Economic History

Remember: Production factors
Labour (and Land)
• That’s us – everyone who produces
• Until c. 11,000 BC – that is for 99% of human history – humans were nomadic hunter-gatherers, that means collected or killed the resources of a large plot of land (c. 8-200 km² per head, depending on climate)
• In the neolithic revolution man started to become a food producer (agriculture and livestock breeding); until at least the
17th Century (in most cases much longer) the vast majority of humans worked in agriculture
• Changes in the number of people (due to higher or lower birth or death rates) affect the resources (land!) per person, and therefore their productivity
2

Some (optimistic!) numbers about the world before 1820
(Maddison 2004)
• Between 1000 and 1820, growth was extensive, this means that most of the increase in world GDP
(multiplied by factor 6) was used to sustain a population that multiplied by factor 4.
• In Western Europe, population multiplied by 5 and
GDP by factor 15 (according to Maddison, others doubt that, and others doubt the doubts!)
• In the “non-Western world” population multiplied by factor 3.75, total
GDP by factor 4.9.
• GDP per capita for the world grew on average 1.2% per year since
1820, which is 24 times the average growth rate in 1000-1820. In the West, the growth rate was much higher, around 1.7% (1.9% since 1870) in other parts of the world it was lower.
3

Calculating population growth
• Crude Birth Rate (CBR) = Births/Population*1000 (“Babies per 1000”)
• Crude Death Rate (CDR) = Deaths/Population*1000 (“Burials per 1000”)
• If CBR exceeds CDR, then population grows (we look at a
“closed population”, that is, there is no immigration or emigration) • If CDR exceeds CBR, population shrinks
• ∆P/P=CBR-CDR (divided by 10 if you want it in percent)
• Variables explaining the growth potential of population:
- TFR (total fertility rate)=Births/Woman15-49 : a measure of reproduction - E0 (life expectancy at birth): a measure of survival
4

Why did population grow faster than income per capita, and can the latter have grown at all?

5

Economic History
6

Malthusian trap
FOOD
PRODUCTION

FOOD REQUIRED

FOOD PRODUCED

DEMOGRAPHIC
CRISIS

TIME
7

Why did he say that?
• Malthus wanted to argue that poverty was not caused by bad government but a natural condition reforms and revolutions were unnecessary and pointless
• Malthus wrote also against helping the poor: they would increase poor’s fertility, thus lowering their real wages and worsening (not improving) their living standard philanthropy was also ill-advised
• Bad or good institutions either were bad, or did not make any difference to living standard
• However, since he died in 1836 world population increased to about six billion, food production has increased about ten times, and per capita production of food has almost doubled in 200 years modern economic growth defeated Malthusian pessimism.
• His view proved wrong about the future. Was he right about the past?

8

Some believe that his view explains all of human history
• One of them is Greg Clark. In his book “A Farewell to
Alms” he presents and intuitive model in the Mathusian tradition and argues that
– “the average person before 1800 was no better off than the average person of 100,000 BC. Indeed in 1800 the bulk of the world’s population was poorer than their remote ancestors. The lucky denizens of wealthy societies such as eighteenth-century England or the Netherlands managed a material lifestyle equivalent to that of the Stone Age.” (Many people, e.g., in China and Japan, were actually poorer than cavemen)
– “The quality of life also failed to improve on any other observable dimension. Life expectancy was no higher in 1800 than for huntergatherers: thirty to thirty-five years. Stature, a measure both of the quality of diet and of children’s exposure to diseases, was higher in the Stone Age than in 1800”.
– He also argues that war, violence, disorder, harvest failures, collapsed public infrastructures, bad sanitation – were good, because they reduced population pressures and increased material living standards

9

Can this be true?
• Lets first look at the model and then at whether it explains reality, or whether reality can explained with other models also
• He uses three assumptions:
– 1) Birth rates differ across societies because of cultural reasons, but increase with living standards
– 2) Death rates decline as living standards increase
– 3) Material living standards decline if population increases
• One implication, if a society has a stagnating population
(CBR=CDR), then life expectancy is the inverse of death rates. That is, if 33/1000 of all people die each year, the life expectancy is around 30 (if 1/3 dies on average, people get c. 3.33 years old)
• If you live in a stagnating society, you have to restrict births to live long; this is what Malthus called a “preventive check”, otherwise nature with “positive checks” will increase mortality and thereby
10
reduce population (see below)

Population

Birth rate, death rate

Malthus according to Clark

N*
N0

y*

y0

Income per person

Y*= subsistence income, allows the population to reproduce itself, at higher income levels, population increases because birth rates rise and death rates fall.
If population increases, income falls, which reduces birth rates, increases death rates and leads society back to the equilibrium population 11

Why should this happen? Because of diminishing marginal returns of labour
• Initially land per worker is high
• High income means high CBR and low
CDR
• As population increases, the land/worker ratio falls (or worse land has to be cultivated) • Income per head is falling (diminishing returns), causing CBR to fall and CDR to increase • Lower income per head leads to worse nutrional status higher risk for diseases and exposure to epidemics.
• Finally the economy settles at an equilibrium with constant population

12

Population size and income per head

The graph is equivalent to that on the last slide in the lower right corner, except that it does not depict marginal product (output), but average product (income per head), which falls with diminishing marginal returns as the amount of inputs (here: population, i.e. labour) increases, but not as fast as the marginal product (since it is the average productivity of all amounts of input, not the additional contribution of the last additional unit of input)
13
See also here: http://en.wikipedia.org/wiki/Diminishing_returns

What if the birth rate schedule increases?

