The hardest question in the subject is not what happened but why it happened in one medium-sized kingdom off the northwest coast of Europe rather than in China, India, France or the Netherlands.
The previous lessons have narrowed it. Britain did not grow quickly at first, so the answer is not that something made everything better at once. It had already released most of its men from farming, so the answer is not simply agricultural. What has to be explained is why a small number of industries changed their production methods radically, here, between roughly 1760 and 1830. Four explanations are seriously defended, and this lesson sets them against a test they can actually fail.
The test
An explanation of invention should predict what gets invented. That is a stronger demand than it sounds, because most accounts of the Industrial Revolution predict only that something will happen, which any of them can do after the fact.
The machines that appeared in Britain have a common signature, and it is very specific. They replaced human labour with machinery, and they consumed prodigious quantities of fuel to do it. Spinning machinery replaced hand spinners. Steam engines replaced muscle and horses while burning coal at rates that would have been absurd anywhere fuel was dear. Coke smelting replaced charcoal with mineral fuel. Nothing in the British inventive record is aimed at economising on fuel for its own sake, and a great deal of it is aimed at economising on hands.
So the question to put to each explanation is whether it predicts labour-saving, fuel-hungry technology in particular. Keep that in mind through what follows.
Relative prices
Robert Allen's account, set out in The British Industrial Revolution in Global Perspective in 2009, is the one that meets the test most directly. His claim is that Britain had a unique price structure: labour was expensive and energy was cheap, so machines that swapped coal for hands paid there and nowhere else.
The wage evidence comes from building workers, chosen because a bricklayer's mate does much the same job in every city and every century, which makes the comparison meaningful. Paid in grams of silver per day around 1750, a London labourer earned something like 11 grams, an Amsterdam labourer nearly as much, a Parisian roughly 4, and a labourer in Delhi or Beijing between 1 and 2. A London wage was several times an Asian one in silver, and remained well above it even after correcting for what the silver would buy locally.
The energy evidence runs the other way. Coal at the Newcastle pithead was the cheapest heat in the world, because the seams outcropped near navigable water and the coal could go to London by sea. Energy in Paris, dependent on wood hauled overland, cost several times as much relative to a day's wage; in Beijing the coal was in Shanxi, hundreds of miles from the cities that would have used it.
Put the two together and Britain, and northern England especially, had the highest ratio of the price of labour to the price of energy anywhere on earth. An invention that turns coal into work is worth having only where that ratio is high. Allen's conclusion is that the British were not more inventive; they were solving a problem that only they had.
Example. Take a machine that costs £70 and does the work of two spinners. In Britain a spinner's annual earnings are £10; in a low-wage economy they are £2. Work out whether the machine is worth buying in each place.
In Britain the machine saves £20 of wages a year on an outlay of £70, a return of per cent a year and a payback in three and a half years. That is an obviously good investment, and a manufacturer who declines it will be undersold by one who does not. In the low-wage economy the same machine saves £4 a year, a return of 5.7 per cent and a payback of seventeen and a half years, which is worse than lending the money and considerably worse once the risk of breakdown, obsolescence and a fall in yarn prices is counted. The machine is identical, the knowledge is identical, and the rational decision is opposite. Allen's calculations for the actual spinning jenny of the 1780s give the same shape: a return of tens of per cent in England, single figures in France, and nothing worth having in India.
Now you. A critic says this cannot be the explanation, because if British labour was expensive then British goods should have been uncompetitive, not dominant. Answer the objection.
Answer
The objection confuses the wage with the cost per unit of output. What matters to a buyer of cloth is the labour cost per yard, which is the wage divided by output per worker. High wages are precisely the pressure that pushes producers to raise output per worker, and once the machinery has done so the unit cost can fall below that of a low-wage competitor whose workers are still spinning by hand. Britain undersold Indian handloom cloth in the 1820s while paying its workers several times the Indian wage, which is the objection answered by the historical record. The deeper point is that a high wage is a problem for an individual employer and an opportunity for an economy, because it makes labour-saving investment pay, and it is worth noticing that this is the same substitution logic that appeared after the Black Death, when landlords facing dear labour turned arable into sheep pasture.
