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Human capital, knowledge and economic development: evidence from the British Industrial Revolution, 1750–1930

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Abstract

Endogenous growth models raise fundamental questions about the nature of human creativity, and the sorts of resources, skills, and knowledge inputs that shift the frontier of technology and production possibilities. Many argue that the experience of early British industrialization supports the thesis that economic advances depend on specialized scientific training, the acquisition of costly human capital, and the role of elites. This paper examines the contributions of different types of knowledge to industrialization, by assessing the backgrounds, education and inventive activity of major contributors to technological advances in Britain during the crucial period between 1750 and 1930. The results indicate that scientists, engineers or technicians were not well-represented among the cadre of important British inventors, and their contributions remained unspecialized until very late in the nineteenth century. The informal institution of apprenticeship and learning on the job provided effective means to enable productivity and innovation. For developing countries today, the implications are that costly investments in specialized human capital resources might be less important than incentives for creativity, flexibility, and the ability to make incremental adjustments that can transform existing technologies into inventions and innovations that are appropriate for prevailing domestic conditions.

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Notes

  1. Rosenberg (1974, 97) emphasized that if we wish to understand economic progress "we must pay close attention to a special supply-side variable: the growing stock of useful knowledge," and further states that "a large part of the economic history of the past 200 years" was due to science and specialized knowledge. See also Rosenberg and Birdzell Jr. (1986).

  2. According to Minns and Wallis (2013), “Training through apprenticeship provided the main mechanism for occupational human capital formation in pre-industrial England.”

  3. See, for instance, Crafts (1995, 2011), Broadberry et al. (2015), Kelly et al. (2014). Allen (2009) argues that observed patterns were due to induced innovation in response to factor prices and, in particular, relative wages; whereas Wrigley (2010) highlights endowments of coal. Allen (1983) and Nuvolari (2004) examined the role of collective invention or general access to knowledge. Sanderson (1999), Mitch (1992), and Floud (1982) have engaged in debates about the nature and consequences of literacy, numeracy, and different forms of education in the growth process during British industrialization. Sanderson, in particular, argues that British universities did not become fully engaged in the realm of practical science and engineering studies until late in the nineteenth/early twentieth century.

  4. Musson and Robinson (1969, p. 7), early exponents of such views, declared that “Contrary to long accepted ideas, the Industrial Revolution was not simply a product of illiterate practical craftsmen, devoid of scientific training. In the development of steam power, in the growth of the chemical industry, and in various other industries, scientists made important contributions and industrialists with scientifically trained minds also utilized applied science in their manufacturing processes.”

  5. See Clow and Clow (1952). For other developments in chemistry, see Donnelly (1986), Leicester (1965), Golinski (1999).

  6. This Society consisted of monthly dinners in the Midlands that included Erasmus Darwin, Matthew Boulton, Josiah Wedgwood, James Keir, Joseph Priestley, and James Watt, among others (Schofield 1963).

  7. The members included Sir Joseph Hooker, Thomas Huxley, Sir Edward Frankland, John Tyndall, Herbert Spencer, and Thomas Hirst, among others, and three of them would become Presidents of the Royal Society. "Anti-societies" such as the Red Lions rebelled against the "donnishness" of the British scientific establishment, and sought members among the "dregs of scientific society," MacLeod (1970). See also Orange (1972).

  8. See Hall and Hall (1964, p. 219): “The beginnings of modern technology in the so-called Industrial Revolution of the eighteenth and early nineteenth century owed virtually nothing to science, and everything to the fruition of the tradition of craft invention.”

  9. Numerous research papers highlight the role of informal knowledge acquisition in such institutions as guilds and apprenticeship systems. See, for instance Epstein (1998), Humphries (2011), Feldman and van der Beek (2016). See also Wrigley (1982).

  10. Cardwell (2003) refers to "the two-way relationship between science and technology," but implies that science benefited more from prior flows of technical insights. Elliott (2000) considers such Derby luminaries as John Whitehurst FRS, Thomas Simpson FRS and Benjamin Parker. He concluded that their experience pointed to the possibility that technology likely influenced scientific discovery and education as much as the reverse.

  11. McKendrick (1973, p. 319) notes that “The major pull came from the demand side of the economy rather than from the push of scientifically induced advance on the supply side. Indeed, in the hierarchy of causal significance, science would not rank very high, but that does not mean that it would not rank at all as a dependent variable, the latent potential of which was released by more commanding variable, it played a necessary but not sufficient role in easing the path of industrial success and economic progress.”

  12. According to Ashworth (1960, p. 27) "heroic inventions" were predominantly made by craftsmen, and the alleged scientists were "enthusiastic amateurs with, at best, a very modest knowledge of scientific theory."

