Econ210a:IntroductiontoEconomicHistoryBarryJ.EichengreenandJ.BradfordDeLong
Spring2016TheRoomFormerlyKnownasEvans608-7(Evans648)
W1-3,January27,2016
ModernEconomicGrowth
BarryJ.EichengreenandJ.BradfordDeLong
Spring2016TheRoomFormerlyKnownasEvans608-7(Evans648)
W1-3,February3,2016
ReadingsforModernEconomicGrowth• MichaelKremer(1993),"PopulationGrowthandTechnologicalChange:OneMillionB.C.to1990",QuarterlyJournalofEconomics108:3(August),pp.681- 716http://www.jstor.org/stable/2118405
• RobertC.Allen(2011),“WhytheIndustrialRevolutionWasBritish:Commerce,InducedInventionandtheScientificRevolution,”EconomicHistoryReview64,pp.357-384.http://onlinelibrary.wiley.com/doi/10.1111/j.1468-0289.2010.00532.x/pdf
• StephenBroadberry(2013),“AccountingfortheGreatDivergence,”unpublishedmanuscript,LondonSchoolofEconomics,http://tinyurl.com/dl20140114a
• WilliamD.Nordhaus.1997.“DoReal-OutputandReal-WageMeasuresCaptureReality?TheHistoryofLightingSuggestsNot.”InTheEconomicsofNewGoods,editedbyTimothyF.BresnahanandRobertJ.Gordon.Chicago:UniversityofChicagoPressforNBER,pp.29–66.http://www.nber.org/chapters/c6064
• RobertJ.Gordon.2014.“TheDemiseofU.S.EconomicGrowth:Restatement,Rebuttal,andReflections.”NBERWorkingPaperNo.19895(February).www.nber.org/papers/w19895
http://www.jstor.org/stable/2118405http://onlinelibrary.wiley.com/doi/10.1111/j.1468-0289.2010.00532.x/pdfhttp://tinyurl.com/dl20140114ahttp://www.nber.org/chapters/c6064http://www.nber.org/papers/w19895
MemoQuestionforModernEconomicGrowth
• Economicstendstoviewgrowthasacontinuousanddiffuseprocess:ifonefirmdoesnotsolvetheproblemofhowtoefficientlyutilizeresources,otherswillanddrivethefirstoutofbusiness;ifonetechnologicalveinplaysitselfout,energywillfocusonothers.Thepapersthisweekarguedifferent.Theyargueeitherthatsomeuniqueandparticularinstitutionsandtechnologiesmatteralot--or,implicitlythattheydonot,foritisotherinstitutionsortechnologiesorsimplytheaggregatestateoftheeconomythatmattersthemost.Whatkindsofevidencenotpresentedinthisweek'sreadingmightleadyoutocomedownononeortheotherofthemany,manysidesinthisdebate?
WhatIstoBeExplained(1)?• (1)OriginsofModernEconomicGrowth:
• WehavemarketeconomiesthroughoutEurasia,atleast—i.e.,placeswherebecomingamerchantdrawingonsophisticatedartisanalproducersisaroadtowealth
• Wehavegovernmentssmartenough—orconstrainedenough—nottokillthegoosethatlaysthegoldeneggs,atleastnotquickly
• Wehavewhatlookslikeworldwidegrowthatafasterpaceafter1500—onethatcallsforthademographicresponse
• Post-1800intheNorthAtlanticwehavegrowththatoutrunsanypossibledemographicresponse,andtriggersthedemographictransition.
• Why?Andhow?
WhatIstoBeExplained(2)and(3)?• (2)PaceofModernEconomicGrowth
• Howfasthasitbeen,really?• Doquantitativeindicesofoutputpercapitahaveanymeaningoverextendedperiodsoftime?