Population

Birth rate, death rate

Birth rate1
Birth rate0
If the birth rate schedule increases, for any income there will be more births, so income per person in equilibrium decreases (if that is sustainable).
On the other hand, societies can increase income levels by limiting fertility

N1*
N0*

y1*

y0*
Income per person

14

Preventive and positive checks
• Restricting fertility (by marrying late, detaining a share of the population from getting married and imposing in-marriage only reproduction) was what Malthus called preventive checks (more about that in a second)
• It avoids that societies fall back to ”bare-bone subsistence” where nature ”takes care” of reducing population (positive checks)
• However, by restricting the birth rate level still populations have to adapt to Malthusian forces, that is
– In good times, people marry more and earlier fertility increases
– In bad times, people marry later and less fertility decreased
• If not, population growth will depress real wages in the long run because of diminishing returns and leads to population stagnation.
• How? Through positive checks increasing mortality due to famines and spread of contagious disease.
• So, the preventive check helps to avoid positive checks
15

The European marriage pattern and fertility

16

Reproduction in Europe, 1300-1950
Number of live births per married woman, age at marriage and survival chances of children, 1650-1950, in Buriano (Tuscany)
Number of Number
Age of children of children Percent woman at Number surviving surviving surving to marriage of births first year to age 10 age 10
1650-1749 23,3
3,85
2,74
2,12
55
1750-1849 22,1
5,04
4,06
3,3
65
1850-74
21,4
5,43
4,62
4,27
79
1875-99
24,8
3,93
3,59
3,43
87
1900-20
24,5
2,4
2,4
2,38
99
Persson (2010), Table 3.1

Population in Western Europe, 1300 and 1800 (Clark 2007, Table 2.1)
Surviving
children
1300
1800 per woman
Norway
0,4
0,88
2,095
Southern
Italy
4,75
7,9
2,061
France
17
27,2
2,056
England
5,8
8,7
2,049
Northern
Italy
7,75
10,2
2,033
Iceland
0,084
0,047
1,93

17

The European fertility pattern (summary)
• We do observe lower CBRs in Europe than in other parts of the world, societies seem to have
“targeted” little more than 2 children per woman
• Consquences:
– Higher income per capita
– Relatively less intensive subsistence crisis
– Slower population growth, relatively smaller population, and higher life expectancy at birth

Population

Birth rate, death rate

What if the death rate schedule changes?
Birth rate

Death rate0
Death rate1

N1*
N0*

y1*

y0*
Income per person

If the death rate schedule decreases, for any income there will less deaths; income per person in equilibrium decreases (if that is sustainable).
On the other hand, everything that increases death rates (war, disorder, desease), is helpful for living standards, while improving sanitary conditions is harmful in a material sense

Population

Birth rate, death rate

What if technology improves?
Birth rate

Death rate

N1*
N0*

y*

y0

Income per person

Better technology means that the same resources produce more, and make more consumption possible. But, increase in income means more births, and more birth depress income, so that in the long run, only population increases
(extensive growth)

20

Do we observe this in history?
• Clark says: “Yes!”

21

Or: Wages vs. Population in England

22

Body size, 1AD – 1800

Nikola Koepke/Jörg Baten, The biological standard of living in Europe during the last two millennia. European Review of Economic History 9 (2005), pp. 61-95.

But?
• According to Angus Maddison (last class!) GDP per capita increased by factor 3 between 1000 and 1820 in Western Europe – that is roughly 0.13% per year (and population grew!)
• Clark says, the numbers for 1000 or 1500 are inventions by Maddison with very little basis; he guessed them too low, thereby creating nonexisting growth before 1800
• Apparently, Maddison’s figures were too low, but we also find that there was growth (0.2%/year until 1700, then 0.5% until 1870) in
England, as well as in the Netherlands and other places. GDP levels were far higher than subistence level (ca. 350$)

24

25

Source: Broadberry et al (2012), p. 36.

