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Transportation improvements and the emergence of the factory: A reply to Jones
Journal
of Economic
Behavior
and Organization
19 (1992) 395-399.
Transportation improvements emergence of the factory
North-Holland
and the
A reply to Jones Rick Szostak University of Alberta, Edmonton, Alta., Canada Received
December
1991, final version received
December
1991
S.R.H. Jones has commented on my 1989 paper in this journal. He accepts the logic of my argument, recognises that the impact of transport improvements has received too little attention in the past, and admits the possibility that transport improvements were responsible for the emergence of the factory system in the late eighteenth century. He raises three objections of a broadly empirical nature. I explicitly recognized in my 1989 paper that empirical evidence which could ‘prove’ my case was unavailable. I therefore welcome this opportunity to deal with potential objections. The evidence, it would appear, points strongly in the direction of transport improvements having been the key, and my case is thus strengthened.
Jones questions my use of Williamson’s (1980) eleven efficiency criteria. Unfortunately, he misinterprets the conclusions I drew from the exercise. I plead not guilty to the charge of confusing logical argument with conclusive proof. As he himself admits a page later, I recognised that without empirical evidence it was only possible to indicate the direction of change in terms of the eleven criteria, not to conclude that those changes had necessarily been large enough to tip the balance in favour of the factory. Jones is concerned that not all of the eleven criteria are easily included in overall cost functions. It may indeed be difficult, as Jones suggests, to calculate the advantage to an entrepreneur of being able to respond to changes in fashion in a matter of days rather than months. It is, nevertheless, a consideration which could easily be of overwhelming importance to entrepreneurs in fashion-oriented trades. To measure that which can be is a laudable goal. To ignore that which cannot be easily measured, though it be of obvious importance, is hardly the proper scientific attitude. I am unsure why Jones bemoans at such length the lack of conclusive
Correspondence to: Professor Rick Szostak. Edmonton, Alb., T6G 2H4, Canada. 016772681~92/$05.00
$> 1992-Elsevier
Department
Science Publishers
of Economics,
University
B.V. All rights reserved
of Alberta,
396
R. Szostak,
Transportation
improvements
and the emergence of the factory
empirical evidence. Surely, if aware of evidence which showed that transport improvements had the insignificant effect alleged, he would present it. To test the case, we would ideally require detailed cost data from putting-out firms and factories producing the exact same products in the same districts. In the absence of a miracle, we must use such evidence as exists, and remain conscious of the fact that the eleven criteria will be of differing relative importance to different entrepreneurs. Jones suggests that higher labor costs in the factory might have outweighed any cost savings resulting from transport improvements. Yet he provides no data to indicate the size of the wage differential. The fact that he has been asserting that the difference was huge for some time is scarcely reassuring. One might be forgiven for thinking that it behooves Jones to do better, especially if he is to criticise others for a lack of quantification. In the all-important early days of the factory, wages were basically determined within the cottage sector [Mokyr (1985)]. There is a consensus in the literature that some compensating wage differential had to be paid to lure outworkers into the factory and cause them to submit to such productivity-enhancing practices as regular hours and supervision. This differential may not have been large. Then, as now, there were workers who had lost any attachment to the agricultural sector and were in no position to insist on a large differential. Moreover, many may have found the regular earnings and social interaction associated with the factory attractive. Wages clearly rose more slowly than productivity in the late eighteenth century. We cannot tell from existing wage data whether the wage increase associated with factory employment was greater than the increase in work intensity [Flinn (1974)]. It is possible that hours worked increased in the new setting: we do not know, regrettably, what the average working week in putting-out was. Jones notes in his second footnote that wages fell over time for many outworkers. This, of course, reflects the difficulty these workers faced in competing with the factory. It tells us nothing about the original emergence of the factory, except that wage differentials might well have been smaller then than later. Again, we have to be careful of not being misled by averages. The division of labor and supervision associated with the factory often made it possible to substitute unskilled for skilled labor. The incidence of child labor in early factories is perhaps the best evidence of this. In such cases, wage rates would hardly provide a major impediment to factory formation. Jones’ assertion that wages in putting-out were but a ‘fraction’ of those in the factory must be viewed as exaggeration. This inflated impression of the differential causes him to conclude that only some revolutionary change could have overcome it, and this he feels could only be due to technological innovation. There can be no doubt that some industries, such as shipbuilding and sugar refining, had long operated in a centralised fashion for technical
R. Szostak, Transportation improvements and the emergence of the factory
397
