Lecture 2 - Pre-modern Economy Flashcards
MALTHUSIAN MODEL
Birth rates increasing in p.c. incomes
Death rates decreasing in p.c. incomes
Malthusian Model (Graphically)
See Notes
Pre-modern production function
y = AL^(-a)
=> Population rise leads to a per capital income fall
Malthusian trap
Population growth pushes p.c. income to subsistence levels
=> Simple account of how pre-industrial economies operated
Mechanism of Malthusian Trap
1) Positive checks - increase in death rate
2) Preventive checks - decrease in birth rate
Malthusian Trap (Graphically)
See Notes
PRE-MODERN EFFLORESCENCES
P.c. income levels rose above subsistence levels for prolonged periods of time
Economic Growth in Pre-Modern Economies
1) Adam Smith
- Larger population = more specialisation
- Specialisation = technological progress (learning by doing)
2) David Ricardo
- Production of goods with comparative advantage
- International trade = international division of labour
Smithian growth
Specialisation and trade
=> Divison of labour allows for output growth absent of technological progress
Smithian growth (Steps)
See Notes
Why did Smithian Growth not stay?
p.c. income gains disappear due to:
=> Pressures of disrupting events
=> Climate change, epidemic, conquest
=> Malthusian forces
Smithian Growth (Graphical)
See Notes
Imperialism
Conquests raise p.c. income
More land & conflict deaths => Malthusian growth
Low transaction costs => Smithian (secure transport, common currency, etc.)
LITTLE DIVERGENCE
Incomes diverges in Malthusian world
Three Horsemen of Riches
1) Plague
2) Urbanization
3) War
1) Plague
Black Death killed between 1/3 and 1/2 or Europes population
=> Wages increased due to labour scarcity
=> Demand for urban manufacturers increased (Engles law)
2) Urbanization
High European Urban mortality
=> Increased long distance trade which increased plagues
=> Urbanization & trade increased tax revenue, used to finance wars
3) War
More killed through spread of disease on camps than battle deaths
Why 3 horsemen affected Europe but not Eurasia
Cleaner asian cities
More political integration, less war in eastern countries
=> No self reinforcing cycles of higher income and rising mortality rates
EMP
European Marriage Pattern
= after Black Death, people married late or often not at all
=> Black Death wages boosted labour market participation
3 Horsemen of riches (Graphical)
See Notes
Northwestern European Birth rates fell the most
Due to:
1) Consensuality (not arranged marriage)
2) Labour market access (free labour market vs serfdom in Eastern Europe)
3) Inheritance (upon parents death not marriage - dowry)
Positive feedback loops in northwest Europe
Once Black Death hit, two positive feedback loops lifted p.c. incomes:
1) Rising urbanisation <=> Rising mortality
2) Rising labour market participation <=> Decreasing fertility
Commercial revolution
Intra European trade intensified due to:
1) Financial institutions (stock exchanges, insurance)
2) Financial instruments (bill of exchange)
3) Business law (joint stock companies)
=> Decreasing transaction costs allowed for European market integration (despite political fragmentation)
=> Led to smithian growth
European Naval Empire
New trade patterns emerged:
- Manufacturers from Europe
- Slave labour from Africa
- Primary American products
- Asian luxury good
=> Imperial Expansion caused Smithian and Malthusian Growth
=> Europe’s early modern growth grounded in imperialism?
