Lecture 4 The Industrial Revolution F11

Lecture 4 The Industrial Revolution F11 - Lecture 4 Fall...

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Lecture 4 Fall 2011 The Industrial Revolution Great Britain 1780-1860
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Western European GDP per capita in 1990 International Geary-Khamis dollars (Source: Maddison, 2005) 0 5,000 10,000 15,000 20,000 25,000 1 1000 1500 1600 1700 1820 1850 1870 1913 1950 1970 2003 Dollars per capita
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Great Britain—the first industrial nation 1780-1860---Great Britain has the first Industrial Revolution 1860/1870-1914---Industrialization spreads to the Continent of Europe. New technologies and industries---differs from first wave 1914-1918: World War I 1919-1939: Interwar Period, Uneven Recovery and Growth and the Great Depression 1939-1944: World War II 1945-1970: The European Miracle 1970-1980/1990: Stagflation and Uneven Growth 1990s-2008: Renewed Growth
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First Industrial Revolution (approx. 1780-1860) 1. Substantial Rise in Per Capita Incomes 2. Technological Innovation in Production 3. Sectoral Shift 4. Population Rises Rapidly 5. Urbanization
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1. The Rise in Per Capita Incomes Unprecedented 1781 £11 per capita for Great Britain 1861 £28 per capita for Great Britain 155% increase in 80 years---no historical parallel. What is happening?
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2. Technological Innovation in Manufacturing Rapid rise in productivity in key (high tech) sectors Textiles (especially cotton) Iron Steam ---for transportation (railroads and steamships) and production (Steam-powered iron machinery used in textiles and other industries. Change in Organization of Production Previously craft and home production of manufactures Factories (British: mills) appear—workers concentrated in one location Increase in size of factories—economies of scale
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3. Sectoral Shift—Change in Economic Structure Date GDP£M Agr% Man&Min% 1770 130 45% 24% 31% 1861 668 18% 37% 44% Note: real GDP growing at about 2% a year
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4. Population Boom Population of Great Britain (millions) 1701 6.8 million 1781 8.9 million (increases at 0.3% p.a.) 1861 23.2 million (increases at 1.2% p.a.)
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5. Urbanization Proportion of British Living in Cities of 50,000 or more 1801 14% (1.5 m) of 10.7 m (75% in London) 1861 25% (5.8 m) of 23.2 m (50% in London) Rise of cities in northern England and Scotland--- Liverpool, Birmingham, Sheffield, Lancaster, Glascow…….
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But, Wait!! How can population grow and incomes grow? Wasn’t Malthus right? An Essay on the Principle of Population (1798) Everyone Believed Him ? The smartest economists believed him: David Ricardo and Adam Smith
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Simple Model: (1) equilibrium? (2) technological innovation? (3) harvest failure? Real Wage Population Demand for Labor Birth Rate, Death Rate Real Wage Deaths Births Population W0
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Output 5 10 100 150 10 acres of land or 10 machines With five workers, Q/L = 20 With 10 workers, Q/L = 15 So wages…. . Diminishing Returns
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This note was uploaded on 09/29/2011 for the course ECON 343 taught by Professor Moondra during the Fall '11 term at Rutgers.

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Lecture 4 The Industrial Revolution F11 - Lecture 4 Fall...

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