reasons. Nor can there be any doubt that steam engines and other machinery encouraged factory formation in the later eighteenth century.’ It is far from the case, though, that the widespread emergence of the factory in the industrial revolution can be credited to this source. The single greatest empirical fact to bring to bear on this issue is that factories employing the same technology used in cottages emerge across a range of industries. It is a major advance in the debate that Jones recognises this fact. It is curious that this does not hinder his resolve. Perhaps he is unclear on the timing. The earliest wave of factories can be dated to the 1750s and 1760s not the 1780s and 1790s as Jones suggests. It is not, then, that some misguided entrepreneurs were swept up in a factory craze without recognising the technological roots of the phenomenon. Rather, long before the Watt steam engine or the Arkwright water frame, numerous entrepreneurs had moved to this new form of organisation. Jones, beyond a cryptic reference to their being ‘atypical, usually the product of particular circumstances’, does not bother to explain this anomaly. Yet its occurrence, and the success many of these entrepreneurs achieved, provides the clearest evidence possible that the wage differential was not at all insurmountable. Jones notes that the factory spreads very slowly, and feels this somehow detracts from my argument. Virtually all innovations are observed to follow an S-shaped diffusion path through time. It would be naive to expect the factory, no matter how advantageous, to have wiped out cottage industry overnight. One common explanation for the S-shaped path is that early experimenters both provide an important example to followers and make important improvements. Certainly, early factory masters had to solve many problems of organisation, and their solutions were copied by those who came after. Thus, if we are to answer the question of why the factory emerged, we are well advised to focus on the early days of innovation and diffusion, and this means the 1750s and 1760s. The upswing in technological innovation comes later. The fact that as late as 1850 there are still more outworkers than factory hands would seem, on the face of it, to be an even greater difficulty for Jones’ claims for the revolutionary role of technology. His answer, I suspect, would be to argue for the uneven impact of innovation across industry.2 Of course, transport improvements also affect entrepreneurs unevenly, depending
‘However, it should be noted that many pieces of supposed ‘factory’ technology were just as suited to cottages. Chapman (1972) has noted that knitting frames and weaving looms were found in factories not because of inherent efficiency gain, but because supervision was possible there. It should also be noted that power for eighteenth century factories generally came from water wheels, even after the Watt rotative engine became available. ‘In Szostak (1991) I show that innovation was in fact much more widespread than is commonly thought. Moreover, factories and cottages are often observed producing the same broadly-defined goods.
398
R. Szostak,
Transportation
improoements
and the emergence ofthefactory
on their use of raw materials, location, fashion orientation, production process etc. This is, again, precisely why estimation of average cost functions, even if possible, could be entirely misleading. To accept Jones’ argument would in any case raise the question of what caused the upsurge in technological innovation from the 1760s. One hopes that Jones would not, like Gaski (1982) and others, assert that technological change was a truly exogenous god-given cause of the Industrial Revolution. I have argued [Szostak (1991)] that transport improvement, by encouraging such phenomena as regional s~cialisation, improved information fIows, and division of Iabor, was also the main force behind markedly higher rates of innovation. Arguably the most important indirect influence was through the emergence of the factory itself. The causal link Jones posits can just as easily run in the other direction. Wadsworth and Mann (19651, for example, noted that once a number of looms had been gathered in one room the thought would naturally occur of hooking them to each other and an external power source. Compare the two logical arguments: (i) faced with the appearance of the factory, innovators naturally turn their efforts toward technology suited to the new setting; (ii} innovators devote great time and effort to developing technology totally unsuited to the existing mode of production, and this forces others to devise an entirely new method of organising workers. The first must be viewed as at least as plausible as the second. Jones might decry the focus on logical argument and urge some empirical test. I would suggest that the relative timing of the emergence of the factory and the increase in the rate of innovation argue strongly for the primacy of the first line of causation. Jones implies that a case study approach might be the best means of solving the debate. I wholeheartedly agree. I have no doubt that some examples of technologically-induced factories can be found. I have recently [Szostak (199111, though, traced the eighteenth century development of cotton, wool, linen, iron, coal, the metal trades, and pottery in both England and France, and demonstrate that both organisational and technological advances in the former country are best understood as resulting from transport improvements. Certainly. factories using cottage technology can be found across these sectors. In the absence of empirical evidence of a conclusive nature, and few questions of historical importance are blessed with such, academic debate must advance through weighing logical argument and such fragmentary evidence as exists. None of the contrary evidence amassed by Jones appears, on reflection, to have detracted from the line of argument I pursued in Szostak (1989). The case for the emprieal validity of that line of argument has thus been strengthened considerably.
