Memo 1: Malthusian Economies
Was the invention of agriculture the worst mistake in the history of the human race?
- Jared Diamond (1987): The Worst Mistake in the History of the Human Race <http:// discovermagazine.com/1987/may/02-the-worst-mistake-in-the-history-of-the-human- race>
- Richard Steckel (2008): Biological Measures of the Standard of Living <http:// www.aeaweb.org/articles.php?doi=10.1257/jep.22.1.129>
- Gregory Clark (2005): The Condition of the Working Class in England, 1209–2004 <http://www.jstor.org/stable/pdfplus/10.1086/ .pdf>
- Robert M. Solow (1985): Economic History and Economics <http://www.jstor.org/stable/ 1805620>
- Kenneth J. Arrow (1985): Maine and Texas <http://www.jstor.org/stable/1805618>
- Paul Krugman (2011): Mr. Keynes and the Moderns <https://voxeu.org/article/mr-keynes-and-moderns>
- Carl Shapiro and Hal Varian (1999): Information Rules: A Strategic Guide to the Network Economy, selections <https://delong.typepad.com/files/shapiro-variation-rules- selections.pdf>
Memo 2: The Industrial Revolution
Compared to what we have seen in our lives—and in the lives of our parents, grandparents, and even great-grandparents—the pace of productivity growth and economic structural change even in Britain over 1700-1850 seems appallingly slow. Compared to what came earlier it seems remarkably rapid. Frame several possible hypotheses about why either British growth 1700-1850 was so much faster than western European growth 1400-1700, or British growth 1700-1850 was so much slower than global growth has been since 1850.
- Robert C. Allen (2011): Why the Industrial Revolution Was British: Commerce, Induced Invention and the Scientific Revolution <http://onlinelibrary.wiley.com/doi/10.1111/ j.1468-0289.2010.00532.x/pdf>
- Peter Temin (1997): Two Views of the British Industrial Revolution <http://www.jstor.org/ stable/pdfplus/2951107.pdf>
- Stephen Nicholas and Richard H. Steckel (1991): Heights and Living Standards of English Workers during the Early Years of Industrialization, 1770–1815 <http:// www.jstor.org/stable/pdfplus/2123399.pdf>
Memo 3: Comparative Development and Underdevelopment
The economies settled from northwestern Europe—the United States, Canada, Australia, New Zealand—were all very resource rich. So why did they industrialize early? Why didn't they simply become gigantic Denmarks, shipping agricultural and other resource-based products to the European industral powers in return for manufactures?
Karl Marx's expectations for the economic development of India over 1850-1900 under the impact of western colonialism were, all in all, profoundly optimistic. Blood, chaos, revolution, yes—but also rapid economic development as the British millocracy throws a net of railways over India... and consequences ensue. All five of the other papers are trying to grapple with why Marx's predictions were false. Pick one paper. How good a job do you think it does?
- Karl Marx (1853): The Future Results of British Rule in India <http://tinyurl.com/ dl20090112l>
- W. Arthur Lewis (1978): Evolution of the International Economic Order <https:// delong.typepad.com/sdj/2008/04/w-arthur-lewis.html>
- Daron Acemoglu, Simon Johnson, and James A. Robinson (2001): The Colonial Origins of Comparative Development: An Empirical Investigation <https://economics.mit.edu/ files/4123>
- Kenneth Sokoloff (1984): Was the Transition from the Artisanal Shop to the Non-Mechanized Factory Associated with Gains in Efficiency? <http://www.nber.org/papers/ w1386>
- Daniel Gross (2017): Scale versus Scope in the Diffusion of New Technology: Evidence from the Tractor <https://www.nber.org/papers/w24125>
- Dave Donaldson and Richard Hornbeck (2016): Railroads and American Economic Growth: A ‘Market Access’ Approach <https://academic.oup.com/qje/article/ 131/2/799/2606976>
Memo 4: Unfreedom
What relevance and use does a work like Karl Marx and Friedrich Engels (1848), "Manifesto of the Communist Party" have to twenty-first century economists today?
