The Expansion of Trade and the Development of European

This paper describes the industrial development of Europe to 1600. The conventional history of industrial development sees technological progress as its primary cause. However, this paper argues that the source of rising productivity was not new technology but the reorganization of production in response to falling trading costs and the expansion of trade. The expansion of trade changed which goods were produced, where they were produced, and by inducing an increasing division of labor, how they were produced. Of course, technological progress did contribute to rising productivity. However, it was less an independent cause than a consequence of industrial reorganization, expanding trade, and falling trading costs. JEL Categories: L10, L60, N53, N63, O14, O18, O13, O52, R12 *This paper is a draft chapter of The Origins of Western Economic Success: Commerce, Finance, and Government in Pre-Industrial Europe. Copies of this and other draft chapters may be downloaded from http://www.dartmouth.edu/~mkohn/ **I am grateful to Yoav Kislev and to Rick Szostak for helpful comments on an earlier version.