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?