Explaining the first Industrial Revolution: two views

Author(s): NICHOLAS CRAFTS

Source: European Review of Economic History , APRIL 2011, Vol. 15, No. 1 (APRIL 2011),
pp. 153-168
Published by: Oxford University Press

Stable URL: http://www.jstor.com/stable/23226564

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European Review of Economic History, 15, 153-168. O European Historical Economics Society 2010
doi:i0.1017/S1361491610000201 First published online 13 December 2010

REVIEW ARTICLE

Explaining the first Industrial

Revolution: two views
NICHOLAS CRAFTS
University of Warwick, [email protected]

This review article looks at the recent books on the British Industrial
Revolution by Robert Allen and Joel Mokyr. Both writers seek to explain
Britain's primacy. This article offers a critical but sympathetic account of
the main arguments of the two authors, considering both the economic
logic and the empirical validity of their rival claims. In each case, the ideas
are promising but the evidence base seems in need of further support. It
may be that eventually these explanations for British economic leadership
at the turn of the nineteenth century are recognized as complementary
rather than competing.

ι. Introduction

New books by Robert Allen (2009a) and Joel Mokyr (2009) contain
important, but competing, reinterpretations of the British Industrial
Revolution. They share common ground in placing the explanation of
sustained acceleration in technological progress at the heart of the story.
They differ, however, on the reasons for this. Allen stresses that the new
technologies were invented in Britain because they were profitable there
but not elsewhere, while Mokyr sees the Enlightenment as highly significant
and underestimated by previous scholars. They each think that the other's
argument is flawed.
This review article seeks first to set out the claims of the two authors and to
place them in some historiographie context, and then to evaluate them. The
tone will, I hope, be one of sympathetic criticism. The task of explaining why
the first Industrial Revolution took place in Britain in the late eighteenth and
early nineteenth centuries is far from trivial; indeed, it has been thought of
in the past as akin to a search for the Holy Grail. The endeavour undertaken
by Allen and Mokyr is most welcome, inter alia, as an antidote to the
fashionable approach of Unified Growth Theory (Galor 2005), which treats
the Industrial Revolution either as essentially a scale effect or as the outcome
of some Darwinian selection process. Taking technological change seriously
must be the hallmark of an economic historian's perspective on the transition
to modern economic growth and these two authors have over some decades

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154 European Review of Economic History

been established at the top of the premier league as analysts of the economic
history of technology.

2. Allen's argument and Mokyr's objections

Allen's explanation for the time and place of the first Industrial
Revolution can be summarized as follows. He concentrates on examining
what stimulated the technological breakthroughs associated with famous
inventions which then triggered off sequences of technological progress
(p. 135). His conclusion is deceptively simple: 'The Industrial Revolution,
in short, was invented in Britain in the eighteenth century because it paid to
invent it there' (p. 2).
This bottom line is reached in several steps. First, it is stressed that
'Britain's unique price and wage structure was the pivot around which
the Industrial Revolution turned' (p. 15). In particular, international
comparisons show Britain had relatively high wages but cheap capital and
very cheap energy. Second, Allen points to the high fixed costs of developing
'macro-inventions' into commercially viable technologies through research
and development; he argues that these will only be incurred where the
technology is profitable to adopt, a decision which turns on relative factor
prices, and where the market is big enough that success in perfecting the
technology will deliver enough sales to reward the proprietor (pp. 141-2,
151 -4). Third, the profitability of adopting several inventions including the
spinning jenny, Arkwright's mill and coke smelting is examined, with the
result in each case that adoption is rational at British but not at French
prices (chapters 8 and 9). Fourth, these technologies are improved markedly
through time in a process of micro-invention, which is Hicks-neutral rather
than labour-saving and eventually means that it is rational for them to diffuse
widely across the rest of the world. This 'tipping point' was typically reached
some decades later and then British competitive advantage was lost (pp.
154~5)· Fifth, it is recognized that a favourable configuration of prices and
wages would not be sufficient to deliver the Industrial Revolution. Allen
accepts that 'factors touching on the supply of inventors may explain why
the Industrial Revolution happened in 1800 rather than 1400' (pp. 268-9);
he notes that a cultural revolution had happened in the meantime and that,
by the latter date, the British economy had a much greater level of human
capital (p. 12).
Although Allen provides much greater detail and conceptual
sophistication, in essence, this argument is not new. Earlier vintages tended
to talk in terms of the role of 'shortages' in inducing technological progress
and to note that Britain differed from its rivals in this regard. For example,
Peter Mathias wrote that 'It is a commonplace to remark that Britain
had been fortunate in her scarcities' (1979, p. 8), while Francois Crouzet

