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EC104 > Term 1 > Flashcards

Term 1 Flashcards

1
Q

Revisionist perspective on GD

A

Europe = Asia before 1800

No divergence until industrial revolution

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2
Q

Traditionalist perspective on GD

A

Europe > Asia before 1800

Process of improvement beginning in early modern period

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3
Q

Pomeranz grain wages: what % of European wages were China’s in Yangzi delta region?

A

87% 16C to 17C

38% 18C to 19C

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4
Q

Why do Broadberry & Gupta say grain wages are unreliable?

A

W/P for china high due to low prices as a result of excess supply + low nominal wages. Higher prices in Europe deflates nominal wages to similar level. Misleading impression of comparable living standards

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5
Q

Why are silver wages better?

A

Silver traded internationally = subject to law of one price

Equal prices so differences in real wages reflect different nominal wages = reflect living standards

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6
Q

Two main causes of great divergence

A

Demographics

Institutions

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7
Q

How was Europe’s democracy different to China’s?

A

Demographic revolution 250 years before IR: high FAFM & low fertility

Preventative checks in Europe vs. Positive checks China.

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8
Q

How did European demography –> GD?

A

Preventative checks = confidence & predictability = Investment
Lower BR & DR = higher wage equilibrium = incentive to invest in labour-saving technologies = K technology change

Positive checks China = low wages = no K L substitution effect

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9
Q

How did institutions –> GD?

A

Olson’s theory of stationary bandits

Stationary bandits > roving bandits (full taxation)
But stationary < democracy (lower tax - see Laffer Curve)

GR 1688 = secure property rights

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10
Q

What were the 3 phases of the European miracle?

A

Phase 1 = Italy & Portugal
Phase 2 = Holland & England
Phase 3 = English MEG

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11
Q

How was Italy an individualist society w.r.t. Mediterranean trade?

A

Italian traders captured gains by hiring agents outside organisation + had enforceable contracts = step towards institutions

Collectivist = sent members abroad, fear of punishment = no need for institutions

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12
Q

How does Kuznet define modern economic growth? (6)

A
  1. Sustained rates of pop & GDP p.c. Growth
  2. Structural change
  3. Urbanisation & secularisation
  4. Rapid transport & communications
  5. Wide gaps between rich and poor countries
  6. High & sustained TFP growth
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13
Q

Causes of European miracle

A

Good institutions
Agricultural revolution
Empire
(Same as GD but focus in European success)

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14
Q

Why was the IR a revolution? (6)

A 
Agriculture to industry
Small to large scale production 
Rapid TFP growth 
Investment 
Capital substituting labour 
Integration of markets
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15
Q

Causes of IR

A
  • Factor prices
  • scientific institutions
  • GR 1688
  • Agricultural Rev & proto-industry
  • Industrious Rev
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16
Q

How did British factor prices lead to IR? (Allen)

A

High wages, low cost of capital = investment in labour saving technologies
Isocost/isoquant diagram

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17
Q

How did scientific institutions lead to IR? (Mokyr)

A

Enlightenment 1800
Royal society 1662
Market for innovations saw an increase in supply

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18
Q

What were the 3 phases of the agricultural revolution and dates?

A
  1. Yeoman’s (Peasant’s) Rev = 16C/17C
  2. Landlord’s Rev = 18C (Enclosure)
  3. 19C Rev = machinery from IR to agriculture
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19
Q

What was enclosure?

A

Consolidation of small landholdings into larger farms & private ownership of previously common pastures

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20
Q

When were the Enclosure acts?

A

1750

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21
Q

4 arguments for Enclosure

A

Overton: economies of scale, draining & proper irrigation

Marx: landless peasants –> cities for IR

Hardin: Tragedy of the commons (public good) = need property rights

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22
Q

3 arguments against Enclosure

A

Inequality
Huge cost for peasants
Policing of common pasture = no tragedy of commons

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23
Q

What are the 2 opposing arguments regarding the timing of the agricultural revolution?

