Cheaper capital then explains the industrial revolution according to North and Weingast !

Was the tax burden higher in representative Britain or absolutist France after the Revolution?

Simulations show that competitiveness and trade expansion—not representative government—were the cause of wages (Remember Allen counterfactual analysis).

• 
  Mokyr argues that modern economic growth is the product of an unprecedented expansion and application of “useful knowledge.”
  
• 
  He begins by dividing useful knowledge into two categories: “propositional knowledge” and “prescriptive knowledge” (p. 4).
  
• 
  Propositional knowledge is general, theoretical knowledge—for example, knowledge of the properties and effects of atmospheric pressure or knowledge of the theory of flight.
  
• 
  Prescriptive knowledge is knowledge of technique—for example, how to build a steam engine or how to build a jet plane.
  
• 
  Overall knowledge of a society: The sum of these two types of knowledge forms.
  
• 
  Knowledge is cumulative (almost always) and evolutionary
  
• 
  The broader the available knowledge basis, the greater the possibilities that an invention is generated and that others are created from it
  
• 
  According to Mokyr, economic growth springs in large part from institutions and norms that encourage an active, rational search for propositional knowledge and the use of such knowledge for the discovery of prescriptive knowledge.
  

• 
  The pre-1750 world produced (innovations), and produced well. It made many path-breaking inventions. But ‘it was a world of engineeering withouth mechanics, iron-making without metallurgy, farming without soil science, mining without geology....’ (Mokyr)
  
• 
  In other terms the stock of knowledge was based on prescriptive knowledge but lacked propositional (epistemic) knowledge.
  
• 
  The main point is that such a lack of epistemic base does not necessarily preclude the development of new techniques through trial and error and simple luck.
  
• 
  But it makes the subsequent wave of micro-inventions that adapt and improve the tecnique much slower and more costly.
  
• 
  Even more importantly these innovations are episodic and in the long-term are not conducive to a sustained growth pattern
  

The Enlightment and the rise of useful knowledge

• 
  The Enlightment was a philosophical cultural movement that spread to Europe in the 1700s.
  
• 
  At the deepest level, the common denominator was the belief in the possibility and desirability of
  

• 
  The material aspect of this belief followed in the footsteps of Francis Bacon (1561-1626)’s idea of understanding nature in order to control it. “Useful knowledge ”became the buzzword of the eighteenth century.
  
• 
  “Useful knowledge” should not be associated simply with either “ science ”or “ technology.
  
• 
  It meant the combination of different kinds of knowledge supporting one another. Not all of it was abstract science: the taxonomic work of Linnaeus increased useful knowledge just as much as the abstract mathematics of Laplace.
  
• 
  Bacon program served as key to the agenda of researchers. The idea was that knowledge was useful and society can be improved. The purpose was to solve practical problems rather than satisfy curiosity.
  
• 
  The Age of Enlightment was the period in which the interaction between “propositional knowledge” and “prescriptive knowledge” became important.
  

• 
  Empiricism is the philosophy that “from Experience...all our Knowledge is founded.” (John Locke)
  
• 
  Facts--rather than the Bible or classical authors--were the source of knowledge.
  
• 
  Empiricism was stimulated by the discovery of the Americas by European explorers.
  
• 
  Galileo’s observations of astronomical bodies using telescopes contradicted classical authors by showing that ‘heavenly’ bodies were not ideal substances but had imperfections (craters on the moon and dark acne on the sun) like our world.
  
• 
  Galileo and Newton showed that simple, mathematical laws explained the facts of the world.
  

This theory can be applied to history by specifying the boxes like this:

Economic explanation: Allen model

Economic explanation: Allen model

1. 
   The Supply of inventions was a necessary but not a sufficient condition
   
2. 
   Links between Science and Technology were very weak. Industrial Enlightenment was an upper class affair and key-inventions were made by artisans, etc. Industrial Revolution was a matter of engineering skills and not of science. “Invention is 1% inspiration, 99% perspiration” (Edison).
   
3. 
   Greater supply of invention would have had little impact without a DEMAND for new techniques. “Technology was invented by people in order to make money.” (Allen 2009).
   
4. 
   Inventions and R&D projects were costly and profitable only in certain economic conditions.
   

British Prices were unique:

British Wages were high in four senses:

1. 
   At the exchange rate (i.e. nominal wages in silver), British wages were high relative to those in its competitors.
   
2. 
   British silver wages were high relative to the cost of living (high welfare ratios)
   
3. 
   British wages were high relative to capital prices.
   
4. 
   Wages in northern and western Britain were exceptionally high relative to the price of energy.
   

Cheap coal did not simply reflect natural reserves. Cheap coal resulted from the urbanization of the 17-18 centuries.

• 
  Britain’s coal resources were not intrinsically superior to those of Germany, Belgium, and northeastern France.
  
• 
  Growth of London meant higher wood prices, which induced the development of English coal fields.
  
• 
  Dutch urbanization led to exploitation of peat and, later, importing English coal since those fuels were cheaper than German coal.
  
• 
  Paris grew enormously by using wood-whose price rose but not exorbitantly.
  

The British inventions led to modern economic growth because they were more transformative.

• 
  General mechanization of industry, railway, steam ship
  
• 
  Basis of 19 century global economy
  
• 
  Account for almost half of growth in British labour productivity in 19 century.
  

A case study: The Spinning Jenny