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 Explaining the first Industrial Revolution 155

(i99°) provided a lengthy review of the factor scarcity hypothesis with

which he clearly sympathized but for which he could not quite provide a
clinching justification. Nevertheless, the construction in the past decade of
the extensive datasets that clearly establish Britain as a high-wage economy
in the context of Asia-Europe comparisons has thrown new light on these
issues and returned them to centre stage, as is underlined by recent research
by Stephen Broadberry and Bishnupriya Gupta (2009) on competitive
advantage in cotton textiles. Allen himself acknowledges an intellectual
debt to H. J. Habakkuk (1962) and sees eighteenth-century Britain as 'the
prequel to nineteenth-century America' (p. 15). Moreover, as he points
out, his approach to micro-inventions is based on the localized-learning
formulation of the Habakkuk hypothesis about the role of relative factor
prices in promoting labour-saving technological progress in nineteenth
century America developed by Paul David (1975).
While he accepts the basic assumption that inventive activity was driven
by a desire to make money, Mokyr devotes several pages, comprising both
theoretical and empirical objections, to a direct rebuttal of Allen's arguments.
Mokyr makes three main points. First, in the tradition of W. E. G. Salter's
(i960) critique of Sir John Hicks (1932), he notes that, in the search for
new techniques, firms will try to save all costs not just those of relatively
expensive factors (pp. 268-9). Second, he claims that there is little evidence
to support the view that technological progress exhibited a labour-saving bias
overall either in terms of its macroeconomic footprint or the evidence from
patents compiled by Christine Macleod (1988) which suggest that, even at
the end of the eighteenth century, only 21 per cent of inventions could be
classified as intended to save labour (pp. 269, 271). Third, at most relative
factor prices may determine the direction of technological change rather
than the intensity of innovative effort, which depended on technological
capabilities and was constrained by the availability of useful knowledge
(pp. 270, 272).

3. Mokyr's argument and Allen's objections

Mokyr conceptualizes the Industrial Revolution as 'the set of events that
placed technology in the position of the main engine of economic change'
(p. 5). His aim is to explain this phenomenon. He sums up his thesis as
follows: 'Britain became the leader of the Industrial Revolution because,
more than any other European economy, it was able to take advantage
of its endowment of human and physical resources thanks to the great
synergy of the Enlightenment: the combination of the Baconian program in
useful knowledge and the recognition that better institutions created better
incentives' (p. 122).
Mokyr suggests that what was needed to generate an industrial revolution
was the right combination of useful knowledge generated by scientists,

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156 European Review of Economic History

