System Theory and Cybernetics of the British Industrial Revolution: Positive Feedback Between Smith-Young Growth and Schumpeterian Growth

This paper explores the conundrum why the industrial revolution firstly occurred in England. Such event should be defined as a revolution of commercial technological application rather than only the emergence of invention. Unlike the traditional explanations focusing on the single-factor model, the study in a holistic perspective introduces the system theory and cybernetics into analysis which concentrates on how the positive feedback mechanism resulted from muti-factor interaction contributed to the industrial revolution. The paper argues that England firstly erected the system around textile industry which facilitated the industrial revolution through the virtuous positive feedback between Smith-Young growth and Schumpeterian growth. The system consisted of market organizer, uniform market and specialization primarily. The Smith-Young growth incentivized invention through the interplay between deep specialization and market expansion, while the Schumpeterian growth emphasized the core role of market organizers in market establishment and technological application to achieve creative destruction. The economic transition was thus accomplished by the interplay between the technological invention and their commercial promotion led by market organizers. In the first stage regarding the system organization, the market organizers including British government and entrepreneurs exploited the market for domestic textile industry by mercantilism, war capitalism and proto-industrialization. Consequently, the interaction between market expansion and deep specialization incentivized experience-based inventions through roundabout method of production of textile industry in the second stage. The entrepreneurs then applied them widely whose spillover effects boosted related industries and further broadened the market scope. Eventually, the dynamic positive feedback loop among specialization, market expansion, and market organizers catalyzed the popularization of machine, railway and fossil fuels and the arrival of the industrial age in England. The British competitors lagged behind since the unqualified market organizer, fragmented market or ignorance of developing textile industry circumscribed the positive feedback mechanism of growth despite possessing a few significant factors.