Grasping Reality on TypePad, by Brad DeLong

Paul Krugman (2003): Serf's Up!: "According to [Evsey] Domar, serfdom actually withered away before the Black Death...

John Maynard Keynes (1937): The General Theory of Employment: "There are passages which suggest that Professor Viner is thinking too much...

Live from Evans Hall: Robert Solow (1985): Economic History and Economics:

Robert M. Solow (1985), "Economic History and Economics", American Economic Review 75:2 (May), pp. 328-331 http://www.jstor.org/stable/1805620

Contact me via: * Skype:braddelong * email:[email protected]

Evans 691a:

• M 1-2 PM PDT May 5
• Tu 4-6 PM PDT May 6
• W 11-12 AM PDT May 7

Hearst Mining 390

• Th 10-12 Am PDT May 15

• I will be entertaining the seminar speaker around lunchtime...

• So office hours on MONDAY March 17, 2014 are postponed to: 6 PM @ Yali's Cafe 1920 Oxford St., Berkeley

[.key] [.pdf] [.ppt]

Introduction to Economic History: Economics 210A

Brad DeLong ([email protected] OH M 1-2 W 11-12) and Barry Eichengreen ([email protected] OH Tu 1-3)

Spring 2014; University of California, Berkeley; Wednesday 1:00-3:00 p.m.; 597 Evans Hall

• Econ 210a Introduction
• Econ 210a Weekly Memos
• Econ 210a Paper Assignment
• Econ 210a Readings
• Econ 210a Key Dates

Readings

Readings are available either on the web or, where there exists no web-based copy, at Graduate Services (http://www.lib.berkeley.edu/doemoff/grad/index.html) at 208 Doe Library. Access to readings available through JSTOR and other proprietary sources may require you to log on through a university-recognized computer and enter your Calnet ID. There can be high demand for the readings on reserve at peak times, and the library can make available only limited numbers of copies. In past years some students have found it useful to purchase some of the books from which material is assigned through their favorite online book seller and to assemble the materials for reproduction at a local copy shop.

Weekly Memo Question: Mar 5: Manhattan Island today has a population density of 70,000 people per square mile. The United States today has an average population density of 100 people per square mile--about the same as the global average in a world in which Asia has 200, Europe 130, Australia/Oceania 10, and Antarctica 0. Pick one paper. What do you think of the reasons it gives, implicitly or explicitly, for our tendency to agglomerate?

Weekly Memo Question: Feb 26: If we were at Chicago, by now you would have been taught to excess that externalities are rare and that government attempts to correct for them via Pigovian or regulatory means are destined to do more harm than good. But we are here at Berkeley--where serious interdependence and externality are everywhere, and where there is not a market that does not need either a large Pigovian tax or bounty somewhere or that does not need very skillful and well-designed regulation to come as close as possible to assigning property rights in order to cut the animal at the joints. What in the two papers this week leaves you suspicious of the Berkeley point of view?

Weekly Memo Question: Feb 19: Adam Smith confidently asserted that slavery was uneconomic--that in commercial society, manumission was the road to higher productivity because the carrot of working for yourself is much more efficient than the stick of being whipped by others. Was Smith right? If you conclude that he was right, does that mean that slavery is in general on the road to its natural extinction? And why is unfree labor such a common institution?

Weekly Memo Question: Feb 12: Economics tends to view growth as a continuous and diffuse process: if one firm does not solve the problem of how to efficiently utilize resources, others will and drive the first out of business; if one technological vein plays itself out, energy will focus on others. The papers this week argue either that unique institutions and technologies matter a lot or that they do not. What kinds of evidence not presented in this week's reading might lead you to come down on one side or the other?

Weekly Memo Question: Feb 5: Maxine Berg and Pat Hudson write that the "historiography of the industrial revolution in England has moved away from viewing the late eighteenth and early nineteenth centuries as a unique turning point in economic and social development." Whether or not it has, do the papers this week make you think that economic historians should move away from viewing the British Industrial Revolution as the axis upon which global economic history turns, or not?

Weekly Memo Question: Jan 29: The January 22 class painted a picture of an economic world in which (a) total factor productivity growth was very slow, and (b) as a result the overwhelming effect of technological progress was to increase human numbers rather than raise standards of living above bare subsistence. This week we read three pieces--Marx, Acemoglu et al., and Allen--all arguing that very important things were happening in northwestern Europe in 1500-1800 to raise the rate of total factor productivity growth. Pick one paper. Do you think it makes a convincing case? Taking as background January 22's class, how much of a difference in the global economic trend do you think that paper's factors by themselves could have made?

