EconAir

INTRODUCTION This post and the next is on the topic of economic development and its contribution to economic growth.   Since the beginning of the Industrial Revolution more than 200 years ago, this is the central economic dynamic.    The following are factors that led to American economic development, many in place  before the beginning of the Industrial Revolution.   The United States, more than any other country, was positioned to take advantage of the new technology and ideas that were the basis of the Industrial Revolution.   The following is an outline of those factors.   For the full story of the early decades of America's Industrial Revolution, see Engines of Change and some of the excellent histories written about America after the Revolution. FACTORS IN AMERICAN ECONOMIC DEVELOPMENT AND GROWTH The usual narrative centers on the inventors and entrepreneurs who developed and commercialized new production and tran...

“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 t...

Baldwin Locomotive Baldwin, the largest producer of steam locomotives in the                 nineteenth century, faced problems typical of a dominant company in a bilateral oligopolistic industry.   Almost everything that               happened at Baldwin was conditioned by a highly cyclical, almost   unpredictable competitive environment.   A high level of business       risk followed from sudden, large fluctuations in demand. This         meant that Baldwin often had excess capacity with substantial         fixed investment, leading to a strategy based on economies of scope and not economies of scale.   Baldwin also depended on a skilled       labor force with firm-specific knowledge and experience that was    exposed to sudden and massive layoffs followed by the company’s   attempts to rehire the sam...