Industrial Efficiency

Industrial Efficiency

This article, in the Journal of Economic History, Asher explains the differences in efficiency between the American and British textile industries. This has been a highly debated topic with many economists weighing in. In Asher’s analysis, he uses a very empirical approach, rather then trying to explain differences in data with a sociological approach as other economists have.

Asher begins by explaining the leading theory in manufacturing efficiency that Rothbarth and Habakkuk developed. Their main explanation for differences is the population disparities between the two countries. In England, there was a labor surplus, while in America, there was a labor scarcity. This scarcity forced American entrepreneurs to implement extremely efficient production methods. While this may be a plausible explanation, Asher maintains that it lacks rigorous formulation and testing.

In response, Asher develops a model, using a production function with constant elasticity of substitution. Within the model, he tries to factor for bias in technical change. Tests were run to determine two different explanations: (a) labor-saving bias was used in America and capital-saving bias was used in Britain; or (b) there was labor-saving bias in both countries, but there was more technical progress in America.

The test indicates that there is a labor saving bias in both countries. This was the expected outcome that follows the Rothbarth-Habakkuk theory. However, in an unexpected outcome, it appears that the test maintains a capital-saving bias in Britain, as well. This is a combination of the two anticipated outcomes and seems to be opposite of the Rothbarth-Habakkuk theory.

This article highlights the technical changes examined in the reading in Chapter 17 of the W&R textbook. While the textbook concentrates on the mass production of goods such as steel, it was interesting to read about a good that individual members of society buy daily – textiles. I think it