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Economic History
Giandomenico Piluso (DEPS)
29 February-18 May 2016
Economic History [2000514]
60 hours, 9 credits
Monday, 2-4 pm (classroom 1)
Tuesday, 2-4 pm (classroom 1)
Wednesday, 2-4 pm (classroom 1)
Office/student consultation hours:
DEPS, second floor, office 219, Tuesday, 10-12 am
Website: http://docenti.unisi.it/giandomenicopiluso/
email: [email protected]
The issues
What does “economic growth” mean and
how to measure economic development?
Why some countries are rich and others
poor?
Does history matter?
complexity and varieties
Just technology? Or institutions and past
choices are as much (or more) relevant in
shaping economic patterns?
The structure
Economic History: A very short
introduction
An introduction to macroeconomics:
national accounts and growth theory
(and facts)
A global economic history: a long term
perspective [timeline]
Major topics in economics and
economic history
Readings
O. Blanchard, Macroeconomics, Prentice Hall, 2005 (Chap.
2, A Tour of the Book; Chap. 10, The Facts of Growth).
D. Acemoglu, S. Johnson, J. Robinson, Institutions as a
fundamental cause of long-run growth
(http://economics.mit.edu/files/4469).
R.C. Allen, Global Economic History. A Very Short
Introduction, Oxford and New York: Oxford University
Press, 2011.
K.G. Persson and Paul Sharp, An Economic History of
Europe. Knowledge, Institutions and Growth, 600 to the
Present, Cambridge: Cambridge University Press, 2015
(second edition).
Tests and examinations
Partial examinations: a mid-term examination
(11 April 2016) and a final examination (24
May 2016)
Written tests:
multiple-choice and free-response questions:
multiple-choice questions: 11
free-response questions: 2 (a shorter and a
longer, to choose from 4)
a definition (e.g., “What is a definition of GDP?”)
A very short introduction
to economic growth
#1
29 February 2016
Why are some countries so rich
and other countries so poor?
Does history matter?
Two variables are plotted in the chart: income
and longevity
Longevity appears related to income
As shown, global inequality has been created
by the very success of modern economic
growth [Deaton, 2013]
A. Inequality is related to growth, so it
appears as a dynamic phenomenon:
the Great Divergence [Pomeranz, 2000]
An unequal world,
a world of differences
Inequality between people and nations is
related to levels of wealth, longevity, health
The world is more and more unequal, even
though poverty is relatively decreasing
(particularly, if we take China into account)
How can we explain emerging differences in
income and longevity around the world?
Why have some nations succeeded, “the
rich”, and others failed, “the poor”?
Let us start with population
Population behaviour (birth/death rate)
and wellbeing depend on resources
Population wellbeing is a function of
income, that is of technology + capital
and related productivity
Differences in income and longevity
vary not simply over time, but, rather,
in history, as data tell us…
World population
or Malthus goes to the attic
Some rough facts
The dynamics of the world population suggest
an enduring long-term stagnation (in the first
millennium)
Afterwards, the population grew at a very low
rate up to 1750 ca, but grew!
After the industrial revolution world population
grew at a very (and increasing) high rate,
even almost geometrically in the last century
The Malthusian world
Malthus [1798] explained the long-term stagnation
until the late XVIII century as a result of scarcity
In fact, the size of the population depends on the
size of the economy (tech + K) and a slowly
growing economy checks its expansion
pop = births – deaths [CBR - CDR/1000]
How does population reach its equilibrium?
Positive checks (mortality rate): famine, disease,
war, but with low levels of income
Negative checks (fertility rate): delaying marriage
or not marrying at all, with high levels of income
An equal world, regardless of
classes and wealth
Before the Great
Transformation (i.e., the
industrial revolution) life
expectancy at birth as a
measure of opportunity
was rather equal “across
the board”, at least in the
UK
The life expectancy of the
dukes was similar to, or
even lower than, that of
the general population
Q. Was life expectancy a good
measure of material
wellbeing or wealth before
the industrial revolution?
Population and Growth
#2
1 March 2016
The post-Malthusian world
The industrial revolutions allowed the population
to grow since a larger and more productive
economy could support more people (and even
richer and healthier people who lived longer)
Industrial revolutions have made productivity
gains a permanent condition through
technological innovation [Mokyr, 2005]
But they have not been a universal phenomenon
Some countries industrialised, whilst others
deindustrialised or stagnated
Hence, the Great Divergence [Pomeranz, 2000]
World population, 1820-2012
Population (in billions)
Average growth rate (%)
1500
0.4
-
1600
0.5
0.2
1700
0.6
0.2
1820
1.0
0.5
1850
1.2
0.5
1900
1.6
0.6
1950
2.5
0.8
1990
5.3
1.8
2000
6.0
1.5
2012
7.0
1.4
World population by macroregions, 1750-2150
A clear correlation
between
economic growth
(industrialisation)
and population
size, that is its
growth rate, at
least until the
1950s
Population growth, 1750-2050
Living longer,
a measure of wellbeing and growth
The Great Divergence in
longevity:
developed economies (right
green bar)
vs “developing” or “less
developed” economies
(left grey bar)
(but today India has a
higher life expectancy
than Scotland in
1945! Why?)