A

Neo-Revisionists: growth slowed after 1740
Yeoman’s Rev > landlord’s

Counter/revisionist: growth rapid after 1700
Landlord’s > peasants
Enclosure very important

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24
Q

Demand side argument for AR causing IR

A

Higher incomes for landlords = higher consumption

Increased efficiency = lower food prices. Due to inelastic demand, excess income spent on industrial goods

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25
Q

Supply side argument for AR causing IR

A

Broke Malthusian checks with increased food production = population growth = increased labour supply. Landless peasants to industry.

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26
Q

What is pronto industrial rev?

A

Shift from agriculture to industry occurred before the IR

IR marked rise of modern industry, but not industry as such

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27
Q

How was proto industry different to IR?

A

Remained decentralised: in homes not factories

Not much capital machinery used in production

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28
Q

3 theories about how proto industry led to IR

A
  1. Demographic acceleration model
  2. Transition to capitalism model
  3. Dualistic labour supply model
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29
Q

Explain demographic acceleration model w.r.t. how proto industry led to IR

A

Agriculture seasonal = underemployment
Proto industry = able to earn more income = could marry & support a family sooner = lower FAFM & higher fertility
Population boom = cheap labour to cities for IR

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30
Q

Explain the transition to capitalism model w.r.t. how proto industry led to IR

A 
Created an entrepreneurial class with skills &amp; business training
Workers better training to operate machines 
Proto industrial exports established trade = first mover advantage
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31
Q

Explain the dualistic labour supply model w.r.t. how proto industry led to IR

A

Lewis: surplus labour from traditional to modern sector
Here traditional = proto industry
Modern = modern industry
Surplus Labour to modern industry for IR without demanding higher wages = profitable = investment in K

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32
Q

Criticism of dualistic labour supply model on how proto industry led to IR

A

Allen shows high wages in Britain led to IR by incentivising capital investment, so wages not low.

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33
Q

What other revolutions is argued to have caused the industrious revolution?

A

Consumer revolution –> industrious revolution

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34
Q

What was the consumer Rev?

A

Households demand for status goods and luxury imports rose
Earning opportunities for women & children increased purchasing power
Great discoveries e..g America –> increased variety of goods

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35
Q

What was the industrious Rev?

A

Wages flat/declining but wanted to consume work = worked longer hours, more work less leisure.

Holidays abolished e.g. Saint Monday & 49 holy days in 16C

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36
Q

Why do critics argue there was no consumer Rev?

A

Hours worked only increased to maintain SoL due to declining real wages = not due to consumerism

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37
Q

Why do critics argue that there was no industrious Rev?

A

Hours worked already high in Middle Ages
Women active in LF in 14C as response to Black Death & remained due to sticky preferences.

Women & children made up small share of income in 19C

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38
Q

Between which dates did British empire come about & exist?

A

1700-1820

39
Q

What did Adam smith believe about empire?

A

Colonies were a burden and crowded out higher return non-colonial investment = don’t explain IR

40
Q

2 examples of early colonies

A
  1. 13 colonies (East Coast America) & Navigation Acts

2. British West Indies & Sugar

41
Q

What were enumerated goods? What % of exports from americas were enumerated?

A

Exports from Americas had to go through England before going elsewhere, and subject to a customs tax in Britain.

76% exports enumerated

42
Q

How did enumeration of exports impact American producers?

A

Loss of PS - greater wedge between American & final price in Europe as going through England increased transport costs = lower quantities and prices for American producers

43
Q

How did enumeration of imports affect American consumers?

A

Led to higher final price in America and lower quantities = loss of consumer surplus

44
Q

What percentage of imports to America were enumerated?

A

75% of imports came from England

45
Q

How did colonies benefit? (2)

A

Defence and protection paid for by Britain

Bounties - subsidies to produce goods otherwise inefficient e.g. Indigo = gain in PS

46
Q

How much of per capita national income were subsidies to 13 colonies ?

A

<1% of p.c. National income

47
Q

What was the rate of return on BWI investments compared to British?

A

BWI = 2% RR vs. GB bonds 3.5% (Thomas)

48
Q

How could Britain have benefitted from BWI sugar?

A

If import price of sugar from BWI to Britain < world price, gain in profit

49
Q

What was the triangular trade?

A

UK to Africa: manufactured goods
Africa to Americas: slaves
Americas to UK: raw materials

50
Q

What is the Williams thesis? W.r.t how slave trade impact European growth

A

Slave trade = more profits for plantation owners (due to full capacity utilisation & free labour) = higher incomes = consume more UK exports

51
Q

What are the 3 exploitation Theories?