- Karl Marx and Friedrich Engels (1848): Manifesto of the Communist Party<http://www.marxists.org/archive/marx/works/1848/communist-manifesto/>
- Stanley Engerman and Kenneth Sokoloff (1994): Factor Endowments, Institutions and Differential Paths of Development among New World Economies <http://papers.nber.org/ papers/h0066>
- Nathan Nunn (2008): The Long-Term Effects of Africa’s Slave Trades <http:// www.jstor.org/stable/pdfplus/25098896.pdf>
In an economy with constant returns to scale, perfect competition, symmetric information, and no externalities—neither physical externalities in production nor psychological externalities in consumption—the market equilibrium can be thought of as the maximum of a social welfare function in which each individual's weight is proportional to the inverse of their marginal utility of wealth. Thus if everybody (say) has the same utility function that is logarithmic in wealth, the market's implicit social welfare function will weigh each person by their wealth when it makes its interpersonal utility tradeoffs. Pick one paper. What light does it shed on whether the market's implicit social welfare function is a sensible one to maximize?
- Branko Milanovic, Peter H. Lindert, and Jeffrey G. Williamson (2010): Pre-Industrial Inequality <http://onlinelibrary.wiley.com/doi/10.1111/j.1468-0297.2010.02403.x/ abstract>
- Thomas Piketty and Gabriel Zucman (2014): Capital Is Back: Wealth-Income Ratios in Rich Countries 1700–2010 <http://qje.oxfordjournals.org/content/129/3/1255.full.pdf>
- Claudia Goldin and Kenneth Sokoloff (1984): The Relative Productivity Hypothesis of Industrialization: The American Case, 1820 to 1850 <http://qje.oxfordjournals.org/content/99/3/461.short>
- Joshua Rosenbloom (2018): Antebellum Labor Markets <https://lib.dr.iastate.edu/econ_workingpapers/42/>
Memo 5: Women and Children
The most important economic change of the past two centuries has been the shift from a "Malthusian" world—in which the typical woman and her children live near subsistence, with the absence of infant formula and easy artificial family planning mechanisms plus the desire to have surviving descendants in a world where average lifespan is less than 30 leads the typical woman to have on average perhaps nine pregnancies to achieve 6.5 live births, 4 children who survive infancy, and 3 to reach near-adulthood; thus spending 20 years "eating for two"—to our current world. Discuss.
- Abigail Smith Adams (1776): Letter to John Adams 31 March - 5 April 1776 <https://www.masshist.org/digitaladams/archive/doc?id=L17760331aa (Links to an external site.)>
- Martha Bailey (2013): Fifty Years of Family Planning: New Evidence on the Long-Run Effects of Increasing Access to Contraception <http://www.nber.org/papers/w19493 (Links to an external site.)>
- Claudia Goldin (1991): The Role of World War II in the Rise of Women’s Employment <https://www.nber.org/papers/w3203>
- Heather Antecol, Kelly Bedard, and Jenna Stearns (2018): Equal but Inequitable: Who Benefits from Gender-Neutral Tenure Clock Stopping Policies <https://pubs.aeaweb.org/doi/pdf/10.1257/aer.20160613 (Links to an external site.)>
- Naomi Lamoreaux (1986): Banks, Kinship, and Economic Development: The New England Case <http://www.jstor.org/stable/2121478>
- Jeremy Edwards and Sheilagh Ogilvie (1996): Universal Banks and German Industrialization: A Reappraisal <https://www.jstor.org/stable/2597758>
Memo 6: International Money and Finance
Textbooks say that the gold standard had internal mechanisms that worked automatically to maintain both price and balance-of-payments stability. Is that impression borne out by the analyses you read this week?
- Michael Bordo and Hugh Rockoff (1996): The Gold Standard as a ‘Good Housekeeping Seal of Approval<https://www.jstor.org/stable/2123971?seq=1#page_scan_tab_contents>
- Warren Weber (2016): A Bitcoin Standard: Lessons from the Gold Standard<http://www.bankofcanada.ca/2016/03/staff-working-paper-2016-14/>
Memo 7: The Post-1914 Breakdown
To what extent do you find John Maynard Keynes's diagnoses of the ills of global economy and polity after 1914 to be well-founded in economics and economic theory? To what extent do you find them to be well-founded, but in disciplines and patterns of thought that are not "economics"? To what extent do you find then ill-founded?
