Understanding the Industrial Revolution

By Charles More | Go to book overview

Chapter 4

Demand

Many accounts of the Industrial Revolution give demand-side forces an important role in stimulating growth. In practice the conditions under which such forces could act need to be carefully specified, and when this is done it is clear that they do not automatically produce the effects which are often attributed to them.

Suppose that the existing land, labour and capital of the country are fully employed. This being the case, on the assumptions of neo-classical economic theory the effect of additional demand, however it comes about, will not be to increase production but to either increase prices or shift output from one sector to another without it necessarily increasing in total. The reasoning behind this is simple: if the factors of production are fully employed, then whatever the demand they cannot produce more. When money supply increases as a result of increasing demand, the outlet is prices. The suggestion has often been made that, in the Industrial Revolution, rising prices became the stimulus, either to innovation, additional investment, or both. Again, given the original assumptions, this would not have happened. If all prices had risen at the same rate and simultaneously - as would occur if the demand was evenly spread - then there would not have been any additional stimulus to businessmen to economise in one way or another, for instance by developing machinery to displace labour. To put it another way, businessmen should have been looking for opportunities to economise anyway, whatever the demand conditions. Nor would there have been any possibilities of supernormal profits from rising prices which might have encouraged additional investment, since costs would have risen as fast as prices, and thus profit margins would have remained the same as before. In practice if interest rates for business borrowing were sticky, as suggested in the previous chapter, then that element of costs would have risen more slowly and there might have been some superprofits and some incentive to substitute capital for labour. But the constraints on the availability of capital and labour would still have existed: the failure of interest rates to increase would have hampered the expansion of credit, so investment would have been restricted. If the additional demand affected some sectors but not others, then as prices rose in those sectors resources would have shifted towards them. This may have given rise to some net increase in income, if, for instance, the growing sectors experienced economies of scale and the declining sectors did not. But there would still have been a decrease in output in other sectors, so the net output gain would have been limited.

-70-

Notes for this page

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Project items

Items saved from this book

This book has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this book

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this page

Cited page

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited page

Bookmark this page
Understanding the Industrial Revolution
Settings

Settings

Typeface
Text size Smaller Larger
Search within

Search within this book

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen
/ 194

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.