements like the Statute of Artificers encouraged an employer-friendly labor environment, resulting in higher outputs per unit of labor cost.
However, the potential for exploitation of labor was a caveat.

Factory Discipline and Wages

Workers in factory settings typically received higher wages compared to those working outside factories, despite the strict control measures.

Empire, Trade and Market Size

Colonial trade expanded during the late 18th century, becoming an effective market for British manufactured goods.

Was the Industrial Revolution Export-Led Growth?

Limited markets or lack of demand were limitations on the growth of industrial production.
Increased market size, facilitated by exports, played a large role in encouraging British industrialization.

Chance and the British Industrial Revolution

Technological advancement is influenced by chance and luck.
The early stages of the British industrial revolution were marked by a heightened level of volatility and chance factors.

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Description

This quiz explores key factors in modern economic growth, including the impact of the Glorious Revolution and the role of coal during the Industrial Revolution in Britain. It covers significant outcomes and critiques related to economic theories and productivity factors from 1750 onwards.