To: Students enrolled in Econ 210a: Introduction to Economic History
From: Brad DeLong [email protected]
Subject: First Class on January 22, 2014
Date: January 19, 2014

Before you show up in Evans 597 at 1 PM on Wednesday, January 22, do the reading:

January 22. The Malthusian Economy (Feudalism and Manorialism; Gilds and Trade) (DeLong)

• Robert M. Solow (1985), "Economic History and Economics", American Economic Review 75:2 (May), pp. 328-331 http://www.jstor.org/stable/1805620
• Kenneth J. Arrow (1985), "Maine and Texas", American Economic Review 75:2 (May), pp. 320-323 http://www.jstor.org/stable/1805618
• Rick Steckel (2008), "Biological Measures of the Standard of Living", Journal of Economic Perspectives 22:1 (Winter), pp. 129-52 http://www.aeaweb.org/articles.php?doi=10.1257/jep.22.1.129
• Thomas Malthus (1798), An Essay on the Principle of Population, Chapters 1-2, pp.1-11, Electronic Scholarly Publishing Project, 1998. http://www.esp.org/books/malthus/population/malthus.pdf
• Gregory Clark (2007), A Farewell to Alms: A Brief Economic History of the World, Chapter 2, “The Logic of the Malthusian Economy,” pp. 19-39 and Chapter 3, “Living Standards,” pp. 40-70. Princeton: Princeton University Press. On reserve at Graduate Services. An earlier draft (not preferred) is available at http://tinyurl.com/dl20090112e (chapter 2) and >http://tinyurl.com/dl20090112j> (chapter 3)
• Moses Finley (1965), "Technical Innovation and Economic Progress in the Ancient World", Economic History Review NS 18:1, pp. 29-45 http://www.jstor.org/stable/2591872

Readings

• Moses Finley (1965), "Technical Innovation and Economic Progress in the Ancient World", Economic History Review NS 18:1, pp. 29-45 http://www.jstor.org/stable/2591872

Aristotle and Finley

• Sir M.I. Finley
• Moses Israel Finkelstein
• Why did TFP growth used to be so terribly, pitifully slow?
• Aristotle of Stagira was not an idiot. For two thousand years people called him "the philosopher”—as if there was only one…

Readings:

• Rick Steckel (2008), "Biological Measures of the Standard of Living", Journal of Economic Perspectives 22:1 (Winter), pp. 129-52 http://www.aeaweb.org/articles.php?doi=10.1257/jep.22.1.129

• Thomas Malthus (1798), An Essay on the Principle of Population, Chapters 1-2, pp.1-11, Electronic Scholarly Publishing Project, 1998. http://www.esp.org/books/malthus/population/malthus.pdf

• Gregory Clark (2007), A Farewell to Alms: A Brief Economic History of the World, Chapter 2, “The Logic of the Malthusian Economy,” pp. 19-39 and Chapter 3, “Living Standards,” pp. 40-70. Princeton: Princeton University Press. On reserve at Graduate Services. An earlier draft (not preferred) is available at http://tinyurl.com/dl20090112e (chapter 2) and http://tinyurl.com/dl20090112j (chapter 3)

Why Assign Readings? Why Ask You to Write?

• Why not just dump a bunch of data on you, and ask you to make sense of it?
• Why assign these readings? How should readings be chosen?
• Why ask you to write about the readings—briefly, briefly—before class?
• Why a big paper rather than a midterm and a final exam?

Why Gather Us All Here W 1-3?

• Self study/distance learning/MOOCs—why aren’t we doing that?
• The 10-40-80 Rule…
• That means you gotta talk—or this course is going to be much less useful than it could and should be…
• The instant-correction-of-misapprehensions principle…

Key Dates

• January 22. First Class
• March 14. Paper Prospectus Due
• March 19. Spring Break
• April 30. Last Class
• May 9. Paper Due

Research Paper

Your research paper is due on Friday May 9th. In addition to sending an electronic copy to both instructors, be sure to put a copy in Professor Eichengreen’s mail box in Economics Department reception on the 5th floor of Evans Hall. The office is open 9:00-4:00. The paper should not exceed 25 pages. This deadline will not be changed; plan in advance.