  13. Mokyr (2002, 2012) argues that the Industrial Revolution was due to an "Industrial Enlightenment," whose major achievements owed to the abilities of an elite minority. According to this perspective, those who focus simply on pure scientific discoveries miss much of the point, since valuable knowledge was drawn from a combination of tâtonnement and conscious insight.

  14. The discussion of broad scientific culture is informative and yields insights into the role of social capital in economic development. However, I chose to focus here on the evolution of contributions to useful knowledge, which are defined as additions to the social information set that have the potential to directly expand the production possibility frontier. Patent counts are used as a proxy for advances in such knowledge. Patents have well-known flaws that suggest that results should be interpreted with a sensitivity to their drawbacks (Griliches 1990); but they do offer the opportunity to adopt a more systematic approach to the relationship between science and technology in British economic growth.

  15. See Matthew and Harrison (eds.) (2004), McNeil (ed.) (1990), Day and McNeil (eds.) (1996).

  16. These sources comprised compilations and individual biographies, including among others Williams (1982), Encyclopaedia Britannica, Crowther (1935), Abbott (1985), Nasmyth (1885), Schneider (1938), Gillispie (1970–1980), Daintith and Gjertsen (1999), Williams (1982), Dictionnaire des Inventeurs et Inventions, Larousse: Paris, 1996, Hilts (1975), Heilbron (2003), Hills (2002), McKendrick (1973). Only 15% of the sample from these records were missing altogether from the filtered data set obtained from DNB.

  17. This was more in accordance with the intent of the Biographical Dictionary, whose contributing authors were specialists in the particular technological field that they examined. The DNB's objective was somewhat different, for its editors intended to incorporate "not just the great and good, but people who have left a mark for any reason, good, bad, or bizarre." This statement is included in the description of the online subscription-restricted database. The volume employed inconsistent terminology in the occupational titles of its biographies, and the mention of inventors or inventions either in the title or text did not necessarily imply that the person in question had made a significant contribution to the course of technical change. For instance, their listings included Walter Wingfield ("inventor of lawn tennis"); Rowland Emett (cartoonist and "inventor of whimsical creations"); as well as the inventors of Plasticine, Pimm's cocktail, self-rising flour and Meccano play sets. At the same time, Henry Bessemer is described as a steel manufacturer, Henry Fourdrinier as a paper manufacturer, and Lord Kelvin as a mathematician and physicist. A large fraction of the technological inventors are featured in the DNB as engineers even though the majority had no formal training. Such non-technological entries were excluded from the data set. A number of inventors were variously described as pioneers, developers, promoters or designers, and Edward Sonsadt is omitted altogether although elsewhere (McNeil 1990, p. 113) he is regarded as an "inventive genius."

  18. Nuvolari and Tartari (2011, p. 12) tested the relationship between a proxy for patent value (WRI) and DNB inventions, for a limited number of DNB inventors through 1841, and conclude that “In all specifications, the variable “Great Inventor” (DNB) is positive and significant, indicating that patents with high WRI scores are consistently related with inventors that appear in the DNB.”

  19. Nuvolari and Tartari (2011) included a “great inventor” dummy variable indicating if the patentees were included in the Dictionary of National Biography. A prominent example of biographical analysis comprises David Galenson’s prolific studies of biographical information on painters, novelists, musicians, poets and Nobel prize winners in economics, among others [see, for instance, Galenson (2011)]. Allen (2009) employed a sample of 79 “great inventors” between 1660 and 1800.

  20. One way to determine the extent of systematic sample bias is to estimate the probability that an inventor drawn from a particular biographical source (e.g. the DNB) was selected on different criteria relative to inventors from other sources. I computed a simple logistic regression model where the dependent variable was the probability that an inventor from my sample was included in the DNB, and the independent variables included all characteristics investigated in this study, such as birth cohort, occupation, education, science background, patenting and publications records, and so on. The response function Y| Xi (Xi = X1, X2, …, Xn) is assumed to have the form E(Y|Xi) = exp(ß0 + ß1x + ···)/(1 + exp(ß0 + ß1x + ···)), where ßi are regression coefficients that represent the intercept and slopes with respect to the particular independent variable. The resulting function is linear in the log of the odds, loge(p/1 − p). Maximum likelihood methods were used to estimate the parameters. The entries from the DNB were significantly more likely to have earned prizes, and their residence at time of invention was more likely to have been in London and outside England. However, since this finding is not inconsistent with the secondary literature, the overall results from these regressions bolster one's confidence in the representativeness of the great inventors' sample. We can further reject the hypothesis of bias for almost all variables of interest, including time of first invention, educational status, science background, and occupation.

