What Was the Industrial Revolution?
At some point in the first half of the 19th century per capita GDP in the United Kingdom and the United States began to grow at something like one to two percent per year and have continued to do so up to the present. Now incomes in many economies routinely grow at 2 percent per year and some grow at much higher “catch-up” rates. These events surely represent a historical watershed, separating a traditional world in which incomes of ordinary working people remained low and fairly stable over the centuries from a modern world where incomes increase for every new generation. This paper uses Gary Becker’s theory of a “quantity/quality trade-off,” consistent both with Malthusian population dynamics (quantity) and with demographic transition (quality), to identify a limited set of forces that were central to this revolution.
I am grateful for comments from Ufuk Atcigit, Jeremy Greenwood, Gene Grossman, Benjamin Moll, Kevin Murphy, Esteban Rossi-Hansberg, Nancy Stokey, Robert Tamura and David Weil, and for the valuable assistance of Nicole Gorton. The views expressed herein are those of the author and do not necessarily reflect the views of the National Bureau of Economic Research.