Economics 113 Slides

J. Bradford Delong http://bradford-delong.com brad.delong@gmail.com

@delong

2017-01-30

key: https://www.icloud.com/keynote/0CDQiI21n5A2CJ4ecF16hzdJw#2017-01-30_Econ_113_Slides

Outline…• AtlanticTrade• Administrivia…• BritishColonialSettlement(andDutch)• Review:BigIdeas• TowardRevolution

iClickers:Supply,Demand,andSurplusinAtlanticTradein1700

AWesternEuropeanpopulationof80millionproducing$3/dayandanAmericaspopulationof12millionproducing$5/dayin1700.Atlantictrade2.5%ofWesternEuropeanGDP—$0.075/person/dayx80Mpeople=$6M/day• AmericasproduceNewWorldcrops—tobacco,(transplanted)sugar,(transplanted)coffee,chocolate,rum,high-qualitytimber,tobacco,indigo,silver(soldtoChinafortea),rubber,etc…

• WhichEuropecannot—Europetradesmanufacturesforthem…

iClickers:1700AtlanticTrade:Equilibrium

Price:• Per$1of“value”inEuropeinequilibrium

Quantity:• $2B/year

iClickers:1700AtlanticTrade:SupplyofNewWorldCrops

Supply:• Epidemicsandconquesthaveleftlotsoffreeland

• SimplysailtoAfricaandgrabsomeslaves—tradinggunstolocalpotentatesforthem

• MovethemtotheAmericas(orenserfAmerindians)andsetthemtowork

• Inthelongrun,constantreturnstoscaleaslongasthefreelandholdsout…

iClickers:1700AtlanticTrade:SupplyCurve

Supply:• Elastic(long-run)supplyofNewWorldproducts

• Butwhataboutdemand?

iClickers:1700AtlanticTrade:DemandCurve

Supply:P=1Demand• Backin1500,averyhealthydemandfor“spicesandsilks”at5x1700’srealprice

• P=5-2Q

iClickers:1700AtlanticTrade:Equilibrium

S:P=1D:P=5-2QWhat’sourequilibriumprice&quantity?A. P*=3,Q*=2B/yrB. P*=1,Q*=2B/yrC. P*=5,Q*=2B/yrD. noneoftheaboveE. cannotbe

determinedfrominformationgiven

iClickers:1700AtlanticTrade:What’stheProducerSurplus?

E:P*=1,Q*=2B/yrS:P=1D:P=5-2Q

A. $8B/yrB. $4B/yrC. $0D. cannotbedeterminedwith

informationgivenE. noneoftheabove

Remember:• D:P=Pd0-dxQ• S:P=Ps0+sxQ• P*=Ps0(d/(s+d))+Pd0(s/(s+d))

• Q*=(Pd0-Ps0)/(s+d)• TS=(Pd0-Ps0)

2/(2(s+d))

• CS=(d/(s+d))TS• PS=(s/(s+d))TS

iClickers:1700AtlanticTrade:What’stheConsumerSurplus?

E:P*=1,Q*=2B/yrS:P=1D:P=5-2Q

A. $8B/yrB. $4B/yrC. $0D. cannotbedeterminedwith

informationgivenE. noneoftheabove

Remember:• D:P=Pd0-dxQ• S:P=Ps0+sxQ• P*=Ps0(d/(s+d))+Pd0(s/(s+d))• Q*=(Pd0-Ps0)/(s+d)• TS=(Pd0-Ps0)

2/(2(s+d))• CS=(d/(s+d))TS• PS=(s/(s+d))TS

iClickers:1700AtlanticTrade:IsThisaCompleteWelfareAccounting?