The writing and submission process requires that you meet two benchmarks. You should discuss your paper topic during office hours with one of your instructors during the first half of the semester and then submit a brief paper prospectus before spring break (by 4:00 PM Friday March 14th – electronic copies to both instructors, also to Professor Eichengreen’s mailbox). That prospectus should explain why the topic is important, state your hypothesis, and describe the materials and approach that you will use to analyze it. Your paper grade will depend in part on the quality of your prospectus.

Introduction to Economic History: Economics 210A

Brad DeLong ([email protected] OH M 1-2 W 11-12) and Barry Eichengreen ([email protected] OH Tu 1-3)

Spring 2014; University of California, Berkeley; Wednesday 1:00-3:00 p.m.; 597 Evans Hall
Introduction

Economics 210a is required of Ph.D. students in the first year of the graduate program. The course is designed to introduce a selection of themes from the contemporary economic history literature ( not to present a narrative account of world economic history). Emphasis is on the insights that history can provide to the practicing economist.

Class meetings consist of a mixture of lecture and discussion. Because discussion will focus on issues raised by the assigned readings, readings should be completed before class.

Your grade will be based 50 percent on one-page memos due at the beginning of each class meeting in the instructors' mailboxes at 5 PM Tuesday, and 50 percent on the research paper (where the latter 50 percent will be based both on the synopsis you submit prior to spring break and the paper you submit at the end of instruction). Extra credit will be given for informed, constructive classroom discussion.

Weekly Memos

A memo on each week’s readings is due at the beginning of each class meeting in the instructors' mailboxes at 5 PM Tuesday before those readings are discussed. You will find the memo questions on Professor DeLong’s and Professor Eichengreen’s 210a subpages:

• http://delong.typepad.com/sdj/econ-210a-spring-2014/
• http://emlab.berkeley.edu/users/webfac/eichengreen/e210a_spring13/e210b.shtml

Typically the week’s question will be posted on the Thursday six days before the class meeting when your memo is due. The memo is due at the start of the class meeting.

Your memos should be one-page, and certainly no more than two pages (12-point type). They cannot be exhaustive or provide definitive answers. But they can explain why a question is important, and they can draw on assigned readings in an effort to answer it.

Readings:

• Robert M. Solow (1985), "Economic History and Economics", American Economic Review 75:2 (May), pp. 328-331 http://www.jstor.org/stable/1805620
• Kenneth J. Arrow (1985), "Maine and Texas", American Economic Review 75:2 (May), pp. 320-323 http://www.jstor.org/stable/1805618
• Isaac Asimov (1953), Second Foundation (New York: Gnome Press), chapter 8 http://tinyurl.com/dl2014014b

Six Passages

(1) Robert M. Solow (1985), "Economic History and Economics":

You could drop a modern economist from a time machine--a helicopter, maybe, like the one that drops the money--at any time, in any place, along with his or her personal computer; he or she could set up in business without even bothering to ask what time and which place. In a little while, the up-to-date economist will have maximized a familiar-looking present-value integral, made a few familiar log-linear approximations, and run the obligatory familiar regression. The familiar coefficients will be poorly determined, but about one-twentieth of them will be significant at the 5 percent level, and the other nineteen do not have to be published... the data are just barely consistent with your thesis adviser's hypothesis that money is neutral (or nonneutral, take your choice) everywhere and always, modulo an information asymmetry, any old information asymmetry, don't worry, you'll think of one. All right, so I exaggerate. You will recognize the kernel of truth.... Of course there are holdouts against this routine, bless their hearts...

J. Bradford DeLong (1995): "Overstrong Against Thyself: War, the State, and Growth in Europe on the Eve of the Industrial Revolution"

January 27, 2010 Snippets: Smith, Marx, Solow: (i) Exchange and its vicissitudes as fundamental to human psychology and society? Adam Smith: http://www.adamsmith.org/smith/won-b1-c2.htm:

Nobody ever saw a dog make a fair and deliberate exchange of one bone for another with another dog.... When an animal wants to obtain something either of a man or of another animal, it has no other means of persuasion but to gain the favour of those whose service it requires. A puppy fawns upon its dam, and a spaniel endeavours by a thousand attractions to engage the attention of its master who is at dinner, when it wants to be fed by him. Man sometimes uses the same arts with his brethren, and when he has no other means of engaging them to act according to his inclinations, endeavours by every servile and fawning attention to obtain their good will. He has not time, however, to do this upon every occasion. In civilised society he stands at all times in need of the cooperation and assistance of great multitudes, while his whole life is scarce sufficient to gain the friendship of a few persons....

