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Econ210a:IntroductiontoEconomicHistoryBarryJ.EichengreenandJ.BradfordDeLong
Spring2016TheRoomFormerlyKnownasEvans608-7(Evans648)
W1-3,January27,2016
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RevolutionsinTime
BarryJ.EichengreenandJ.BradfordDeLong
Spring2016TheRoomFormerlyKnownasEvans608-7(Evans648)
W1-3,January27,2016
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Readings:January27.RevolutionsinTime:LiteracyRevolution,CommercialRevolution,AgriculturalRevolution,StateandMarket
Building(DeLong)• KarlMarx(1867),"TheSecretofPrimitiveCapitalAccumulation,"Capital,Vol.1,PartVIII,Chapters26-32http://tinyurl.com/dl20090112k
• JeremiahE.Dittmar(2011),“InformationTechnologyandEconomicChange:TheImpactofthePrintingPress,”QuarterlyJournalofEconomics126(August):1133–1172.http://qje.oxfordjournals.org/content/126/3/1133.abstract
• DaronAcemoglu,SimonJohnson,andJamesRobinson(2005),"TheRiseofEurope:AtlanticTrade,InstitutionalChange,andEconomicGrowth,"AmericanEconomicReview95:3,pp.546-79.http://www.jstor.org/stable/i387682
• RobertAllen(2008),“TheNitrogenHypothesisandtheEnglishAgriculturalRevolution:ABiologicalAnalysis,”JournalofEconomicHistory68,pp.182-210.http://journals.cambridge.org/action/displayAbstract?fromPage=online&aid=1741020&fulltextType=RA&fileId=S0022050708000065
• J.BradfordDeLongandAndreiShleifer(1993),“PrincesandMerchants:EuropeanCityGrowthBeforetheIndustrialRevolution,”JournalofLaw&Economics36,pp.671-702.http://www.jstor.org/stable/725804
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1348andAllThat…• StephenBroadberry(2013):“AccountingfortheGreatDivergence”http://
tinyurl.com/dl20140114a
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IstheKeytotheIndustrialRevolutionFoundintheInstitutionsoftheCommercialRevolution?• Conventional:CR—>IR—>MEG• Andtodaywehavefive“yes”es,atleastforthe“institutionalchangesareimportantandsetthestage”view…• RobertAllen(2008):Biologyplaysahugerole…• KarlMarx(1867):Yes,thekeyiscapitalism!• JeremiahE.Dittmar(2011):Thespreadofinformationdisseminationoftechnologiesisabigdeal…
• DaronAcemoglu,SimonJohnson,andJamesRobinson(2005)andJ.BradfordDeLongandAndreiShleifer(1993):Itisapolitical-economyinterest-groupstory…
• Butwealsohavea“no”frompeoplelikeGregClark
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GregClarkBeingContrarian• Therewerelotsoftechnological“revolutions”beforetheIndustrialRevolution
• Buttheyallpeteredoutbecauseoflowprice-elasticityofdemand
• Coal-steam-cotton-machinery-textiles-railsweredifferent• Buteventhatwasreachinglimitstogrowthby1870orso…
• TheclassicBritishIndustrialRevolutionmoreacomparative-advantageconcentrationofglobalmanufacturingthantruemoderneconomicgrowth…
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Transport!• GregoryClark(2001),“TheSecretHistoryoftheIndustrialRevolution”
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Printing!
• GregoryClark(2001),“TheSecretHistoryoftheIndustrialRevolution”
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ANo-Longer-Quite-so-MalthusianEconomy• WorldGDPgrowsby:
• 0.03%/year—0.9%/generation—from8000BCto1000BC
• 0.09%/year—2.7%/generation—from1000BCto1500AD
• 0.23%/year—7%/generation—from1500to1800
• NolongerquiteMalthusian,atleastinsome(important)places…
• Whenceandwhyandwherethespeedup?