R. Szostak,
Transport&on
improvements
and the emergence of rhe factory
399
References Chapman, S.D., 1972, The cotton industry in the industrial revolution (Macmillan, London). Flinn, M.W., 1974, Trends in real wages, 1750-1850, Economic History Review 27, 39.5413. Gaski, J., 1982, The cause of the industrial revolution: A brief ‘single factor’ argument, Journal of European Economic History 11,no. 2, 227-234. Jones, S.R.H., 1992. The emergence of the factory system in 18th century England. Did transportation improvements really matter?, Journal of Economic Behaviour and Organization, this issue. Mokyr, Joel, 1985, Introduction, in: Joel Mokyr, ed., The economics of the industrial revolution (Rowman and Allenheld, Totowa, NJ). Szostak, Rick, 1989, The organisation of work: The emergence of the factory revisited, Journal of Economic Behaviour and Organisation 11, 343-358. Szostak, Rick, 1991, The role of transportation in the industrial revolution: A comparison of England and France (McGill-Queen’s University Press, Montreal). Wadsworth, A.P. and Julia de Lacey Mann, 1965, The cotton trade and industrial Lancashire 1600-1700 (Manchester University Press, Manchester). Williamson, Oliver F., 1980, The organisation of work: ‘A comparative institutional assessment, Journal of Economic Behaviour and Or~nisation I, 5-38.
of Economic
Behavior
and Organization
19 (1992) 395-399.
Transportation improvements emergence of the factory
North-Holland
and the
A reply to Jones Rick Szostak University of Alberta, Edmonton, Alta., Canada Received
December
1991, final version received
December
1991
S.R.H. Jones has commented on my 1989 paper in this journal. He accepts the logic of my argument, recognises that the impact of transport improvements has received too little attention in the past, and admits the possibility that transport improvements were responsible for the emergence of the factory system in the late eighteenth century. He raises three objections of a broadly empirical nature. I explicitly recognized in my 1989 paper that empirical evidence which could ‘prove’ my case was unavailable. I therefore welcome this opportunity to deal with potential objections. The evidence, it would appear, points strongly in the direction of transport improvements having been the key, and my case is thus strengthened.
