Figure 1, for example, shows the real wage of building workers in England from 1200 to 1869 (standardized to a notional 10 hour day after 1860) for building workers from 1200 to 2000 in England. Real wages in 1800 were no higher than their average level over the previous 600 years. The economy thus seemed caught in stasis. But yet there are signs several important elements of the economy were very different in 1750, at the eve of the Industrial Revolution, than in 10,000 BC. One profound and unexplained change was in interest rates. Real interest rates in most countries in Europe before 1400 were above 10% a year, while in the modern world the real interest rate on the equivalent investment would be 2%. This paper documents this, and asks how we can explain this dramatic change.
Source: The Interest Rate in the Very Long Run: Institutions, Preferences and Modern Growth, Gregory Clark (UC-Davis), April 2005, firstname.lastname@example.org