• SungChinaontheeveoftheMongolconquestproducedasmuchironasBritainin1750
• Capitalof4000BCisUr,of1000BCBabylon,of400BCAthens,of400ADConstantinople,of800ADBaghdad,of1100ADHangzhou,of1600ADBeijingorDelhiorConstantinopleorIsfahan…
• Andyet…
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RobertAllen(2008):TheBiologyofAgriculturePlaysaHugeRole…
• RobertAllen(2008),“TheNitrogenHypothesisandtheEnglishAgriculturalRevolution:ABiologicalAnalysis,”JournalofEconomicHistory68,pp.182-210.http://journals.cambridge.org/action/displayAbstract?fromPage=online&aid=1741020&fulltextType=RA&fileId=S0022050708000065• Ricevs.dry-scrubwheat(plusolive,grape)vs.temperate-borealforestwheat(cf.:FernandBraudel)
• Animal-centeredagriculture• Evidence-basedagriculture
• Thedifficultyofdoingevidence-basedagriculture• Theimportanceofthecheapaxe• Theimportanceoftheheavyplow
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Allen:DoYouDareMaketheInvestmentinSwitchingSystems?
• Whatisthecostofswitchingtocroprotation?
• Giveupmorethan15%ofyourcropforhowmanyyears?
• Whywouldpeoplebefore1650haveeverswitchedfromtwotothreefields?
• Thisis500yearsofeconomy-widetechnologicalprogresshere…
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KarlMarx(1867):TheKeyis“Capitalism”—MarketEconomyPlus…
• KarlMarx(1867),"TheSecretofPrimitiveCapitalAccumulation,"Capital,Vol.1,PartVIII,Chapters26-32http://tinyurl.com/dl20090112k
• “Wehaveseenhowmoneyischangedintocapital;howthroughcapitalsurplus-valueismade,andfromsurplus-valuemorecapital.Buttheaccumulationofcapitalpresupposessurplus-value;surplus-valuepresupposescapitalisticproduction;capitalisticproductionpresupposesthepre-existenceofconsiderablemassesofcapitalandoflabourpowerinthehandsofproducersofcommodities.Thewholemovement,therefore,seemstoturninaviciouscircle,outofwhichwecanonlygetbysupposingaprimitiveaccumulation(previousaccumulationofAdamSmith)precedingcapitalisticaccumulation;anaccumulationnottheresultofthecapitalisticmodeofproduction,butitsstartingpoint…”
• “Theimmediateproducer,thelabourer,couldonlydisposeofhisownpersonafterhehadceasedtobeattachedtothesoil…theslave,serf,orbondsmanofanother.Tobecomeafreeselleroflabourpower…hemustfurtherhaveescapedfromtheregimeoftheguilds….Thehistoricalmovementwhichchangestheproducersintowage-workers…theiremancipationfromserfdomandfromthefettersoftheguilds…aloneexistsforourbourgeoishistorians…”
• “But…thesenewfreedmen…[werealso]robbedofalltheirownmeansofproduction,andofalltheguaranteesofexistenceaffordedbytheoldfeudalarrangements.Andthehistoryofthis,theirexpropriation,iswrittenintheannalsofmankindinlettersofbloodandfire…”
• Workersmustworkforwages…• Capitalistsmustinvestandaccumulate…
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JeremiahDittmar(2011):ThePrintingPressasanAgentofChange…
• JeremiahE.Dittmar(2011),“InformationTechnologyandEconomicChange:TheImpactofthePrintingPress,”QuarterlyJournalofEconomics126(August):1133–1172.http://qje.oxfordjournals.org/content/126/3/1133.abstract• Informationeconomicsvisitsthe1500s…• Howmuchofadifferencecanasmallsector—1%ofGDP—actuallymake?
• Whataretheeconomicbenefitsofbooks,anyway?• Whatdoesthistellusaboutthemarketsystemasoptimalsocietalstructure?
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JeremiahDittmar(2011):ThePrintingPressasanAgentofChange…II
• Dittmar’sTest:Compare(especiallyovertheperiod1500–1600)populationgrowthofcitiesthatdidanddidnotadopttheprintingpressbefore1500.