engineers and inventors to be exploited by a supply of skilled craftsmen

in an institutional environment that produced the correct incentives for
entrepreneurs (p. 116). He believes that Britain's advantages must have
been on the supply rather than the demand side of the economy since
the Netherlands was richer, France was larger, and Spain had more
colonies (p. 99). In this regard, the Enlightenment is seen as having two
favourable effects in terms of improving both technological capabilities and
also institutional quality. The Baconian program comprised research based
on experimentation and scientific method, directing the research agenda
to focus on solving practical problems, and making the results widely
accessible by organization and dissemination of knowledge (p. 40). Mokyr
acknowledges that the impact of the Enlightenment on institutions is hard
to quantify but argues that the success of its ideology reduced rent-seeking
and promoted competitive markets (p. 63). It was manifested in terms of
legislation such as the abolition of the Corn Laws, but also strengthened
informal institutions in the form of social norms that favoured gentlemanly
capitalism rather than opportunistic behaviour (chapter 16).
Here too, it is easy to point to precursors in the historiography but, in
this case, of the components of the argument rather than the synthesis
highlighting the role of ideology that is constructed by Mokyr. The links
between scientific thought and the Industrial Revolution were underlined
by T. S. Ashton (1948), extensively documented in A. E. Musson and
Eric Robinson (1969) and put into perspective by Mathias (1979) who
anticipated Mokyr's emphasis on scientific attitudes rather than scientific
knowledge. Recent cliometric work by Joerg Baten and Jan-Luiten van
Zanden (2008) has found that the growth of book production had a positive
effect on European economic growth in the pre- and early industrial period.
Similarly, the role played by gentlemanly capitalism in reducing transactions
costs was promulgated by Peter Cain and Antony Hopkins (1993), while
Daniel Bogart and Gary Richardson (2008) have catalogued the role of
parliament as a force for institutional adaptability that promoted more
efficient markets, and the emphasis on belief systems as a major influence on
institutions, especially informal institutions, echoes Douglass North (2005).
Allen devotes chapter 1 o of his book to rejecting Mokyr's 'Industrial
Enlightenment model' of invention using a sample of 79 inventors of whom
10 created macro-inventions that drove the Industrial Revolution.1 First,
Allen investigates the links of these people with Enlightenment science and
finds that these were present for about half, but that while this was quite
general in the case of steam it was infrequent for textiles or metals which
had much greater economic impact: 'using that yardstick, the Industrial

1 These ι O are Richard Arkwright, Edmund Cartwright, Samuel Crompton, Henry Cort,
Abraham Darby, James Hargreaves, Thomas Newcomen, John Smeaton, James Watt and
Josiah Wedgwood.

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 Explaining the first Industrial Revolution 157

Enlightenment did not matter much' (p. 252). Second, Allen considers
whether the inventors came from the upper class as he contends the
Enlightenment model predicts. There is some support for this, in particular,
merchants, lawyers and capitalists made up 4.6 per cent of the population
but 32.8 per cent of the inventors (p. 259); however, at the same time, the
fathers of many inventors were artisans. Third, Allen looks at inventors as
experimenters; he finds that 'Experimentation was ... the common feature
that characterized eighteenth-century inventors' (p. 255), but sees this as
nothing new and takes any increases in the volume of experimentation to
be more a consequence of better education than the Enlightenment per
se (pp. 257, 267). Interestingly, Allen says nothing about the impact of
the Enlightenment on institutions or economic reform. Presumably, this is
because he considers institutional quality to be unimportant as a reason for
English primacy in the Industrial Revolution (pp. 5, 15, 125).

4. Assessment

4.1. The role of relative factor prices

This deserves to be examined in terms both of what modern economic theory

has to say and also with regard to the details of the empirical evidence. Taking
an approach based on the endogenous-innovation school of new growth
economics makes a difference. But while this provides a solid theoretical
underpinning for a labour-scarcity hypothesis about the bias and the rate
of technological progress it also highlights the need for clarification as to
what the key differences were between Britain and other countries. Then,
the weight of the evidence put forward by Allen to support his claims can be
assessed.
The model set out by Daron Acemoglu (2002) predicts the direction
of technical change in a setting where suppliers of different types of new
technology respond to market signals. In his model, relative-price and
market-size effects both matter; the former creates incentives to develop
techniques used in the production of goods that use more expensive factors
of production and the latter to invent technologies that have a larger market,
i.e. use the more abundant factor. The net effect depends on the elasticity of
substitution between factors. The importance of the market-size effect can
be understood in terms of expected profitability in the context of incurring
fixed costs in development of a new technology.2 Acemoglu (2009) extends
this analysis to consider the impact of labour scarcity on the rate, rather than

2 This puts Hicks's (1932) conjecture on a firm foundation. It should also be noted that in
this model, in general, technical change is biased towards factors that become relatively
more abundant in the sense that, at constant factor proportions, its relative marginal
product will be increased.

