Causes of Industrial Revolution

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The question as to why the Industrial Revolution occurred in Western Europe and not anywhere else in the world like China is indeed a very intriguing matter. There is no doubt that the Industrial Revolution, an accelerated technological innovation did indeed happen as the same reason as all technological innovations which is to reduce labour costs. However, to posit that that is the only reason that the Industrial Revolution occurred could be huge blunder. Hence, akin to what E.H. Carr once said, that the historian deals in a multiplicity of causes, we postulate that there were not one but several causes which led to the Industrial Revolution in the 1800s.

Firstly, the sound and well-established institutions in Western Europe also provides us with an explanation as to why the Industrial Revolution occurred. These institutions managed to drive technological innovations in two ways- by providing an incentive to invest and an incentive to trade. The incentive to invest stemmed from the establishment of the patent system. The patent system provided the incentive for investors to invest in inventors to invent as the patent system protected inventions, thus allowing both parties to capture a larger share of the benefits of the invention and by extension the investment. The patent system enabled the elevation of the private rate of return closer to the social rate and acted as a set of systematic incentives which boosted technological innovation. This created a healthy competitive environment in Western Europe whereby investors competed to be the patron of the next ‘superstar’ in the science field. Besides, because of these institutions, the establishment of a stable government facilitated the change in the economic environment which further provided economic incentive for investors to invest as the government ensures that the investors will be able to enjoy benefits of their investment activity which cannot be blatantly expropriated.

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