Domestic Reshufflings, Such as Transport and Coal, Do Not Explain the Modern World
Transportation improvements cannot have caused anything close to the factor of 16 in British economic growth. By Harberger’s (and Fogel’s) Law, an industry that is 10% of national product, improving by 50 percent on the 50% of non-natural routes, results in a mere one-time increase of product of 2.5% (= .1 x .5 x .5), when the thing to be explained is an increase of 1500%. Nor is transport rescued by “dynamic” effects, which are undermined by (1.) the small size of the static gain to start them off and (2.) the instable economic models necessary to make them nonlinear dynamic. The same holds for many other suggested causes of the modern world: enclosure, for example, or the division of labor or the Kuznets-Williamson Hypothesis of reallocation from agriculture to industry, country to town. Wider geographical arguments, such as Diamond’s or Sachs’, turn out to be ill-timed to explain what we wish to explain. And “resources,” such as oil or gold, have both the Harberger Problem and the timing problem. Not even coal---the favorite of Wrigley, Pomeranz, Allen, and Harris---can survive the criticism that it was transportable and substitutable. The factor-bias arguments of Allen have the old problem of the Habbakuk Hypothesis, namely, that all factors are scarce. Even if we add up all the static and quasi-dynamic effects of resources, they do not explain Britain’s lead, or Japan’s or Hong Kong’s catching up.
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- Olmstead,Alan L. & Rhode,Paul W., 2008.
Cambridge University Press, number 9780521857116.
- Fogel, Robert William, 1979. "Notes on the Social Saving Controversy," The Journal of Economic History, Cambridge University Press, vol. 39(01), pages 1-54, March.
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- Williamson, Jeffrey G, 1987. "Did English Factor Markets Fail during the Industrial Revolution?," Oxford Economic Papers, Oxford University Press, vol. 39(4), pages 641-78, December.
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