The Industrial Revolution, the Industrial Revolution and the Industrialization of the United States

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Over the last 300 years or so, this has been the story of the human enterprise. Increased trade, increased opportunity to interact with each other,. which leads to increased specialization and technology. But not everyone is better off every minute. A textile worker in north carolina can have a lower standard living than a few years ago because of technological change and because of trade.

Russ Roberts, host of EconTalk, does a monologue this week on the economics of trade and specialization. Economists have focused on David Ricardo's idea of comparative advantage as the source of specialization and wealth creation from trade. Drawing on Adam Smith and the work of James Buchanan, Yong Yoon, and Paul Romer, Roberts argues that we've neglected the role of the size of the market in creating incentives for specialization and wealth creation via trade. Simply put, the more people we trade with, the greater the opportunity to specialize and innovate, even when people are identical. The Ricardian insight masks the power of market size in driving innovation and the transformation of our standard of living over the last few centuries in the developed world.