Why Study the Industrial Revolution?

Why Study the Industrial Revolution?

A Before-and-After Snapshot

Figure 1: UK GDP per capita, 1700–1900

The Core Puzzle

Technology outpaces institutions

The Technology–Institution Gap

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flowchart LR
  A["New Technology<br/>(e.g., Steam Engine)"] --> B["Productivity<br/>Gains"]
  B --> C["Social<br/>Disruption"]
  C --> D["Institutional<br/>Lag"]
  D --> E["Political<br/>Pressure"]
  E --> F["Institutional<br/>Adaptation"]
  F --> G["New<br/>Equilibrium"]
  G -.->|"Next shock"| A

  style A fill:#4a7c6f,color:#fff,stroke:#334155
  style C fill:#b44527,color:#fff,stroke:#334155
  style F fill:#4a7c6f,color:#fff,stroke:#334155
  style G fill:#b7943a,color:#fff,stroke:#334155

General-Purpose Technologies (GPTs)

A technology that transforms an entire economy

Key insight: GPTs do not just improve one task — they restructure the economy (Bresnahan & Trajtenberg, 1995).

Comparing GPTs Across Eras

Technology vs. Organization of Production

Complementarity Framework

Technology, Skills, and Institutions

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flowchart LR
  T["Technology"] <--> S["Skills"]
  S <--> I["Institutions"]
  I <--> T
  T --> O["Economic<br/>Output"]
  S --> O
  I --> O

  style T fill:#4a7c6f,color:#fff,stroke:#334155
  style S fill:#b44527,color:#fff,stroke:#334155
  style I fill:#b7943a,color:#fff,stroke:#334155
  style O fill:#1e293b,color:#fff,stroke:#334155

Discussion Exercise 1

Identifying General-Purpose Technologies

Prompt: Choose a technology from the past 50 years (e.g., the smartphone, the internet, GPS). Does it meet all three GPT criteria — pervasiveness, improvement over time, and spawning complementary innovations? Present one example for and one against.

Format: Pairs, then brief class share

Time: 5 minutes

Steam Power and Mechanization

From Cottage Industry to Factory

Two systems of production

From Cottage Industry to Factory

Two systems of production

Scale, Speed, and Standardization

The Coal Revolution

The Structural Shift in Labor

Figure 3: UK labor force by sector, 1700–1900

The Shift to Wage Labor

Deskilling and Reskilling

A dual process

. . .

Time Discipline and New Class Structures

The Distributional Paradox

Engels’ Pause: Wages vs. Output

Figure 4: Real wages lagged GDP per capita for decades

Urbanization and Social Dislocation

Worker Resistance: The Luddites

Discussion Exercise 2

Winners and Losers

Prompt: Based on Engels’ Pause, factory owners gained while workers’ wages stagnated for 50+ years. Why might this pattern persist so long? Brainstorm at least two mechanisms (economic, political, or institutional) that delayed the sharing of productivity gains.

Format: Small groups (3–4), then class discussion

Time: 5 minutes

Labor Regulation and Education

Collective Organization and Early Welfare

Key Institutional Reforms

Path Dependence in Institutional Change

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flowchart LR
  A["Pre-industrial<br/>Institutions"] --> B{"Critical Juncture:<br/>Factory System"}
  B -->|"Reform"| C["Factory Acts &<br/>Education Acts"]
  B -->|"Laissez-faire"| D["Minimal<br/>regulation"]
  C --> E["Regulated<br/>labor market"]
  D --> F["Persistent<br/>inequality"]
  E --> G["Welfare state<br/>(20th century)"]
  F --> H["Social<br/>instability"]

  style A fill:#64748b,color:#fff,stroke:#334155
  style B fill:#b44527,color:#fff,stroke:#334155
  style C fill:#4a7c6f,color:#fff,stroke:#334155
  style D fill:#b7943a,color:#fff,stroke:#334155
  style G fill:#4a7c6f,color:#fff,stroke:#334155
  style H fill:#b44527,color:#fff,stroke:#334155

IR vs. AI/Automation: Parallels

Comparing Technological Shocks: Then and Now

Automation Risk by Occupation

Figure 6: Estimated automation probability by occupation

Lessons for Managing Technological Change

Discussion Exercise 3

Designing Institutions for AI

Prompt: You are advising a government on AI policy. Drawing on the Industrial Revolution, propose one institutional reform that could help manage the transition. Consider: Who are the likely losers? How fast must the response be? What failed or succeeded in the 1800s?

Format: Small groups (3–4), prepare a 1-minute pitch

Time: 5 minutes

Key Takeaways