The British Industrial revolution and incentives for new technologies. This section raises a very important economic history question: why the Industrial Revolution happened first in Britain as opposed to other countries like France, Netherlands or China or India, and this section answers this question by using the model that we built so far, the cost and technology model. As before these, are isocost curves and these are technologies. Let's focus on the technology of clock production before the Industrial Revolution in 17th century. That technology here is represented by B, which is a relatively labor-intensive technology: you need four workers and only two tons of coal to run this technology. This technology made sense because the price of labor was relatively low at that time. As you can see it didn't make sense for Britain to move from technology B to technology A, which is a more energy-intensive technology. In other words Britain didn't have any incentive to automate, why? Because the price of labor was low. As you can see, technology A lies to the right of our isocost curves, so it didn't make economic sense to move from B to A, but things started to change as Britain moved from 17th century to 18th century. Wages start to gradually increase, therefore Britain moved from this isocost curve JH to this new iso cost curve FG, which is steeper and reflects the price of labor going up. Now in this new world Britain had an incentive to replace labor: it had an incentive to automate, why? Because the cost of labor was increasing, therefore it had an incentive to move away from this labor-intensive technology towards a more energy-intensive one. It had an incentive to invent new automated technologies. As you can see now in this new isocost curve technology B is more costly and technology A makes economic sense. Because of this incentive we got this new technology. Now let's have a quick look at the evidence and see whether the data fits the story or not. If we scroll up we find data from the early 18th century on the relative price of labor wages to the relative price of energy. In these cities, Newcastle, London, Amsterdam, Strasbourg, Paris and Beijing and as you can see, in Britain the relative cost of labor to energy was highest, therefore Britain had the highest incentive to automate to replace labor. So the data is consistent with the theoretical story that I told you. Now let me end with this important question: is this simple model of isocost lines and technology useful to think about the next industrial revolution everybody is talking about, the upcoming artificial intelligence revolution? Thanks to the advancements in big data and computer sciences everyone is excited about driverless cars, 3-D printers, a new generation of industrial robots that are going to replace our physical and cognitive abilities. This upcoming revolution poses a series of important questions to think about, for instance is AI going to impact all the sectors or countries in a uniform way? Who will be the main winners and losers of this revolution within societies? And finally, can we shape this revolution? Can governments shape the advancements in AI in a way that we end up with technologies that benefit most people in the society? Now I believe the simple model of isocost lines and technology can help us to think about this question, so I'll leave the rest of it to you. Thank you.