In the linked doc, I mainly contrast two different perspectives on the Industrial Revolution.
Stable Dynamics: The core dynamics of economic growth were stable between the Neolithic Revolution and the 20th century. Growth rates increased substantially around the Industrial Revolution, but this increase was nothing new. In fact, growth rates were generally increasing throughout this lengthy period (albeit in a stochastic fashion). The most likely cause for the upward trend in growth rates was rising population levels: larger populations could come up with larger numbers of new ideas for how to increase economic output.
Phase Transition: The dynamics of growth changed over the course of the Industrial Revolution. There was some barrier to growth that was removed, some tipping point that was reached, or some new feedback loop that was introduced. There was a relatively brief phase change from a slow-growth economy to a fast-growth economy. The causes of this phase transition are somewhat ambiguous.
In the doc, I essentially argue that existing data on long-run growth doesn’t support the “stable dynamics” perspective over the “phase transition” perspective. I think that more than anything else, due to data quality issues, we are in a state of empirical ignorance.
I don’t really say anything, though, about the other reasons people might have for finding one perspective more plausible than the other.[1] Since I personally lean toward the “phase change” perspective, despite its relative inelegance and vagueness, I thought it might also be useful for me to write up a more detailed comment explaining my sympathy for it.
Here, I think, are some points that count in favor of the phase change perspective.
1. So far as I can tell, most prominent economic historians favor the phase change perspective.
For example, here is Joel Mokyr describing his version of the phase change perspective (quote stitched together from two different sources):
The basic facts are not in dispute. The British Industrial Revolution of the late eighteenth century unleashed a phenomenon never before even remotely experienced by any society. Of course, innovation has taken place throughout history. Milestone breakthroughs in earlier times—such as water mills, the horse collar, and the printing press—can all be traced more or less, and their economic effects can be assessed. They appeared, often transformed an industry affected, but once incorporated, further progress slowed and sometimes stopped altogether. They did not trigger anything resembling sustained technological progress....
The early advances in the cotton industry, iron manufacturing, and steam power of the years after 1760 became in the nineteenth century a self-reinforcing cascade of innovation, one that is still very much with us today and seems to grow ever more pervasive and powerful. If economic growth before the Industrial Revolution, such as it was, was largely driven by trade, more effective markets and improved allocations of resources, growth in the modern era has been increasingly driven by the expansion of what was known in the age of Enlightenment as “useful knowledge” (A Culture of Growth, p. 3-4).
Technological modernity is created when the positive feedback from the two types of knowledge [practical knowledge and scientific knowledge] becomes self-reinforcing and autocatalytic. We could think of this as a phase transition in economic history, in which the old parameters no longer hold, and in which the system’s dynamics have been unalterably changed (“Long-Term Economic Growth and the History of Technology”, p. 12).
And here’s Robert Allen telling another phase transition story (quotes stitched together from Global Economic History: A Very Short Introduction):
The greatest achievement of the Industrial Revolution was that the 18th-century inventions were not one-offs like the achievements of earlier centuries. Instead, the 18th-century inventions kicked off a continuing stream of innovations.
The explanation [for the Industrial Revolution] lies in Britain’s unique structure of wages and prices. Britain’s high-wage, cheap-energy economy made it profitable for British firms to invent and use the breakthrough technologies of the Industrial Revolution.
The Western countries have experienced a development trajectory in which higher wages led to the invention of labour-saving technology, whose use drove up labour productivity and wages with it. The cycle repeats.
I’m not widely read in this area, but I don’t think I’ve encountered any prominent economic historians who favor the “Stable Dynamics” perspective (although some growth theorists appear to).[2]
2. The stable dynamics perspective is in tension with the extremely “local” nature of the Industrial Revolution.
Although a number of different countries were experiencing efflorescences in the early modern period, the Industrial Revolution was a pretty distinctly British (or, more generously, Northern European) phenomenon. An extremely disproportionate fraction of the key innovations were produced within Britain. During the same time period, for example, China is typically thought to have experienced only negligible technological progress (despite being similarly ‘advanced’ and having something like 30x more people). Economic historians also typically express strong skepticism that any country other than Britain (or at best its close neighbors) was moving toward an imminent industrial revolution of its own. See, for example, the passages I quote in this comment on the economy of early modern China.
This observation fits decently well with phase transition stories, such as Robert Allen’s: the British economy achieved ignition, then the fire spread to other states. The observation seems to fit less well, though, with the “stable dynamics” perspective. Why should the Industrial Revolution have happened in a very specific place, which held only a tiny portion of the world’s population and which was until recently only an economic ‘backwater’?
