Question

During the Industrial Revolution, the increase in wages relative to price of coal in Britain OCreated the incentive to innovate less capital-intensive technologies resulting in cheaper machines. Created incentives to move labor-intensive work to France. Created incentives to begin colonizing India. Created the incentive to innovate more capital-intensive technologies.

Answer 1

As wages increased relative to the price of capital in Britain, it became more and more desirable to substitute capital for work, and that is what happened. "The real reason for the predominance of labor-saving inventions is surely that ... a change in the relative prices of the factors of production is in itself an incentive for innovation and for inventions of a certain kind, particular - to save the use of a factor that has become relatively expensive".

The high cost of labor compared to fuel has created a particularly strong incentive to replace fuel with work in Britain. Britain's cheap energy economy was a determining factor in the pace and nature of technical change.

An example may be the fully automated silk loom from Vaucanson. This was a tremendous technological achievement, but it was never used for commercial purposes because it required far too much capital. These technologies show that they were not profitable to invent because they were not profitable to use.

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