• WhyareDIttmar’sIVestimatessobig?0.6percentury—aneardoubling—asopposedto0.2?
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DeLongandShleifer(1993)andAcemogluetal.(2005):MerchantsRule!OK?
• J.BradfordDeLongandAndreiShleifer(1993),“PrincesandMerchants:EuropeanCityGrowthBeforetheIndustrialRevolution,”JournalofLaw&Economics36,pp.671-702.http://www.jstor.org/stable/725804• Inwhichgenreisthispaper?• The“freedomofthecitizen”genre…• The“characteroftheelites”genre…
• DaronAcemoglu,SimonJohnson,andJamesRobinson(2005),"TheRiseofEurope:AtlanticTrade,InstitutionalChange,andEconomicGrowth,"AmericanEconomicReview95:3,pp.546-79.http://www.jstor.org/stable/i387682• Butwheredoeslimitedgovernmentcomefrom?• Atlantictradeshockasanidentifyinginstrument
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DeLongandShleifer• Particularinstitutionofinterest• Absolutistversuslimitedgovernment.• (NotsureIwouldsay“limited”—Britishgovernmentwasverygoodatstealingstuffthatdidnotbelongtothegentry/merchantaristocracy—that’swhatMarxisallabout)
• Whatisassumeddirectionofeffectandmechanism?• Directionofcausation?
• Urbanizationasindicator:Isthissensible?
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DeLongandShleiferII• It’sabigdeal…
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DeLongandShleiferIII• NorthernItalyin1500-1650is“surprising”asabsolutistthen
• England1650-1800is“surprising”asnon-absolutistthen
• WTF?!withtheItalianurbanboom1050-1200
• Econometricproblems• Normaldistribution—wehaveonly45observations,and30degreesoffreedom…
• Thefile-drawerproblem…
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Acemoglu,Johnson,andRobinson• DaronAcemoglu,SimonJohnson,andJamesRobinson(2005),"TheRiseofEurope:AtlanticTrade,InstitutionalChange,andEconomicGrowth,"AmericanEconomicReview95:3,pp.546-79.http://www.jstor.org/stable/i387682• Whatarethedirecteffectsof“Atlantictrade”?• WhatdoAJRclaimaretheindirecteffects?• Whydotheythinktheindirecteffectsaremateriallylarge?
• Whatwouldconvinceyoutheywereright(orwrong)?
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Acemoglu,Johnson,andRobinson:UrbanizationandAtlanticTrade
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AJR
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AJR
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AJR
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AJR
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ModernEconomicGrowth:Preview
BarryJ.EichengreenandJ.BradfordDeLong
Spring2016TheRoomFormerlyKnownasEvans608-7(Evans648)
Previewofissuesfordiscussionon:W1-3,February3,2016
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Readings• 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
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WhatIstoBeExplained(1)?• (1)OriginsofModernEconomicGrowth:
• WehavemarketeconomiesthroughoutEurasia,atleast—i.e.,placeswherebecomingamerchantdrawingonsophisticatedartisanalproducersisaroadtowealth
• Wehavegovernmentssmartenough—orconstrainedenough—nottokillthegoosethatlaysthegoldeneggs,atleastnotquickly
• Wehavewhatlookslikeworldwidegrowthatafasterpaceafter1500—onethatcallsforthademographicresponse
• Post-1800intheNorthAtlanticwehavegrowththatoutrunsanypossibledemographicresponse,andtriggersthedemographictransition.
• Why?Andhow?
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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…
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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?
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RobertAllen:Rule,Brittania!II• Britain—notLondonsomuchasNewcastle,andManchester—hadauniquelycheaprealpriceofenergy
• Why?Coalatthesurface?• Why?Coalonnavigablewater?
• Why?Wetcoalmines?• OnlyinBritainwouldthefirstgenerationofsteamenginesbeboth(a)usefuland(b)profitable
• Eighteenth-centuryLancashiretheonlyescapefromMalthusianagrarianpoverty
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StephenBroadberry:WaitaMinute!WhatHappenedtoChina?