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15 8 European Review of Economic History

the bias, of technological progress. The key result is that this effect is positive
if technological change is strongly labour saving, i.e. it reduces the marginal
product of labour.3
Thus, notwithstanding Mokyr's dismissive reaction, Allen's analysis is
theoretically defensible and his emphasis on the costs of development of a
technology goes with the flow of recent growth economics. In the spirit
of Acemoglu's model, the decision to incur the development costs for
the technologies that were central to the Industrial Revolution would be
predicted to depend on the number of potential adopters. In turn, this would
depend both on whether it was profitable for firms to adopt the technology,
given factor prices, and also on how many firms were in the market, as Allen
points out (pp. 152-3). Either relative factor prices or market size might
undermine the viability of developing the technology and it would be nice to
distinguish clearly between the two. Let us review Allen's evidence with this
in mind.

Allen considers the profitability of adopting the spinning jenny in detail

(pp. 185, 194-5, 2I3_I5)· He compares savings in wages with the cost of
the jenny and finds that the rate of return around 1780 was 38 per cent in
England, compared with a required rate of return assumed to be 15 per cent,
but only 2.5 per cent in France and minus 5.2 per cent in India. England's
advantage over France accrues both from higher wages and cheaper jennies
in the former. Allen's calculations are reported in Table 1 together with some
further permutations.
Several interesting points emerge from Table 1. First, at the English price,
the jenny would be profitable at French wages. It is incorrect to say that
low wages were the reason the French did not use the jenny. Indeed, at
the French jenny price, adoption would not have been profitable at English
wages. Second, it looks very profitable to invent and adopt the jenny in
America.4 So, perhaps it is really the small size of the market there that is
the obstacle, as Allen seems to suggest (p. 41), or perhaps human capital
is inadequate (p. 212).5 Third, in England, the jenny would have been
profitable at wages of 3-75d (60 per cent of the figure used by Allen). Based
on Allen's wage and prices dataset, this implies that it had been profitable

3 Technology is strongly labour saving if in the production function Y = f(L, Ζ, Θ), where θ
is a vector of technologies where an increase in any component raises output, there are
decreasing differences in θ and L. This might be where machines replace tasks previously
undertaken by labour, as in Joseph Zeira (1998).
4 This also seems to be true of the Arkwright mill. Using a procedure analogous to that used
by Allen (2009, pp. 215-16) based on American wages divided by American jenny costs
relative to English wages divided by English jenny costs ( = 1.049), I calculate that the
potential rate of return on the Arkwright mill in Philadelphia was 32.5 per cent.
5 Allen makes a similar point about the invention of the steam engine; in comparing
England and Belgium, he appeals to the small size of the Belgian coal industry rather than
relative factor prices as Belgium's key disadvantage.

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 Explaining the first Industrial Revolution 159

Table ι. Internal rate of return on purchase of spinning jenny, c. 1780

Cost of jenny 84od 145 od I500d

Wages
9-375d 64.0 31.0 29.5
6.25d 38.0 13-5 12.0

4.66d 24.0 2-5 1-5

3-75d 15.0 —5.0 -6.5
Notes:
England: price of jenny = 840c!, wage = 6.25c! (Allen 2009, p. 214)
France: price of jenny = 1450c!, wage = 4.66d (Allen 2009, p. 214)
United States (Philadelphia): price of jenny = i500d (Jeremy 1973, p. 30),
wage = 9-375d based on 50 per cent differential with England (Adams 1970).
Rate of return is derived from the expression
J = E(wAL-m)/(i + r)1
where J is the price of the jenny, w is the daily wage of a spinner, m is the
additional maintenance cost of the jenny assumed to be 10 per cent of the purchase
price each year and the lifetime of the machine is 1 o years.
AL is the saving of labour based on the formula
AL = YD(i - i/P)
Where Y is the number of days the jenny is used each year, D is the proportion of a
full day that it was used for, and Ρ is the relative labour productivity of a spinner
with the jenny compared with the spinning wheel. Allen's base-case assumptions
are that Y = 250, D = 0.4 and Ρ = 3 so AL = 67.
Source: own calculations based on these assumptions.