3. There has been vast cross-country variation in growth rates, which isn’t explained by differences in scale
In modern times, there are many examples of countries that have experienced consistently low growth rates relative to others. This suggests that there can be fairly persistent barriers to growth, other than insufficient scale, which cause growth rates to be substantially lower than they otherwise would be. As an extreme example, South Korea’s GDP growth rate may have been about an order-of-magnitude higher than North Korea’s for much of its history: despite many other similarities, institutional barriers were sufficient to keep North Korea’s growth rate far lower. (The start of South Korea’s “growth miracle” also seems like it could be pretty naturally described as a phase transition.)
At least in principle, it seems plausible that some barriers to growth—institutional, cultural, or material—affected all countries before the Industrial Revolution but only affected some afterward. Along a number of dimensions, states that are growing quickly today used to be a lot more similar to states that are growing slowly today. They also faced a number of barriers to growth (e.g. the need to rely entirely on ‘organic’ sources of energy; the inability to copy or attract investments from ultra-wealthy countries; etc.) that even the poorest countries typically don’t have today.
Acemoglu makes a similar point, in his growth textbook, when talking about the Kremer model (p. 114):
This discussion therefore suggests that models based on economies of scale of one sort or another do not provide us with fundamental causes of cross-country income differences. At best, they are theories of growth of the world taken as a whole. Moreover, once we recognize that the modern economic growth process has been uneven, meaning that it took place in some parts of the world and not others, the appeal of such theories diminishes further. If economies of scale were responsible for modern economic growth, this phenomenon should also be able to explain when and where this process of economic growth started. Existing models based on economies of scale do not. In this sense, they are unlikely to provide the fundamental causes of modern economic growth.
4. It’s not too hard to develop formal growth models that exhibit phase transitions
For example, there are models that formalize Robert Allen’s theory, “two sector” models in which the industrial sector overtakes the agricultural sector (and causes the growth rate to increase) once a certain level of technological maturity is reached, models in which physical capital and human capital are complementary (and a shock that increases capital-per-worker makes it rational to start investing in human capital), and models in which insufficient property protections limit the rate of growth (by capping incentives to innovate and invest). For example, here’s a classic two sector model.
I don’t necessarily “buy” any of these specific models, but they do suffice to show that there are a number of different ways you could potentially get phase transitions in economic growth processes.
5. The key forces driving and constraining post-industrial growth seem fairly different from the key forces driving and constraining pre-industrial growth
Technological and (especially) scientific progress, or what Mokyr calls “the growth of useful knowledge,” seems to play a much larger role in driving post-industrial growth than it did in driving pre-industrial growth. For example, based on my memory of the book The Economic History of China, a really large portion of China’s economic growth between 200AD and 1800AD seems to be attributed to new crops (first early ripening rice from Champa, then American crops); to land reclamation (e.g. turning marshes into rice paddies; terracing hills; planting American crops where rice and wheat wouldn’t grow); and to the more efficient allocation of resources (through expanding markets or changes in property rights). The development or improvement of machines, or even the development or improvement of agricultural and manufacturing practices, doesn’t seem to have been a comparably big deal. The big growth surge that both Europe and China experienced in the early modern period, and which may have partly set Britain for its Industrial Revolution, also seems to be mostly a matter of market expansion and new crops.
For example, Mokyr again:
The [historical] record is that despite many significant, even pathbreaking innovations in many societies since the start of written history, [technological progress] has not really been a major factor in economic growth, such as it was, before the Industrial Revolution.… The Industrial Revolution, then, can be regarded not as the beginnings of growth altogether but as the time at which technology began to assume an ever-increasing weight in the generation of growth and when economic growth accelerated dramatically (“Long-Term Economic Growth and the History of Technology,” pg. 1116-118).
There are also a couple obvious material constraints that apply much more strongly in pre-industrial than post-industrial societies. First, agricultural production is limited by the supply of fertile land in a way that industrial production (or the production of services) is not; if you double capital and labor, without doubling land, agricultural production will tend to exhibit more sharply diminishing returns.
Second, and probably more importantly, pre-industrial economic production relies almost entirely on ‘organic’ sources of energy. If you want to make something, or move something, then the necessary energy will typically come from: (a) you eating plants, (b) you feeding plants to an animal, or (c) you burning plants. Wind and water can also be used, but you have no way of transporting or storing the energy produced; you can’t, for example, use the energy from a waterwheel to power something that’s not right next to the waterwheel. This all makes it just really, really hard to increase the amount of energy used per person beyond a certain level. Transitioning away from ‘organic’ sources of energy to fossil fuels, and introducing means of storing/transmitting/transforming energy, intuitively seems to remove a kind of soft ceiling on growth. (Some people who have made a version of this point are: Vaclav Smil, Ian Morris, John Landers, and Jack Goldstone. It’s also sort of implicit in Robert Allen’s model.) It’s especially notable that, for all but the most developed countries, total energy consumption within a state tends to be fairly closely associated with total economic output.
