links for 2010-02-18
Economists for Wage Subsidies

Ten Things Worth Reading, More than Half Economics: February 18, 2010

1) Robert Allen: Why was the Industrial Revolution British?:

The growth of British commerce had three important consequences. First... [t]he coal burning house was invented. It then paid to mine coal in Northumberland and ship it down the coast to London. The coal trade began. On the coal fields (in Newcastle, for instance), Britain had the cheapest energy in the world. Energy was more expensive on the European continent and particularly expensive in China.... Second, the growth of cities and manufacturing increased the demand for labour with the result that British wages and living standards were the highest in the world.... Third, the growth of cities and the high wage economy... strong demand for food and particularly meat, butter, and cheese led to the conversion of arable to pasture, convertible husbandry, and the production of fodder crops (beans, clover, turnips), most of which raised soil nitrogen levels and pushed up the yields of wheat and barley.... Success in international trade created Britain’s high wage, cheap energy economy, and it was the spring board for the Industrial Revolution. High wages and cheap energy created a demand for technology that substituted capital and energy for labour. These incentives operated in many industries.... The famous inventions of the Industrial Revolution were responses to the high wages and cheap energy of the British economy. These inventions also substituted capital and energy for labour. The steam engine increased the use of capital and coal to raise output per worker. The cotton mill used machines to raise labour productivity in spinning and weaving. New technologies of iron making substituted cheap coal for expensive charcoal and mechanised production to increase output per worker. These technologies eventually revolutionised the world, but at the outset they were barely profitable in Britain, and their commercial success depended on increasing the use of inputs that were relatively cheap in Britain. In other countries, where wages were lower and energy more expensive, it did not pay to use technology that reduced employment and increased the consumption of fuel.

2) Nick Crafts: :

In 1800 there were about 35,000 and in 1830 about 160,000 steam horsepower... and even in 1870 only about 1.7 million steam horsepower... about 2.5 per cent of the capital stock. Steam power was intensively used in textiles, the iron industry and coal mining but important sectors of the economy including agriculture and the tertiary sector outside of transport were virtually untouched by it. For a very long time water power remained cheaper for most users.... Although Watt's steam engine represented an important advance, from 1800 to about 1840 there was little further advance and the capital costs of steam engines did not fall − there was no equivalent to Moore's Law in operation then. There followed a period of further advance; many steam engines were upgraded to work at higher pressures and the price of steam power to the user had approximately halved by the mid-1850s.... [T]he contribution to TFP growth was fairly modest... steam power's impact on economic growth was modest throughout the industrial revolution and on into the railway age when compared with that of ICT. TFP growth in the computer sector has exceeded that on the railroads by massive amounts, especially recently. But the much greater impact of ICT applies not only to TFP growth but also to capital inputs, and was apparent prior to the post- 1995 growth spurt...

3) Robert Waldmann said...:

[Megan] McArdle is Uranus. I noticed a huge surge of blog posts noting that health insurance is good for people's health. I wondered why people suddenly felt the need to state the well known. Over time, I was very unsurprised to read the word McArdle (I should have guessed). Now I read the further phrase "Atlantic article" and I understand.

I'd say that the article seems to have been well above average for McArdle -- wrong, but wrong in an interesting way, and wrong in a way which might possibly not be due to intellectual dishonesty (note "might" makes right). I am not surprised that there is no mortality discontinuity at 65. The response that mortality responds slowly to health care is obvious. However, I think McArdle's article would have made me think for at least a tenth of a second if I had read it before reading the rebuttals. So definitely well above average for McArdle.

Doesn't he mean: "Megan McArdle is Neptune"?

4) Dean Baker: The Budget Deficit Scare Story and the Great Recession:

The Great Recession has left tens of millions of families facing unemployment, underemployment and the threat of losing their home. However, concerns over the deficit threaten to derail efforts to turn around the economy and spur employment. This report attempts to correct many of the misperceptions about the deficit that have brought the issue to the center of national debate. In a time when cogent, effective policies are needed to address the suffering stemming from the economic downturn, the tactics of the deficit hawks distract the public and policy makers from the policies necessary to bring the economy back to full employment.