  21. Indeed, such data have provided demonstrably useful results regarding the very criticisms expressed by Nuvolari and Macleod. For instance, when Khan and Sokoloff (1993, 2004a, b, 2006) used a parallel sample of American “great inventors,” their results disproved the claims about heroic inventors and “macroinventions,” showing that these noted inventors tended to be drawn from relatively undistinguished backgrounds, and to behave very much like “ordinary inventors;” and that patterns for their inventive activity replicated those of incremental inventions. Moreover, the data on the “great inventors” were found to be significantly related to other measures of both economic and technical value, including patent assignments, litigation about inventions, and long-term patent citations.

  22. A potential second candidate is Eleanor Coade (1733–1821), the owner of an innovative stone-making factory. However, her status as an inventor is completely speculative: there is no evidence that she was responsible for the innovations her factory produced, and they might well have been the product of her employees.

  23. For general background see Bullough and Bullough (1973), Olson (1975, 1990), Elliott (2000), Kargon (1978), Mollan et al. (2002).

  24. The educational factors are all defined as categorical variables, since there is no systematic information on years of schooling for these individuals.

  25. According to Maine (1886, p. 98), “All that has made England famous, and all that has made England wealthy, has been the work of minorities, sometimes very small ones. It seems to me quite certain that, if for four centuries there had been a very widely extended franchise… the threshing machine, the power loom, the spinning jenny, and possibly the steam engine, would have been prohibited.”

  26. Landes (1969) supports this position. The 1870 Elementary Education Act extended state support for education if private school funds were insufficient. Compulsory education was introduced in 1880 and limited free public education was made available in 1891. For an excellent study of the role of the state in promoting literacy, see Mitch (1992).

  27. According to Cronin (2001, p. 241), "throughout much of the nineteenth-century the craft-apprenticeship mode of training was the only form of technical education."

  28. These specific claims are made in Cardwell (2003) essays IV, p. 474; and VII, pp. 40–41.

  29. Employers were averse to hiring college-educated workers. As the Times opined in 1897, "technical education is not needed for the masses of people. Indeed they are better without it… [it] only teaches the workman to think that he is as good as his master" (cited in Cronin, p. 222). See also Sanderson (1999).

  30. Edgerton (1996) contended that science was “not Oxbridge,” and Wiener (1981) similarly faulted the elite universities for turning out gentlemen rather than productive individuals.

  31. See Howarth (1987). Tawney (1931, p. 37) wryly commented that the English "frisk into polite obsolescence on the playing fields of Eton." Along the same lines, Gowing (1978, p. 9) characterized English efforts at reforming its educational institutions at the end of the nineteenth century as "too little and too late." She attributes this deficiency to such causes as inadequate funding, and the influence of social class.

  32. For an illuminating analysis, see Macleod and Moseley (1980). Most Cambridge graduates were destined for occupations such as the clergy. The method of teaching eschewed practical laboratory work; and there was a general disdain among the Dons for the notion that science should be directed toward professional training; so it is not surprising that only 4% of the NST graduates entered industry. Students who did take the NSTs tended to perform poorly because of improper preparation and indifferent teaching, especially in colleges other than Trinity, Caius and St. John's. The contrast to the United States is striking: MIT alone had seven engineering professors in 1891, whereas a chaired position in Engineering was only created in Oxford in 1907.

  33. Barnes (1996) finds a tendency for the red-brick universities to be regarded as second-rate, and for the classical Oxbridge approach to be regarded as a superior model in a "triumph of tradition." Part of the problem was financial, since most professors had to pay for their research expenditures out of their meager salaries.

  34. See Report of the Royal Commissioners appointed to enquire into the Universities of Scotland: Returns and Documents, Parliamentary Papers xxxv (1878): 336–340.

  35. Sir Joseph Banks, the president during the critical years between 1778 and 1820, supported the election of wealthy patrons who might be persuaded to finance research efforts. See Hall (1984), and Hunter (1994).

  36. Babbage (1830, p. 52) noted that "those who are ambitious of scientific distinction, may, according to their fancy, render their name a kind of comet, carrying with it a tail of upwards of forty letters, at the average cost of 10₤. 9s. 9d. per letter. It should be observed, that all members contribute equally, and that the sum now required is fifty pounds… The amount of this subscription is so large, that it is calculated to prevent many men of real science from entering the Society, and is a very severe tax on those who do so."

  37. Babbage (1830, p. 1) regretted that "in England, particularly with respect to the more difficult and abstract sciences, we are much below other nations, not merely of equal rank, but below several even of inferior power. That a country, eminently distinguished for its mechanical and manufacturing ingenuity, should be indifferent to the progress of inquiries which form the highest departments of that knowledge on whose more elementary truths its wealth and rank depend, is a fact which is well deserving the attention of those who shall inquire into the causes that influence the progress of nations."

