Morgan Kelly and Cormac Ó Gráda (2016): Adam Smith, Watch Prices, and the Industrial Revolution
Six Questions:
- What do Kelly and Ó Gráda mean by a "middle class consumer durable"?
- How large a cumulative real price decline is 1.3%/year on average over 160 years?
- How do we understand the combination of falling watch prices in terms of labor time with stable prices in terms of labor time of necessities in Britain between 1650 and 1810?
- Was there equivalents of the watch in terms of technological improvement over 1490-1650? Or 1330-1490? Or 1170-1330? What were they, and why were they what they were?
- If it is indeed the case that making an equivalent-quality watch from metal ore and energy took only 1/8 as much time and trouble in 1810 as it had taken in 1650, where should we look to understand the details of this extraordinary improvement?
- When and why did British artisans cease being the world's watchmakers?
Morgan Kelly and Cormac Ó Gráda (2016): Adam Smith, Watch Prices, and the Industrial Revolution: "Watches were the first mass-produced consumer durable...
...and were Adam Smith’s preeminent example of technological progress.... Smith makes the notable claim that watch prices may have fallen by up to 95% over the preceding century.... We look at changes in the reported value of over 3,200 stolen watches from criminal trials in the Old Bailey in London from 1685 to 1810... the real price of watches in nearly all categories falls steadily by 1.3% a year... showing that sustained innovation in the production of a highly complex artifact had already appeared in one important sector of the British economy by the early eighteenth century....
Against the view of a narrowly based Industrial Revolution, our results on watchmaking support the view of a more broadly based advance across many manufacturing sectors proposed by Berg and Hudson (1992) and Temin (1997) , among others.... What distinguishes watches... is that, except for scientific instruments, watches were the most complex artifacts of their time. That is what makes their productivity growth so interesting.... Our results support the view that the roots of the Industrial Revolution stretch back further than the mid-eighteenth century. The beginnings of growth in the seventeenth century are consistent with the findings of Broadberry et al. (2015) on English GDP.... As Bailey and Barker (1969) demonstrate, the origins of watchmaking in Lancashire lie in the area’s tradition of brass making that dates back to the late sixteenth century...
Bernard de Mandeville: The Fable of the Bees: "Cleomenes: Man, as I have hinted before, naturally loves to imitate what he sees others do...
...which is the reason that savage people all do the same thing: this hinders them from meliorating their condition, though they are always wishing for it: but if one will wholly apply himself to the making of bows and arrows, whilst another provides food, a third builds huts, a fourth makes garments, and a sixth utensils: they not only become useful to one another, but the callings and employments themselves will in the fame number of years receive much greater improvements, than if all had been promiscuously followed by every one of the five.
Horatio: I believe you are perfectly right there, and the truth of what you say is in nothing so conspicuous, as it is in watch making, which is come to a higher degree of perfection, than it would have been arrived at yet, if the whole had always remained the employment of one person; and I am persuaded, that even the plenty we have of clocks and watches, as well as the exactness and beauty they may be made of, are chiefly owing to the division that has been made of that art into many branches...
Adam Smith (1776): [Wealth of Nations, Book I, Chapter 11][]: "It is the natural effect of improvement, however, to diminish gradually the real price of almost all manufactures...
...That of the manufacturing workmanship diminishes, perhaps, in all of them without exception. In consequence of better machinery, of greater dexterity, and of a more proper division and distribution of work, all of which are the natural effects of improvement, a much smaller quantity of labour becomes requisite for executing any particular piece of work; and though, in consequence of the flourishing circumstances of the society, the real price of labour should rise very considerably, yet the great diminution of the quantity will generally much more than compensate the greatest rise which can happen in the price....
In all cases in which the real price of the rude materials either does not rise at all, or does not rise very much, that of the manufactured commodity sinks very considerably. This diminution of price has, in the course of the present and preceding century, been most remarkable in those manufactures of which the materials are the coarser metals. A better movement of a watch, than about the middle of the last century could have been bought for twenty pounds, may now perhaps be had for twenty shillings.
In the work of cutlers and locksmiths, in all the toys which are made of the coarser metals, and in all those goods which are commonly known by the name of Birmingham and Sheffield ware, there has been, during the same period, a very great reduction of price, though not altogether so great as in watch-work. It has, however, been sufficient to astonish the workmen of every other part of Europe, who in many cases acknowledge that they can produce no work of equal goodness for double, or even for triple the price. There are perhaps no manufactures in which the division of labour can be carried further, or in which the machinery employed admits of a greater variety of improvements, than those of which the materials are the coarser metals...
[Wealth of Nations, Book I, Chapter 11]: https://www.econlib.org/library/Smith/smWN5.html#B.I, Ch.11, Of the Rent of Land