since 1650, over a century before Hargreaves's invention. Fourth, it should

also be noted that the rate of return is quite sensitive to the utilization
assumptions.6 If it is assumed that the jenny would be in use for half the day
on 300 days of the year rather than 40 per cent of the day on 250 days, as
assumed by Allen, then AL = 100 and the rate of return in France becomes
18 per cent while it would have been profitable with English wages at 2.5id
(40 per cent of Allen's wage rate).
Overall, Allen's headline story that the combination of high wages and
cheap coal was the key to inventing the Industrial Revolution seems a bit
too bold. Market size may well matter and coal does not come into it in the
important case of the breakthroughs in cotton-textile technology; devoting
some effort to quantifying market size would be valuable. The delay in
inventing the jenny, although it appears that it would have been profitable
long before the 1760s, and the questionable robustness of the rate-of-return
calculations add to the sense that the argument is oversold. More work
on similar calculations for the other inventions would strengthen Allen's
claims.

6 I am grateful to John Lyons for making the point to me that Allen's utilization rates appear
very low.

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160 European Review of Economic History

4-2. Macro- and micro-inventions

Both Allen and Mokyr use the terminology of 'macro-inventions' and

'micro-inventions' and this distinction is not only valuable in thinking about
technological change in the Industrial Revolution but it also has implications
in terms of the evidence for their rival interpretations. To avoid serious
confusion, however, it is important to recognize that they use different
definitions of these terms.
The Enlightened Economy continues in the tradition of Mokyr (1990),
where macro-inventions are radical new ideas without clear precedent that
emerge more or less ab nihilo with potentially dramatic effects. The Industrial
Revolution was notable for a cluster of such inventions. Micro-inventions
represent the development stage which turns the original invention into
viable business proposition (Mokyr 2002, p. 48, 105) and the continuous
flow of incremental improvements that made the new techniques work better
(Mokyr 2009, p. 81). In other words, micro-inventions are a combination
research and development and learning by doing/using. Mokyr sees macro
inventions as only weakly, if at all, related to economic forces but the process
of micro-invention is responsive to economic incentives (1990, p. 295).
Micro-inventions are far more frequent and account for the lion's share o
productivity gains (Mokyr 1990, p. 13).
Allen also sees macro-inventions as important breakthroughs that give
rise to long trajectories of advance but, for him, a key characteristic is th
they radically changed factor proportions, and in the case of the Industr
Revolution were labour saving (p. 136). To perfect a macro-invention to th
point where it is commercially viable requires a great deal of perspiration
(and expense) and this explains why macro-invention is biased and sensitiv
to relative factor prices (p. 141). Micro-invention is the process of localize
learning after the technology has been introduced and this is neutral rath
than prone to a factor-saving bias. Allen thinks in terms of a diagram
introduced by David (1975) and reproduced here as Figure 1. The process
of macro-invention makes point C possible, which will only appeal to
the country with the Pt relative factor prices, but then learning generates
movement down the a ray.
If we think of a sequence which comprises three phases, which are (1)
idea —>■ (2) R & D including substantial development expenditure —» (3)
incremental improvement, then Allen considers (1) and (2) as 'macro
invention' and (3) as 'micro-invention', whereas for Mokyr (1) is 'macro
invention' while (2) and 3) are both aspects of 'micro-invention'. The
different treatment of development explains why for Allen macro- but not
micro-invention is sensitive to price signals but for Mokyr the opposite is the
case. Adopting a common convention on terminology could eliminate this
apparent discrepancy and allow the two approaches to be combined. Then
the big difference between the two authors would concern their hypotheses

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 Explaining the first Industrial Revolution 161

