Is education policy innovation policy?

Ralf R Meisenzahl, Joel Mokyr 13 June 2011

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The Industrial Revolution is widely regarded as the start of modern economic growth. In his recent influential work, Allen (2009a, 2009b) has resurrected induced innovation theory and re-emphasised the role of factor prices. As the theory goes, scarce labour (measured by high wages) stimulated labour-saving inventions in Britain – basically induced innovation is a corollary of the old saying, “necessity is the mother of invention”. We beg to differ.

In our recent work (Meisenzahl and Mokyr 2011), we argue that there were deep complementarities between the groups of key workers. The first is the relatively small group of people who actually invented things. The second is the somewhat larger group of highly-skilled craftsmen who possessed the training and natural dexterity to actually carry out the “instructions”. The second group is critical. They had to implement – with a high degree of accuracy – the new recipes and blueprints that inventors wrote. This involved building the parts on a routine basis with very low degrees of tolerance for error while still being able to fill in the blanks when the instructions were inevitably incomplete. It was this technical competence of the British mechanical elite that was able to implement and tweak the great ideas and turn them into economic realities.

In other words, our view on what determined the rate and direction of technological change during the Industrial Revolution is entirely supply-based. Our analysis raises the question of whether education can foster an innovative environment.

Britain’s comparative advantage

What drove British leadership, and why was Britain the most technologically advanced economy in the world for so long? The question has been attacked many times, and with many different answers (e.g. Allen 2009a, 2009b, North and Weingast 1989, Wrigley 2004, 2010).

We focus on competence, which is defined here as the high-quality workmanship and materials needed to implement an innovation, that is, to follow the blueprint with a high level of accuracy, carry out the instructions embodied in the technique, and to have the ability to install, operate, adapt, and repair the machinery and equipment under a variety of circumstances. Beyond those, competence often involved minor improvements, adaptations, and refinements of a technique, which clearly enhanced the innovative effort in economy.

Competence is a form of human capital. As Mitch (1998) points out, it may seriously be doubted whether the average level of education of the British labouring class (say, the bottom two-thirds of the income distribution) made much difference to the outcome. The question is: Where did this competence come from? How was a country with such a mediocre educational system able to generate such a high-level technical skills?

Data and findings

To answer this question, we focus on a sample of 759 skilled craftsmen and technicians. We study their education and incentives to innovate. Our findings are that a vast majority of our craftsmen were apprenticed (at least among those who can identify their education). Formal education played only a minor role. These findings support the view of Humphries (2003) and Mokyr (2009) that the apprenticeship system was crucial in generating competence. Technical competence, the key driver of the implementation of inventive activity depended on the functioning of apprenticeship as the chief mode of the intergenerational transmission of skills and competence.

The question then becomes: What were the prime economic incentives driving this “second tier” of technological creators? Many authors have highlighted the importance of intellectual-property rights for innovation, but we find that many skilled workmen relied on secrecy and first-mover advantages to reap the benefits of their innovations. In fact, over 40% of our sample here never took out a patent. Reputations derived from inventive accomplishments and alternative rewards such as prizes and medals also contributed to the rise in inventive activity.

One point needs to be emphasised. Invention took place in all sectors of the economy, not just in cotton and steam engines. In fact, the results of our analysis show that patterns for the textiles sector differ substantially. This is not an unusual finding. Becker et al. (2009), studying the impact of literacy on technology adoption in Prussia – a technological follower – find that literacy fostered industrialisation in all sectors except textiles. Hence, inferences based primarily on evidence from the textile sector about the whole economy might be misleading.

Implications

The centrality of the supply of competence in this period suggests something of wider significance about the direction of innovation. The rate of technological change is dependent on those supply factors that reflect what engineers and skilled workers actually can do regardless of what they would like to do. The drive toward improvement was quite general in the eighteenth century, but the results were highly uneven, with major productivity improvements in textiles, iron, civil engineering, and power technology, but few in farming, medicine, steel, chemicals, and communications. Competence as defined here was an integral part of the supply side, as inventors would not be able to carry out their ideas without the trained workers they employed. The direction of technological progress reflected the difficulties on the supply side rather than any obvious demand-side bias. Factor endowments may in some cases have helped decide what problems inventors chose to work on. Thus, the presence of coal in Britain may have led to the development of mechanical pumps to remove water from mine, and from those pumps, of course, the steam engine was born.

What are the policy lessons for our age?

The one obvious conclusion is that in addition to the “Hall of Fame” of great inventors, a few tens of thousands individuals may have played a crucial role in the technological transformation of the British economy.

The average level of human capital in Britain, as measured by mean literacy rates, school attendance, and even the number of people attending institutes of higher education are often regarded as surprisingly low for an industrial leader. What counted most, however, were the characteristics of the top few percentiles of highly skilled mechanics and similar artisans.

The Industrial Revolution may have been driven more by aptitude than by attitude. This may be a more general characteristic of the impact of human capital on technological creativity. We should not focus only on the average properties of the population at large, nor on the experiences of the handful of superstars, but on the group of competent artisans in between who were the ones who turned designs and mechanical models into workable machinery and equipment.

The policy implications of this insight are far from obvious, but clearly if the driver of technological success is a small percentage of the labour force, this is something that an educational policy would have to take into account.

Editor’s note: The views in this column are the personal views of the authors and do not necessarily reflect the positions of the Federal Reserve System.

References

Allen, Robert C (2009a), The British Industrial Revolution in Global Perspective, Cambridge University Press.

Allen, Robert C (2009b), “The Industrial Revolution in Miniature: The Spinning Jenny in Britain, France, and India”, Journal of Economic History, 69(04):901-927.

Becker, Sascha O, Erik Hornung, and Ludger Woessmann (2009), “Catch Me If you Can: Education and Catch-up in the Industrial Revolution”, Stirling Economics Discussion Paper, No. 2009-2019.

Humphries, Jane (2003), “English Apprenticeships: A Neglected Factor in the first Industrial Revolution”, in Paul A David and Mark Thomas (eds.), The Economic Future in Historical Perspective, Oxford University Press, 73-102.

Meisenzahl, Ralf R. and Joel Mokyr. 2011. “The Rate and Direction of Invention in the British Industrial Revolution: Incentives and Institutions.” NBER Working Paper 16993.

Mitch, David. 1998. “The Role of Education and Skill in the British Industrial Revolution.” In Joel Mokyr, ed., The British Industrial Revolution: An Economic Perspective, 2nd edition, Westview Press, 241-279.

Mokyr, Joel (2009), The Enlightened Economy, Yale University Press.

North, Douglass C and Barry Weingast (1989), “Constitutions and Commitment: Evolution of Institutions Governing Public Choice in Seventeenth Century England”, Journal of Economic History, 49(4):803-832.

Wrigley, EA (2004), “The Divergence of England: The Growth of the English Economy in the Seventeenth and Eighteenth Centuries”, In EA Wrigley, Poverty, Progress, and Population,Cambridge University Press, 44-67.

Wrigley, EA (2010), Energy and the English Industrial Revolution, Cambridge University Press.

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Topics:  Development Economic history Poverty and income inequality

Tags:  education, growth, Industrial Revolution

Principal Economist, Federal Reserve Board

Professor of Economics, Northwestern University.

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