Econ210a:IntroductiontoEconomicHistoryBarryJ.EichengreenandJ.BradfordDeLong

Spring2016TheRoomFormerlyKnownasEvans608-7(Evans648)

W1-3,January27,2016

RevolutionsinTime

BarryJ.EichengreenandJ.BradfordDeLong

Spring2016TheRoomFormerlyKnownasEvans608-7(Evans648)

W1-3,January27,2016

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

1348andAllThat…• StephenBroadberry(2013):“AccountingfortheGreatDivergence”http://

tinyurl.com/dl20140114a

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

GregClarkBeingContrarian• Therewerelotsoftechnological“revolutions”beforetheIndustrialRevolution

• Buttheyallpeteredoutbecauseoflowprice-elasticityofdemand

• Coal-steam-cotton-machinery-textiles-railsweredifferent• Buteventhatwasreachinglimitstogrowthby1870orso…

• TheclassicBritishIndustrialRevolutionmoreacomparative-advantageconcentrationofglobalmanufacturingthantruemoderneconomicgrowth…

Transport!• GregoryClark(2001),“TheSecretHistoryoftheIndustrialRevolution”

Printing!

• GregoryClark(2001),“TheSecretHistoryoftheIndustrialRevolution”

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…

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

Allen:DoYouDareMaketheInvestmentinSwitchingSystems?

• Whatisthecostofswitchingtocroprotation?

• Giveupmorethan15%ofyourcropforhowmanyyears?

• Whywouldpeoplebefore1650haveeverswitchedfromtwotothreefields?

• Thisis500yearsofeconomy-widetechnologicalprogresshere…

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…

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?

JeremiahDittmar(2011):ThePrintingPressasanAgentofChange…II

• Dittmar’sTest:Compare(especiallyovertheperiod1500–1600)populationgrowthofcitiesthatdidanddidnotadopttheprintingpressbefore1500.

• WhyareDIttmar’sIVestimatessobig?0.6percentury—aneardoubling—asopposedto0.2?

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

DeLongandShleifer• Particularinstitutionofinterest• Absolutistversuslimitedgovernment.• (NotsureIwouldsay“limited”—Britishgovernmentwasverygoodatstealingstuffthatdidnotbelongtothegentry/merchantaristocracy—that’swhatMarxisallabout)

• Whatisassumeddirectionofeffectandmechanism?• Directionofcausation?

• Urbanizationasindicator:Isthissensible?

DeLongandShleiferII• It’sabigdeal…

DeLongandShleiferIII• NorthernItalyin1500-1650is“surprising”asabsolutistthen

• England1650-1800is“surprising”asnon-absolutistthen

• WTF?!withtheItalianurbanboom1050-1200

• Econometricproblems• Normaldistribution—wehaveonly45observations,and30degreesoffreedom…

• Thefile-drawerproblem…

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)?

Acemoglu,Johnson,andRobinson:UrbanizationandAtlanticTrade

AJR

AJR

AJR

AJR

ModernEconomicGrowth:Preview

BarryJ.EichengreenandJ.BradfordDeLong

Spring2016TheRoomFormerlyKnownasEvans608-7(Evans648)

Previewofissuesfordiscussionon:W1-3,February3,2016

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

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…

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?

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…

StephenBroadberry:WaitaMinute!WhatHappenedtoChina?II

• LittledivergenceinwesternEurope:• Property,politicaleconomy,andEngland-Holland-northernFrancevs.Spain-Portugal-Italy

• LittledivergenceinAsia:• Mongolconquests,kamikaze,latemarriageinJapan,femaleparticipationandindustriousrevolution

• GreatdivergencebetweenEuropeandAsia:• BubonicPlague• Tradeplusmaritimeconquestplusinstitutions

• Animal-basedagriculture• Marriagepatterns

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

MichaelKremer:TwoHeadsAreBetterthanOneII

• Question:IsKremer’stheorythattwo-heads-are-better-than-oneanadequateaccountofthedriversofproductivitygrowth?

• Question:IsWHABtOplusdemographictransitionanadequateaccountofthedynamicsofper-capitarealincomes?

• Question:IfKremerisinadequate,howshouldweimproveit?

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

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: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…

MemoQuestionforModernEconomicGrowth

• Economicstendstoviewgrowthasacontinuousanddiffuseprocess:ifonefirmdoesnotsolvetheproblemofhowtoefficientlyutilizeresources,otherswillanddrivethefirstoutofbusiness;ifonetechnologicalveinplaysitselfout,energywillfocusonothers.Thepapersthisweekarguedifferent.Theyargueeitherthatsomeuniqueandparticularinstitutionsandtechnologiesmatteralot--or,implicitlythattheydonot,foritisotherinstitutionsortechnologiesorsimplytheaggregatestateoftheeconomythatmattersthemost.Whatkindsofevidencenotpresentedinthisweek'sreadingmightleadyoutocomedownononeortheotherofthemany,manysidesinthisdebate?