Monday, March 20, 2006

Why England?

Naveen forwarded this blog post to me so, while not having read the underlying paper, I will give a few comments about the Industrial Revolution and why it happened in England first.

I think it is fair to say that most people interested in this question agree the Industrial Revolution was the result of a confluence of conditions that all happened to be in place by 1760 in England. One crucial thing that is often left out is geography. England had large coal deposits at the time and it is no coincidence that the first areas to industrialize in England were those near coal fields. A similar pattern holds in Scotland as well as mainland Europe and the United States. Nowadays, natural resources do not matter nearly as much because it is much cheaper to transport coal or oil between countries and regions than it was in the 18th century.

Two other things you need for an Industrial Revolution are access to cheap and reliable transportation to bring goods to market and the ability to feed industrial workers. England certainly had the first, since it is an island country with many rivers running through it. For most of history, transportation by ship has been much cheaper than over-land transport. As for the second, agricultural productivity was relatively high in England before the Industrial Revolution. This meant that not only was the countryside producing enough food to feed textile mill workers but also that farmers were earning income from selling produce which they could then use to buy manufactured goods. The Poor Law would have been ineffective at alleviating poverty if it wasn't for the high level of income and productivity in the English countryside at the time.

It is at this point that we start to ask even deeper questions. Why was agricultural productivity in England higher than mainland Europe or Asia? Or would it have been possible to have an industrial revolution in another country not based on coal power? These are the kinds of questions that still elude explanation.

Here is the abstract, courtesy of New Economist:

Why was England first? And why Europe? We present a probabilistic model that builds on big-push models by Murphy, Shleifer and Vishny (1989), combined with hierarchical preferences. Exogenous demographic factors (in particular the English low-pressure variant of the European marriage pattern) and redistributive institutions – such as the Old Poor Law – combined to make an Industrial Revolution more likely. Industrialization was the result of having a critical mass of consumers that is “rich enough” to afford (potentially) mass-produced goods.

Our model is calibrated to match the main characteristics of the English economy in 1780 and the observed transition until 1850. This allows us to address explicitly one of the key features of the British Industrial Revolution unearthed by economic historians over the last three decades – the slowness of productivity and output change. In our calibration, we find that the probability of Britain industrializing before France and Belgium is above 90 percent. Contrary to recent claims in the literature, 18th century China had only a minimal chance to industrialize at all.

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