• Howmanysingularities?• (3)DurationofModernEconomicGrowth
• Gordonvs.Varian• Gordon:it’sallaboutmattermanipulation,powergenerationandapplication,andflushtoilets—andthat’sover…
• Varian:wecombinephysicalstuff,energyappliedtomatter-manipulation,information,andcommunicationtogenerateutility—andthat’sjustbeginning…
MichaelKremer:TwoHeadsAreBetterthanOne
• MichaelKremer(1993),"PopulationGrowthandTechnologicalChange:OneMillionB.C.to1990",QuarterlyJournalofEconomics108:3(August),pp.681- 716http://www.jstor.org/stable/2118405
• Malthusianpopulationdynamics• Plusapossible(eventual)demographictransition
• Innovation—changeinlogtechnology—proportionaltopopulation
http://www.jstor.org/stable/2118405
MichaelKremer:TwoHeadsAreBetterthanOne
• Themorecomplexmodelgeneratesverystrongconclusions:
• Eventualmoderneconomicgrowthinevitable,andinescapable
• MajordeterminantsofwhenMEGtakeshold:• improvementsincommunication-diffusion,
• inscience-innovation,and
• inthetriggersofthedemographictransition
• Theconclusionsarestrong,butonlyasstrongasthemodel.Howstrongisthemodel?
MichaelKremer:TwoHeadsAreBetterthanOneII
• Question:IsKremer’stheorythattwo-heads-are-better-than-oneanadequateaccountofthedriversofproductivitygrowth?
• Question:IsWHABtOplusdemographictransitionanadequateaccountofthedynamicsofper-capitarealincomes?
• Question:IfKremerisinadequate,howshouldweimproveit?
BillNordhaus:MeasuredRealProductivity• WilliamD.Nordhaus.1997.“DoReal-OutputandReal-WageMeasuresCaptureReality?TheHistoryofLightingSuggestsNot.”InTheEconomicsofNewGoods,editedbyTimothyF.BresnahanandRobertJ.Gordon.Chicago:UniversityofChicagoPressforNBER,pp.29–66.http://www.nber.org/chapters/c6064
• Conventionalmeasures:a15-foldincreaseinrealfirst-worldGDP/capitaandproductivity
http://www.nber.org/chapters/c6064
BillNordhaus:RocketShiptotheSingularity
• A5000-folddecreaseinthepriceoflightsince1800
• Thisissomethingthatchurnedupbetween1%and5%ofhouseholdbudgetsbackin1800
• 100-foldCPIbiasinthepriceoflightsince1800
BillNordhaus:RocketShiptotheSingularityII
• A20-foldora30,000-foldincreaseinrealwagesintheNorthAtlanticsince1800?
• Nordhauscalculatesthat—backin1991—28%ofconsumptionwas“run-of-the-mill”,36%hadbeen“seismically-active”since1800,and37%wasinsectorsthathadnoeffectiveaffordableequivalentin1800
• Dixit-Stiglitztellsusthatwemultiply“ordinary”utilitiesbythenumberofvarieties.Whichwaydoesthatmisleadus?
BobGordon:TechnologicalExhaustionOccurredFortyYearsAgo
• RobertJ.Gordon.2014.“TheDemiseofU.S.EconomicGrowth:Restatement,Rebuttal,andReflections.”NBERWorkingPaperNo.19895(February).www.nber.org/papers/w19895
• “Thereisnoneedtoforecastthatinnovationinthefuturewill‘falter’….Theslowdownintherateofproductivitygrowth…occurredmorethanfourdecadesago….
• “[My]forecastassumesthatinnovationsinthenext40yearswillbedevelopedatthesamepaceasthelastfourdecades,butreasonsforskepticismareprovidedforthatprediction….
