THE REAL GROWTH IN AN ECONOMY

As every economist knows, the modern era is the era of economic growth. In the past



two centuries, measures of output per capita have increased dramatically and in a sustained


manner, in a way they had never done before. It seems by now a consensus to term


the start of this phenomenon “the Industrial Revolution”, although it is somewhat in dispute


what precisely is meant by that term. In the past two decades an


enormous literature has emerged to explain this phenomenon. A large number of “deep”


questions have emerged which this literature has tried to answer. Below I list the most


pertinent of these questions and in the subsequent pages, I shall make an attempt to


answer them.


**What explains the location of the Industrial Revolution (in Europe as opposed to


the rest of the world, in Britain as opposed to the rest of Europe, in certain regions


of Britain as opposed to others).What role did geography play in determining the


main parameters of the Industrial Revolution?


**What explains the timing of the Industrial Revolution in the last third of the eighteenth


century (though the full swing of economic growth did not really start until


after 1815)? Could it have started in the middle ages or in classical antiquity?


** Is sustained economic growth and continuous change the “normal” state of the


economy, unless it is blocked by specific “barriers to riches” or is the stationary


state the normal condition, and the experience of the past 200 years is truly a


revolutionary regime change?


** What was the role of technology in the origins of the Industrial Revolution and


the subsequent evolution of the more dynamic economies in which rapid growth


became the norm?

**. What was the relation between demographic behavior (and specifically the fall in


mortality after 1750 and the subsequent decline in fertility and shift toward fewer


but higher-quality children) in bringing about and sustaining modern economic


growth?


** What was the role of institutions (in the widest sense of the word) in bringing


about modern economic growth, and to what extent can we separate it from other


factors such as technology and factor accumulation?


** To what extent is modern growth due to “culture”, that is, intellectual factors regarding


beliefs, attitudes, and preferences? Does culture normally adapt to the economic environment, or can one discern autonomous cultural changes that



shaped the economy?


** Did the “Great Divergence” really start only in the eighteenth century, and until


then the economic performance and potential of occident and the orient were


comparable, or can signs of the divergence be dated to the renaissance or even


the middle ages?


** Was the Industrial Revolution “inevitable” in the sense that the economies a thousand


years earlier already contained the seeds of modern economic growth that


inexorably had to sprout and bring it about?


** What was the exact role of human capital, through formal education or other
forms, in bringing about modern economic growth?