E:P*=1,Q*=2B/yrS:P=1D:P=5-2QCS:$4B/yrPS:$0

A. YesB. noC. maybeD. cannotbedeterminedwith

informationgivenE. noneoftheabove

Remember:• D:P=Pd0-dxQ• S:P=Ps0+sxQ• P*=Ps0(d/(s+d))+Pd0(s/(s+d))• Q*=(Pd0-Ps0)/(s+d)• TS=(Pd0-Ps0)2/(2(s+d))• CS=(d/(s+d))TS• PS=(s/(s+d))TS

1700AtlanticTrade:InPerspectiveW.Europe:80Mpeople,$80B/yrGDPAmericas:12Mpeople,$20B/yrGDPAtlantictrade:$2B/yr

• Butthat$2B/yrisproviding$6B/yrinvaluetoEuropeanconsumers—$4B/yrinsurplus

• 7.5%ofvalue—important,butnotdecisive• Buthalfofthatgoes(orisabouttogo)toBritain—with13Mpeople.Nowwearemorethan20%

• AndallofthatgoestothetophalfoftheBritishpopulation:a30%boosttoresources

• Plus:inequalityandexploitationintheAmericas

• Plus:what’sgoingoninAfrica?

CatchOurBreath…• Comments? • Questions?

British Settlement (and Dutch)• Toofarsouthtohavegoodfurs• Thusnothinggreattotradefor/with

• Toofarnorthtoraisestapleplantationcrops• Exceptfortobacco• Whichkillsyoursoilstonedeadinaremarkablyshorttime

• Nogoldorsilver—andfewAmerindians• Algonquin:24Kin1607—>2Kin1669

• Wampanoag:12Kin1607—>400in1676

• Settlement…

Administrivia…• bCourses• bCoursesunacceptablebecauseitdoesnotindicateitsstate• Youcanbeloggedoutwithnosign…

• Inwhichcaseyouloseallyourworkifyoutrytosaveit…

• Wewillkeepitfor:• Assignmentturn-in• iClickergradingintegration• Messages• Homepage

• Ifthosecanbemadetowork• Otherwise,movingthingsbacktomyownwebsite…

Administrivia: Time…• Tenhours/week• Threeinlecture• Oneinsession• Sixoutside

• Reading• Reviewing• Exercising

Administrivia: Lectures…• Mixof

• Exercises• Review• Lecturesproper• Background

• Lectureslides• Lecturenotes—whentheyarereadyenoughtobeuseful(theymaynotbeuntilthenexttimeIteachthis)

Administrivia: Outside Class…• Readings

• Readingnotes• Review!

• Structuredrepetitionandreview…

• Exercises• Mapexerciseouttomorrow…

• SamplemidtermoutonFriday…

Administrivia: Cognitive Science

• Isthehomepageuseful?• Buildinganintellectualweb• Thingsyoucanuse• Thingsyouknow• Thingsyoucanremember

• Thingsyoucanrefresh• Thingsyouknowwheretolookup

• Thingsyoudonotunderstand

• Thingsyoucannotfind…

AnInvestment• Thisisaninvestmentbythehumanrace• Thevaluetousofyourgettingaliberaleducation

• ThisisaninvestmentbythestateofCalifornia• Thevaluetousofyourgettingaliberaleducation

• Thisisaninvestmentbyyouinyou• Expectedbenefits• Surprisebenefits• A“liberaleducation”• Thevaluetoyou(andus)ofa“liberaleducation”

ALiberalEducationaValuableThing• Ata$40,000/yearaverageearningslevel…

• 82.2%x$40,000/year=$32,884/year

• Gotocollege:invest$15K/yr(tuitionandfees)+$20K/yr(earningsnotmade)for5years=$175,000

• Getanextra$32,884/yearfor40yearsifyou’rethekindofpersonwhocangraduate

• Plus:freedom,depthofexperience…

CatchOurBreath…• Comments? • Questions?

Settler Population of British North American Colonies

• 1610:350• 1650:50,000• 1700:250,000• 1750:1,170,000• 1780:2,780,000• 1810:7,240,000• 1840:17,000,000• 1860:31,000,000• Union:22million(21millionfreewhite;0.4millionfreeblack;0.4millionslave)

• Confederacy:9million(5millionfreewhite;0.1millionfreeblack;3.9millionslave)

Three Important Strains• “Virginia”—tidewaterpluspiedmont

• “Kentucky”• “NewEngland”—Puritan,followedbycommercial

• Twomore:• Slavesociety:GeorgiaandCarolina,plusCaribbeanslavecolonies

• Middlecolonies:Maryland,Pennsylvania,NewJersey,andNewAmsterdam(York)

Immigration: Virginia• Aquarterofwhitepopulation“free”

• Threequartersindentured• Buthowdoyouholdontotheindentured?

