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Measuring pre 1820 economic
growth
How right/wrong are the pre 1820 Maddison estimates?
Jan Luiten van Zanden
Faculty professor ‘global economic history’ UU
Debate about pre 1800 economic growth, and in
particular the Maddison estimates
Maddison estimates based on number of ideas/assumptions:
• Subsistence level is about 400 international dollars
• 1820 benchmark: Western Europe was much more wealthy
than rest of the world
• Gap between western Europe and ‘the rest’ was about 1:3
(Average Western Europe: $ 1234; UK: 1706; Netherlands: $
1838, versus China $ 600, India $ 533, Indonesia $ 612; Latin
America $ 691; South Africa $ 415)
• Growth of European Economy was very gradual: Western
Europe in 1000: $ 425, 1500: $ 797, 1600: 906; 1700: 1028
(in fact, growth was almost constant between 1000 and 1800
at 0,126%)
• On balance: almost no per capita growth in China (and
elsewhere): China (China in 1500 also has $ 600, in 1000:
466)
• Roman Economy was already quite wealthy: Italy in 1 has
GDP per capita of $ 809 (Egypt: $ 600)
Debate about pre 1800 economic growth, and in
particular the Maddison estimates
• All these estimates & assumptions have been criticized:
• Subsistence level is about 400 international dollars: no
empirical foundation – perhaps much higher (Malanima)?
• 1820 benchmark: Western Europe was much more wealthy
than rest of the world: Great Divergence Debate/California
School: no no big gap in 1750/(or 1820)
• Growth of European Economy was very gradual, at constant
rate: Clark: there was almost no growth; Van
Zanden/Federico/Prados: growth was slower between 1500
and 1800 (except for Netherlands and England)
• Substantial growth in China (but by how much? And when?)
• Roman Economy was already quite wealthy – but Maddison
underestimated GDP of Ancient economy (Lo Cascio &
Malanima)
• More in general: what do 1990 dollars ‘mean’ in 1 or 1500?
Can we develop ways to empirically ground those estimates?
Overview of new work – and perhaps new approach
- New work on real wages and ‘subsistence minimum’ by
Allen and Allen et.al. makes it possible to empirically
ground estimates of this minimum
- New work on long term growth in England and Holland
and other European countries (Spain, Germany, Italy)
can help to ground long term growth patterns between
1300 and 1800
- New work on real wages and GDP estimates for China,
Indonesia, India, Latin America and South Africa can
help to test Angus’ ideas about the relative GDP of these
countries
- New work on urbanisation and literacy/book production,
can help to bridge gap between Ancient Economy and
Middle Ages (700 and 1300)
Fundamental equation/identity
Implicit Maddison equation:
GDP per capita = C * S
S: subsistence minimum = 400 dollars of 1990
C: some kind of measure of complexity/level of
advancement of economy, drawn from social tables
and/or level of urbanisation
(also used by Milanovic, and others)
Can we estimate the subsistence minimum?
Work by Allen (2001) and Allen et.al. (2010): estimating
the current value of a ‘minimum’ basket of consumption
goods, necessary for ‘subsistence’, in local currencies,
and in grammes of silver
Allen: European countries 1300-1913
Allen et.al.: China 1700-1929
Bassino and Ma: Japan
Allen: India 1600-1913 & Roman Economy c 300
Arroyo Abad et.al.: Spanish America 1525-1820
De Zwart: South Africa 1660-1913
Van Zanden: Indonesia 1820-1939
What is the subsistence minimum?
Initially, Allen for Western Europe calculated a
‘respectable’ basket, including alcohol (beer or wine),
bread, and other ‘luxuries’ – reflecting the ‘normal’
consumption standards of working families in Western
Europe
This did not work for China: consumption basket was
much more basic, and a respectable basket lead to
extremely low real wages (nobody was able to survive)
Introduction of the ‘bare bones’ basket, with minimum
expenditure on cloth, soap etc., and food almost
exclusively consisting of cheapest cereals (oats for
porridge, for example)
Costs of the ‘bare bones’ basket 35-45% of costs of
‘respectable’ basket
How to relate this to GDP, and to dollars of 1990?
For England and Holland: new work on GDP per capita in
current prices, going back to late Middle Ages, resulting
in estimates of
1. GDP in current prices
2. GDP in 1990 international dollars
3. Barebones and Respectable basket in current prices
(work by Allen et.al.)