Notes: The Character of the Absolutist State in Western Europe: Archive Entry From Brad DeLong's Webjournal: May 12, 2003:

Perhaps the most interesting argument about why the demographic crisis produced by the Black Death did not lead to the reemergence of serfdom in Western Europe (as lords discovered that, with population down by 1/3, they would rather be labor lords than landlords) is that made by Perry Anderson in his book Lineages of the Absolutist State. Anderson has two arguments. His first is that the particular role of Western European towns made a formal reimposition of servile bondage impossible:

the aristocracy had to adjust to a second antagonist: the mercantile bourgeoisie... towns... the intercalation of this third presence... prevented the Western nobility from settling its accounts with the peasantry in Eastern [European] fashion, by smashing its resistance and fettering it to the manor. The medieval town... hierarchical dispersion of sovereignties... feudal mode of production... freed urban economies from direct domination by a rural ruling class.... [Urban] economic and social vitality acted as a constant, objective interference in the class struggle on the land, and blocked any regressive solution to it by the nobles." Feudal lords could agree among themselves and with the king to reimpose serfdom, but they lacked the power to do so if peasants could still (as they could in Western Europe) run to the towns for protection.

Econ 210a: Spring 2012: U.C. Berkeley: Question for April 25, 2012: The Great Divergence, the Great Moderation and the Great Recession:

We have three topics for April 25, so try to sum up your thoughts on one--and only one of the three:

• What, in your view, is right and what is wrong with Lant Pritchett's attempt to document and account for the rise in global relative inequality from 1800 to 1980?

• Why didn't Raghu Rajan's fears about the dangers of increased "financial sophistication" have more purchase in economists' thought as of the mid-2000s?

• What do we really know and not know about why the economy falls to pieces after a financial crisis?

Office Hours This Week:

• Tu 4-6, Qualcomm Cafe
• W 2-3, 601 Evans

Econ 210a: Spring 2012: U.C. Berkeley: March 21, 2012: Globalization and Crises:

• Class Slides

Michael D. Bordo and Barry Eichengreen http://www.nber.org/papers/w8716.pdf:

Goodhart dates the first age of globalization to the laying of the transatlantic telegraph cable, which by providing a real-time communications link between England and North America transformed the information environment. ... There were other, perhaps equally important, factors at work. One was the growth of trade, stimulated by the Cobden-Chevalier Treaty of 1860 which was generalized to other countries through the operation of most-favored-nation clauses. In the four decades leading up to World War I, as transport costs fell and governments adopted trade-friendlier commercial policies, there was nearly a doubling of the share of exports in GDP.... Certainly the enthusiasm of British investors for Argentine railway bonds would have been less in the absence not just of cable traffic and refrigerated steamships but also of an open British market for chilled beef...

19th Century Financial Crises: How Do They Compare to Today's? Pegged exchange rates, high capital mobility, asymmetric information, and weak institutions clearly comprised a fertile environment for crises. In these respects if not others, the crises of the pre-1914 era bear no little resemblance to the Asian crisis of 1997-8 and other recent crises. But how extensive are the parallels?... We distinguish banking crises, currency crises and twin crises. For an episode to qualify as a currency crisis, we must observe a forced change in parity, abandonment of a pegged exchange rate, or an international rescue. For an episode to qualify as a banking crisis, we must observe either bank runs, widespread bank failures and the suspension of convertibility of deposits into currency such that the latter circulates at a premium relative to deposits (a banking panic), or significant banking sector problems (including but not limited to bank failures) resulting in the erosion of most or all of banking system collateral that are resolved by a fiscally- underwritten bank restructuring...

Compared to these pre-1914 cases, Asian countries in the 1990s fared less well because of the absence of an analogous rule. There, as Delargy and Goodhart put it, "the combination of a downwardly flexible exchange rate (raising the domestic burden of dollar debt) combined with efforts to keep the Asian countries from imposing moratoria on outward debt payments, plus high (often sky-high) interest rates has led to a cocktail of external/internal financial conditions far less conducive to rapid recovery than pre-1914..."

