How energy (basically coal) helped create industrial revolution?

This is a superb piece from Tony Wrigley. A brilliant take on economic history.

He says both Smith and Ricardo were pessimistic on sustained growth. There are 3 factors of production – land, labor and capital.  While last two were capable of indefinite expansion, the first was limited. Land was limited and so was output that came from land – wool. Cotton, food etc. Then to get things from land like iron, we need huge energy sources which were again limited to wood and animal energy. Even energy from wood was based on process of photosynthesis (it didn’t really occur to me that photosynthesis could be a factor in growth as well) which was limited as well as it captures less that 0.5% of energy in sunlight.

So you had limitations of all kinds in land. Both input and output were limited and posed typical economics problems of optimal allocation If you gave more land for sheep to get more wool, you got less land for food.

So what gave way?

Well it was a paradox called coal which itself was a result of photosynthesis over a geological time space. Coal allowed to heat and smelt iron at high temperatures resulting in development of industries and railroads. The steam engine powered by coal allowed converting heat energy into mechanical energy helping build transport systems.

And it was England which could break free from wood and managed to use increasing supply of coal. Now the article does not discuss whether it was because coal supply were abundant in England and not in others. Or it was because others simply could not learn the lessons from England. Even economists noted this energy revolution laters.

Amazing stuff.

Have things changed? Not much as energy determines future growth revolutions in 21st century. We have moved from coal to oil & natural gas but much of sustained growth still depends on energy. Post WW-II we saw abundant energy at low prices (barring oil shock of 1970s) allowing countries like Japan, China, SE Asia to develop(and other 13 economies highlighted by Growth Commission). Now we are not so sure and there is huge uncertainty how populous and poor countries like India and Africa will grow with energy constraints. There are reports which show how rising oil prices are going to impact growth. Then population in these economies is very high which will keep pressure on oil prices leading to a policy dilemma.

We need to discover more sources of energy like English discovered coal during the industrial revolution.


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