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Book Chapter

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Lund University Press


There are three closely related themes in this essay. The first has to do with the characterization of technological differences in the two regions. Contrary to the Rothbarth/Habakkuk tradition , 2 which claims that the distinctive feature of American technology was its "labor saving" quality, this essay argues, in the spirit of Ricardo's remarks, that the most distinctive feature of American in comparison with British technology in the nineteenth century was its capital-saving quality . Some representative examples of this tendency included the American practices of using structures and equipment with shorter service lives, running and depreciating their equipment more quickly, and adopting organizational forms that reduced inventories per unit output and per unit labor. American procedures consistently tended to reduce the stocks of fixed and working capital held at any moment of time and, perforce, on the average throughout a year, thereby reducing the annual carrying costs of such capital at any positive interest rate. This conclusion is inescapable when one examines technological and organizational practice in the different sectors of the two economies , and is consistent with an examination of aggregate data on capital-labor and capital-output ratios in the two countries in the middle of the nineteenth century. Both of these ratios in Britain exceeded their American values by a factor of (approximately) four in mid-century.

The second theme concerns the factor price differences which are most central to understanding these technological and organizational differences. Contrary to the Rothbarth/Habakkuk emphasis on relative wage rates in the two countries, this paper stresses the differences in the pure cost of capital, as reflected in relative profit/interest rates in the two regions. It argues, moreover, that under certain assumptions such differences in and of themselves provide a means of understanding the imperatives that led in the direction of the technological characteristics described above.

The final theme concerns the characteristics of the theoretical model needed to understand the link between land abundance and input prices, and the link between input prices and technical choice. Models drawn from the international trade literature, of which the Peter Temin, Robert Fogel and Ronald Jones analyses are representative, 3 are useful in organizing our thinking about the relationship between land abundance and the sectoral composition of output under different assumptions about demand elasticities and the use of different inputs in different sectors. But, the structure of such models renders them deficient as a means of investigating the total sequence of connections between land abundance and technical choice, insofar as technical choice involves the U .s. adoption of faster depreciation techniques and lower aggregate capital intensities. The major difficulty is that in the Temin/Fogel/Jones models, the aggregate stock of capital and the aggregate stock of labor are fixed exogenously, so that land abundance or shortage can, by assumption, have no effect on aggregate capital intensity.

Chapter of

Technical Change, Employment and Investment


Lennart Jorberg
Nathan Rosenberg

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Economics Commons