LVY

Figure ι a. Choice of technology: the role of factor prices

Source: David, 1975

Note: Κ is capital, L is labour and APF is the available production techniques frontier.
The dotted lines P0P0 and P,P, are isocost lines at different relative factor prices. At
P, (P0) relative factor prices, point A (B) on the Available Process Frontier will be
chosen. Compared with these original points, C is on a lower (higher) isocost line
at Pi (P0) relative factor prices.

about the major influences on the successful development of new technology

(phase 2).7
If micro-invention is central to technological advance, especially with
regard to realizing its productivity potential, then, if the Industrial
Enlightenment hypothesis is to carry weight, it must explain why it
entails a substantial impact on micro-invention. Indeed, this is central to
Mokyr's argument. He maintains that micro-invention required a great
deal of pragmatic and informal knowledge and a systematic method of
experimentation (2002, p. 48), that at the heart of the process were
anonymous craftsmen who investigated what worked and what did not work
(2009, p. 44), and that a major contribution came from reduced access costs
to useful knowledge. The human capital of the workforce then gave Britain
a comparative advantage in micro-invention (2009, p.113).
Several points arise from this with regard to attempts to test Mokyr's
hypothesis. First, Allen's focus on the origins and contacts of the macro
inventors is at best a partial test or, at worst, misplaced and the
very anonymity of micro-invention makes quantitative investigation of
the craftsmen's role impossible. Second, if artisanal micro-invention is

7 Their hypotheses are not mutually exclusive and the real argument may be about their
relative importance.

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162 European Review of Economic History

L/Y

Figure ib. Technical progress: localized change

Source: David, 1975

Note: from point C neutral localized learning proceeds down the α ray towards the
origin. Eventually, this technology will be preferred at both sets of relative factor
prices if there is no progress down the β ray. Following David (1975), Broadberry
and Gupta (2009) suggest that progress down the a ray will be much faster than
down the β ray.

important, the connections of this with the Enlightenment remain somewhat

elusive and, at best, indirect, as Mokyr admits (2009, pp. 57-61). Third,
the notion of lower access costs to knowledge as a stimulus to micro
invention during the Industrial Revolution is attractive but again remains
to be quantified and may be the result of the spread of tacit knowledge
through the factory system or urbanization rather than the availability of
technical manuals or the activities of scientific societies.
The notion of micro-invention embodied in Figure 1 has implications for
the identification of labour-saving bias in technological progress. If there is
movement towards the origin down the a ray, then the cumulative effect of
these locally neutral improvements is to impart a labour-saving bias to the
shape of the isoquant. (Indeed, this is exactly what David had in mind (1975,
p. 59) when he devised this set-up as a solution to the problems posed by
the Habakkuk debate.) However, in this case, there is no reason to expect
that the associated patent citations will on average exhibit claims of labour
saving. Indeed, following Moses Abramovitz and David (2001), the place to
look for evidence would be in the macroeconomic footprint of technological
change on relative factor shares as capital-to-labour ratios change.

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 Explaining the first Industrial Revolution 163

Here, pace Mokyr, there is some evidence in support of Allen's view

that technological change in the Industrial Revolution was labour saving.
Allen (2009b) offers a calibrated model of the British economy based on a
translog production function that approximately replicates the stagnation of
real wages and the rise in the share of profits in national income at this time
together with faster growth of the capital stock than the labour force. The
calibration assumes that technical change is entirely labour augmenting and
has an elasticity of substitution between capital and labour of 0.2. This is
similar to the view of technological change in nineteenth-century America
offered by Abramovitz and David (2001).8
Was micro-invention really neutral? David (1975) asserted that localized
learning would have this characteristic and had technical reasons for wanting
this to be the case but offered little evidence to support his claim. Allen's
discussion of several cases offers at best mixed support. While coke smelting
seems to fit the assumption (p. 217), micro-invention in cotton textiles
was relentless labour saving (pp. 184, 209) while in steam engines it
actually entailed a reversal of the original bias and became energy saving
(p. 177). When micro-invention is interpreted à la Mokyr, then bias might
be predicted if, for example, trying to find point C is interpreted as factor
substitution when the process of trying to convert ideas into commercial
propositions is guided by price signals (cf. David 1975, p. 35).
If micro-invention is interpreted as a flow of incremental improvements,
then it remains to be established how far the resulting labour productivity
growth was the result of passive learning rather than investments in intangible
capital or changes in physical or human capital to labour ratios. Generally
speaking, the literature on learning by doing has tended over time to think
that omitted-variables bias has inflated estimates of productivity growth from
case studies of learning-by-doing. This appears to be true in the famous cases
both of Liberty ships (Thompson 2001) and the Lowell textile mills (Bessen
2003; Lazonick and Brush 1985), although in neither case has this bias been
fully purged. The bottom line seems to be that we need to know considerably
more about micro-invention and, especially, learning in order to evaluate the
competing claims of Allen and Mokyr.

