EconAir

Vienna's Ringstrasse Europe: 1871-1914. Some political commentators believe we are returning to a political order similar to that of Europe in the years preceding World War I. It was a period of tremendous economic development, economic growth, and economic change. Some economic historians call this period the Second Industrial Revolution.  Much of the technology of the modern world was created during this period - electricity, steel, skyscrapers, autos, oil refining, chemicals, telephones, radio, movies, record players, and airplanes. Large expansion of railroads and steamships. Mass production, factories, industrial centers and the modern corporation. Large expansion in the economic role of finance and financial institutions. Also a large increase in international trade that threatened established national economic groups with political power, especially European landowners and farmers (except in Austria-Hungary). As the Industrial and Transportation Revolutio

A better introduction to the beginning of the Industrial Revolution than Adam Smith is the history of Josiah Wedgwood and the Wedgwood Pottery Company. This is how one company actually ushered in the Industrial Revolution. The revolutionary generation that first adopted steam engines saw the following trends and changes: Manufacturing was being modernized by a small group of entrepreneurs. Much of the new raw material processing and manufacturing was concentrated in a small area in the middle of England, away from London. These modernizing entrepreneurs formed a new economic, intellectual and social network. Modernizing entrepreneurs like Wedgwood tended to be members of Dissenting sects (like Quakers) or Nonconformist churches (not members of the Church of England), Whig (liberals) in politics, and believers in “progress.” They were optimistic about the future, influenced by the ideas of Hume, Rousseau, Locke and Adam Smith. They believed their society could be refor

ADAM SMITH VISITS A PIN FACTORY   Adam Smith’s description of a pin factory is on the first page of  The Wealth of Nations .  (Chapter 1 – “Of the Division of Labour”)  Drawings of pin factories of this period show workers using hand tools. Smith says the process can be broken down into 18 distinct steps, including packaging the pins. Smith mentions that pin factory workers were poorly paid, despite their high productivity.    Adam Smith says he visited a pin factory employing 10 men who produced 48,000 pins per day.  If each of the ten workers had done all the steps themselves, Smith says each worker could produce only 10 or 20 pins per day.  So the pin factory replaces 2,400 to 4,800 pin makers. The increase in labor productivity (output per person per day) is as high as 50 times that of individual pin makers.     This reduction in unit cost or average cost (AC) and the huge increase in quantity produced do not just replace older methods of organization and production.  They increa

“The age is running mad after innovation.” Samuel Johnson In the Beginning Why study economic theory and analysis, read economic history, and make economic forecasts? The short answer is because of the Industrial Revolution and the attempt to understand its dynamics and structure. Economics is an attempt to understand the material world we live in, the environment created by the Industrial Revolution. THE BEGINNING OF THE INDUSTRIAL REVOLUTION The Industrial Revolution began in England in the late 1700s. It then spread to America  and western European countries. This post will summarize its origins in England and describe the early decades of the Industrial Revolution in America. The Industrial Revolution was a radical break in history. But in England, many of the preconditions were already in place, as can be seen by the history of the Wedgwood company. The revolutionary generation that first adopted steam engines saw the f