… is from page 57 of Deirdre McCloskey’s 1985 paper “The Industrial Revolution 1780-1860: A Survey,” which is Chapter 2 of The Economics of the Industrial Revolution, Joel Mokyr, Ed. (1985) (original emphasis):
What was extraordinary about the Industrial Revolution is that better land, better machines, and better people so decisively overcame diminishing returns. Had the machines and men of 1860 embodied the same knowledge of how to spin cotton or move cargo that they had in 1780, the larger number of spindles and ships would have barely offset the fixity of land. Income per head would have remained at its level in 1780, about £11, instead of rising to £28 by 1860…. The larger quantities of capital did make some difference. Had the effort of investment in new capital from 1780 to 1860 not been made – that is, had the Englishman’s tools in 1860 been the same in quantity as well as quality as they had been in 1780 – income per head would have fallen to £6.4…. But the larger part of the difference between this dismal possibility and the £28 per head actually achieved by 1860 was attributable to better technology. In short – and this is the main point – ingenuity rather than abstention governed the Industrial Revolution.
DBx: The monetary figures expressed above are adjusted for inflation; specifically, they are expressed in the value of the British pound in the 1850s.
…..
Proponents of industrial policy should take note of the reality described here by McCloskey. Ingenuity mixes with industrial policy as oil mixes with water. Ingenuity by its nature is creative and, hence, disruptive. Industrial-policy schemes meant to improve the living standards of the mass of ordinary people necessarily suppress ingenuity. These schemes, therefore, necessarily suppress the great driver of economic growth.
An industrial-policy scheme meant, not to improve living standards, but, instead, to prevent change and economic growth stands a better chance of succeeding in its mission, as proponents of such a scheme will acknowledge that they have no use for ingenuity. As a practical matter, however, such an industrial-policy scheme would, over time, cause living standards to consistently fall. The reason is that the ingenuity required to deal with resource depletion and unexpected ‘exogenous’ changes – such as changes in the trade policies of foreign countries – would be suppressed.
