Abstract
On the eve of the industrial revolution, new economic theories were sought to displace mercantilism and Physiocracy, and instead promote savings and investment as the main drives of economic growth. A combination of technological advance, market incentives and better institutions made England the hotbed of the new age, leaving behind wealthier—yet dysfunctional and repressive—France. Adam Smith provided a theory on how markets can ensure unhindered progress for the mankind, laying the foundations of modern economic theory. Subsequently, Malthus warned on the limited availability of resources and the risk of a society collapsing if population expansion is not checked. Ricardo reaffirmed the potential of continuing growth if capital accumulation is freed from high land rents and trade is liberalized so that each nation is specialized in its competitive advantage.
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Notes
- 1.
Colletti, From Rousseau to Lenin: Studies in Ideology and Society (1974, p. 155).
- 2.
Derived by using data from Bolt and van Zanden (2013), Table 2 GDP per capita in various parts of the world, 1348–1800.
- 3.
A similar system of attachment to a specific location can be found even in modern China. The infamous hukou system essentially forbids the Chinese to move permanently from the country to urban centers. If a Chinese citizen wants to start a family, for example, he has to return to his place of birth, since many benefits, including the right of his children to go to school, are only available there. The number of Chinese citizens falling into this category is around 130 million; for a description see Cohen, La Prospérité du vice: Une introduction (inquiète) à l'économie (2009).
- 4.
See Hindes and Hirst, Pre-capitalist Modes of Production (1979, p. 204).
- 5.
Voltaire, Essay on the Manners and Spirit of Nations (1979, p. 552). He was actually wrong as Empress Wu Zeitan did reign during 690–705 AD overpowering the weak Emperor Tainzog.
- 6.
Clark, A Farewell to Alms: A Brief Economic History of the World (2007, p. 260).
- 7.
Findlay and O’Rourke, Power and Plenty: Trade, War, and the World Economy in the Second Millennium (2007, p. 359).
- 8.
Data are from Maddison historical population series.
- 9.
One hundred years later, in 1870, British GDP per capita had more than doubled compared to its levels at the beginning of eighteenth century. It was also 1.7 times larger than French per capita GDP and 16 % higher than Holland’s. Data of GDP per capita are from Maddison historical series.
- 10.
According to Lefebvre, French Revolution (1962, p. 137), the combination of the two fostered a rebellious mindset that eventually led to the French Revolution.
- 11.
Lefebvre, op.cit., p. 66.
- 12.
Trevelyan, English Social History (1946, p. 346).
- 13.
- 14.
Data are from Broadberry, Recent developments in the theory of very long run growth: a historical appraisal (2007, Graph 2).
- 15.
An example was the Gentlemen’s Magazine, which, according to since 1729 had been a publication dedicated to informing its readers about new inventions, as commented by Heilbroner and Midberg, op. cit., (p. 142).
- 16.
Lefebvre, op. cit. (1962, p. 66).
- 17.
Even after the French Revolution, science was not considered a major component of social progress. During the Reign of Terror, the great chemist Lavoisier was tried as a traitor (despite having participated in the revolution). When he appealed to the judge to spare his life in order to continue with a very important experiment, the judge is said to have replied that “the Republic needs neither scientists nor chemists”. Lavoisier was guillotined in 1794.
- 18.
Lefebvre, op. cit., (1962, p. 67).
- 19.
- 20.
Blaug, Economic Theory in Retrospect (1978, p. 63).
- 21.
For a discussion see Himmelfarb, The Roads to Modernity (2008, pp. 53–70).
- 22.
- 23.
Galiani (1728–1787) published Della Moneta (On Money) in 1751 where he described the mechanism of equilibrating demand and supply: When production of goods is raised “…the use of them increased: which use prevented their value from falling as much as their abundance required. And so this interrelation produces the great and very useful effect of equilibrium of the whole… although it results, not from human prudence or virtue, but from the base incentive of sordid gain”. Quoted from Monroe, Early Economic Thought: Selected Writings from Aristotle to Hume (2006, pp. 297–298).
- 24.
Malthus, An Essay on the Principle of Population (1985, p. 244).
- 25.
Malthus op. cit., (p. 252).
- 26.
Engels, for example, called the Malthusian population theory “the crudest, most barbarous theory that ever existed”, (cited from the Introduction to Malthus, Outlines of a Critique of Political Economy, p. 51).
- 27.
For a thorough account on how the interactions between population increase and available resources affected the Maya collapse, see Tainter, The Collapse of Complex Societies (1988, pp. 152–178).
- 28.
For a description of Malthusian collapses in human history see Diamond, Collapse (2005).
- 29.
Ricardo and Keynes had one more in common: Pierro Sraffa. He was a friend and colleague of Keynes at the University of Cambridge, and also the master editor of Ricardo’s Works, finally published in 1973.
- 30.
Keynes J. M., Essays in Persuasion (Keynes 1984, p. 179).
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Christodoulakis, N. (2015). The Industrial Revolution and the Foundation of Classical Economics. In: How Crises Shaped Economic Ideas and Policies. Springer, Cham. https://doi.org/10.1007/978-3-319-16871-5_7
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