ecn 110b { world economic history since the industrial

Introduction

ECN 110B – World Economic History Since theIndustrial Revolution

J. Parman (UC-Davis) World Economic History, Spring 2011 March 28, 2011 1 / 40

Contact info, office hours

John Parman (instructor)Email: [email protected]: 1125 SSHOffice hours: M, W 3pm-5pm

Andrew Foote (TA)Email: [email protected]: 120 SSHOffice hours: TBA

Brock Smith (TA)Email: [email protected]: 132 SSHOffice hours: TBA


General Details

We will have a course website (smartsite.ucdavis.edu)

The syllabus, lecture slides, old exams and extrareadings will all be posted to the site (under the’Resources’ section)

Lecture slides will typically be posted the morning ofthe lecture

Try accessing smartsite at some point in the nextcouple of days to make certain you have access


Prerequisites

Officially, the prerequisites are ECN 1A, ECN 1B andECN 110A

You should have taken ECN 1A and 1B, I’ll assume acertain knowledge of economic terms and concepts fromthese courses

It is fine if you haven’t taken 110A (although the firstweek may be slightly easier if you have taken 110A)


Wait list, open campus, permission to add, etc.

The economics department does not issue PTA numbers

Everyone gets into the course through the waitlist

Be careful about switching sections, paying fees late,etc.

Open campus students should talk to me after class


Grading

Grades are based on two midterms (each worth 25% ofthe overall grade) and one final exam (worth 50%)

The final course grades will be curved in line with theecon department rules (the average GPA for the classwill be 2.7)

There are no makeup exams, everyone must take theexam at the regularly scheduled time

You have one week after an exam is first returned toraise any grading issues


Readings

The required text for the course will be “A Farewell toAlms” by Gregory Clark:

There will be additional required readings posted onSmartsite (these will be shorter articles)

I’ll also reference other readings that aren’t required butare worth exploring if any of the topics catch yourinterest


Schedule

Week of Monday Wednesday Friday

March 28 lecture lecture no classApril 4 lecture lecture lectureApril 11 lecture lecture Midterm 1April 18 lecture lecture lectureApril 25 lecture lecture lectureMay 2 lecture lecture Midterm 2May 9 lecture lecture lectureMay 16 lecture lecture lectureMay 23 lecture lecture lectureMay 30 Holiday lecture –

Final Exam: Monday, June 6, 8am-10am


What The Course is About

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US Growth, 1790-2008


Was Anything Happening in the Malthusian World?


Plenty Happened in the Malthusian World

Major technological advances: fire, tools, metalworking, canals, windmills, explosives, domestication ofplants and animals, math, astronomy, physics, etc.

Exploration and trade across long distances occurred

Empires came and went

Some people became very, very wealthy but overallincome per capita did not rise


Explaining the Malthusian Trap

The first part of the course will be explaining thisMalthusian world

Why did income per person stay constant for so long?

Why weren’t technological advances leading toeconomic growth?

Why didn’t the rise of empires, international trade, etc.lead to increases in average income?


Escaping the Malthusian Trap

The Industrial Revolution marked a break from theMalthusian Trap

The second part of the course will be explaining whatthe Industrial Revolution actually was

We’ll cover the technological improvements but thesewere just a part of what happened

Other important features of the revolution:

Agricultural RevolutionIndustrious RevolutionDemographic Transition


Escaping the Malthusian Trap

Why was it England that led this break from theMalthusian world?

Why did the Industrial Revolution happen when it did?

Why didn’t it happen sooner in other parts of the world?

We’ll consider a variety of explanations:

InstitutionsNatural ResourcesGeographyEvolutionary


The Great Divergence


The Great Divergence

What were the benefits of industrialization for WesternEuropean countries?

Which segments of society benefited the most?

Why did other countries not benefit from the IndustrialRevolution?

How do we explain the divergence in per capita incomeacross countries since the Industrial Revolution?


