10.7. Efficiency and Price Reductions

We will see in other sections, that the prices for food and other articles fell from 1825 to 1860. This was not due to a general decrement in prices, or from government policies, but because the costs of production went down. This was demonstrably due to the Industrial Revolution. We have here an “industrializing dividend”, similar to the “peace dividend” after the collapse of the Soviet Empire in 1989-1991.

These were the changes in manufacture:

  • machines with fast, repetitive movements to produce large quantities of articles, with high quality;
  • enough purchasing power in the working classes and professional classes to buy these articles;
  • reduction in transport costs, with the introduction of the steam train and the steam boat;
  • reduction in energy costs in industry and in agriculture, due to the introduction of the stationary steam engine, and continual increases in its efficiency;
  • continuous improvements in technology, with a large number of trained mechanics;
  • assembly line organization;
  • an economic environment, which gave more sales and at better prices, to companies which brought better products to market;
  • use of management accounting, to identify costs savings, and to give input for deciding prices;
  • use of iron and steel, instead of wood.

The costs of manufacture of mechanical goods in Birmingham decreased by 40 % to 70 % in 20 years:

(Porter, 1851, pp. 246-247) 

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