Lecture 8: Standards of living and the industrial
revolution
ECON 451
Fall 2012
Professor David Jacks
1
The lot of the average worker and their physical
standard of living has generated controversy
from the time of the IR itself.
Renewed interest as ROW followed the path of
Britain…and like the old/new school debate
Introduction
2
Convenience of organizing the debate around
central questions in the literature:
1.) Why are we interested in this?
Somewhat of a philosophical issue
Four questions
3
1.) Why are we interested in this?
Also, opens up big questions about trade-offs
associated with economic growth
Four questions
4
2.) Er…what is the standard of living?
Obvious components
Non-obvious components
Four questions
5
3.) Um…the standard of living for whom?
Big distributional consequences
Standard of living for individuals or households?
Four questions
6
4.) Even if real wages/incomes capture
everything, how do we measure them?
Wholesale or retail prices?
What is the basket of consumption?
Variation?
Four questions
7
4.) Even if real wages/incomes capture
everything, how do we measure them?
Incorporating different goods.
Four questions
8
We should also note the general environment in
which the industrial revolution was taking place.
Namely, the key period from 1793 to 1815 was
one of continuous war for the English.
Complicating factors
9
Powerful influence on British food prices:
although a net calorie exporter, Britain reliant on
imports for roughly 20% of its grains.
Highly inelastic (SR) demand curves always
lead to radically higher prices…
Complicating factors
10
Connection to SOL?
War-related price movements generate a lot of
uncertainty about movement in SOL (wages
easy, not so much prices…)
Complicating factors
11
Given this statistical murk, maybe it makes
sense to consider other measures of well-being.
Various historians have argued that we look at
such things as:
1.) heights;
2.) hours of work;
3.) the human development index.
Alternative approaches
12
Steckel (among others) argues for the use of
human heights to track changes in welfare.
Basic claim: height at a particular age reflects an
individual’s history of net nutrition, diet minus
claims on the diet from work and disease.
Alternative approach #1
13
Conveniently, the average heights are highly
correlated with life expectancy at birth and with
the log of the GPC.
Alternative approach #1
14
Another route is the evolution of the human
development index in England at this time.
HDI used extensively by the World Bank and aid
agencies to measure the level of general
development across countries and time.
Alternative approach #2
15
Thought to capture “human capabilities”.
Generally, three components are computed in
index form and HDI is simple average.
Alternative approach #2
16
Recent efforts to measure the actual amount of
time spent at work to see if England was
experiencing an “Industrious Revolution”.
IR as an aggregate demand-driven phenomena.
Alternative approach #3
17
But timing is off? Seems that the Industrial
Revolution drove changes in time use…
One thing is for certain: Europeans began to
work longer—much longer—in this period.
Alternative approach #3
18