Gavin Kennedy, Adam Smith, and Gregory Clark
By Arnold Kling
In the extreme, I have suggested that economic history of the last 10,000 years (and for long enough before that) the history of the poor is not the decisive factor in economic development: it is the history of the rich (all those above subsistence), plus the history of the politically powerful who diverted some proportion (from taxation, levies, duties, and oppression) of the annual production of wealth into stone built cities, infra-structure, cathedrals, harbours, canals, routes for trade, shipping, and the instruments of war.
The growing commercial exchange economy below a society, gradually accumulating capital stock (Smithian growth), with all the associated knowledge, literature, natural and moral philosophy, science, invention, and technologies, prepared the ground for the eventual invention and application of power-driven machinery that constituted what some call the industrial revolution.
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Let me summarize various ideas to explain what we call the industrial revolution, and problems with them:
1. Gradual accumulation of capital. Then why such a sudden, sharp rise in the average standard of living?
2. Better institutions. Rather than accuse Adam Smith of taking this view, let me accuse Meir Kohn, who I recall giving a talk in which he said, in effect, you don’t need anything special to get economic growth. You just need government to stop being predatory. The problem with this view, according to Clark, is that England’s government (and perhaps that in other countries) could be described as not severely predatory long before the industrial revolution.
3. Better interaction between science and applied technology. I associate that view with Joel Mokyr. The problem with this view is that it is difficult to explain why the industrial revolution was so concentrated in England.
4. A more industrious work force. Clark’s view is that harsh conditions killed off the less industrious people in England, leaving a race that was easier to train, educate, and discipline.
There is nothing about any one of these explanations that excludes the other. I like (3), because ideas have increasing returns. A story of capital accumulation alone runs into the problem that diminishing returns should cause growth to fizzle out at some point.
I like (2), because it is very hard to explain international differences without looking at institutions. Clark himself has pointed out that the same worker can have higher productivity by immigrating to the United States. Bryan and I have both argued that this implicitly suggests a role for institutions.
There is something to be said for (4), also. Clark makes a good point that it is remarkable that the cotton industry was organized so that raw cotton was shipped at great cost to England, turned into cloth, and then shipped at great cost back to India. If India’s work force had been amenable to training and discipline, then presumably most of the manufacturing would have taken place in India.