Unified Growth Theory is not the Enemy

NOTE: The Growth Economics Blog has moved sites. Click here to find this post at the new site.

In a recent post I compared and contrasted Joel Mokyr’s and Bob Allen’s viewpoints on the origins of the British Industrial Revolution (IR). One failure was to not link to a review paper by Nick Crafts. His is an in-depth review of their two positions, and you should read it.

One of the the themes running through Crafts review is that differences among economic historians in explaining the IR should be set aside (perhaps temporarily) in favor of defending themselves from the real enemy, unified growth theory (UGT). For the uninitiated, UGT is a set of work that develops dynamic models of growth that capture both a period of Malthusian stagnation in output per worker and the take-off to sustained growth. They are concerned with understanding what allows for that transition from stagnation to growth. Oded Galor is the capo di tutti capi of the UGT mafia, and early chapters of his book are an excellent introduction to this literature. I think Chad and I do a good job of giving a low-tech version of UGT in Chapter 8 of our book (you should buy lots and lots of copies).

Full disclosure here. Oded was my dissertation advisor, and I’ve co-authored a paper with him. I have papers of my own that hover around the edge of the true UGT world. So when I proceed to defend this literature below, I am not a neutral 3rd party.

My guess as to why Crafts sets UGT up as the foil to economic history is that UGT takes on big questions while sweeping tremendous amounts of detail under the theoretical rug. The models in UGT are abstract, and while their assumptions may be based on stylized facts drawn from history, they ignore nearly all the nuance that an economic historian would find compelling.

But of course it does that, it’s theory. UGT is not meant to explain the specific instance of the British IR, or any other particular take-off. It is intended to illuminate general forces driving the take-off to sustained growth. Forces that are not obvious from studying James Watts’ personal correspondence or the minutiae of French textile plant accounts.

UGT separates the “Industrial Revolution” from the concept of the take-off to sustained growth. They are not necessarily the same thing, nor do they have to have occurred in any particular order. The take-off to sustained growth is a general economic phenomenon, and the British experience is just one example of it. The British experience happens to make the distinctions very clear. The IR is traditionally date to the late 1700’s but there is a robust literature arguing that sustained growth did not begin in Britain until well into the mid-1800’s (see Crafts and Harley, 1992 on output growth, see Allen for a more recent evaluation of the wage literature).

To wildly over-simplify, the IR is the onset of a specific package of technology that (depending on the author) includes some combination of the following: inorganic power sources, mechanization of tasks, large scale enterprises, institutions supporting innovation, urbanization, the expansion of finance, the expansion of trade, and [fill in whatever I missed]. Growth in wages or output per worker is one other feature of the IR to be studied alongside these. The British IR would have been a revolution even if sustained growth hadn’t occurred.

In contrast, the take-off to sustained growth is specifically and particularly about growth in output per worker. Under what conditions will population growth fail to keep up with output growth caused by technological change? What UGT demonstrates is that something needs to shift in the demographics for sustained growth to occur. Technology, however widely defined, is not enough. It is not until technology changes the trade-off between quantity and quality of children that sustained growth happens.

While UGT focuses on general conditions for the take-off, it is a mistake to think that UGT rules out path dependence or historical contingency. There is nothing in UGT that makes take-off inevitable. Under the right conditions on the demographic or technology functions, an economy will end up stagnating forever. UGT focuses on the take-off because that is what we see in the data, but it need not be the case.

One source of confusion is that UGT papers often use the British experience for examples of the forces at work (I cannot begin to count the number of papers I’ve read that try to calibrate their model to UK data). That, I think, has led to the impression that UGT is meant as a competing explanation for the British IR. It’s not, and the UGT crowd can and should do better in moving beyond the British IR in terms of stylized facts. That would go a long way towards making the distinctions clearer in the literature.

But UGT is not in any sense mutually exclusive with detailed economic history work. If someone wakes up tomorrow and shows that both Mokyr and Allen are wrong about the British IR, that doesn’t mean UGT “wins”. And if someone wakes up tomorrow and shows that some central result of UGT is theoretically incorrect, that doesn’t mean Mokyr or Allen are right. We should all be focused on the true enemy of increased understanding: grading papers.

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4 thoughts on “Unified Growth Theory is not the Enemy

  1. Your post inspired me to spend two days reading everything I could find online about UGT. I then formulated by opinions on it, specifically what seems to be missing (or outside the scope).

    I then reread your post and you said it perfectly.

    Thanks for the inspiration.

    • Thanks, cool to think I got someone out there reading up on this. Easy to think it all just exists in this hermetically sealed academic tomb.

    • Yes and no. Yes, growth is typically endogenous because of population effects, but ugt doesn’t usually get into firm-level specifics.

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