A longer life partly
explains population
growth and size
A slightly closer look
In the last 50 years the “less
developed regions” of the
world have got a reduction in
mortality rates
It could be the uneven result of
income increase (market
health), treatment and
innovation (public health),
plus education which
improve the effectiveness of
both [Deaton, 2013]
[Source: Deaton, 2013]
China and India, 1950-2010
Both China and India have
improved their income per
capita after the 1980s
The IMR, related to poverty
diseases, decreased in both
countries but following different
patterns:
steadily in India, slowing down
after 1979 reforms in China
Where’s the answer: i) partly,
income growth; ii) partly,
technology/intervention “bonus”
[Source: Deaton, 2013]
A larger population,
a larger income
GDP per capita, price
adjusted 2000US$
An overall success,
although unequally
spread around the
world, as seen,
and even within a
nations:
“A large income is the
best recipe for
happiness I ever
heard of” [Austen,
Mansfield Park,
1814]
The demographic transition
Population behaviour
changes in response
of changing
incentives as income
per capita grows
A demographic
transition model
(DTM) may offer a
simplified idea of the
interaction of factors
Population structure
and the DTM
The DTM produces a
sea change in the
population
structure by age
Such changes (stage
4) can robustly
influence fiscal
budgets, pension
systems and even
political preferences
The Great Escape
#3
2 March 2016
What does it mean?
The Great Escape from what?
The Great Escape is from hunger, disease
and premature death [Fogel, 2004]
This is the “natural” condition of humanity up
to the industrial revolution: the normalcy of
the past
the low average growth rate of population
(0.2 pc/year) is a measure of both
instability (crops) and exposure to major
shocks (e.g. the Black Death, 1346-1353)
The Black Death in Europe, the
Mediterranean and England population
CDR was even higher in certain areas,
such as Germany, or in some Italian
cities (Florence, Sienna), where
density was incredibly high for the
then current urbanisation rates: CDR
oscillated between 30 and 60%
The bubonic plague hit a population
which was probably reaching the
upper limit of the ancien régime
economy’s potential
The Mediterranean commercial space
was an effective “vector”
The Great Escape in Europe
Europe has been the first region to escape
from hunger, disease and premature
death
Why Europe first?
The more immediate cause has been
technology innovation and productivity
improvements
But has the European population model
been responsible for such a result?
Competing explanatory models
for the Great Escape
i) The “family structure model”
Western Europe was distinctive, wasn’t it?
having a preventive check demographic
system so that birth and death rates were
lower
In such a context the standard of living was
higher and provided more scope for savings
and investment
As a result Western Europe’s lead grew over
time. But, have a check…
Was actually England a positive
check society?
Vital rates (CBR – CDR)
depict a different England,
with no positive checks
as CBR started growing,
while CDR declined, after
1750 when industrial
revolution set in motion
Economic growth
(technological innovation)
better explains population
dynamics
[Source: Wrigley and Shofield, 1989]
So, was it the economy
enough?
ii) Increase in productivity/income as a result
of capital accumulation + technological
innovation
The first industrial revolution (ca 1750-1860)
provided more income (increasing living
standards) and a wider range of goods
and services [Allen, 2006]
But was it enough?
+ iii) control of disease through public health
measure (e.g., vaccines, water supply)
The Great Escape:
nutrition and public health control
The agricultural revolution (intensive high
farming) in the XVIII cent.:
per capita income grew and steady improvements
in nutrition (stronger and healthier workers)
[Fogel, 1994]
+ Public health control: drinking water
supply/sewage, sanitation, vaccines [Deaton,
2013]
e.g., variolation (smallpox): Royal Family, 1721)
at last breaking up the long-lasting fecal-oral link
What did a better health mean in
Western Europe?
Public health control (reducing
diseconomies) reduced infant mortality,
extended average life expectancy and
improved health/workers’ efficiency
a “natural experiment in history”: John Snow
(physician), London, 1852: mapped cholera
deaths and matched them with offending
water companies: sanitation was the response
Better-off workers (net nutrition – nutrition
lost to disease) meant higher efficiency
Just higher “individual”
efficiency?
Public health improved the living standard
and provided more scope for savings and
investment
But it offered also a major opportunity to
invest more in human capital (education),
perfecting individual abilities, thus
favouring technological innovation in the
long run: in a word, capabilities [Sen, 1999]
and a demand for public investments (with
positive feedback effects)
And technological innovation
(in historical perspective)
Technology (innovation) is the first
apparent factor which accounts for
growth in productivity and income
Does exist a correlation between a higher
income today and innovation in the past?
Actually, higher levels of “technology
adoption” in the past are positively
correlated with a current higher income
Why?
Why does history matter
in technological innovation?
New technologies stem out from existing
technologies
A “rich technological heritage” provides an
extensive knowledge and a better
understanding of the potential of new
technologies
There are positive feedbacks between
technology, science and human capital
Lower costs and learning by doing
Are cumulative effects a trap?
Undoubtedly, cumulative effects matter and
can lock some countries in a (poverty) trap
technology, physical capital, human capital,
knowledge (R&D) (the “Great Left Behind”)
But historically they are not insurmountable
barriers to economic growth, as they can
offer “demonstration effects”
catching up strategies (USA, D, J), industrial
targeted policies (J, KR), technology transfers
(China)
Just a one-way story?
Sometimes the history of economic growth is
represented as a history of material
progress with no pitfalls at all
But the story of economic progress is a story
of growth and increasing inequality, both
amongst nations and within countries
This course will provide some methods and
empirical evidence to understand how and
why