Is possible to calculate the C variable: the ratio between
GDP per capita and the costs of the subsistence
minimum (1./3.)
And to estimate the subsistence minimum in 1990 dollars:
(3.*2./1.)
GDP per capita expressed in number of barebones
baskets, and respectable baskets, England 12701850
12
10
8
6
4
2
0
1270
1320
1370
1420
1470
1520
GDP/barebones England/GB
1570
1620
1670
1720
1770
GDP/respectable England/GB
1820
Estimates of the value of the barebones &
respectable minimum basket in 1990 dollars,
England/UK and Holland
1,200
1,000
800
600
400
200
0
127012951320134513701395142014451470149515201545157015951620164516701695172017451770179518201845
barebones minimum England (dollars 1990)
respectable minimum England (dollars 1990)
barebones minimum Holland (dollars 1990)
respectable minimum Holland (1990 dollars)
Results for Holland and England
• Minimums are ‘constant’ and similar between 1270 and
1850
• At on average $ 250 (barebones) and $ 580
(respectable)
• Can this help to ground the GDP estiumates?
How to relate this to GDP, and to dollars of 1990?
We can also estimate another formula for GDP per capita:
GDPpc= A * W
GDPpc: GDP per capita, expressed in the number of
‘barebones’ baskets
A: measure of complexity
W: real wage, expressed in number of barebones baskets
GDP: product of real wages and A-factor, England
1270-1850
12
10
8
6
4
2
0
1301
1351
1401
GDP/barebones
1451
1501
1551
1601
1651
Real wages (barebones)
1701
1751
1801
A: GDP/Real wages
GDP: product of real wages and A-factor, Holland
1410-1807
16
14
12
10
8
6
4
2
0
1410
1460
1510
GDP/barebones
1560
1610
Real wages
1660
1710
A: GDP/real wages
1760
Is it possible to estimate GDP per capita on basis of
real wages (nominal wages and estimated Afactor)?
• A-factor changes very slowly, even in the ‘most
dynamic’ economies of Holland and England
• Fluctuate around 2 (consistent with the Bairoch rule?),
in rapidly developing economies long term tendency is
upward, but not very strong
• If we have estimates of real wages and costs of
subsistence only, and if degree of complexity does not
change a lot, a first approximation may be
GDP per capita (in 1990 dollars) = 250 * ± 2 * Real wage
in bare bones baskets
Or
GDP per capita (in 1990 dollars) = 580 * ± 2 * Real
wages in respectable baskets
Ancient economy (following Milanovic)
• Milanovic produced set of estimates of GDP of Ancient
Economy in terms of ‘barebones’ subsistence, ranging
from 2.14 times barebones (or, at $ 250: $ 535) in Italy
in 14, to 1.04 (or $ 260) in Roman Britain in 500-600
• This is probably too low: average income is barely as
high as real wage
• Allen: real wage Roman Italy in 300 is 1.2 * barebones
subsistence; which would imply, using the formula
developed here: 250 * 1.2 * 2 = $ 600
• Applying estimates Ward-Perkins/Milanovic would bring
range of Ancient economy GDP estimates from $ 470 in
Roman Britain to $ 970 for Italy in 14
How to fill the gap between 700 and 1300?
Estimates of GDP per capita for 14-1400 (in 1990 dollars)
14
300
700 1000 1200
1300
1400
Italy
970
610
510
1640
1730Broadb
France
540
610
510
1110
1300Prados
Spain
Greece/Turke
y/Byzantium
540
610
510
940
590
590
480
Britain
500
560
480
Holland
680
640
890Prados
(in 1500:
540 Br.)
740
1300Br.
870
1195vZ/vL
Problems?
• Enormous growth if Italy (and France) between 700 and
1300 – is this acceptable, or is GDP in 1300
overestimated, or in 700 underestimated?
• Very high levels of GDP per capita in Western Europe
from c 1200 onwards
• Comparison with Maddison: this ‘new evidence’ points to
growth 700-1300 being faster (Italy: 0.2% per annum),
and growth 1300-1820 being much less spectacular
(growth of GDP per capita is about half the rate
estimated by Maddison: 0,07% for Western Europe);
this would be consistent with criticism of Maddison
estimates by Federico (2002) and others
Gap between Western Europe and Asia/China?
