This essay is based on the working paper “When Did Growth Begin? New Estimates of Productivity Growth in England from 1250 to 1870” by Paul Bouscasse, Emi Nakamura, and Jón Steinsson.

Over the past few hundred years, economic growth has transformed the standard of living of a large and growing portion of humanity. In the early nineteenth century, the vast majority of people lived in what we now consider extreme poverty. Today, however, the fraction of people living in extreme poverty has dropped to less than 10 percent and keeps falling. The main driver of this monumental change is economic growth.

But significant economic growth is a relatively recent phenomenon. For most of human history, economic growth was glacially slow if there was any growth at all. There were occasional “efflorescences”—i.e., periods of growth in a particular region (such as ancient Greece or Rome)—that lasted for a few hundred years and then petered out, with living standards falling back to where they had been before. The growth we have seen over the past few hundred years has been much faster and has reached a much larger portion of the globe. 

The incredible importance of economic growth for human welfare motivates interest in understanding why growth began. If we understand why growth began, perhaps we are closer to understanding the ingredients that are necessary for growth to continue and better equipped to avoid a premature collapse. In the quest to understand why growth began, it is very useful to know when growth began. This helps focus research on developments roughly contemporaneous to the onset of growth. 

In a recent paper written jointly with Paul Bouscasse and Emi Nakamura, I try to shed light on the question of when growth began. Our focus is on England—the original location of the Industrial Revolution—over the period 1250 to 1870. The concept we focus on is productivity: we ask when growth in productivity began in England. Our main finding is that growth in productivity began around 1600. We estimate no growth in productivity between 1250 and 1600. After 1600, growth begins at the relatively modest rate of 3 percent per decade. We allow for a speedup in productivity growth at the time of the Industrial Revolution but conclude that such an acceleration was minimal; Productivity growth was 4 percent per decade on average between 1760 and 1860. 

The English economy did grow much faster after the onset of the Industrial Revolution. Our analysis attributes this speedup not to increased productivity growth but rather to a fall in the importance of land as a factor of production. Prior to the Industrial Revolution, land was a hugely important factor of production. This began to change rapidly with the advent of steam power fueled by coal. Steam power fueled by coal implied that energy production was no longer land intensive, which dramatically reduced the overall land intensity of production. 

Some authors have argued that the Glorious Revolution of 1688 kickstarted economic growth in England. Our estimates indicate that growth began almost a century before the Glorious Revolution and several decades before the English Civil War. This is not to say that institutional change was unimportant in the onset of growth. Institutional change may well have been extremely important, but it must have been earlier institutional change. 

There are plenty of candidates for institutional change in the period leading up to 1600. One obvious candidate is the Reformation. Another is the gradual increase in the security of property rights of freehold and tenant farmers in England, as well as the rise of the gentry. A third candidate is the rising importance of international trade, which interacted with initial institutions and helped propel further institutional change. 

Our estimates are most easily understood by considering the following figure:


This figure plots labor supply in England on the x-axis and real wages on the y-axis. Labor supply is the population multiplied by days worked per worker. The dark gray points to the left of the figure chart the evolution of the English economy from 1250 to 1600. First, from 1250 to 1300, the population increased and real wages fell. From 1300 to 1450, the population fell and real wages rose. From 1450 to 1600, the population recovered and real wages fell. Interestingly, the economy ended up in roughly the same place in 1630 as it was in 1300. 

One way to interpret this set of points is as showing the English economy traveling up and down a stable labor demand curve. Since the economy arrives back at essentially the same point in 1630 as it was in 1300, it cannot be that the labor demand curve shifted much. If the labor demand curve had shifted significantly over this period—i.e., if there had been significant productivity growth—the point the economy was at in 1300 would no longer be on the economy’s labor demand curve in 1630. Instead, the economy would be somewhere to the north or east of that point. This implies that there was no productivity growth in England prior to 1600. 

After 1600, something changed. The points start moving off the old labor demand curve; the curve shifts up and to the right. This implies that productivity growth commenced. 

Our work builds on earlier informal arguments made by Gregory Clark based on a figure similar to ours above. We show how productivity can be inferred from data on real wages and labor supply in a Malthusian environment. This allows us to estimate when growth began. It also allows us to assess how much productivity growth there was after the onset of growth and how the speed of productivity growth changed with the onset of the Industrial Revolution. 

Importantly, we are able to allow for changing factor shares after the onset of industrialization. Allowing factor shares to change has substantial effects on our estimates. When we do not allow for this, we estimate a much larger increase in productivity growth at the time of the Industrial Revolution. In contrast, when we do allow factor shares to change, we conclude that the rapid growth after 1760 was due in large part to gradual relaxation of the constraint imposed by the scarcity of land; as land became less important as a factor of production, the scarcity of land became less of a constraint on growth. 

The onset of modern growth is one of the most important turning points in history. Our analysis dates this turning point at the year 1600. We hope that this analysis inspires more research on the possible causes and antecedents of growth and helps guide this research in terms of when and where to look. 

Read the full working paper here.

Jón Steinsson is Chancellor's Professor of Economics at University of California–Berkeley and research associate and codirector of the Monetary Economics program of the National Bureau of Economic Research.

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