EXPLORATIONS IN ECONOMIC HISTORY 17,400-410 (1980) Structural Change in the lath-century British Economy: A Test Using Cubic Splines* WILLIAM J. HAUSMAN AND JAMES M. WATTS University of North Carolina at Greensboro INTRODUCTION Recent work by Little (1976) and Crafts (1976) indicates the extent to which there remains a fundamental lack of agreement among economic historians concerning both the pace of growth and points of structural change in the l&h-century British economy. The most fundamental dis- agreement concerns the dating of the industrial revolution, but con- troversy also surrounds a hypothesized downturn in economic activity between the mid-1720s and the mid-1740s. If historians are ever to explain the forces making for growth and retarded growth, it is necessary first to know as precisely as possible when economic activity advanced and when it slowed down. The controversy involving the pace of growth in the earlier decades of the century centers on the effects of a series of exceptionally good harvests, running from the 1720s to the 1740s. There is no doubt that these bountiful harvests resulted in the reduction of the relative price of grains. The question is How did these low grain prices work their way through the economic system, and what impact did they have on the overall rate of growth? John (1961, 1965) has argued that since these grains comprised a substantial proportion of the diet of all but the wealthiest segments of society, a fall in their price resulted in an increase in real per capita incomes. Arguing, furthermore, that people did not choose to spend their increased incomes by withdrawing labor from the market (increased con- sumption of leisure), John asserted that the consumption of a wide range of goods other than necessities increased. John’s conclusion was that “the years from 1725 to 1750 were not, on the whole, years of stagna- * We gratefully acknowledge the assistance of three anonymous referees. 400 0014-4983/80/040400-11$02.00/O Copyright @ 1980 by Academic Press. Inc. All rights of reproduction in any form reserved.