Lecture 2 - Pre-modern Economy

Question 1

MALTHUSIAN MODEL

Answer 1

Birth rates increasing in p.c. incomes

Death rates decreasing in p.c. incomes

Question 2

Malthusian Model (Graphically)

Answer 2

See Notes

Question 3

Pre-modern production function

Answer 3

y = AL^(-a)

=> Population rise leads to a per capital income fall

Question 4

Malthusian trap

Answer 4

Population growth pushes p.c. income to subsistence levels

=> Simple account of how pre-industrial economies operated

Question 5

Mechanism of Malthusian Trap

Answer 5

1) Positive checks - increase in death rate
2) Preventive checks - decrease in birth rate

Question 6

Malthusian Trap (Graphically)

Answer 6

See Notes

Question 7

PRE-MODERN EFFLORESCENCES

Answer 7

P.c. income levels rose above subsistence levels for prolonged periods of time

Question 8

Economic Growth in Pre-Modern Economies

Answer 8

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

Question 9

Smithian growth

Answer 9

Specialisation and trade

=> Divison of labour allows for output growth absent of technological progress

Question 10

Smithian growth (Steps)

Answer 10

See Notes

Question 11

Why did Smithian Growth not stay?

Answer 11

p.c. income gains disappear due to:

=> Pressures of disrupting events
=> Climate change, epidemic, conquest
=> Malthusian forces

Question 12

Smithian Growth (Graphical)

Answer 12

See Notes

Question 13

Imperialism

Answer 13

Conquests raise p.c. income

More land & conflict deaths => Malthusian growth

Low transaction costs => Smithian (secure transport, common currency, etc.)

Question 14

LITTLE DIVERGENCE

Answer 14

Incomes diverges in Malthusian world

Question 15

Three Horsemen of Riches

Answer 15

1) Plague
2) Urbanization
3) War

Question 16

1) Plague

Answer 16

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)

Question 17

2) Urbanization

Answer 17

High European Urban mortality

=> Increased long distance trade which increased plagues
=> Urbanization & trade increased tax revenue, used to finance wars

Question 18

3) War

Answer 18

More killed through spread of disease on camps than battle deaths

Question 19

Why 3 horsemen affected Europe but not Eurasia

Answer 19

Cleaner asian cities

More political integration, less war in eastern countries

=> No self reinforcing cycles of higher income and rising mortality rates

Question 20

EMP

Answer 20

European Marriage Pattern

= after Black Death, people married late or often not at all

=> Black Death wages boosted labour market participation

Question 21

3 Horsemen of riches (Graphical)

Answer 21

See Notes

Question 22

Northwestern European Birth rates fell the most

Answer 22

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)

Question 23

Positive feedback loops in northwest Europe

Answer 23

Once Black Death hit, two positive feedback loops lifted p.c. incomes:

1) Rising urbanisation <=> Rising mortality
2) Rising labour market participation <=> Decreasing fertility

Question 24

Commercial revolution

Answer 24

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

Question 25

European Naval Empire

Answer 25

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?