The major difference between then and now, we would argue, lay not in currency crises per se but in banking crises and their tendency to spill over to the currency market. Banking crises, although as frequent then as now, were less prone to undermine confidence in the currency in the countries that were at the core of the gold-standard system. Today, the outbreak of a banking crisis typically leads investors to anticipate that the authorities will engage in large-scale credit creation to bail out the banks. Banking crises undermine currency stability, creating the notorious twin crisis problem (Kaminsky and Reinhart 2000). This was not the case a century ago at the center of the gold standard system. Then, banks suspended the convertibility of deposits into currency, currency went to a premium (relative to deposits), and foreign capital -- undeterred by exchange risk -- flowed in to arbitrage the difference, so long as countries remained on gold (Gorton 1987)...

Where the pre-1914 system appears to have worked better (quoting Delargy and Goodhart, 1999, p.11) was in limiting the tendency for banking problems to destabilize the currency market.... A very hard currency peg, like that practiced in the countries at the core of the European gold standard in the late 19th century, could thus prevent financial problems arising elsewhere in the economy from also undermining the currency and then feeding back to the rest of the economy in destabilizing ways. Of course, even a very firm commitment to the peg was no guarantee against other financial problems, serious banking-sector problems in particular. This is an important lesson of history for emerging markets today...

March 21. Globalization and Crisis (DeLong)

Globalization:

• Douglas Irwin (1998), “Did Late Nineteen Century U.S. Tariffs Promote Infant Industries? Evidence from the Tinplate Industry,” NBER Working Paper no. 6835 (December). http://www.nber.org/papers/w6835

• Richard Baldwin and Philippe Martin (1999), “Two Waves of Globalization: Superficial Similarities, Fundamental Differences,” NBER Working Paper no.6904 (January). http://www.nber.org/papers/w6904

Crisis:

• Barry Eichengreen and Michael Bordo (2002), “Crises Now and Then: What Lessons from the Last Era of Financial Globalization?” NBER Working Paper no. 8716 (January). http://www.nber.org/papers/w8716

Memo Question for March 21, 2012::

From our present perspective, what did Barry Eichengreen and Michael Bordo miss back in 2002 when they tried to draw lessons for the then future about financial crises from the pre-1914 record of growth, development, and financial deepening?

Econ 210a: Spring 2012: U.C. Berkeley: Globalization and Crisis: Memo Question for March 21, 2012:

From our present perspective, what did Barry Eichengreen and Michael Bordo miss back in 2002 when they tried to draw lessons for the then future about financial crises from the pre-1914 record of growth, development, and financial deepening?

Memo Question for February 29: The Uneven Spread of Industrialization:

By the end of the nineteenth century, the classic Industrial Revolution technologies of coal, steam, textile machinery, rails, locomotives, and precision metalworking--plus a large number of follow-on technologies, as witnessed by the growth of a Johannesburg centered around leading-edge organic chemicals--were or could be profitable pretty much everywhere in the world, if the organization and resources could be assembled. Why then did industrialization spread from Britain in the years up to 1900 only to western Europe, the temperate zones of the Americas and Australasia, and Japan? What answers do this week's readings suggest to you?

February 29. The Uneven Spread of Industrialization (DeLong)

• Tom Nicholas (2011), “The Origins of Japanese Technological Modernization,” Explorations in Economic History 48:2, pp. 272-291. http://www.sciencedirect.com/science/journal/00144983/48/2

• Justin Lin (1995), “The Needham Puzzle: Why the Industrial Revolution Did Not Originate in China,” Economic Development and Cultural Change 43:2, pp. 269-292. http://www.jstor.org/stable/i248445

• Carol Schiue and Wolfgang Keller (2004), “Markets in China and Europe on the Eve of the Industrial Revolution,” NBER Working Paper no.10778. http://www.nber.org/papers/w10778

• Indijrat Ray (2009), “Identifying the Woes of the Cotton Textile Industry in Bengal: Tales of the 19th Century,” Economic History Review 62:4, pp. 857-892. http://onlinelibrary.wiley.com/doi/10.1111/j.1468-0289.2009.00444.x/abstract

Econ 210a: Spring 2012: U.C. Berkeley: Memo Question for February 22: American Exceptionalism:

Robert Allen for Britain and Peter Temin for the U.S. (in Temin's case, channeling earlier historians like Rothbarth and Habakkuk) both argue that high real wages combined with abundant resources led to a distinctive pattern of industrialization. Along with obvious similarities, their arguments also display important differences. What are these differences and for what do they matter?

