What Caused the Industrial Revolution?

Course Outline

What Caused the Industrial Revolution?

In this video, which is also featured in Marginal Revolution University’s Everyday Economics course, we discuss the key factors behind the rise in innovation and entrepreneurship over the past couple of centuries.

The economic historian Deirdre McCloskey coined the term “innovationism." While there have always been inventors and innovators, that number exploded after the eighteenth century, contributing to what has been described as the “Hockey Stick of Human Prosperity."

Why has innovation grown so rapidly? Economist Douglass North argued it had to do with institutions such as property rights, non-corrupt courts, and rule of law, which lay the foundation for innovation to take place. Others attribute the rise to factors such as education or access to reliable energy. McCloskey argues that what really kicked innovation into high gear is a change in attitude — ordinary people who once celebrated conquerors and kings began to celebrate merchants and inventors.

In the end, a better understanding of what drives innovation could help poor countries that still live on the handle of the “Hockey Stick" reach a much greater level of prosperity.

Teacher Resources


When we tell the tale of the hockey stick of human prosperity, the phenomenon of innovationism plays a leading role in the story. Think about it. The steam engine, indoor plumbing, penicillin, semiconductors, air conditioning, automobiles, TVs, airplanes, desktops, laptops, iPads, smart phones, the internet -- the list of brilliant inventions from the past few centuries is long. Yet, the number of relatively minor, unsung improvements is still longer -- much, much longer. I'd personally like to give a shout-out to whoever invented the sealed lunch bag. You rock.


The great economic historian, Deirdre McCloskey, coined the term “innovationism” to describe this phenomenon. She contends that it is the defining feature of the past 200 or so years of human history. Of course, the world had inventors and innovators before the 18th century, but they were few and far between. Compared to today, the world before the 18th century was not only very poor, it was also static. People in, say, 10th century France or 15th century Sweden lived their entire lives without much change. Their economy, their world, was pretty much like their parents' world, which was pretty much like their parents' world and so on, for generations on end.



So, what caused this orgy of innovation and the resulting bend in the hockey stick? Scholars still debate this question today. Of course, one important component, as argued by Nobel economist Douglass North, was good institutions, such as secure property rights, non-corrupt courts, and the rule of law. These institutions laid the foundation for the resulting expansion of specialization in trade, which unquestionably fueled the innovation engine. However, some scholars contend that this explanation is incomplete.


For example, some point to improvements in education, others to the discovery of inexpensive access to reliable energy, like plentiful coal in England. McCloskey argues that the vital spark for all of this innovation was a change in attitudes. Specifically, the growing appreciation among ordinary people, of entrepreneurial innovators, and of the economic changes they unleash. Rather than celebrate conquerors and kings, people began to applaud merchants and inventors. Whatever the answer, getting it right is of profound importance, not just because it explains how we got to where we are today, but, much more importantly, because it is crucial to helping still poor people reach our high level of prosperity, as many around the world are unlucky enough to live on the handle of the hockey stick.



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