Jones questions my use of Williamson’s (1980) eleven efficiency criteria. Unfortunately, he misinterprets the conclusions I drew from the exercise. I plead not guilty to the charge of confusing logical argument with conclusive proof. As he himself admits a page later, I recognised that without empirical evidence it was only possible to indicate the direction of change in terms of the eleven criteria, not to conclude that those changes had necessarily been large enough to tip the balance in favour of the factory. Jones is concerned that not all of the eleven criteria are easily included in overall cost functions. It may indeed be difficult, as Jones suggests, to calculate the advantage to an entrepreneur of being able to respond to changes in fashion in a matter of days rather than months. It is, nevertheless, a consideration which could easily be of overwhelming importance to entrepreneurs in fashion-oriented trades. To measure that which can be is a laudable goal. To ignore that which cannot be easily measured, though it be of obvious importance, is hardly the proper scientific attitude. I am unsure why Jones bemoans at such length the lack of conclusive
Correspondence to: Professor Rick Szostak. Edmonton, Alb., T6G 2H4, Canada. 016772681~92/$05.00
$> 1992-Elsevier
Department
Science Publishers
of Economics,
University
B.V. All rights reserved
of Alberta,
396
R. Szostak,
Transportation
improvements
and the emergence of the factory
empirical evidence. Surely, if aware of evidence which showed that transport improvements had the insignificant effect alleged, he would present it. To test the case, we would ideally require detailed cost data from putting-out firms and factories producing the exact same products in the same districts. In the absence of a miracle, we must use such evidence as exists, and remain conscious of the fact that the eleven criteria will be of differing relative importance to different entrepreneurs. Jones suggests that higher labor costs in the factory might have outweighed any cost savings resulting from transport improvements. Yet he provides no data to indicate the size of the wage differential. The fact that he has been asserting that the difference was huge for some time is scarcely reassuring. One might be forgiven for thinking that it behooves Jones to do better, especially if he is to criticise others for a lack of quantification. In the all-important early days of the factory, wages were basically determined within the cottage sector [Mokyr (1985)]. There is a consensus in the literature that some compensating wage differential had to be paid to lure outworkers into the factory and cause them to submit to such productivity-enhancing practices as regular hours and supervision. This differential may not have been large. Then, as now, there were workers who had lost any attachment to the agricultural sector and were in no position to insist on a large differential. Moreover, many may have found the regular earnings and social interaction associated with the factory attractive. Wages clearly rose more slowly than productivity in the late eighteenth century. We cannot tell from existing wage data whether the wage increase associated with factory employment was greater than the increase in work intensity [Flinn (1974)]. It is possible that hours worked increased in the new setting: we do not know, regrettably, what the average working week in putting-out was. Jones notes in his second footnote that wages fell over time for many outworkers. This, of course, reflects the difficulty these workers faced in competing with the factory. It tells us nothing about the original emergence of the factory, except that wage differentials might well have been smaller then than later. Again, we have to be careful of not being misled by averages. The division of labor and supervision associated with the factory often made it possible to substitute unskilled for skilled labor. The incidence of child labor in early factories is perhaps the best evidence of this. In such cases, wage rates would hardly provide a major impediment to factory formation. Jones’ assertion that wages in putting-out were but a ‘fraction’ of those in the factory must be viewed as exaggeration. This inflated impression of the differential causes him to conclude that only some revolutionary change could have overcome it, and this he feels could only be due to technological innovation. There can be no doubt that some industries, such as shipbuilding and sugar refining, had long operated in a centralised fashion for technical
R. Szostak, Transportation improvements and the emergence of the factory
397
reasons. Nor can there be any doubt that steam engines and other machinery encouraged factory formation in the later eighteenth century.’ It is far from the case, though, that the widespread emergence of the factory in the industrial revolution can be credited to this source. The single greatest empirical fact to bring to bear on this issue is that factories employing the same technology used in cottages emerge across a range of industries. It is a major advance in the debate that Jones recognises this fact. It is curious that this does not hinder his resolve. Perhaps he is unclear on the timing. The earliest wave of factories can be dated to the 1750s and 1760s not the 1780s and 1790s as Jones suggests. It is not, then, that some misguided entrepreneurs were swept up in a factory craze without recognising the technological roots of the phenomenon. Rather, long before the Watt steam engine or the Arkwright water frame, numerous entrepreneurs had moved to this new form of organisation. Jones, beyond a cryptic reference to their being ‘atypical, usually the product of particular circumstances’, does not bother to explain this anomaly. Yet its occurrence, and the success many of these entrepreneurs achieved, provides the clearest evidence possible that the wage differential was not at all insurmountable. Jones notes that the factory spreads very slowly, and feels this somehow detracts from my argument. Virtually all innovations are observed to follow an S-shaped diffusion path through time. It would be naive to expect the factory, no matter how advantageous, to have wiped out cottage industry overnight. One common explanation for the S-shaped path is that early experimenters both provide an important example to followers and make important improvements. Certainly, early factory masters had to solve many problems of organisation, and their solutions were copied by those who came after. Thus, if we are to answer the question of why the factory emerged, we are well advised to focus on the early days of innovation and diffusion, and this means the 1750s and 1760s. The upswing in technological innovation comes later. The fact that as late as 1850 there are still more outworkers than factory hands would seem, on the face of it, to be an even greater difficulty for Jones’ claims for the revolutionary role of technology. His answer, I suspect, would be to argue for the uneven impact of innovation across industry.2 Of course, transport improvements also affect entrepreneurs unevenly, depending
‘However, it should be noted that many pieces of supposed ‘factory’ technology were just as suited to cottages. Chapman (1972) has noted that knitting frames and weaving looms were found in factories not because of inherent efficiency gain, but because supervision was possible there. It should also be noted that power for eighteenth century factories generally came from water wheels, even after the Watt rotative engine became available. ‘In Szostak (1991) I show that innovation was in fact much more widespread than is commonly thought. Moreover, factories and cottages are often observed producing the same broadly-defined goods.