  38. According to Stimson (1948, p. 236), "The change came by evolution rather than by revolution and took a good many years to become fully effective. As late as 1860 there were 330 Fellows who were scientists and 300 who were not. Also, in 1860, 117 of that group of 330 scientist Fellows were physicians and surgeons, an overwhelming proportion of medical men which had been characteristic of the Society's membership from the first."

  39. In Gulliver's Travels, Jonathan Swift satirized the Royal Society and some of its fantastical endeavors, as the "Grand Academy of Projectors" in the kingdom of Laputa.

  40. Griliches (1990) discusses the costs and benefits of analyzing patents. The major problems with patent statistics as a measure of inventive activity and technological change are that not all inventions are patented or can be patented; the propensity to patent differs across time, industries and activities; patents vary in terms of intrinsic and commercial value; patents might not be directly comparable across countries or time because of differences in institutional features and enforcement; and patents are a better gauge of inputs than productivity or output. Griliches concludes (p. 43) that “In spite of all the difficulties, patent statistics remain a unique resource for the analysis of the process of technical change. Nothing else even comes close in the quantity of available data, accessibility, and the potential industrial, organizational, and technological detail.”

  41. See Cooke (1857).

  42. Widespread dissatisfaction with the British patent system had existed more than a century before the reforms of 1852. The motivation for making changes in the patent rules came when the Crystal Palace exhibition in 1851 revealed that Britain was in danger of losing its industrial competitiveness to the United States. It was argued that part of the growing American advantage owed to its favorable patent institutions. As a result the British patent laws were explicitly revised in the direction of the U.S. system (Khan 2005). The motivation for the change therefore was exogenously driven by the perceived rise of American industrial superiority, and not to accommodate an increased propensity to patent in Britain.

  43. The Society of Telegraph Engineers (later the Institution of Electrical Engineers) was founded in London in 1871 by eight men, and rapidly became one of the largest societies in Britain. Its membership rose from 352 in 1871 (8.5% of all enrollment in engineering institutions) to 2100 (14.0%) in 1890 and 4000 (17.2%) in 1910. Even these professional institutions resisted formal education, and apprenticeships remained the favoured mode of human capital acquisition among the engineering class examinations until the end of the nineteenth century. See Buchanan (1985).

  44. See Galton, who adds (1874, p. 6) "Some of my readers may feel surprise that so many as 300 persons are to be found in the United Kingdom who deserve the title of scientific men…" According to William Ramsay’s 1911 Presidential Address of the British Association for the Advancement of Science, the true beginning of British science did not start until the middle of the nineteenth century.

  45. Cardwell (2003) attributes a scarcity of scientists to failures of the educational system. Reports from a number of Royal Commissions—including the Samuelson (1868 and 1882) and Devonshire (1878) Commissions—outlined the inadequacy of British science and its institutions of scientific and technical training. Enrollments in science classes at the secondary school level were "negligible;" and university science was "seriously deficient in quantity and quality." Despite the frequent investigations by Commissions of this sort, reform was "miserably slow." Gowing (1978), Ashby (1963, p. 7) considered British academic science to be "dogmatic and dessicated" until after the middle of the nineteenth century. Alter (1987) points to the equally limited role of the state in encouraging science. The state was involved in the establishment of the National Physical Laboratory, the Imperial College of Science and Technology, and the Medical Research Committee, but a significant role for state funding awaited the first World War.

  46. Charles Tennant (1768–1838), the son of a Scottish weaver, developed such inventions in chemistry as bleaching powder, and founded a firm that was the precursor of ICI.

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Acknowledgements

I am grateful for comments and discussions with Robert Allen, Steve Broadberry, Neil Cummins, Stanley Engerman, Robert Fox, Claudia Goldin, Larry Katz, Naomi Lamoreaux, Frank Lewis, Christine MacLeod, David Mitch, Joel Mokyr, Tom Nicholas, Alessandro Nuvolari, Patrick O’Brien, Leigh Shaw-Taylor and participants in seminars at the National Bureau of Economic Research, the University of California at Berkeley, Cambridge University, and the Economic History Association Meetings. The paper was significantly improved by the suggestions of two anonymous referees. This project was supported by a grant from the National Science Foundation. Thanks are especially due to the Economic History Group at the London School of Economics, which provided a supportive and stimulating environment during the completion of this project.

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  1. Department of Economics, Bowdoin College, 9700 College Station, Brunswick, ME, 04011-8497, USA

    B. Zorina Khan

  2. NBER, Cambridge, MA, USA

    B. Zorina Khan

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Khan, B.Z. Human capital, knowledge and economic development: evidence from the British Industrial Revolution, 1750–1930. Cliometrica 12, 313–341 (2018). https://doi.org/10.1007/s11698-017-0163-z

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