• Ferociousmortality:1620-40VApopulation7K—>14Kwith25Kindenturedservants

• Slaves:300in1650—>13000in1700—>150000(40%)by1750

• WhatdidVAexport?Tobacco(andcorn)

Settlement: New England• Buildingautopia…• Godlyandprosperous…• Timber,fish,shipbuilding,shipping…• InreturnforBritishmanufacturedgoods…

• AndCaribbeanandothercolonialstaples…

• 20,000migrantsby1640—thereafternaturalincrease

• Notyoung,unskilledyoungmenonthemake…

• Notindenturedservants…• Healthierandclosertogenderbalanced…

CatchOurBreath…• Comments? • Questions?

Big Ideas• Structuredrepetition• Allofourbigideasliveinthefuturestill,exceptfortwo

• Whichbigideashavewebrushedsofar?A. AmericannationalismandAmerican

exceptionalismB. AmericanexceptionalismandAmericanslaveryC. ThetyrannyofgeographyandAmerican

nationalismD. SocialdemocracyandGildedAgesE. Noneoftheabove

BIG IDEAS• Which of these do you think will turn out to be most important in this

course? A. Narrative: We are animals that live by it—hence by studying

history… B. American nationalism: There are three:

A. The City Upon a Hill: “Let it be as it was in New-England…” A. A place where we can live freely… B. “But here was Old Kentucky!”

C. American exceptionalism: The American project has been astonishingly successful—in Trotsky’s words: “the furnace where the future is being forged…”

D. American slavery: But the American project has been much worse than shadowed by plantation slavery and its echoes down the centuries…

BIG IDEAS II• Which of these do you think will be most important? A. Immigration: One big contributor to the success of the

American project has been immigration… B. Liberty: American society has generated a large—in

comparative context—but unevenly distributed quantum of liberty…

C. Opportunity: American society used to deliver an unusually large quantum of opportunity—but not any more…

D. Prosperity: American society has delivered an unprecedented and unequalled quantum of prosperity

E. Public Interest: Growth: The story of industrialization requires focusing on growth-oriented industrial policy…

BIG IDEAS III• Which of these do you think will be most important?

A. Public Interest: Distribution: The story of industrialization requires focusing on societal well being-oriented industrial policy

B. Gilded Ages: The story of opportunity and prosperity is the story of our two Gilded Ages: their rise, fall, and rise

C. Social Democracy: The apogee of American success is the mid twentieth century era of social democracy

D. Structural Transition: Society has moved from agriculture to industry to post-industrial services, and is now moving on to ?…

E. The Tyranny of Geography: Much of what has gone wrong with America can be traced to regional geography—and to the cultures that entrenched themselves in that geography…

CatchOurBreath…• Comments? • Questions?

TowardRevolution• TheconquestofNewFrance• NewOrleans(1718-64French;1764-1803Spanish;1803French)

• RoyalProclamationof1763

• “NavigationActs”• Taxation?Representation?Quartering?Royalgovernors?

ThomasJefferson’sView• ThefamilypsychodramaofThomasJefferson

• “Whydoweheartheloudestyelpsforlibertyfromthemastersofnegroes?”

• VirtuousRomanfarmers• ThecorruptionandfalloftheRomanRepublic• Britain’sAugustanAge

BenefitsofRevolution?• Torevolutionaries—youngmenonthemake…

• Tosupportersofrevolution…• Coststosupporters…• Coststoothers…

• Tories…• Amerindians…• Slaves…

• Howcanwedrawaplusoutofthis?• EffectsofAmericanRevolutiononEuropeanpoliticaldevelopment…

ArtemasWard• Seriousrabble-rouser• MilitaryexperienceintheFrenchandIndianWar

• Organizerofthearmy• DecisiontofortifyBunkerHill• BattleofBunkerHillJune17,1775• GeorgeWashingtonarrivesJuly3,1775

• GeorgeWashingtonlosestheentirearmyinNewYork• August-December1776:BattleofLongIsland,captureofFortWashington:from24Kdownto2Kinthemainfieldarmy

CatchOurBreath…• Comments? • Questions?