To be clear, this super long addendum has only focused on reasons to take the “phase transition hypothesis” seriously. I’ve only presented one side. But I thought it might still be useful to do this, since the reasons to take the “phase transition perspective” seriously are probably less obvious than the reasons to take the “constant dynamics perspective” seriously.
Of course, my descriptions of these two perspectives are far from mathematically precise. There is some ambiguity about what it means for one perspective to be “more true” than the other. This paper by Chad Jones, for example, describes a model that combines bits of the two perspectives.
As another point of clarification, growth theory work in this vein does tend to suggest that important changes happened during the nineteenth century: once productivity growth becomes fast enough, and people start to leave the Malthusian state, certain new dynamics come into play. However, the high rate of growth in the nineteenth century is understood to result from growth dynamics that have been essentially stable since early human history.
One version of the phase change model that I think is worth highlighting: S-curve growth.
Basically, the set of transformative innovations is finite, and we discovered most of them over the past 200 years. Hence, the Industrial Revolution was a period of fast technological growth, but that growth will end as we run out of innovations.The hockey-stick graph will level out and become an S-curve, as g→0.
Addendum:
In the linked doc, I mainly contrast two different perspectives on the Industrial Revolution.
Stable Dynamics: The core dynamics of economic growth were stable between the Neolithic Revolution and the 20th century. Growth rates increased substantially around the Industrial Revolution, but this increase was nothing new. In fact, growth rates were generally increasing throughout this lengthy period (albeit in a stochastic fashion). The most likely cause for the upward trend in growth rates was rising population levels: larger populations could come up with larger numbers of new ideas for how to increase economic output.
Phase Transition: The dynamics of growth changed over the course of the Industrial Revolution. There was some barrier to growth that was removed, some tipping point that was reached, or some new feedback loop that was introduced. There was a relatively brief phase change from a slow-growth economy to a fast-growth economy. The causes of this phase transition are somewhat ambiguous.
In the doc, I essentially argue that existing data on long-run growth doesn’t support the “stable dynamics” perspective over the “phase transition” perspective. I think that more than anything else, due to data quality issues, we are in a state of empirical ignorance.
I don’t really say anything, though, about the other reasons people might have for finding one perspective more plausible than the other.[1] Since I personally lean toward the “phase change” perspective, despite its relative inelegance and vagueness, I thought it might also be useful for me to write up a more detailed comment explaining my sympathy for it.
Here, I think, are some points that count in favor of the phase change perspective.
1. So far as I can tell, most prominent economic historians favor the phase change perspective.
For example, here is Joel Mokyr describing his version of the phase change perspective (quote stitched together from two different sources):
And here’s Robert Allen telling another phase transition story (quotes stitched together from Global Economic History: A Very Short Introduction):
I’m not widely read in this area, but I don’t think I’ve encountered any prominent economic historians who favor the “Stable Dynamics” perspective (although some growth theorists appear to).[2]
2. The stable dynamics perspective is in tension with the extremely “local” nature of the Industrial Revolution.
Although a number of different countries were experiencing efflorescences in the early modern period, the Industrial Revolution was a pretty distinctly British (or, more generously, Northern European) phenomenon. An extremely disproportionate fraction of the key innovations were produced within Britain. During the same time period, for example, China is typically thought to have experienced only negligible technological progress (despite being similarly ‘advanced’ and having something like 30x more people). Economic historians also typically express strong skepticism that any country other than Britain (or at best its close neighbors) was moving toward an imminent industrial revolution of its own. See, for example, the passages I quote in this comment on the economy of early modern China.
This observation fits decently well with phase transition stories, such as Robert Allen’s: the British economy achieved ignition, then the fire spread to other states. The observation seems to fit less well, though, with the “stable dynamics” perspective. Why should the Industrial Revolution have happened in a very specific place, which held only a tiny portion of the world’s population and which was until recently only an economic ‘backwater’?
Mokyr expresses skepticism on similar grounds (p. 36-37).
3. There has been vast cross-country variation in growth rates, which isn’t explained by differences in scale
In modern times, there are many examples of countries that have experienced consistently low growth rates relative to others. This suggests that there can be fairly persistent barriers to growth, other than insufficient scale, which cause growth rates to be substantially lower than they otherwise would be. As an extreme example, South Korea’s GDP growth rate may have been about an order-of-magnitude higher than North Korea’s for much of its history: despite many other similarities, institutional barriers were sufficient to keep North Korea’s growth rate far lower. (The start of South Korea’s “growth miracle” also seems like it could be pretty naturally described as a phase transition.)