Explaining the Malthusian Economy


Population in the Modern World


Population in the Preindustrial World

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Population in the Preindustrial World

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Surviving children per

womanNorway 0.4 0.88 2.095Southern Italy 4.75 7.9 2.061France 17 27.2 2.056England 5.8 8.7 2.049Northern Italy 7.75 10.2 2.033Iceland 0.084 0.047 1.93


Explaining Stationary Populations

One of the key differences between the preindustrialworld and the modern world was that population sizewas pretty much static

It turns out that there is a very simple economicargument for why this was the case

The argument depends on three assumptions about howpreindustrial economies worked:

Each society had a birth rate increasing with livingstandardsEach society had a death rate decreasing with livingstandardsLiving standards decline as population increases


The Birth Rate Schedule

The birth rate is just the number of births per year perthousand people

For example, there were 4,059,000 births in the UnitedStates in 2000 and the US population was 281,421,906:

b2000 =4059000281421906

1000

= 14.4

We assume that in the preindustrial world, birth ratesrose with material living standards

Why? A wealthier family could better afford anadditional child, a healthier woman was more likely tohave a successful pregnancy, ...


The Birth Rate Schedule


The Death Rate Schedule

The death rate is just the number of deaths per yearper thousand people

For example, there were 2,403,000 deaths in the UnitedStates in 2000 and the US population was 281,421,906:

d2000 =2403000281421906

1000

= 8.5

We assume that in the preindustrial world, death ratesfell with material living standards

Why? Higher levels of consumption (better food,clothing, shelter, etc.) helps you live longer


The Death Rate Schedule


Stationary Population

Notice that for our US figures, the birth rate was 14.4births per 1,000 people per year and the death rate was8.5 deaths per 1,000 people per year

This means that each year, more people are being bornthan are dying so population must be growing

Recall that the preindustrial world had almost nopopulation growth

So in the preindustrial world, the birth rate roughlyequaled the death rate (the income per person at whichthis occurs is called the subsistence income)



But why a stationary population?

Because of the technology curve relating population toincome per person

With some resources fixed (for example land), themarginal product of an extra person is positive butsmaller than the marginal product of the previous person

This means that while total output increases aspopulation increases, it increases at a slower rate thanpopulation


Diminishing Marginal Product of Workers


The Technology Curve


The Malthusian Equilibrium


Moving to the Malthusian Equilibrium

Suppose we were at an income per person greater thanthe equilibrium level

Then births would exceed deaths leading to populationgrowth

As the population grows, we move up and to the leftalong the technology curve

This leads to lower income per person increasing thedeath rate and decreasing the birth rate

Things stop moving once the birth rate equals thedeath rate



Notice that equilibrium income per person had nothingto do with the level of technology

Equilibrium income per person is determined entirely bythe birth rate and death rate

The technology curve mattered for two reasons:

The downward slope told us how income per personwould change if the population was growing or shrinkingThe position determined the equilibrium population level


The Effects of a Change in Technology

Suppose that there is an improvement in technology (weinvent the wheel). What happens?

The advance in technology will shift the technologycurve to the right

In the short run (before population adjusts), this meansgreater income per person

Births will rise, deaths will fall and the population willgrow

The economy returns to the old income per person onlyat a new higher population

So an improvement in technology can allow for greaterpopulation density but doesn’t improve average income perperson


The Effects of a Change in Technology


The Effects of a Change in the Birth or Death Schedules

A shift in the birth or death schedules can changeequilibrium income per person. Suppose that the plaguecomes along, what happens?

The rise in disease will shift the death rate curve up(more deaths at any given income level)

At the current income per person, deaths will nowoutnumber births and the population will decrease

As the population decreases, income per person will riseuntil deaths once again equal births

The economy settles at a new higher income per personand a new lower population


A Shift in the Death Rate Curve


ecn 110b { world economic history since the industrial

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