4.3. Ideology, institutional change and economic reform

Mokyr stresses that the ideology of the Enlightenment had a dual impact
on the first Industrial Revolution both because it was conducive to the
production of more useful knowledge while at the same time redu

8 An implication is that estimates of TFP growth devised from imposition of standard

Cobb-Douglas assumptions are biased downwards. However, using the formula in Dan
Rodrik (i 997) indicates that the bias is small; 0.04 and 0.17 percentage points per yea
1760-1801 and 1801-31, respectively. These numbers reflect the slow increase in the
capital to labour ratio.

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164 European Review of Economic History

Figure 2. Endogenous growth

Source·, based on Carlin and Soskice (2006)

Note: the rate of technological change is on the vertical axis and the capital to
effective labour ratio on the horizontal axis. The Solow relationship captures the
steady-state relationship between capital intensity and the rate of technological
change for a given savings ratio. The Schumpeter relationship captures the standard
assumption of endogenous-innovation growth models. Higher λ represents an
economic environment that is more conducive to innovation, for example, because
institutions are better, R & D is more productive because of a better science base,
etc.

access costs and through its effects in improving incentive structures thr
promoting better economic policy and institutions. This argument f
perfectly with endogenous growth theory in the tradition of Philippe Agh
and Peter Howitt (1992). Once again, the issues that arise are not so m
with the logic of the argument but its empirical validity.
In terms of Figure 2, the Enlightenment would raise λ, the innova
friendliness of the economy, thus shifting the Schumpeter relation
upwards and increasing the amount of technological progress expect
any level of the capital to effective labour ratio. The favourable impac
came both through lower costs of innovating and from better payoffs
innovating as the process of creative destruction was facilitated and
seeking opportunities were greatly reduced. Mokyr sees the breakth
of the British Industrial Revolution in terms of a transition to sustained
technological advance and thus the real contribution of the higher λ tha
to the Enlightenment was to underpin productivity growth through mi
invention (pp. 487-8).
Mokyr's argument is much more subtle than earlier discussions of
institutional change in the context of the Industrial Revolution. For example,
in emphasizing the effectiveness of the parliamentary system as an agent of
reforms that make markets work better he is more convincing on how the
Glorious Revolution mattered than North and Barry Weingast (1989), in

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 Explaining the first Industrial Revolution 165