• “The…1870and1900,withcontinuingbenefitsto1972…“SecondIndustrialRevolution”(IR#2)….growthrateofAmericanproductivity…[of]2.36percentperyear,comparedto1.59percentperyearsince1972.Thatpermanentdeclineof
http://www.nber.org/papers/w19895
BobGordon:PowerandMatterManipulationandFlushToilets
• ModernEconomicGrowthain’tgoingtocontinue
• It’sreallyallabout:• Nonhumancombustion-basedenergysources
• Useofenergyandautomaticmachineryformattermanipulation
• Flushtoilets• EverythingelsethatisimportantissubjecttoBaumol’sdisease
• TheTrachtenberg/Nordhauscounter…
• TheVariancounter…
BobGordon:1996-2004aFlashinthePan
• ModernEconomicGrowthain’tgoingtocontinueatits1890-1972pace
• Inwhatwaysis2004-13unrepresentativeofthefuture?
• Howwouldwefigureoutwhether1996-2004or1972-1996ismorelikelygoingforward?
BobGordon:“Headwinds”• ModernEconomicGrowthain’tgoingtocontinueatits1890-1972pace
• Demographyyes…
• Buteducation,inequality,“debtfix”?
• GordonisgreatlywideninghiscritiquebeyondtheuniquenessofIR#2
BobGordon:TheEightyYearsBefore1890• InOctober,1879,ThomasEdisoncreatedthefirstworkingelectriclightbulb…• Between1890and1930theAmericanhouseholdbecamefully“networked,”replacingitspreviousisolationbyfivetypesofconnections–electricity,gas,telephone,runningwater,andsewerpipes….
• TwomonthsafterEdison’selectriclight,KarlBenzachievedthefirstreliableandworkableinternalcombustionengine…
• AnEnglishmannamedDavidEdwardHughessucceededinsendingawirelesssignalseveralhundredmetersinLondonalmosttwodecadesbeforeMarconiwonhisearliestwirelesspatents
• AtleastthreeaspectsoftheSecondIndustrialRevolutionhavereceivedlessattentionthantheydeserve…themulti-dimensionalnature…everythinghappenedallatonce….economicprogressthrough1972mainlyconsistedofconsolidatingtheincompleteaspectsofIR#2acrossmanysubsidiaryandcomplementaryinventions….
• TwocriteriahelptocapturetheuniquenessofIR#2.First,somethingcannotbemorethan100percent….Thesecond…someindicatorscannotgobelowzero…
BobGordon:TheNextFortyYears• Aswepeeroutintothefuture,theachievementsofthepast40yearssetahurdlethatisdauntinglyhigh.
• Theachievementsthatmustbematchedforimportanceinthenextfourdecadesinclude:• Memorytypewriters,thepersonalcomputer,word-processingandspreadsheets
• Bar-codescanning,ATMbanking,cableandsatelliteTV• Internet,e-mail,webbrowsing,e-commerce• Google,Amazon,Wikipedia,Linked-In,Facebook• Mobilephones,smartphones,ipads• CDs,DVDs,i-tunes,Netflix,moviestreaming• Airlinereservationsystems,supply-chainmonitoringsystems,electroniclibrarycatalogs
• Whatisinstoreforthenext40years?
RobertAllen:Rule,Brittania!• RobertC.Allen(2011),“WhytheIndustrialRevolutionWasBritish:Commerce,InducedInventionandtheScientificRevolution,”EconomicHistoryReview64,pp.357-384.http://onlinelibrary.wiley.com/doi/10.1111/j.1468-0289.2010.00532.x/pdf
• Britainhaduniquelyhighrealwages• Why?NorthwestEuropeanmarriagepattern?
• Why?YeomansmallholderlegacyoftheBubonicPlague?
• Why?TheBritishnavyandtheBritishempireandthefiscal-militarystate?
http://onlinelibrary.wiley.com/doi/10.1111/j.1468-0289.2010.00532.x/pdf
RobertAllen:Rule,Brittania!II• Britain—notLondonsomuchasNewcastle,andManchester—hadauniquelycheaprealpriceofenergy
• Why?Coalatthesurface?• Why?Coalonnavigablewater?