• Pomeranz (2000): China at about 1750 at parity with
Western Europe; Maddison overestimated gap between
them
• Bozhong Li and Van Zanden (2010): comparison GDP
per capita in Netherlands and Yangtze Delta; GDPp.c. in
the Netherlands 86% higher than in Yangtze delta (c.
1838 versus 988 $); Yangtze delta had higher GDPp.c.
than the rest of China; difference Yangtze/China was 4050%; China as a whole (in 1820) about 660-700 $, 1015% higher than Maddison estimate
• Allen et al estimated welfare ratio (barebones basket) for
Suzhou, Beijing and Canton, in 1811/20 about .86
(Beijing about 1, other cities about .8), less than one
third of the level in London and Amsterdam (3.4 and
3.0); suggests a GDPp.c. gap of at least 3 : 1 –
Does this approach help to quantify the
difference between Western Europe and Asia?
- Similar work on Indonesia, India and Japan confirms
large difference in real wages between North Sea area
and these countries (Allen et.al. 2010)
- Suggests similar large differences in GDP per capita
- Example Indonesia: real wages and GDP per capita
- Conclusion: The gap between Asia and Western Europe
as estimated by Maddison of more or less correct
GDPp.c.: comparison between Netherlands, England
and Java/Indonesia
100000
10000
1000
100
1300
1350
1400
1450
1500
Indonesia
1550
1600
Netherlands
1650
Java
1700
1750
Holland
1800
1850
England/UK
1900
1950
2000
Real wages (in barebones baskets) in Engeland and
various parts of Asia 1738-1913
9
London
Oxford
Beijing
Suzhou/Shanghai
7
Canton
Kyoto/Tokyo
6
Bengal
8
5
4
3
2
1906
1898
1890
1882
1874
1866
1858
1850
1842
1834
1826
1818
1810
1802
1794
1786
1778
1770
1762
1754
1746
0
1738
1
Adding Java, the Netherlands and Leipzig to the
picture, 1813-1913
Real wages as starting point for estimating GDP
per capita: Latin America, 1524-1824
Latin American ‘growth’ 1500-1800
Mexico: population decline lead to relatively high wage
levels in 17th and 18th centuries
Peru/Potosi/Chile: 18th century real wages (much) above
subsistence minimum
Argentina: post 1770 wage data also suggest very high
real wages
Around 1820: real wages in Mexico, Peru, Chile and
Bolivia have declined to subsistence minimum, but not
in Argentina (about 3 times subsistence)
Pattern of 1500-1800 growth perhaps similar to t England
after 1348
Different timing of GDP growth: population decline and
labour scarcity
Assessment
Maddison estimates based on number of
ideas/assumptions:
• Subsistence level is about 400 international dollars:
probably incorrect: better to distinguish two different
minimum baskets
• 1820 benchmark: Western Europe was much more
wealthy than rest of the world: is probably correct
• Growth of European Economy was very gradual: is
probably incorrect: growth was more rapid before 1500,
and rather slow between 1500 and 1800
• On balance: no per capita growth in China (and
elsewhere): China (China in 1500 also has $ 600, in
1000: 466) – we do not know (yet)
• Roman Economy was already quite wealthy: Italy in 1
has GDP per capita of $ 809 (Egypt: $ 600) is correct,
but the recent tendency to raise these estimates to
much higher levels…..
Conclusions
Linking Maddison project to Allen et.al. Project on real
wage developments is promising
• Estimates of ‘subsistence’ minimum
• Estimates of range of possible GDP per capita – first
approximations
Timing European growth 800-1800 is probably somewhat
different from current Maddison estimates: less growth
1300-1800, more growth 800-1300; unexplained and
perhaps ‘problematic’ growth spurt 800-1300
Gap between Western Europe and Asia at about 1820
more or less correctly estimated by Maddison
Real wage studies may help to refine our picture of growth
in Latin America, (South) Africa, North America, Russia
etc…
New datasets to be integrated
• Development of urbanization: Europe and Middle East
800-1800
• Under construction: new dataset of urbanization in
whole world 800-1800
• New dataset on book production Europe 500-1800;
similar estimates for other parts of the world can
perhaps be made….
• Pre 1800 estimates based on real wages, urbanization
(and based on this, via the Wrigley approach:
agricultural productivity), and book production