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Demand versus Supply in the Industrial Revolution: A Reply

Published online by Cambridge University Press:  03 March 2009

Joel Mokyr
Joel Mokyr
Affiliation:
The author is Professor of Economics and History at Northwestern University Evanston, Illinois 60201
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Abstract

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Type
Notes and discussion
Information
The Journal of Economic History , Volume 44 , Issue 3 , September 1984 , pp. 806 - 809
Copyright
Copyright © The Economic History Association 1984

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References

1 I have tried to make amends by providing a detailed discussion of the central issues in my “editor's introduction” to Mokyr, Joel, ed., The Economics of the Industrial Revolution (Totowa, New Jersey, 1984, forthcoming).Google Scholar

2 However unlikely, I cannot suppress the thought that Ben-Shachar has failed to read Parts II and III of my paper properly. Otherwise, what could he possibly mean by saying that I use comparative statics throughout my paper? He fails to see the internal logic of the paper, namely, that even if my conclusion in Part I that the shift in demand was not large were rejected, such a shift would not necessarily create the conditions for the satisfaction of this increased demand.Google Scholar

3 As I make clear in footnote 2 in the paper, the Gilboy thesis was expressed in a large body of quite diverse literature, some of which was sampled in that note. Ben-Shachar presents the paper as an “anti-Gilboy” manifesto, which it was not, of course.Google Scholar

4 Although Ben-Shachar appears little interested in historical fact (“whether Gilboy is correct is not at issue”) we may well ask whether changes in income distribution can be seriously regarded as a possible cause for an increase in demand for manufactured goods. As manufactures were more income-elastic than agricultural goods, such a shift would have required an increase in the inequality of income distribution before the Industrial Revolution and independent of it. The only quantitative evidence available for the eighteenth century is presented in Williamson, Jeffrey G., “Two Centuries of British Inequality” (unpublished, University of Wisconsin, 1979). Williamson reports a marked leveling of income distribution between 1700 and 1760, which accelerated in 1760–1780.Google Scholar

5 The only continuous series which can be used for this purpose is the Phelps Brown and Hopkins collection of prices, which is not a complete price index. Nevertheless the results are unambiguous: set the ratio farinaceous products prices to textile prices equal to 100 in 1749/59, it then equals 182 in 1790/1799, and 269 in 1840/49. I did not use these series in the paper but used an index computed from the Gilboy-Schumpeter prices indices, which indicates that the relative price of cereals and legumes rose by 30–40 percent between 1750 and 1810, though year-to-year fluctuations are rather large. This series ends in 1823, and had to be spliced to the Rousseaux indices which exhibit a mild rise in the relative price of agricultural goods in the first half of the nineteenth century.Google Scholar

6 The equation used in footnote 7 is neither original nor terribly important to the argument, but it is correct under the assumptions stated. It is used exactly in the same form in R. A. Ippolito's article on which this computation was based, as acknowledged in footnote 6 in the original paper.Google Scholar

7 On the role of exports as a prime mover of the Industrial Revolution, something of a consensus has been reached among historians and economists interested in the issue. See for instance Thomas, R. P. and McCloskey, D. N., “Overseas Trade and Empire, 1700–1860,” in The Economic History of Britain since 1700, ed. Floud, Roderick and McCloskey, Donald N. (Cambridge, 1981), pp. 99–102.Google Scholar The late Ralph Davis (whose data are cited by Ben-Shachar) wrote: “I share the view that overseas trade did not have an important direct role either in bringing about the Industrial Revolution or in supporting the first stage of its progress…the initiative (to the Industrial Revolution) came from the supply side.” Davis, Ralph, The Industrial Revolution and British Overseas Trade (Leicester, 1979), pp. 9–10.Google Scholar The same conclusion has been reached by Ronald Findlay using an entirely different research methodology: “The analysis of the trade-growth nexus in the…Industrial Revolution seems to imply that the causal arrow runs from growth (in the form of technological change in the manufacturing sector) to trade rather than in the reverse direction.” See Findlay, R., “Trade and Growth in the Industrial Revolution,” in Economics in the Long View: Essays in honor of W. W. Rostow, ed. Kindleberger, Charles P. and Tella, Guido di (New York, 1982), vol. 1, p. 186.Google Scholar

8 For a more sophisticated econometric test of the role of exports as an autonomous factor, see Hatton, T. J., Lyons, J. S., and Satchell, S. E., “Eighteenth Century British Trade: Homespun or Empire Made,” Explorations in Economic History, 20 (04 1983), 163–82. Although Hatton et al. find evidence for exogenous movements of export, their procedures cannot distinguish between shifts in foreign demand and domestic supply (p. 178).CrossRefGoogle Scholar

9 Jones, Eric L., “The Fashion Manipulators: Consumer Tastes and British Industries, 1660–1800,” in Business Enterprise and Economic Change, Essays in Honor of Harold F. Williamson, ed. Cain, Louis P. and Uselding, Paul J. (Kent, Ohio, 1973), pp. 198–226.Google Scholar

10 For a recent summing-up, see Lindert, Peter, “Remodeling British Economic History,” this Journal, 43 (12 1983), 990.Google Scholar No consensus on the overall role of demand has been reached, of course. A recent restatement of the hypothesis is in McKendrick, Neil, “The Consumer Revolution of Eighteenth Century England,” in McKendrick, Neil, Brewer, John, and Plumb, J. H., The Birth of a Consumer Society (Bloomington, Indiana, 1982), pp. 9–33.Google Scholar Of special interest is the conclusion reached by J. S. Cohen, to whose influence Ben-Shachar attributes his comment. Cohen writes that “there appears … to be no quantitative basis to support the argument that demand increased at just the right moment to bring about industrialization.” See Cohen, Jon S., “Managers and Machinery: An Analysis of the Rise of Factory Production,” Australian Economic Papers, 20 (06 1981), 33. A comparison of the subsequent paragraphs with my “Demand vs. Supply” article leads to the suspicion that Cohen's failure to acknowledge his debt to it must be due to a misprint.CrossRefGoogle Scholar