• Why?Wetcoalmines?• OnlyinBritainwouldthefirstgenerationofsteamenginesbeboth(a)usefuland(b)profitable
• Eighteenth-centuryLancashiretheonlyescapefromMalthusianagrarianpoverty
StephenBroadberry:WaitaMinute!WhatHappenedtoChina?
• StephenBroadberry(2013),“AccountingfortheGreatDivergence,”unpublishedmanuscript,LondonSchoolofEconomics,http://tinyurl.com/dl20140114a
• Nobodyin300ADwouldhaveseenwesternEuropeasthefuture.
• Samefor800,1100,even1500
• Lookatregions,notnations,andwhatdowesee?
• Littledivergences,andagreatdivergence…
http://tinyurl.com/dl20140114a
StephenBroadberry:WaitaMinute!WhatHappenedtoChina?II
• LittledivergenceinwesternEurope:• Property,politicaleconomy,andEngland-Holland-northernFrancevs.Spain-Portugal-Italy
• LittledivergenceinAsia:• Mongolconquests,kamikaze,latemarriageinJapan,femaleparticipationandindustriousrevolution
• GreatdivergencebetweenEuropeandAsia:• BubonicPlague• Tradeplusmaritimeconquestplusinstitutions
• Animal-basedagriculture• Marriagepatterns
SlaveryandSerfdom:Preview
BarryJ.EichengreenandJ.BradfordDeLong
Spring2016TheRoomFormerlyKnownasEvans608-7(Evans648)
W1-3,February3,2016
Readings:SlaveryandSerfdom• StanleyEngermanandKennethSokoloff(1994),"FactorEndowments,InstitutionsandDifferentialPathsofDevelopmentamongNewWorldEconomies:AViewfromEconomicHistoriansoftheUnitedStates,"NBERWorkingPaperno.10066http://papers.nber.org/papers/h0066
• RobertBrenner(1976),"AgrarianClassStructureandEconomicDevelopmentinPre-IndustrialEurope",Past&Present70(Feb.),pp.30-75http://www.jstor.org/stable/650345
• StefanoFenoaltea(1984),“SlaveryandSupervisioninComparativePerspective:AModel,”JournalofEconomicHistory44:3,pp.635-668.http://www.jstor.org/stable/2124146
• SureshNaiduandNoamYuchtman.2013.“CoerciveContractEnforcement:LawandtheLaborMarketinNineteenthCenturyIndustrialBritain,”AmericanEconomicReview103(February):107–144.https://www.aeaweb.org/articles.php?doi=10.1257/aer.103.1.107
• NathanNunn(2008)“TheLong-TermEffectsofAfrica’sSlaveTrades”,QuarterlyJournalofEconomics123(February):139–176.http://www.jstor.org/stable/pdfplus/25098896.pdf
http://papers.nber.org/papers/h0066http://www.jstor.org/stable/650345http://www.jstor.org/stable/2124146https://www.aeaweb.org/articles.php?doi=10.1257/aer.103.1.107http://www.jstor.org/stable/pdfplus/25098896.pdf
WhenSomethingisValuable• Whensomethingisvaluable,youcaneither:
• Workhardtomakestuffandtradestuff• Stealit—byfraud,orforce,orthreatofforce
• Whenpropertyrightsareendogenous,whoendogenizesthem,andhow?• Aswithsomuchelse,thesehistoricalargumentsstartwiththe14thCenturyBubonicPlague• TheBrennerthesis,andtheBrennerdebate• Doeliteschoose,andwhatsystemsdotheychoose?Fenoaltea• Is“freedom”reallyfree?NaiduandYuchtman• WhatdidtheslavetradedotoAfricaintheverylongrun?Dunn• Whatdidmaintainingaslavery/debtpeonagesystemdotoLatinAmerica(andtheU.S.South)intheverylongrun?EngermanandSokoloff
RobertBrenner:TheBrennerThesis• Late-Romanconsolidationof“serfdom”• Medievalentrenchmentof“villainage”• Risingcommercialprosperity950-1350?• EffectonwesternEuropeanruralinstitutions?