The Gapminder World 2006, beta

6) *SECOND BEST NON-ECONOMICS THING I HAVE READ TODAY: Can chocolate lower your risk of stroke?:

Eating chocolate may lower your risk of having a stroke, according to an analysis of available research that was released February 11 and will be presented at the American Academy of Neurology's 62nd Annual Meeting in Toronto April 10 to April 17, 2010. Another study found that eating chocolate may lower the risk of death after suffering a stroke.... "More research is needed to determine whether chocolate truly lowers stroke risk, or whether healthier people are simply more likely to eat chocolate than others," said study author Sarah Sahib, BScCA, with McMaster University in Hamilton, Ontario, Canada. Sahib worked alongside Gustavo Saposnik, MD, MSc, where the study was completed at St. Michael's Hospital and the University of Toronto. Chocolate is rich in antioxidants called flavonoids, which may have a protective effect against stroke.... 44,489 people who ate one serving of chocolate per week were 22 percent less likely to have a stroke than people who ate no chocolate.... 1,169 people who ate 50 grams of chocolate once a week were 46 percent less likely to die following a stroke than people who did not eat chocolate.

7) BEST NON-ECONOMICS THING I HAVE READ TODAY: Glen Biegel, former speechwriter of Sarah Palin, on why she ditched him:

8) STUPIDEST PERSON OF THE DAY: Joe Wurzelbacher, as observed by the Blue Texan:

Personification of Patriotic, Pro-America Areas No Longer Supporting Sarah Palin: Yesterday, “Joe” the “Plumber” endorsed the Teabagger candidate for governor in Pennsylvania, and made a startling announcement.

Wurzelbacher touched on several different points during his speech, and many of them were surprising. He said he doesn’t support Sarah Palin anymore. Why? Because she’s backing John McCain’s re-election effort. “John McCain is no public servant,” he told the room, calling the 2008 Republican nominee a career politician.

But what about all that campaigning you did for him, Joe?

Wurzelbacher said, “McCain was trying to use me. I happened to be the face of middle Americans. It was a ploy.”

You’re in good company, Joe — so was the Quitter.


Brad steals a page from my book, quoting "Apocalypse Now" to describe the Bush approach to public policy, but he mangles the lines. Willard says, "They told me that you had gone totally insane, and that your methods were unsound." Kurtz asks: "Are my methods unsound?" And Willard replies: "I don't see any method at all, sir." (They're surrounded by deep-jungle tribespeople, decapitated heads on sticks, all sorts of corpses, etc.) I think that about sums it up.

10) HOISTED FROM THE ARCHIVES: DeLong (2005): DeLong on Tim Burke's Critique of Jared Diamond:

First, explaining the 1550-1850 rape of west Africa by the Atlantic slave trade requires more than "proximity... trade wind[s]... European nautical capacity... lack of harbors plus poor habitability of the west and central African coastline" (plus sugar islands where slave plantation labor can be exploited extremely profitably). It also requires a west Africa that doesn't have its own gunpowder armaments industry, and where small amounts of "advanced" European military technology can upset the balance of power and induce slave raiding-driven chaos for centuries. Second (and this is tentative, for here I am out of my depth), all societies develop internal strife. Whether the strife is resolved by internal civil war and purge or by the breaking-off and migration outward of a portion of the society depends crucially on just who is over the next hill, whether they are friendly, and whether it matters whether they are friendly. Bantu-speakers' technologies of farming meant that they could support much higher population densities in areas they chose to move into. Bantu-speakers' technologies of iron working meant that they had sharper tools and weapons than others in areas they chose to move into. Without these edges, lineage splitoffs would have found migration next to impossible. Third, I think that Tim Burke is right when he writes that "Diamond thinks that post-1500 events are no more than the icing on the cake." Diamond thinks that, given inequalities as they existed in 1500, post-1500 history is unproblematic--the interesting things, for Diamond, are what happened before 1500, so that's what he thinks is worth studying, and that's what he writes about. I think that Diamond is wrong: I think that post-1500 history is not the icing on the cake, and is very problematic. But it would be grossly unfair to focus a critique of Diamond on what he does not write about, rather than on what he does. Fourth, let me agree with Tim Burke that most of the questions I think are most interesting about world history are not ones that Diamond has much purchase on. Europe v. China. South America v. North America. What happened to Islamic civilization after 1000. Diamond has little to say about any of these.

I even think that Diamond massively overstates the ability of his model to hel us understand sub-Saharan Africa's development. Yes, climate is different and a great deal of the Middle Eastern biotechnological toolkit is not directly applicable. But a lot of the biotechnological toolkit is. And the whole rest of the technological toolkit is. And it's not as though east Africa was cut off from news about what was happening in Eurasia: the most important seaport on the central east African coast--the House of Peace--is named not in Swahili but in Arabic: Dar es Salaam. The writers of 1 Kings were especially impressed with what the Indian Ocean trade fleets brought: gold, and silver, and ivory, apes, and peacocks. Why, from 1000 to 1800, weren't the areas around Timbuktu and Dar es Salaam a lot more like the areas around Samarkand and Tashkent (in some centuries they were, weren't they?)? Diamond's model doesn't help us to understand why not. I don't understand why not.