Was an Industrial Revolution Inevitable Economic G

NBERWORKINGPAPERSERIESWASANINDUSTRIALREVOLUTIONINEVITABLE?ECONOMICGROWTHOVERTHEVERYLONGRUNCharlesI.JonesWorkingPaper7375:February1999October1999IwouldliketothankDaronAcemoglu,WilliamBaumol,OdedGalor,AvnerGreif,BobHall,MichaelKremer,LantPritchett,AntonioRangel,PaulRomer,TomSargent,AlwynYoung,andseminarparticipantsattheHebrewUniversityGrowthConference,theMinneapolisFed,theNBERSummerInstitute,theNorthwesternSummerMacroWorkshop,NYU,PennState,andUSCfortheircommentsandsuggestions.SergeiMorozovandSoojinKimprovidedexcellentresearchassistance.FinancialsupportfromtheNationalScienceFoundation(SBR-9818911)andtheSloanFoundationisgratefullyacknowledged.TheviewsexpressedhereinarethoseoftheauthorsandnotnecessarilythoseoftheNationalBureauofEconomicResearch.©1999byCharlesI.Jones.Allrightsreserved.Shortsectionsoftext,nottoexceedtwoparagraphs,maybequotedwithoutexplicitpermissionprovidedthatfullcredit,including©notice,isgiventothesource.WasanIndustrialRevolutionInevitable?EconomicGrowthOvertheVeryLongRunCharlesI.JonesNBERWorkingPaperNo.7375October1999JELNo.O40,E10ABSTRACTThispaperstudiesagrowthmodelthatisabletomatchseveralkeyfactsofeconomichistory.Forthousandsofyears,theaveragestandardoflivingseemstohaverisenverylittle,despiteincreasesintheleveloftechnologyandlargeincreasesinthelevelofthepopulation.Then,afterthousandsofyearsoflittlechange,thelevelofpercapitaconsumptionincreaseddramaticallyinlessthantwocenturies.Quantitativeanalysisofthemodelhighlightstwofactorscentraltounderstandingthishistory.Thefirstisavirtuouscircle:morepeopleproducemoreideas,whichinturnmakesadditionalpopulationgrowthpossible.Thesecondisanimprovementininstitutionsthatpromoteinnovation,suchaspropertyrights:thesimulatedeconomyindicatesthatthesinglemostimportantfactorinthetransitiontomoderngrowthhasbeentheincreaseinthefractionofoutputpaidtocompensateinventorsforthefruitsoftheirlabor.CharlesI.JonesDepartmentofEconomicsStanfordUniversityStanford,[e-mail]Run11IntroductionThepastcenturyhasbeenmarkedbyextremelyrapidincreasesinstandardsofliving.MeasuredGDPpercapitaisperhapstentimeshigherintheUnitedStatestodaythan125yearsearlier,andwithamismeasurementofgrowthofonepercentagepointperyear,thefactorcouldeasilybemorethanthirty.Alsoremarkableistherelativelybriefspanofhistoryduringwhichthisrapidgrowthhasoccurred.Conservativeestimatessuggestthathumanswerealreadydistinguishablefromotherprimates1millionyearsago.Imag-ineplacingatimelinecorrespondingtothismillionyearperiodalongthelengthofafootballfield.Onthistimeline,humanswerehuntersandgath-erersuntiltheagriculturalrevolution,perhaps10,000yearsago—thatis,forthefirst99yardsofthefield.TheheightoftheRomanempireoccursonly7inchesfromtherightmostgoalline,andtheIndustrialRevolutionbeginslessthanoneinchfromthefield’send.Large,sustainedincreasesinstandardsofliving,ourworkingdefinitionofanindustrialrevolution,haveoccurredduringarelativelyshorttime—equivalenttothewidthofagolfballrestingattheendofafootballfield.Thispapercombinesanidea-basedtheoryofgrowthinwhichpeopleareakeyinputintotheproductionofnewideaswithamodelofendogenousfertilityandmortalityinordertoanalyzetheseremarkablefacts.Theinter-naldynamicsprovidedbythemodelareabletoproducethousandsofyearsofvirtuallynosustainedgrowthinstandardsoflivingdespiteincreasesinbothtechnologyandpopulation,followedbytheemergenceofrapidgrowth.Moregenerallythemodelmatchesthebroadtimeseriesbehaviorofbothpopulationandpercapitaconsumption.Tomatchthepopulationdataexactly,however,thequantitativeanalysisintroducestwoshocks.Thefirstshockisanimprovementinpropertyrights.Thefractionofoutputthatisallocatedtocompensateinventiveeffortisanexogenousvariableinthismodel.Inaneconomywithawell-functioningsystemofpropertyrights,inventorsareallowedtoearnthereturnsfromGrowthOvertheVeryLongRun2theirdiscoveries,eitherthroughsomedirectmechanismsuchasaprizeorthroughanalternativemechanismsuchasthemonopolyrentsthataccruetotheownerofapatent.Intellectualpropertyrightsareobviouslyimportantinsuchasystem,butsoaremoregeneralkindsofpropertyrights:apatentisvaluableonlyinsofarastheownerisallowedtorecoupone-timeinventioncoststhroughsubsequentsalesofsomeproduct.NorthandThomas(1973),RosenbergandBirdzell(1986),Jones(1988),andMokyr(1990)suggestthatoverthebroadcourseofhistory,changesinsuchpropertyrightshavebeenafundamentaldeterminantofeconomicgrowth.ThesecondshockintroducedinthemodelisatemporarydeclineinthestandardSolow(1956)measureoftotalfactorproductivity,asmightoccurduringtimesofwarorfamine.Quantitativeanalysisofthemodelassignsamajorroletochangesinpropertyrightsinexplaininggrowthovertheverylongrun.Asoneexample,thenumberofnewideasproducedinayearrisesbyafactorof110,000inthesimulatedeconomybetween25,000B.C.andthe20thcentury.Afactorof108ofthisincreaseisduetothefactthatthe20thcenturyhasalargerpopulationbasefromwhichinventorsaredrawn;afactorof4ofthisincreaseisattributedtoknowledgespillovers,i.e