Timing Sustained Economic Growth

Dietz Vollrath has written a new blogpost calling attention to a working paper on measuring economic growth for the most hotly debated time period and region in economic history: early modern Britain. The paper, by Jane Humphries and Jacob Weisdorf, assembles evidence on annual wage contracts (rather than daily wages) to suggest that modern, sustained economic growth began a lot earlier than the “classic” accounts of the Industrial Revolution. They try to solve the contentious matter of how many days in the year people actually worked — if you’re measuring only day wages, it matters how many holidays people took when calculating the annual wage. And this, in turn, matters for how you estimate GDP per capita before the dawn of official statistics. For years now, there has been a puzzling divergence between recent estimates by Broadberry et al of GDP per capita, which seems to take off in the seventeenth century, and Gregory Clark’s data on daily wages, which ought to keep up but instead seem to stagnate until the nineteenth century:

One explanation is that growth initially benefited capitalists’ profits before it resulted in pay rises (“Engels’ Pause”). The other explanation is that people worked more and more days in the year. Humphries and Weisdorf favour the latter. They show a steady increase in annual wages that, crucially, implies a steady increase in the number of hours worked. To achieve the same annual wages as workers employed on annual contracts, workers paid by the day (according to Gregory Clark’s data) up until the mid-seventeenth century would have had to work about 200 days in a year, rising to an impossibly high 400 by 1850. This could be down to an “industrious revolution”, as described by Jan de Vries, who argued that workers gave up more of their leisure time in order to consume new and exotic imported luxury goods like tea, coffee, sugar, tobacco, and fancy textiles. Or it could be down to imposed drudgery. Maybe both! Regardless, workers seem to have worked more.

Humphries and Weisdorf’s new data conforms more closely to Broadberry et al’s recent GDP per capita estimates. Here is their key graph:

Humphries and Weisdorf use this data to suggest that sustained, or “modern” economic growth started from the early seventeenth century, implying that its initial roots that had little or nothing to do with technological change. As Dietz puts it, they “firmly sever the connection of the Industrial Revolution — a technological event — from the onset of sustained growth”.

But woah, not so fast!

Accepting that Humphries and Weisdorf’s new estimates are correct (Gregory Clark has his doubts whether these annual wages applied to full-time workers in the earlier centuries) an initial increase in GDP per capita due to an increase in working hours does not imply that such growth could be sustained. An increase in working days is an increase in labour input — a case of extensive growth that inevitably would have been finite (you couldn’t keep increasing it beyond 365 days per year). It is difficult to imagine that the growth due to an increase in working hours could have continued beyond an initial up-tick without a growing flow of new inventions — an acceleration of innovation — increasing productivity. There is an all-important qualitative distinction when assessing whether or not growth is modern that relies on its sources, not just its quantity.

There is also, however, a growing body of work pushing back the timing of the acceleration of innovation to well before the “classic” period of 1780–1830, taking the emphasis away from the more famous industries of cotton, iron, and steam. Morgan Kelly and Cormac Ó Gráda have shown how watches, invented around 1660, steadily declined in price due to technological advancements over the following century. A more recent paper of theirs also shows steady improvements in the speed of sailing ships from at least the 1750s.

I could add to this my own work, which seeks to catalogue inventors back to the mid-sixteenth century. There was plenty of innovative activity in the earlier period, even if there seems to have been some kind of acceleration in the early eighteenth century. And, indeed, there was likely much more in the earlier period than I’ve yet been able to find — the records then are the sparsest. The late sixteenth century saw the introduction into Britain of German techniques for making paper and smelting brass and lead. It saw considerable improvements to navigational techniques and instruments, as well as to ships and civil engineering. The early seventeenth century saw many early attempts to use coal instead of wood in the smelting of metals and the production of glass, as well as advances in pottery. By at least the 1650s, if not earlier, there was a growing craze for agricultural improvement. The Royal Society, founded in 1660, did not appear in a vacuum — it was organised around an already-existing and thriving community of natural philosophers who, at least during that early phase, were interested in scientific knowledge’s practical applications as well as its theories and abstractions.

The impact of these early innovations on economic growth is difficult to ascertain, and may well have been very limited, but as far as I know little attempt has been made to measure them. If the work of Kelly and Ó Gráda and others is any indication, the dates of the effects of technological changes are being pushed back further and further, perhaps to a period more in keeping with the timings for growth suggested by Humphries and Weisdorf. Regardless, however, their new work does not definitively sever the connection between technology and sustained economic growth.