• StephenBroadberry(2013),“AccountingfortheGreatDivergence,”unpublishedmanuscript,LondonSchoolofEconomics,http://tinyurl.com/dl20140114a
• Nobodyin300ADwouldhaveseenwesternEuropeasthefuture.
• Samefor800,1100,even1500
• Lookatregions,notnations,andwhatdowesee?
• Littledivergences,andagreatdivergence…
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StephenBroadberry:WaitaMinute!WhatHappenedtoChina?II
• LittledivergenceinwesternEurope:• Property,politicaleconomy,andEngland-Holland-northernFrancevs.Spain-Portugal-Italy
• LittledivergenceinAsia:• Mongolconquests,kamikaze,latemarriageinJapan,femaleparticipationandindustriousrevolution
• GreatdivergencebetweenEuropeandAsia:• BubonicPlague• Tradeplusmaritimeconquestplusinstitutions
• Animal-basedagriculture• Marriagepatterns
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MichaelKremer:TwoHeadsAreBetterthanOne
• MichaelKremer(1993),"PopulationGrowthandTechnologicalChange:OneMillionB.C.to1990",QuarterlyJournalofEconomics108:3(August),pp.681- 716http://www.jstor.org/stable/2118405
• Eventualmoderneconomicgrowthinevitable,andinescapable
• MajordeterminantsofwhenMEGtakeshold:• improvementsincommunication-diffusion,
• inscience-innovation,and
• inthetriggersofthedemographictransition
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MichaelKremer:TwoHeadsAreBetterthanOneII
• Question:IsKremer’stheorythattwo-heads-are-better-than-oneanadequateaccountofthedriversofproductivitygrowth?
• Question:IsWHABtOplusdemographictransitionanadequateaccountofthedynamicsofper-capitarealincomes?
• Question:IfKremerisinadequate,howshouldweimproveit?
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BillNordhaus:RocketShiptotheSingularity• WilliamD.Nordhaus.1997.“DoReal-OutputandReal-WageMeasuresCaptureReality?TheHistoryofLightingSuggestsNot.”InTheEconomicsofNewGoods,editedbyTimothyF.BresnahanandRobertJ.Gordon.Chicago:UniversityofChicagoPressforNBER,pp.29–66.http://www.nber.org/chapters/c6064
• A5000-folddecreaseinthepriceoflightsince1800• Thisissomethingthatchurnedupbetween1%and5%ofhouseholdbudgetsbackin1800
• 100-foldCPIbiasinthepriceoflightsince1800
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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?
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BobGordon:PowerandMatterManipulationandFlushToilets
• RobertJ.Gordon.2014.“TheDemiseofU.S.EconomicGrowth:Restatement,Rebuttal,andReflections.”NBERWorkingPaperNo.19895(February).www.nber.org/papers/w19895
• ModernEconomicGrowthain’tgoingtocontinue
• It’sreallyallabout:• Nonhumancombustion-basedenergysources
• Useofenergyandautomaticmachineryformattermanipulation
• Flushtoilets• EverythingelsethatisimportantissubjecttoBaumol’sdisease
• TheTrachtenberg/Nordhauscounter…• TheVariancounter…
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MemoQuestionforModernEconomicGrowth
• Economicstendstoviewgrowthasacontinuousanddiffuseprocess:ifonefirmdoesnotsolvetheproblemofhowtoefficientlyutilizeresources,otherswillanddrivethefirstoutofbusiness;ifonetechnologicalveinplaysitselfout,energywillfocusonothers.Thepapersthisweekarguedifferent.Theyargueeitherthatsomeuniqueandparticularinstitutionsandtechnologiesmatteralot--or,implicitlythattheydonot,foritisotherinstitutionsortechnologiesorsimplytheaggregatestateoftheeconomythatmattersthemost.Whatkindsofevidencenotpresentedinthisweek'sreadingmightleadyoutocomedownononeortheotherofthemany,manysidesinthisdebate?