Spinning Welfare: The Gains From Process Innovation In Cotton And Car Production
Economists and economic historians want to know how much better life is today than in the past. Fifty years ago economic historians found surprisingly small gains from 19th century US railroads, while more recently economists have found relatively large gains from electricity, computers and cell phones. In each case the implicit or explicit assumption is that researchers were measuring the value of a new good to society. In this paper, the authors use the same techniques to find the value to society of making existing goods cheaper. Henry Ford did not invent the car, and the inventors of mechanised cotton spinning in the industrial revolution invented no new product.