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I was once told by a typesetter that paragraphs have always been separated by indenting the first line.

Then along came Microsoft Word, which inserted vertical space between paragraphs instead. Now most people think it's supposed to be that way.

I have no citation for this, but have noticed that novels in print use indentation rather than spacing.

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this is not strictly true, but it is a postwar convention that was popularized by Penguin books [1] and its 'composition rules' which were canonized by jan tschichold. The more common 'tradition', which Typeplate ignores, is that you indent only if you do not insert vertical space between lines. The idea being that you only need to do one visual 'thing' to make a block of text distinct from another, why do two?

the earlier tradition was that you'd add a pilcrow or some other distinctive mark at the start of a logical paragraph mid-line so that as little paper (which was either baby cow parchment or made of precious linen) was wasted on whitespace. For an example, look at a 42 line bible [2] or eric gill's book on typography [3].

[1]: http://www.thenewgraphic.com/2012/06/jan-tschichold-penguin-... [2]: http://www.hrc.utexas.edu/exhibitions/permanent/gutenbergbib... [3]: http://www.olivertomas.com/books/eric-gills-an-essay-on-typo...

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