A
  1. Dependency theory
  2. World systems theory
  3. Staples thesis
52
Q

4 aspects of dependency theory

A
  • exploitation: resource extraction & exports
  • core/periphery relation
  • the resource curve
  • primary product dependency & prebisch singer
53
Q

3 systems in world systems theory

A

Mini systems
World empire
World economies

54
Q

What are staples?

A

Commodities which dominate a country’s exports

55
Q

5 aspects of staples thesis

A
  • geographical determinism
  • core / periphery
  • linkages: backwards, forwards, final demand
  • vent for surplus
  • imbalanced / balanced growth
56
Q

Explain the 3 types of linkages in the staples thesis

A

Backwards e.g. Infrastructure- transport & communications
Forwards e.g. Manufactures using staples as an input
Final demand - staples related income spent on domestic consumer goods

57
Q

What is vent for surplus in staples thesis?

A

Labour surplus in old region goes to new region where increasing returns

Catch up growth - convergence of regions

58
Q

What is balanced growth in staples thesis?

A

Spillover effects from staple
Diversification
Industrialisation outside staples
Periphery becomes core

59
Q

Name two pessimists in the real wage debate

A

Feinstein & Allen

60
Q

Name 2 optimists in the real wage debate

A

Lindert & Williamson

Clark

61
Q

What are Lindert & Williamson’s findings on real wage debate?

A

Before mid18C nominal wage gains eaten up by rising prices
Real wages double from mid-18C to mid-19C

= confirms optimists

62
Q

What 5 issues with previous estimations of a cost of living index do L&W correct?

A
  • Using wholesale not consumer prices
  • Using Organisation prices not family prices
  • Using London prices not regional
  • Inaccurate basket of goods with zero weight for rent, including industrial raw materials
  • Basket not diverse for urban/rural and north/south
63
Q

What revisions does Feinstein make to L&W work & what are the conclusions?

A

Change nominal wage: include women & children, cover 80% LF, include payments in kind
Change price index: wheat overweighted, rent only based on small sample
Result = wage increase after mid-18C less impressive

64
Q

How does Clark change Feinstein’s work and what does he conclude about real wages?

A

Change farm workers nominal wages & uses rural prices
New price data & uses Geometric not Laspeyres price index

Results = higher real wage increase that Feinstein, but less than L&W

65
Q

What does Allen conclude about Feinstein’s vs. Clark’s work on real wages?

A

Clark problems: bread weight too low, not enough carbs, salt, spices & tobacco should be 0% not 1% each, food price series very wrong, light price series wrong to base on gas as not used in households yet.

Result = Feinstein is correct

66
Q

What is Engel’s Pause?

A

A term used by Allen to describe the gap between growth in output per work & real wage growth in first half of 19C = labour doesn’t see the benefits of growth

67
Q

How can we use height to Measure SOL?

A

If final height < growth trajectory = stunted growth = sign or poor net nutritional status = poor SOL

68
Q

Nicholas & Oxley’s evidence on heights & SOL

A

Use data on convicts to Australia
Includes women
Use Irish as a control since not industrialised
Heights decrease for English over IR, not Irish
Rural heights > urban heights
But fall in rural heights greater than fall in urban.
Heights rise after 1850 = LR Gains

69
Q

What does energy cost accounting reveal about British SOL during IR?

A

Food consumption vs energy constraints (work)
Adult male needed 3500 kcal for heavy work
Hours worked increased by 600 in a year
Calories fell 3000 to <2500 across IR

70
Q

How does mortality data confirm pessimist view about SOL?

A

Life expectancy 35 in cities vs 41 nationally
IMR rose from 151 to 172 per 1000 1813-1831
Worse in industrial areas

71
Q

3 criticisms of using anthropometrics as a measure of SOL

A
  1. Doesn’t include migration - SOL impact especially children in first 5 years of life
  2. Changes in height may be unrelated to SOL
  3. Assume people prefer better health: sometimes sacrifice health for utility e.g. Tobacco, alcohol, chocolate
72
Q

What are the optimist and pessimist arguments in child labour as a measure of SOL?