- John Maynard Keynes (1919): The Economic Consequences of the Peace, selections chs. 1-4 <https://delong.typepad.com/files/keynes-peace.pdf (Links to an external site.)>
- John Maynard Keynes (1925): The Economic Consequences of Mr. Churchill <https://gutenberg.ca/ebooks/keynes-essaysinpersuasion/keynes-essaysinpersuasion-00-h.html#Economic_Consequences (Links to an external site.)>
Memo 8: Origins of the Great Depression
What similarities strike you between what you know about the global financial crisis of 2007-9 and what you read for this week about the origins of the Great Depression? What differences?
- Gary Richardson and William Troost (2009): Monetary Intervention Mitigated Banking Panics during the Great Depression: Quasi-Experimental Evidence from the Federal Reserve District Border in Mississippi, 1929 to 1933 <http://www.journals.uchicago.edu/doi/abs/10.1086/649603 (Links to an external site.)>
- Ben Bernanke (1995): The Macroeconomics of the Great Depression: A Comparative Approach <http://www.jstor.org/stable/i336266 (Links to an external site.)>
Why was recovery from the Great Depression so partial and delayed?
- Christina Romer (1992): What Ended the Great Depression? <http://www.jstor.org/stable/2123226>
- Gauti Eggertsson (2008): Great Expectations and the End of the Great Depression<http://www.jstor.org/stable/29730131>
- Joshua Hausman (2016): Fiscal Policy and Economic Recovery: The Case of the 1936 Veterans’ Bonus <https://www.aeaweb.org/articles?id=10.1257/aer.20130957>
Memo 10: Race and the South
Which of the papers we read this week did you find most depressing and disheartening, and why?
- Gavin Wright (1987): The Economic Revolution in the American South <https://www.aeaweb.org/articles?id=10.1257/jep.1.1.161>
- Taylor Jaworski (2017): World War II and the Industrialization of the American South<http://www.nber.org/papers/w23477>
- Ellora Derenocourt (2018): Can You Move to Opportunity? Evidence from the Great Migration<https://scholar.harvard.edu/elloraderenoncourt/publications>
Memo 11: The Great Compression in Incomes
In this week's two readings there is a certain tension between Claudia Goldin-as-Chicago-economist and Claudia-Goldin-as-sensitive-to-institutions. To what degree did this week's readings strengthen your belief that labor markets are reasonably well understood as the results of supply and demand in competitive markets with supply and demand strongly rooted, on the one hand, in human preferences for the things that make material prosperity, and, on the other hand, technologies? To what degree did this week's readings strengthen your belief that labor markets are better understood by simply doing sociological and institutional analysis?
- Claudia Goldin and Robert Margo (1992): The Great Compression: The U.S. Wage Structure at Midcentury <https://academic.oup.com/qje/article/107/1/1/1925779>
- Claudia Goldin (2001): The Human-Capital Century and American Leadership: Virtues of the Past<http://www.nber.org/papers/w8239>
Memo 12: Convergence and Its Absence
In what ways do you think that the statistical descriptions found in this week's readings of the level, variability, and growth of human economies are most inadequate and unsatisfactory?
- Lant Pritchett (1997): Divergence, Big Time Journal of Economic Perspectives (Summer), pp. 3-17, <http://tinyurl.com/dl20090112o>
- Dev Patel, Justin Sandefur, and Arvind Subramanian (2018): Everything You Know about Cross-Country Convergence Is (Now) Wrong <https://www.piie.com/blogs/realtime-economic-issues-watch/everything-you-know-about-cross-country-convergence-now-wrong>
- Paul Johnson and Chris Papageorgiou: What Remains of Cross-Country Convergence?<https://delong.typepad.com/files/johnson-papageorgiou.pdf>
Memo 13: Economic Growth Speedups and Slowdowns
How much do economists understand about the nature and causes of economic growth—both why some countries are more successful at attaining economic growth than others, why the globe's rate of economic growth varies over time, and why individual countries' rates of economic growth vary over time?