• 1348andAllThat• Peasantprosperity?• Orfromlaborlordstolandlords?• Andwhen?
• Post-1100largely-Germanicmigrationtotheeast…
• Post-1500:• Thegrain-shortageNorthSeaarea
• The“SecondSerfdom”• Thesteppefrontier:
• Avars,Magyars,Mongols,theGoldenHorde…andtheHetmanate…
StefanoFenoaltea:TheLogicofExploitativeInstitutions
• Fenoaltea’slanguage:• “Supervision-intensivestructures…”
• “Fearofhunger…”• “Painincentives…”• “Optimumlevelofanxiety…”• “Paretooptimality…”• “Transaction-costeconomics…”• “Therelationsamongsupervision,painincentives,andproductivity…”
• Marxonthemarketasrealmofexchangebetweenequals:“TherealoneruleFreedom,Equality,Property,andBentham”
• Marxsaid“freedomisslavery”;isFenoalteaindangerofsaying“slaveryisfreedom”?
• Andiswarpeace?Isignorancestrength?
NaiduandYuchtman:Degreesof“Freedom”• Whensomethingisvaluable,youcaneither:
• Workhardtomakestuffandtradestuff
• Stealit—byfraud,orforce,orthreatofforce
• Aswithsomuchelse,thesehistoricalargumentsstartwiththe14thCenturyBubonicPlague—theBrennerthesis,andtheBrennerdebate
• Doeliteschoose,andwhatsystemsdotheychoose?Fenoaltea
• Is“freedom”reallyfree?NaiduandYuchtman
• WhatdidtheslavetradedotoAfricaintheverylongrun?Dunn
• Whatdidmaintainingaslavery/debtpeonagesystemdotoLatinAmerica(andtheU.S.South)intheverylongrun?EngermanandSokoloff
Nunn:ConsequencesofRum,Guns,andSlaves
• From8to6.5inthenaturallog…
• exp(1.5)=4.5• Doweneedcontrols?Whatcontrolsdoweneed?
• Doweneedinstruments?Whatareourinstruments?• Whatisourfirststage?
• Doweneedchannels?Whatareourchannels?
• WhatwouldaBayesiansayaboutthepublicationfilter?
EngermanandSokoloff:VeryLongRunConsequencesofBeingRuledbySlave-orSerf-Masters
• Differentlaborsystemsastheresultoftheluckofhistoryand“factorendowments”
• Howdoyouestablishanunfreelaborsystem?
• Howdoyoumaintainanunfreelaborsystem?
• Whatdoeshavinganunfreelaborsystemdotoeliteincentives?
• Doestheelitecontroltheeconomy?Ifso,doesitcontrolitinitslong-runinterest?
MemoQuestionforSlaveryandSerfdom• Week4MemoAssignment:SlaveryandSerfdom:InhisWealthofNations,AdamSmithconfidentlyassertedthatslaverywasuneconomic–thatincommercialsociety,manumissionwastheroadtohigherproductivitybecausethecarrotofworkingforyourselfismuchmoreefficientthanthestickofbeingwhippedbyothers.Hewentontosaythatunfreelabor–slavery,serfdom,debtpeonage,andsoon–couldonlysurvivewheretherichchosetopursuenotthepleasuresofprosperouslivingbutthepleasuresofdomination–andthatashumanityprogressedmorallyandalsoprogressedtechnologicallytoinventnewcommoditiesthisloveofdominationwoulddecline.Thisweekwehaveanumberofpapersthatconclude,asIreadthem,thatSmithwashorriblywrong.CanwerescueSmith'soptimal,Panglossianviewofthehistoricaldestinyofunfreelabor?Why,inhistory,didn'tSmith'sargumentwork?