A

Pessimist - child labour a response to low earnings = shows low SOL

optimists - child labour -> higher earnings meaning consumer Rev possible = higher SOL

73
Q

Explain the child labour equilibrium model & how it supports pessimist view on SOL

A

Assumptions: luxury axiom (parents only make children work if necessary) and substitution axiom - children Lower productivity lower wage workers.

3 equilibriums:

  • E1: If W>S, zero child labour so SL = N adults
  • E3: If W
74
Q

4 reasons why child labour increased in IR

A
  1. Partially mechanised technology = children suitable for small tasks. Comparative advantage for children e.g. As “hurriers’ in mines
  2. Fatherless families due to French wars & low LE
  3. Engel’s Pause
  4. Lack of protective laws
75
Q

4 possible reasons for decline in child labour

A
  • Legislation: Factory Acts 1830s/40s = under 8s banned & work 6.5 hours max a day
  • Tech change = full mechanisation = no demand for child labour
  • education opportunities = higher returns to school than work
  • Engel’s Pause ends = W>S = children no longer need to work out of necessity
76
Q

When was the Victorian era?

A

1837-1901

77
Q

When was the second IR?

A

1870-1914

78
Q

What period do we classify as mid-Victorian success?

A

1850s to 1870s

79
Q

What period do we classify as late Victorian failure?

A

1870s to WWI (this is actually late Victorian to early Edwardian period)

80
Q

6 British causes of Victorian failure

A
  • overcommitment in first IR
  • Too much K abroad
  • Banking failure
  • Education failure
  • Entrepreneurial failure
  • Business / labour market failures
81
Q

How did K outflows cause Victorian failure?

A

K abroad = opportunity cost in terms of domestic investment opportunities
Social benefits > private benefits of investing at home. Investors ignore positive externality = underinvestment = market failure
Higher private returns abroad

82
Q

How did banking failure lead to Victorian failure?

A

‘Money back on demand’ = lack of LR loans
Concentrated banking industry = less lending & flexibility
Stock markets price out small/medium firms: issues £1M or more only
K markets biased against new industries: lack of info = no loan

83
Q

How did entrepreneurial failure lead to Victorian failure?

A

Aldcroft thesis:

  1. Technological failures: didn’t use best tech nor innovate
  2. Production failures - bespoke designs for cars, not Standard = no assembly line
  3. Sales & marketing failures - lack of specialised divisions
84
Q

Business market failures –> Victorian failure (3)

A

Lots of family firms vs industrial oligopoly US & Germany
Small market share = no economies of scale
Limited management hierarchy

85
Q

Labour market issues –> Victorian failure (2)

A

High unionisation 44% adult males

Constrained full mechanisation = lower productivity

86
Q

What was ASM?

A

American system of manufacturing

Assembly line, large scale, standardised goods, K intensive, division of operations

87
Q

6 causes of the rise of USA

A
  1. US wages high, K and resources cheap
  2. Institutions
  3. British K to US
  4. European migrants
  5. Education
  6. Tariffs
88
Q

How did institutions contribute to rise of USA?

A

US dominance in resource extraction, not in resource endowments = required investment in extraction, transportation, geological knowledge & tech

89
Q

What is the Habakkuk thesis w.r.t. Rise of USA?

A

Land abundance + labour scarcity –> labour saving innovations –> K accumulation & tech change

90
Q

How did access to British capital lead to rise of USA?

A

Indispensability theory: railways indispensable to US success
40% GB foreign K in railroads
Lots of K to US (as well as empire)

91
Q

How did European migration lead to rise of US?

A

Direct impacts - more productive, make K more scarce relative to L = more K accumulation

Indirect - need for more secure property rights (Homestead act 1862), democratic voting and education and welfare system

92
Q

How was US education superior in late Victorian period?

A

Higher general education (primary enrolment & literacy) = LR gains vs low educated by skilled at operating machines British

Science & maths = key for second IR industries (chemicals, engineering)

93
Q

How did Tariffs lead to rise of US?

A

Infant industry argument for protectionism = inefficient domestic industries develop
Tariffs >50%
No British retaliation - free trade after corn laws = few SR losses
Tariffs revenue & attract FDI as alternative to export

EC104 (2 decks)

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