The rise and fall of the factory system: technology, firms, and households since the industrial revolution

The factory system, which arose with the British Industrial Revolution, was responsible for bringing about the separation of the location of consumption (the household) and that of production (the plant or office). This separation has had large effects on economic welfare. The reasons behind the emergence of the factory system are analyzed here, and a new interpretation is proposed, based on the need to divide up the growing knowledge base of production in an age of technological advances. The possibilities and implications of telecommuting as a reversal of this trend are examined.