Useful knowledge
Joel Mokyr's account, developed across The Gifts of Athena and The Enlightened Economy, accepts that incentives matter and denies that they are enough. Incentives cannot call into being knowledge that nobody has.
His claim is that eighteenth century Britain had an unusual relationship between people who understood nature and people who made things. The Royal Society, founded in 1660, took as its motto that nothing should be taken on authority. Provincial groups like the Lunar Society of Birmingham, which met at full moon so members could ride home by its light, put Matthew Boulton, James Watt, Josiah Wedgwood and Joseph Priestley around the same table: two manufacturers, an engineer and a chemist. Encyclopedias, published lecture courses, itinerant demonstrators with air pumps and an unusually thick layer of skilled instrument makers, millwrights and clockmakers spread technique rather than hoarding it.
Mokyr's evidence for the mechanism rather than the atmosphere is that British invention typically ran ahead of the science that explained it, then fed back. Nobody understood why clover fertilised a field, why a blast furnace worked, or, for a long time, why a steam engine had a maximum efficiency. What Britain had was not correct theory but a large population of people willing to measure things, publish the result, and act on someone else's measurement.
The test above treats this less kindly than Allen's account does. A culture of useful knowledge predicts more invention. It does not, by itself, predict labour-saving invention in particular, and it has to explain why France, which had at least as good a scientific establishment and rather better formal engineering education, produced fewer usable machines.
Institutions
The third account starts in 1688. Douglass North and Barry Weingast argued in 1989 that the Glorious Revolution, by making the Crown answerable to Parliament for taxation and spending, converted England into a state that could credibly promise not to expropriate its creditors.
The evidence they lead with is a price. Before 1688 the English Crown borrowed at punitive rates and defaulted when convenient; within a few decades of the settlement, with the Bank of England founded in 1694 and the debt funded by parliamentary taxation, the government could borrow at something close to 3 per cent. That is not a small thing: on a million pounds of debt the difference between 14 per cent and 3 per cent is £110,000 a year. A state that can borrow cheaply can fight wars without confiscating, and a country where the government does not confiscate is one where private investment is worth making.
Around that sit secure property in land, a functioning patent system dating from the Statute of Monopolies of 1624, courts that enforced contracts, and a Parliament that could be petitioned by manufacturers and canal companies and generally listened.
The difficulty is timing and geography. The institutional changes are late seventeenth century; the machines are late eighteenth. The Dutch Republic had comparable protections earlier and did not industrialise. And patents in Britain cost around £100 to obtain, several years of a labourer's earnings, which meant most invention happened outside the system rather than because of it. Institutions look better as a permissive condition than as a cause.
Example. English patents sealed run at roughly 90 in the 1750s and roughly 650 in the 1790s. How much does that support the claim that Britain became more inventive, and what would you need to know before believing it?
The ratio is , from about nine patents a year to about sixty-five, and the timing sits neatly on top of the machinery. It is still weak evidence, for three reasons that apply to any count of a legal act rather than of the thing the act refers to. First, it measures patenting, not invention, and patenting is a decision about cost and enforceability: at £100 a patent, nearly four years of a labourer's earnings, the count is filtered by who could afford one and by whether a court would uphold it. Second, the economy itself grew across those forty years, so some of the rise is simply more people making more things. Third, the count is unweighted, and it puts a better mousetrap and the separate condenser on the same footing. To believe the series measured inventiveness you would want it deflated by the size of the economy, some independent weighting by importance, and evidence that the propensity to patent a given invention did not change, and the third of those is exactly what did change across the period.
Now you. Samuel Crompton never patented the mule and was eventually voted £5,000 by Parliament in 1812 instead. Richard Arkwright's patents were thrown out by the courts in 1785. What do those two facts do to the institutional account?