- Nicholas Crafts (2002): The Solow Productivity Paradox in Historical Perspective<http://www.cepr.org/pubs/dps/DP3142.asp>
- Dani Rodrik (1995): Getting Interventions Right: How South Korea and Taiwan Grew Rich<http://tinyurl.com/dl20090112t>
- Peter J. Klenow and Andres Rodriguez-Clare (1997): The Neoclassical Revival in Growth Economics: Has It Gone too Far? <https://delong.typepad.com/klenow-rodriguez-clare.pdf>
Modern Economic Growth
Economics tends to view growth as a continuous and diffuse process: if one firm does not solve the problem of how to efficiently utilize resources, others will and drive the first out of business; if one technological vein plays itself out, energy will focus on others. These readings all argue different. They argue one side of a debate. They argue either that some unique and particular institutions and technologies matter a lot. What kinds of evidence not presented in these reading might lead you to come down on one or the other of the many, many sides in this debate—either on the side of economists' standard prior, or that in fact it is still other and still different institutions or technologies or simply the aggregate state of the economy that matters the most?
- William D. Nordhaus (1997): Do Real-Output and Real-Wage Measures Capture Reality? The History of Lighting Suggests Not <http://www.nber.org/chapters/c6064>
- Dave Donaldson (2016): Railroads of the Raj: Estimating the Impact of Transportation Infrastructure <http://www.nber.org/papers/w16487.pdf>
- Peter Thompson (2001): How Much Did the Liberty Shipbuilders Learn? New Evidence for an Old Case Study <http://www.jstor.org/stable/pdfplus/10.1086/318605.pdf>
- Nicholas Crafts (2002): The Solow Productivity Paradox in Historical Perspective <http://www.cepr.org/pubs/dps/DP3142.asp>
A Great Divergence?
Was there much of a "Great Divergence" in the early modern era? To what extent is it reasonable to pursue the project of tracing the late-nineteenth and twentieth century centrality of the North Atlantic in the global economy to events and processes going on over 1500-1700?
- Stephen Broadberry (2013): Accounting for the Great Divergence <http://www.lse.ac.uk/economicHistory/workingPapers/2013/WP184.pdf>
- Nico Voigtländer and Hans-Joachim Voth (2013): The Three Horsemen of Riches: Plague, War, and Urbanization in Early Modern Europe <http://restud.oxfordjournals.org/content/80/2/774.full.pdf>
- Daron Acemoglu, Simon Johnson, and James Robinson (2005): The Rise of Europe: Atlantic Trade, Institutional Change, and Economic Growth <http://www.jstor.org/stable/4132729>
Commercial and Other Pre-Industrial Economic Revolutions
The January 20 class painted a picture of an economic world in which (a) total factor productivity growth was very slow, and (b) as a result the overwhelming effect of technological progress was to increase human numbers rather than raise standards of living above bare subsistence. This week we read pieces all arguing that very important things were happening in northwestern Europe in 1500-1800 to raise the rate of total factor productivity growth. Pick one paper. Do you think it makes a convincing case? Taking as background January 20's class, how much of a difference in the global economic trend do you think that paper's factors by themselves could have made?
Modern Economic Growth
Economics tends to view growth as a continuous and diffuse process: if one firm does not solve the problem of how to efficiently utilize resources, others will and drive the first out of business; if one technological vein plays itself out, energy will focus on others. The papers this week argue different. They argue either that some unique and particular institutions and technologies matter a lot--or, implicitly that they do not, for it is other institutions or technologies or simply the aggregate state of the economy that matters the most. What kinds of evidence not presented in this week's reading might lead you to come down on one or the other of the many, many sides in this debate?
Slavery and Serfdom
In his Wealth of Nations, Adam Smith confidently asserted that slavery was uneconomic–that in commercial society, manumission was the road to higher productivity because the carrot of working for yourself is much more efficient than the stick of being whipped by others. He went on to say that unfree labor–slavery, serfdom, debt peonage, and so on–could only survive where the rich chose to pursue not the pleasures of prosperous living but the pleasures of domination–and that as humanity progressed morally and also progressed technologically to invent new commodities this love of domination would decline. This week we have a number of papers that conclude, as I read them, that Smith was horribly wrong. Can we rescue Smith's optimal, Panglossian view of the historical destiny of unfree labor? Why, in history, didn't Smith's argument work?
