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To a Humanist, It Doesn’t Add Up

The Price of Watches

By Jonathan B. Wight

Critics sometimes complain that Adam Smith’s economics were not very good. The labor theory of value has certainly not held up well in most circles, and Smith was flummoxed by the diamond-water paradox.

But one area where he remains right, apparently, is in his economic history. Kelly and Ó Gráda in “Adam Smith, Watch Prices, and the Industrial Revolution,” (QJE 2016) find that Smith’s rough guess that watch prices fell by 95% over the preceding century was in the ballpark. After adjusting for quality improvements, Smith’s analysis is even closer to the truth.

Here’s the abstract:

“Although largely absent from modern accounts of the Industrial Revolution, watches were the first mass-produced consumer durable and were Adam Smith’s preeminent example of technological progress. In fact, Smith makes the notable claim that watch prices may have fallen by up to 95% over the preceding century, a claim that this article attempts to evaluate. We look at changes in the reported value of over 3,200 stolen watches from criminal trials in the Old Bailey in London from 1685 to 1810. Before allowing for quality improvements, we find that the real price of watches in nearly all categories falls steadily by 1.3% a year, equivalent to a fall of 75% over a century, showing that sustained innovation in the production of a highly complex artifact had already appeared in one important sector of the British economy by the early eighteenth century.”

When we hear justifiable complaints against the dehumanizing effects of the modern industrial system (and Smith was himself such a critic) it should be remembered that there are compensating benefits. In this case, a timepiece has become a much more affordable item for a working person.


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