Answer
They cut it down without killing it. If the two most consequential textile inventions of the period were, respectively, never patented and successfully invalidated, then the patent system cannot be what called them into being, and the reward for the more important of the two arrived as an act of Parliament a quarter of a century late. That is a serious blow to any version of the argument in which secure intellectual property is the engine. What survives is the weaker and more defensible claim: what mattered was not the patent but the general security of the returns to investment, the confidence that a mill built at Cromford would still belong to its owner in ten years and that a contract with a Manchester merchant could be enforced. Notice too that Arkwright's defeat in 1785 was followed by a burst of mill building by everyone else, so on this evidence weak patent enforcement diffused the technology faster than strong enforcement would have. Institutions were doing real work here, but not the work usually credited to them.
Empire and coal
The fourth account, associated above all with Kenneth Pomeranz's The Great Divergence of 2000, argues that the interesting comparison is not Britain against France but Britain against the most advanced parts of Asia, and that on that comparison Britain's advantages were two: coal, and colonies.
Pomeranz's case is that the Yangzi delta around 1750 was about as commercialised, as market-integrated and as prosperous per head as England, and was hitting the same ecological ceiling: land was finite, and land had to supply food, fuel, fibre and building material at once. What Britain got that the Yangzi did not was a coal field under its industrial districts and a set of colonies supplying land-intensive goods it would otherwise have had to grow. Sugar, cotton, timber and fish arriving from across the Atlantic amount to what he calls ghost acreage, land Britain used without owning.
The comparison has been fought over hard, and Broadberry, Allen and others have produced income and wage estimates putting England well ahead of the Yangzi by 1750 rather than level. But the coal half of the argument is unanswerable and is not really in dispute: Britain was producing something like ten million tons of coal a year by 1790 against perhaps seven hundred thousand in France, a factor of fourteen, and that gap is the fuel side of Allen's price ratio arriving from a different direction.
Example. The Netherlands in 1700 had the highest wages in Europe, the best commercial institutions, a strong scientific culture and an overseas empire. It did not industrialise. Which explanation does that fact test hardest?
It tests the institutional and knowledge accounts hardest, and it supports the price account. The Dutch had almost everything the institutionalists point to and much of what Mokyr points to, several decades earlier than Britain, and produced no cotton mills. What they did not have was cheap energy: their peat bogs were being worked out, peat was costly to move once the easy diggings were gone, and they had no coal of their own. So the Dutch faced high wages with expensive energy, which pushes an economy towards trade, finance and skill rather than towards machines that eat fuel. The Netherlands is the closest thing this subject has to a controlled comparison, since it holds institutions and knowledge roughly fixed and varies the energy price, and the outcome falls on Allen's side.
Now you. What would have to be true for the Dutch case to be evidence against Allen instead of for him?
Answer
It would have to be shown either that Dutch energy was not in fact dear, or that the Dutch adopted the fuel-hungry British machines readily once they existed. Both are checkable, and neither holds: Dutch energy prices relative to wages were among the highest in Europe by 1750, and Dutch industry took up the steam engine slowly and late, with windmills remaining competitive well into the nineteenth century precisely because they burned nothing. A weaker but fairer objection survives, which is that the Dutch had reasons to specialise in trade and finance that had nothing to do with fuel, so the case is suggestive rather than decisive. Historical comparisons are never true experiments, and the honest position is that the Netherlands makes the price account more credible without proving it.
What the answer probably is
The four accounts are not really rivals across their whole length, and pretending otherwise is the commonest mistake made with this material.
Institutions and useful knowledge are best read as necessary conditions with long lead times. They explain why Britain could respond, why an idea could be published, financed, patented and built, and why the response was not confiscated. Neither explains the timing or the direction, because both were in place decades before the machinery and were shared with countries that did not industrialise.
Relative prices explain the direction and much of the timing. They say why the invention that got made was labour-saving and fuel-burning, why it got made in the north of England, and why the same machines were ignored in France and India by people who knew perfectly well what they were.
Coal and colonies explain why the response did not run into a wall. Every previous burst of growth in an organic economy had been strangled by the land needed to feed it, fuel it and clothe it, and Britain evaded all three constraints at once.
The next lesson takes the prediction and checks it against the industry where it first came true. If dear labour and cheap fuel is the right account, the earliest and most spectacular gains should appear in the most labour-intensive process in the largest manufacturing trade, and that is the spinning of cotton yarn.