Other countries, 1500-1800 in 1990 international US-$
GDP/capita
(Maddison)
1500
England 714 (UK)
Holland
761 (NL)
Belgium
875
Italy
1100
Spain
661
Germany
688
Japan
(1450)
500
India
(1600)
550

GDP/capita
(new estimates)

Population
Annual
Annual Children
Maddison (1.000) Growth per Growth
1500
1820 woman (%)
(%)
0.22
3,942
21,239
0.53
2.32
0.19
950
2,333
0.28
2.17
0.00
1,400
3,434
0.28
2.17
-0.03
10,500 20,176
0.20
2.12
0.06
6,800
12,203
0.18
2.11
-0.05
12,000 24,905
0.23
2.14

1820
1706 (UK)
1838 (NL)
1319
1117
1008
1077

Annual
Growth
(%)
0.27
0.28
0.13
0.00
0.13
0.14

699

0.09

527

641

0.06

15,400

31,000

0.22

2.14

533

-0.01

792

646

-0.07

135,000 209,000

0.20

2.12

1500
1800
1086 2097 (GB)
1454
2609
1467
1497
1533 (N) 1330 (N)
846
916
1146
986

NB: 1800 is in the middle of the Revolutionary Wars in Europe, 1820 is 5 years after the Congress of Vienna
Source: Angus Maddison “old homepage”; Maddison Project (http://www.ggdc.net/maddison/maddisonproject/home.htm for GB/UK, NL, BEL, Italy, Japan and Broadberry et al (table in a preliminary 2009 version – India, 26
Spain, Germany).

Are there really decreasing marginal returns?
• Sceptics about Malthusian theory (like Persson 2010, ch. 3) have argued that actually the “land constraint” behind the diminishing returns populations growth has never become effective
• They argue that maybe using more land means that “marginal lands” of inferior quality have to be used, but that what we observe is that the amount of harvests per year as well as the yield per harvest have increased along history, this means that Malthusian forces are not irrelevant, but technological progress was always faster than
Malthusian checks
• If the rate of technological progress (translating into higher labour productivity) exceeds (with given land) the rate of population growth, income per person will rise; this seems to have been the case at least since 1500 in the most advanced parts of Europe
• (The Black Death of the 14th Century might have been exogenous, as were many wars; and between 1550 and 1650 climate deteriorated,
27
etc.)

Vital Rates

The historical record after c.
1500
-income above subsistence and rising, though slowly
-positive population growth.

cbr = crude birth rate

cdr = crude death rate Malthusian Equilibrium?

Income per capita Source: See Persson (2010), p. 46 (the axes are turned around in comparison with former graphs).
28

If there are no diminishing returns, so what?
An anti-Malthusian view:
Increase in population leads to innovation in agriculture!

Food supply Total population Ester Boserup,
Danish economist,
1910-1999
29

The Boserup Model
• Population growth is the motor of development
– Forces societies to adopt more intensive techniques
– In sparsely populated areas we observe technological regress (like after decline of Rome)
• Investment in infrastructure requires a critical mass of resources that cannot be raised by small groups
• This leads to larger markets, more trade, more division of labour and specialization, better communication (“forces of Smithian growth”) • Urbanization: Functional specialization in control and defense, needs agricultural excess production
• Since about the 10th Century we find increasing technological change
(fertilizers, mouldboard plough, crop rotation, etc., but slowly)
• Innovations only made sense if excess production can be exchanged for other goods. Innovation and investment are endogenous to
30
opportunities of commercialization

31

Persson (2010), p. 35

The bottom line
• Malthus predicted that increasing population density would depress real wages population growth would eventually come to a halt
• However, technological progress in agriculture techniques kept real wages at a constant or slowly increasing level despite continuing population growth in pre-industrial economies.
• Positive checks were mostly exogenous (epidemics, wars) rather then endogenous
• Episodes of falling real wages also exogenous (climate, not shown in this class)
• Population growth and urbanization stimulated technological progress and specialization.
32

Some conclusions
• Malthusian theory can give some guidance to understand preindustrial, agrarian economies
• However, it is dificult to say up to which point it is empirically observable (Clark vs. Maddison, Persson, etc.) and valid in the long run
• This is because the effects of different factors like sufficiently rapid technological change, wars, etc., might be difficult to separate from Malthusian mechanisms
• We observe that in the long run world population and incomes increased (at least if we do not follow Clark). This might be because of higher population density (if we believe in Boserup and Smithian growth)

Population growth +
+
Diminishing marginal returns (Malthusian mechanism)
Divison of labour
(Smithian mechanism)

+
-

+
Learning-by-doing based methodological change which might be linked to population size (for example in the Boserup way)
Persson (2010), p. 61

+

Income per capita/
Real wages

34

Sources
• Massimo Livi Bacci: A Concise History of World Population, ch. 3
(text 2 in the red reader).
• Gregory Clark: A Farewell to Alms, Princeton University Press,
2007, part 1
• Karl-Gunnar Persson: An Economic History of Europe, Cambridge
University Press, 2010, ch. 3
• Stephen Broadberry et. al.: British Economic Growth, 1270-1870: An output based approach, 2012, ftp://ftp.ukc.ac.uk/pub/ejr/RePEc/ukc/ukcedp/1203.pdf .
• Material of professors Stefano Battilossi, Stefan Houpt, Juan Carlos
Rojo, Carlos Santiago, Jordi Domenech, Joan Rosés, Lasse Sonne.

35