Everytime I reread http://www.ehs.org.uk/ehs/conference2007/Assets/AllenIIA.pdf, I think: Robert Allen is a fracking genius!:

The Industrial Revolution is one of the most celebrated watersheds in human history. It is no longer regarded as the abrupt discontinuity that its name suggests, for it was the result of an economic expansion that started in the sixteenth century. Nevertheless, the eighteenth century does represent a decisive break in the history of technology and the economy. The famous inventions–the spinning jenny, the steam engine, coke smelting, and so forth–deserve their renown1, for they mark the start of a process that has carried the West, at least, to the mass prosperity of the twenty-first century. The purpose of this essay is to explain why they occurred in the eighteenth century, in Britain, and how the process of their invention has transformed the world... […]

The industrial revolution was fundamentally a technological revolution, and progress in understanding it can be made by focussing on the sources of invention.... [T]he reason the industrial revolution happened in Britain, in the eighteenth and nineteenth centuries, was not because of luck (Crafts 1977) or British genius or culture or the rise of science. Rather it was Britain’s success in the international economy that set in train economic developments that presented Britain’s inventors with unique and highly remunerative possibilities. The industrial revolution was a response to the opportunity… […]

What commercial success did for Britain was to create a structure of wages and prices that differentiated Britain from the continent and, indeed, Asia: In Britain, wages were remarkably high and energy cheap. This wage and price history was a fundamental reason for the technological breakthroughs of the eighteenth century whose object was to substitute capital and energy for labour. Scientific discoveries and scientific culture do not explain why Britain differed from the rest of Europe. They may have been necessary conditions for the industrial revolution, but they were not sufficient: Without Britain’s distinctive wage and price environment, Newton would have produced as little economic progress in England as Galileo produced in Italy... [...]

The working assumption of this paper is that technology was invented by people in order to make money.... [L]abour was particularly expensive and energy particularly cheap in Britain, so inventors in Britain were led to invent machines that substituted energy and capital for labour.... The scale of the mining industry in eighteenth century Britain was much greater than anywhere else, so the return to inventing improved drainage machinery (a.k.a. the steam engine) was greater in Britain than in France or China. Third, patents that allow the inventor to capture all of the gains created by his invention raise the rate of return and encourage invention... [...]

Britain was a high wage economy in four senses:1. At the exchange rate, British wages were higher than those of its competitors. 2. High silver wages translated into higher living standards than elsewhere. 3. British wages were high relative to capital prices. 4. Wages in northern and western Britain were exceptionally high relative to energy prices...

The different trajectories of the wage-rental ratio created different incentives to mechanize production in the two parts of Europe. In England, the continuous rise in the cost of labour relative to capital led to an increasingly greater incentive to invent ways of substituting capital for labour in production. On the continent, the reverse was true…. It was not Newtonian science that inclined British inventors and entrepreneurs to seek machines that raised labour productivity but the rising cost of labour... [...]

Britain’s unusual wages and prices were due to two factors. The first was Britain’s success in the global economy, which was in part the result of state policy. The second was geographical–Britain had vast and readily worked coal deposits…. The superior real wage performance of northwestern Europe was due to a boom in international trade…. In a mercantilist age, imperialism was necessary to expand trade, and greater trade led to urbanization.... Coal deposits were a second factor contributing to England’s unusual wage and price structure…. First, inexpensive coal raised the ratio of the price of labour to the price of energy (Figure 4), and, thereby, contributed to the demand for energy-using technology. In addition, energy was an important input in the production of metals and bricks, which dominated the index of the price of capital services.... [C]oal is a ‘natural’ resource, but the coal industry was not a natural phenomenon.... It was the growth of London in the late sixteenth century, however, that caused the coal industry to take off. The Dutch cities provide a contrast that reinforces the point (Pounds and Parker 1957, de Vries and van der Woude 1997, Unger 1984). The coal deposits that stretched from northeastern France across Belgium and into Germany were as useful and accessible as Britain’s.... The pivotal question is why city growth in the Netherlands did not precipitate the exploitation of Ruhr coal in a process parallel to the exploitation of Northern English coal. Urbanization in the Low Countries also led to a rise in the demand for fuel. In the first instance, however, it was met by exploiting Dutch peat. This checked the rise in fuel prices, so that there was no economic return to improving transport on the Ruhr or resolving the political-taxation issues related to shipping coal down the Rhine. Once the Newcastle industry was established, coal could be delivered as cheaply to the Low Countries as it could be to London, and that trade put a ceiling on the price of energy in the Dutch Republic that forestalled the development of German coal. This was portentous: Had German coal been developed in the sixteenth century rather than the nineteenth, the industrial revolution might have been a Dutch-German breakthrough rather than a British achievement... [...]

