Why didn’t the industrial revolution start in China?

I am trying to read up works of Justin Lin, World Bank’s chief economist. I just pointed to his wonderful analysis on why China grew after 1979?

Now, I just discovered another of his interesting paper (via the references on China after 1979 paper). It talks about the Needham Puzzle. Needham was an economic historian who points China was a strong economy with good institutions in 14th century. Then why did the industrial revolution only happen in UK (& Europe) and not China? This Lin refers to as Needham Puzzle.

Lin looks at various hypotheses and does not agree with them. His idea is it was a combination of incentives and differences in research & innovation in the two geographies. First Chinese growth and innovation till then was based on geniuses and was experience based. Where as industrial revolution happened in economies that were more experiment and trial and error based. Then another issue with China was it encouraged all geniuses to enter civil services where this experiment activity could not happen.

I agree with Needham, Qian, and others that China’s failure to make the transition from premodern science to modern science probably had something to do with China’s sociopolitical system. However, the key to the question is not so much that this system prohibited intellectual creativity, as they argued, but rather that the incentive structure of the system diverted the intelligentsia away from scientific endeavors, especially from the mathematization of hypotheses about nature and controlled experimentation.

In premodern times, most technological inventions stemmed from the experiences of artisans and farmers, and scientific findings were made spontaneously by a few geniuses with innate acumen in observing nature. In modern times, technological inventions mainly result from experiment cum science. Scientific discovery is made pri- marily by the technique of mathematized hypotheses and models about nature tested by controlled experiment or replicable tests, which can more reliably be performed by scientists with special training. Under the premodern model of technological invention and scientific discovery, the larger the population in a society, the greater the number of experienced artisans, farmers, and geniuses in the society.

Therefore, other things being equal, more advance in technology and science would be more likely to occur in a larger society. China had compara- tive advantages in premodern times because of its large population but fell behind the West in modem times because technological invention in China continued to rely on happenstance and experience, while Europe changed to planned experiment cum science in the scientific revolution of the seventeenth century. The reason that China failed to have a scientific revolution I have attributed here to the contents of civil service examinations and the criteria of promotion, which dis- tracted the attention of intellectuals away from investing the human capital necessary for modern scientific research. Therefore, the proba- bility of making a transition from primitive science to modern science was reduced.

Fascinating  really. I was not much aware about this inquiry into economic history.

Further Lin explains that it has implications for today as well:

To the extent that the above hypothesis is valid, several policy implications for economic development are in order. In premodern times the large population size in an economy is potentially an asset for economic growth, as a large population is likely to contribute to a higher rate of technological innovation and scientific discovery in that economy. Experience-based invention is still an important source of technological change in modern times, especially with respect to minor modifications of existing technology. However, if this large population is ill equipped with the acquired human capital necessary for undertak ing modem scientific research and experiment, the likelihood that the economy will contribute to modem technological invention and scientific discovery is small.

For a developing country in modern times, many technologies can certainly be imported from developed countries at a much lower cost than the cost of inventing them independently. However, many empirical studies have found that the success or fail00ure of technology transfers crucially depends on the domestic ability to follow up with adaptive innovations on the imported technology, which in turn depends on domestic scientific research capacity. Therefore, in modern times a large population is no longer an endowment for economic development. More important than the size of the population is education with an emphasis on modem curriculum.

Going back to Lin’s why China after 1979, it seems China managed to work on both education and domestic research capacity. Lessons for India (and others) for sure.

It throws some insights into a question which I have always asked myself – Why the IT revolution happened in India? Around 1980, Infosys etc started their operations and are giants now. Now there are may reasons given by people – there was limited govt. intervention in this activity, India always had high skill-sets, IITs etc.

Given Lin’s theory and focus on modern times, it seems education did play a major role. IITs trained students in areas which were ahead of their times. The nature of the business was also such that it could be done over wires with minimal government intervention. Now here, role of state is crucial. In India’s case it was not so much that government played an active supporting role. One has heard stories of how Infosys had to wait for months to get computers and founders took ISD calls at neighbours’ houses.  In China’s case government seemed to have got the act right in atleast some cases which then made it a leading economy in many sectors. 

But all this is just a skeletal sketch of things. Much more flesh needs to be  applied here to make it a full framework on Lin’s theory.

Coming back to the paper, what an interesting paper. Economists inquiry into history is so fertile and enlightening.

2 Responses to “Why didn’t the industrial revolution start in China?”

  1. Banking: From Bagehot to Basel and back again « Mostly Economics Says:

    […] also wondering if industrial revolution had indeed happened in China, would banking have been different? Would it have have been more sober and Chinese style of banking […]

  2. FundExpert | The Great Indian story of riches to hardly rich - The British episode Says:

    […] we fall off track? Why didn’t the Industrial revolution happen in India (or for that fact, China?) There are accusations aplenty. Some blame the British colonial rule for looting India. Some blame […]

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