downplaying the role of the 'deeply flawed' patent system (p. 410) relative to
other aspects of institutional quality he rightly dismisses the claims of North
and Robert Thomas (1973), and in focusing on the incentives for micro
invention he need not be perturbed by the rejection of the institutional
improvement hypothesis by Greg Clark (2007) on the grounds that many
famous inventors made no money.
Mokyr can certainly point to evidence of improvements in institutions and
reductions in rent-seeking from the mid eighteenth to the mid nineteenth
century. Bogart and Richardson (2008) noted the number of parliamentary
Acts that reorganized property rights numbered about 2$ per year in the
1720s compared with 175 per year in the 1820s. Forrest Capie (2004)
calculated an increase in the coefficient of contract-intensive money (defined
as non-currency money divided by total money supply), a proxy for the
enforceability and security of property rights, from 0.26 in 1790 to 0.76 in
1870. William Rubinstein's research on probates (1992) showed that those
based on exploiting rent-seeking opportunities provided by the state were
still very prominent in 1809-39 but not thereafter.
That said, it has to be noted that Mokyr offers no quantification either
of institutional quality or its impact on technological progress and, indeed,
this may not be possible, especially if informal institutions are held to be the
key; λ is unobservable. Moreover, while Mokyr can point to better economic
policy in terms, for example, of the abolition of the Statute of Artificers, the
Bubble Act and the Usury Laws, the reform of the patent system, and.the
repeal of the Corn Laws, many of these were long-delayed. And it is easy
to point to major failures of government policy which might well disappoint
those imbued with Enlightenment views, for example, the refusal to promote
state-financed primary education despite the high social (and fiscal) rate of
return it could have delivered (Lindert 2009), the incompetent regulation of
the railway system that involved the construction of a seriously sub-optimal
network at high cost (Casson 2009; Foreman-Peck 1987), and the obvious
shortcomings of company law even in the second half of the nineteenth
century (Cottrell 1980). These really seem to be the outcome of interest
group politics not evidence-based policy design.
So did Enlightenment ideology matter as much as Mokyr claims? The most
serious and quantitative debate on the role of ideology in policy reform has
related to the repeal of the Corn Laws in 1846. Using various econometric
methodologies, results have differed but it would fair to conclude that it is
possible to detect roles for ideology, party affiliation and economic interests
in the crucial vote (McKeown 1989; McLean and Bustani 1999). However,
the ideology which is held to matter is not that of the Enlightenment.
The most sophisticated interpretation by Cheryl Schonhardt-Bailey (2003)
actually concludes that the success of repeal in 1846 was based on a weakening
of the role of ideology relative to constituency economic interest within the
split Tory party and the ideology in question relates to defending traditional
British institutions.

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166 European Review of Economic History

Of course, Mokyr repeatedly acknowledges qualifications to his hypothesis

along similar lines to the above and accepts that the evidence for his
claims will not strike everyone as compelling, while at the same time
definitely thinking that 'the glass is half-full'. To be convinced that the
Enlightenment had the twofold favourable impact on λ that Mokyr claims
requires not only that institutions and/or policy improved, but also that this
was driven by ideology. In particular, this entails dropping the traditional
belief that economic interests were much more important than ideas in
shaping economic reform and being able to show that there were significant
positive impacts of reforms on innovative effort. Before this interpretation
gains general acceptance, especially among those of a cliometric disposition,
more quantitative evidence will be required.

5. Concluding comments

These books are really valuable additions to the historiography of the

Industrial Revolution. Not surprisingly, they do not solve the problem of
explaining why the ideas for the famous inventions came along where and
when they did; that would be to ask too much. But they do make progress in
offering plausible ideas as to why these ideas fell on fertile ground and they do
offer important insights into what we need to know to understand how and
why a sustained and significant acceleration of technological progress took
place in Britain from the late eighteenth century onwards. Unlike Unified
Growth Theory, they seek to understand this phenomenon rather than, in
effect, to explain it away.
In the best argumentative traditions of the new economic history, Allen
and Mokyr see their accounts as competing. In essence, however, they are
not mutually exclusive and perhaps eventually will more appropriately be
seen as complementary. It is widely accepted by economic historians that
the explanation for a sustained acceleration of productivity growth must
come from understanding the development and subsequent incremental
improvement of new technologies. Thus, a combination of Allen's and
Mokyr's claims might produce the hypothesis that this resulted from the
responsiveness of agents, which was augmented by the Enlightenment, to the
wage and price configuration that underpinned the profitability of innovative
effort in the eighteenth century.

Acknowledgements
I am grateful to Bishnu Gupta for comments on an earlier draft, to Steve Broadberry
and Tim Leunig for a number of very useful suggestions, to John Lyons for his
insights on cotton-spinning technology, and to Bob Allen for help with his data.
The usual disclaimer applies.

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 Explaining the first Industrial Revolution 167

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