The following generalizations apply to many inventions including the most famous: 1. The British inventions were biased. They were labour saving and energy and capital using.... 2. As a result of 1, cost reductions were greatest at British factor prices, so the new technologies were adopted in Britain and not on the continent.... [C]oke smelting was not profitable in France or Germany before the mid-nineteenth century (Fremdling 2000). Continuing with charcoal was rational behaviour in view of continental factor prices. This result looks general; in which case, adoption lags mean that British technology was not cost-effective at continental input prices. 3. The famous inventions of the industrial revolution were made in Britain rather than elsewhere in the world because the necessary R&D was profitable in Britain (under British conditions) but unprofitable elsewhere.... 4. Once British technology was put into use, engineers continued to improved it, often by economizing on the inputs that were cheap in Britain. This made British technology cost-effective in more places and led to its spread across the continent later in the nineteenth century.... The theory advanced here explains the technological breakthroughs of the industrial revolution in terms of the economic base of society–natural resources, international trade, profit opportunities. Through their impact on wages and prices, these prime movers affected both the demand for technology and its supply... [...]

Why did the French ignore the new spinning machines? Cost calculations for France are not robust, but the available figures indicate that jennies achieved consistent savings only at high count work, which was not the typical application (Ballot 1923, pp. 48-9). In France, a 60 spindle jenny cost 280 livre tournois in 1790 (Chassagne 1991, p. 191), while a labourer in the provinces earned about three quarters of a livre tournois per day, so the jenny cost 373 days labour. In England, a jenny cost 140 shillings and a labourer earned about one shilling per day, so the jenny was worth 140 days labour (Chapman and Butt 1988, p. 107). In France, the value of the labour saved with the jenny was not worth the extra capital cost, while in England it was. French cost comparisons show that Arkwright’s water frame, a much more capital intensive technique, was no more economical than the jenny. The reverse was true in England where water frames were rapidly overtaking jennies. The French lag in mechanization was the result of the low French wage… […]

Why did the industrial revolution lead to modern economic growth? I have argued that the famous inventions of the British industrial revolution were responses to Britain’s unique economic environment and would not have been developed anywhere else. This is one reason that the Industrial Revolution was British. But why did those inventions matter? The French were certainly active inventors, and the scientific revolution was a pan-European phenomenon. Wouldn’t the French, or the Germans, or the Italians, have produced an industrial revolution by another route? Weren’t there alternative paths to the twentieth century? These questions are closely related to another important question asked by Mokyr: Why didn’t the industrial revolution peter out after 1815? He is right that there were previous occasions when important inventions were made. The result, however, was a one-shot rise in productivity that did not translate into sustained economic growth. The nineteenth century was different–the First Industrial Revolution turned into Modern Economic Growth. Why? Mokyr’s answer is that scientific knowledge increased enough to allow continuous invention. Technological improvement was certainly at the heart of the matter, but it was not due to discoveries in science–at least not before 1900. The reason that incomes continued to grow in the hundred years after Waterloo was because Britain’s pre-1815 inventions were particularly transformative, much more so than continental inventions. That is a second reason that the Industrial Revolution was British and also the reason that growth continued throughout the nineteenth century.... The nineteenth century engineering industry was a spin-off of the coal industry. All three of the developments that raised productivity in the nineteenth century depended on two things–the steam engine and cheap iron. Both of these, as we have seen, were closely related to coal. The steam engine was invented to drain coal mines, and it burnt coal. Cheap iron required the substitution of coke for charcoal and was prompted by cheap coal. (A further tie- in with coal was geological–Britain’s iron deposits were often found in proximity to coal deposits.) There were more connections: The railroad, in particular, was a spin-off of the coal industry. Railways were invented in the seventeenth century to haul coal in mines and from mines to canals or rivers. Once established, railways invited continuous experimentation to improve road beds and rails. Iron rails were developed in the eighteenth century as a result, and alternative dimensions and profiles were explored. Furthermore, the need for traction provided the first market for locomotives. There was no market for steam-powered land vehicles because roads were unpaved and too uneven to support a steam vehicle (as Cugnot and Trevithick discovered). Railways, however, provided a controlled surface on which steam vehicles could function, and colliery railways were the first purchasers of steam locomotives. When George Stephenson developed the Rocket for the Rainhill trials, he tested his design ideas by incorporating them in locomotives he was building for coal railways. In this way, the commercial operation of primitive versions of technology promoted further development as R&D expenses were absorbed as normal business costs.... The reason that the British inventions of the eighteenth century–cheap iron and the steam engine, in particular–were so transformative was because of the possibilities they created for the further development of technology. Technologies invented in France–in paper production, glass, knitting–did not lead to general mechanization or globalization. One of the social benefits of an invention is the door it opens to further improvements. British technology in the eighteenth century had much greater possibilities in this regard than French inventions. The British were not more rational or prescient than the French in developing coal-based technologies: The British were simply luckier in their geology. The knock-on effect was large, however: There is no reason to believe that French technology would have led to the engineering industry, the general mechanization of industrial processes, the railway, the steam ship, or the global economy. In other words, there was only one route to the twentieth century–and it went through northern Britain...