At least in principle, it seems plausible that some barriers to growth—institutional, cultural, or material—affected all countries before the Industrial Revolution but only affected some afterward. Along a number of dimensions, states that are growing quickly today used to be a lot more similar to states that are growing slowly today. They also faced a number of barriers to growth (e.g. the need to rely entirely on ‘organic’ sources of energy; the inability to copy or attract investments from ultra-wealthy countries; etc.) that even the poorest countries typically don’t have today.
Acemoglu makes a similar point, in his growth textbook, when talking about the Kremer model (p. 114):
4. It’s not too hard to develop formal growth models that exhibit phase transitions
For example, there are models that formalize Robert Allen’s theory, “two sector” models in which the industrial sector overtakes the agricultural sector (and causes the growth rate to increase) once a certain level of technological maturity is reached, models in which physical capital and human capital are complementary (and a shock that increases capital-per-worker makes it rational to start investing in human capital), and models in which insufficient property protections limit the rate of growth (by capping incentives to innovate and invest). For example, here’s a classic two sector model.
I don’t necessarily “buy” any of these specific models, but they do suffice to show that there are a number of different ways you could potentially get phase transitions in economic growth processes.
5. The key forces driving and constraining post-industrial growth seem fairly different from the key forces driving and constraining pre-industrial growth
Technological and (especially) scientific progress, or what Mokyr calls “the growth of useful knowledge,” seems to play a much larger role in driving post-industrial growth than it did in driving pre-industrial growth. For example, based on my memory of the book The Economic History of China, a really large portion of China’s economic growth between 200AD and 1800AD seems to be attributed to new crops (first early ripening rice from Champa, then American crops); to land reclamation (e.g. turning marshes into rice paddies; terracing hills; planting American crops where rice and wheat wouldn’t grow); and to the more efficient allocation of resources (through expanding markets or changes in property rights). The development or improvement of machines, or even the development or improvement of agricultural and manufacturing practices, doesn’t seem to have been a comparably big deal. The big growth surge that both Europe and China experienced in the early modern period, and which may have partly set Britain for its Industrial Revolution, also seems to be mostly a matter of market expansion and new crops.
For example, Mokyr again:
There are also a couple obvious material constraints that apply much more strongly in pre-industrial than post-industrial societies. First, agricultural production is limited by the supply of fertile land in a way that industrial production (or the production of services) is not; if you double capital and labor, without doubling land, agricultural production will tend to exhibit more sharply diminishing returns.
Second, and probably more importantly, pre-industrial economic production relies almost entirely on ‘organic’ sources of energy. If you want to make something, or move something, then the necessary energy will typically come from: (a) you eating plants, (b) you feeding plants to an animal, or (c) you burning plants. Wind and water can also be used, but you have no way of transporting or storing the energy produced; you can’t, for example, use the energy from a waterwheel to power something that’s not right next to the waterwheel. This all makes it just really, really hard to increase the amount of energy used per person beyond a certain level. Transitioning away from ‘organic’ sources of energy to fossil fuels, and introducing means of storing/transmitting/transforming energy, intuitively seems to remove a kind of soft ceiling on growth. (Some people who have made a version of this point are: Vaclav Smil, Ian Morris, John Landers, and Jack Goldstone. It’s also sort of implicit in Robert Allen’s model.) It’s especially notable that, for all but the most developed countries, total energy consumption within a state tends to be fairly closely associated with total economic output.
To be clear, this super long addendum has only focused on reasons to take the “phase transition hypothesis” seriously. I’ve only presented one side. But I thought it might still be useful to do this, since the reasons to take the “phase transition perspective” seriously are probably less obvious than the reasons to take the “constant dynamics perspective” seriously.
Of course, my descriptions of these two perspectives are far from mathematically precise. There is some ambiguity about what it means for one perspective to be “more true” than the other. This paper by Chad Jones, for example, describes a model that combines bits of the two perspectives.
As another point of clarification, growth theory work in this vein does tend to suggest that important changes happened during the nineteenth century: once productivity growth becomes fast enough, and people start to leave the Malthusian state, certain new dynamics come into play. However, the high rate of growth in the nineteenth century is understood to result from growth dynamics that have been essentially stable since early human history.
One version of the phase change model that I think is worth highlighting: S-curve growth.
Basically, the set of transformative innovations is finite, and we discovered most of them over the past 200 years. Hence, the Industrial Revolution was a period of fast technological growth, but that growth will end as we run out of innovations.The hockey-stick graph will level out and become an S-curve, as g→0.