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: giandomenico.piluso@unisi.it
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