Cf: <

February 15. The Industrial Revolution (DeLong):

• Robert C. Allen (2011), “Why the Industrial Revolution Was British: Commerce, Induced Invention and the Scientific Revolution,” Economic History Review 64, pp. 357-384. http://onlinelibrary.wiley.com/doi/10.1111/j.1468-0289.2010.00532.x/pdf

• Jeffrey Williamson (1984), "Why Was British Economic Growth So Slow During the Industrial Revolution?" Journal of Economic History 44:3, pp. 687-712. http://www.jstor.org/stable/2124148

• Nicholas Crafts (2002), "The Solow Productivity Paradox in Historical Perspective," CEPR Discussion Paper no.3142. http://www.j-bradford-delong.net/articles_of_the_month/pdf/Newsolow.pdf

Industrial Revolution Memo Question

Econ 210a: UC Berkeley: Spring 2012: Memo Question:

To what extent should we view the late eighteenth and early nineteenth centuries in Britain as a unique turning point in economic and social development?

It looks as though my office hours will be interrupted at 3 by a (hopefully) brief faculty meeting...

Office hours today: 2-3, 4-6.

Memo Question for February 8, 2012: Slavery and Serfdom:

Adam Smith in the Wealth of Nations has a theory about unfree labor. It is, he says, economically inefficient. But wherever demand is very high relative to supply masters will resort to slave labor because it yields them powerful psychic income:

The experience of all ages and nations, I believe, demonstrates that the work done by slaves, though it appears to cost only their maintenance, is in the end the dearest of any…. Whatever work he does beyond what is sufficient to purchase his own maintenance, can be squeezed out of him by violence only, and not by any interest of his own. In ancient Italy, how much the cultivation of corn degenerated, how unprofitable it became to the master, when it fell under the management of slaves, is remarked both by Pliny and Columella….

The pride of man makes him love to domineer, and nothing mortifies him so much as to be obliged to condescend to persuade his inferiors. Wherever the law allows it, and the nature of the work can afford it, therefore, he will generally prefer the service of slaves to that of freemen. The planting of sugar and tobacco can afford the expense of slave cultivation. The raising of corn, it seems, in the present times, cannot. In the English colonies, of which the principal produce is corn, the far greater part of the work is done by freemen…. The profits of a sugar plantation in any of our West Indian colonies, are generally much greater than those of any other cultivation that is known either in Europe or America; and the profits of a tobacco plantation, though inferior to those of sugar, are superior to those of corn, as has already been observed. Both can afford the expense of slave cultivation…

Was he right? Was he wrong?

Food for thought related to Allen on nitrogen:

Henry Farrell and Cosma Shalizi, "Evolutionary Theory and the Dynamics of Institutional Change"

• Class Slides

February 1. The Agricultural Revolution (DeLong)

• Donald McCloskey (1972), “The Enclosure of Open Fields,” Journal of Economic History 32, pp. 15-35. http://www.jstor.org/stable/2117175

• Robert Allen (2008), “The Nitrogen Hypothesis and the English Agricultural Revolution: A Biological Analysis,” Journal of Economic History 68, pp. 182-210. http://journals.cambridge.org/action/displayIssue?jid=JEH&volumeId=68&issueId=01&iid=1740956

• Robert C. Allen (1999), “Tracking the Agricultural Revolution in England,” Economic History Review , New Series 52:2 (May), pp. 209-235 http://www.jstor.org/stable/2599937

Does the Agricultural Revolution deserve its "R"? That is, is it well-conceptualized as a "Revolution" rather than as something much slower and much more gradual?