398
R. Szostak,
Transportation
improoements
and the emergence ofthefactory
on their use of raw materials, location, fashion orientation, production process etc. This is, again, precisely why estimation of average cost functions, even if possible, could be entirely misleading. To accept Jones’ argument would in any case raise the question of what caused the upsurge in technological innovation from the 1760s. One hopes that Jones would not, like Gaski (1982) and others, assert that technological change was a truly exogenous god-given cause of the Industrial Revolution. I have argued [Szostak (1991)] that transport improvement, by encouraging such phenomena as regional s~cialisation, improved information fIows, and division of Iabor, was also the main force behind markedly higher rates of innovation. Arguably the most important indirect influence was through the emergence of the factory itself. The causal link Jones posits can just as easily run in the other direction. Wadsworth and Mann (19651, for example, noted that once a number of looms had been gathered in one room the thought would naturally occur of hooking them to each other and an external power source. Compare the two logical arguments: (i) faced with the appearance of the factory, innovators naturally turn their efforts toward technology suited to the new setting; (ii} innovators devote great time and effort to developing technology totally unsuited to the existing mode of production, and this forces others to devise an entirely new method of organising workers. The first must be viewed as at least as plausible as the second. Jones might decry the focus on logical argument and urge some empirical test. I would suggest that the relative timing of the emergence of the factory and the increase in the rate of innovation argue strongly for the primacy of the first line of causation. Jones implies that a case study approach might be the best means of solving the debate. I wholeheartedly agree. I have no doubt that some examples of technologically-induced factories can be found. I have recently [Szostak (199111, though, traced the eighteenth century development of cotton, wool, linen, iron, coal, the metal trades, and pottery in both England and France, and demonstrate that both organisational and technological advances in the former country are best understood as resulting from transport improvements. Certainly. factories using cottage technology can be found across these sectors. In the absence of empirical evidence of a conclusive nature, and few questions of historical importance are blessed with such, academic debate must advance through weighing logical argument and such fragmentary evidence as exists. None of the contrary evidence amassed by Jones appears, on reflection, to have detracted from the line of argument I pursued in Szostak (1989). The case for the emprieal validity of that line of argument has thus been strengthened considerably.
R. Szostak,
Transport&on
improvements
and the emergence of rhe factory
399
References Chapman, S.D., 1972, The cotton industry in the industrial revolution (Macmillan, London). Flinn, M.W., 1974, Trends in real wages, 1750-1850, Economic History Review 27, 39.5413. Gaski, J., 1982, The cause of the industrial revolution: A brief ‘single factor’ argument, Journal of European Economic History 11,no. 2, 227-234. Jones, S.R.H., 1992. The emergence of the factory system in 18th century England. Did transportation improvements really matter?, Journal of Economic Behaviour and Organization, this issue. Mokyr, Joel, 1985, Introduction, in: Joel Mokyr, ed., The economics of the industrial revolution (Rowman and Allenheld, Totowa, NJ). Szostak, Rick, 1989, The organisation of work: The emergence of the factory revisited, Journal of Economic Behaviour and Organisation 11, 343-358. Szostak, Rick, 1991, The role of transportation in the industrial revolution: A comparison of England and France (McGill-Queen’s University Press, Montreal). Wadsworth, A.P. and Julia de Lacey Mann, 1965, The cotton trade and industrial Lancashire 1600-1700 (Manchester University Press, Manchester). Williamson, Oliver F., 1980, The organisation of work: ‘A comparative institutional assessment, Journal of Economic Behaviour and Or~nisation I, 5-38.