Accounting for Growth
This week we have a large number of disparate papers that pursue various strategies in trying to nail down—or at least to vaguely wave their hands in some direction at—the contributions of different sectors and investment efforts to the remarkable process of improvement in productivity and living standards that we call “modern economic growth”. Take any two of the papers this week, and compare them with respect to the strategies they follow to try to make their case. Which is the more convincing? How convincing is it? Why do you find it more convincing? What should the author of the other paper done to strengthen the case—or, rather, to see if there was a strong case?
If commodities are fully rival and excludible—i.e., the resources devoted to the production of one unit are thereby used up, and cannot be used to aid in the production of a second unit; and if sellers can easily prevent non-buyers from benefiting from what they produce (and non-buyers can easily prevent sellers from imposing costs on them—then, if the distribution of wealth accords with desert and utility, the competitive market economy in equilibrium does the job. But how often is production really constant returns to scale? And how often are spillovers truly absent? And where and when are markets thick enough to actually be in any form of “competitive equilibrium”? Please reflect on these and related issues in the context of this week's readings.
Extractive and Developmental Institutions
One of the deep problems with the economics that has lurked in the background so far this course is that we economists’ standard models lead almost inescapably to the conclusion that nothing is important. We start with a market-equilibrium benchmark. We introduce one friction, one inefficiency, one market failure. We calculate its effect on the equilibrium. We calculate the resulting Harberger triangle. We find that the Harberger triangle is small relative to the size of the economy. The standard dodge has become to appeal to “institutions”: things that construct the market or the absence of which means that markets are not properly constructed at all. How convincing is this dodge? What are these “institutions” that are appealed to? How convincing are the arguments that “institutions” in general have big effects? How convincing are the arguments that the favorite institutions of some team of economists are the ones that have the big effects?
Additional Memo Questions:
"The treasure captured outside Europe by undisguised looting, enslavement and murder, floated back to the mother-country and were there turned into capital." -- Marx, Capital, Vol. 1 Ch. 32. Do the other assigned readings provide any basis for assessing the general truth of this passage from Marx? In what sense did colonial trade in the 1497-1800 period contribute to capital formation in Europe?
Most economic historians now think that the agricultural revolution was more a gradual and drawn out process than previously believed. Why do they now think this?
Maxine Berg and Pat Hudson write that the "historiography of the industrial revolution in England has moved away from viewing the late eighteenth and early nineteenth centuries as a unique turning point in economic and social development." Do you agree with their conclusion that the literature has moved too far in this direction? Why or why not?
An influential literature cites the scarcity of labor as a key factor in the emergence of the "American System of Production." How much of this argument (if any) survives Peter Temin's 1966 critique?
What are the most striking similarities between the pre-1914 life-insurance-mortgage company connection described by Kenneth Snowden and the subprime crisis?
Sanford Jacoby and John James both suggest that late-19th century American labor markets were very different from American labor markets today. What are the three most important factors they point to as explaining these differences?
Adam Smith confidently predicted that slavery was on its way out for economic reasons. In commercial society, manumission would be the rule because the carrot of working for yourself is much more efficient than the stick of being whipped by others. Was Smith right? If you conclude he was wrong, why was he wrong?
It is popularly argued that the world was even more globalized a hundred years ago than it is today. Is this an accurate characterization? If so, why? If not, why not?
What similarities strike you between what you have been reading about the global financial crisis over the past eighteen months and what you read for this week? What differences?
John Maynard Keynes said, near the end of his life, that the problem of controlling inflation while maintaining full employment was fundamentally a political and not an economic question. Did the 1970s in the developed world prove him right, or prove him wrong?
The economic history of the world both in the post-WWII period 1945-1990 and, in broader perspective, over the past two centuries has been one in which the world has shrunken enormously in distance along every conceivable measurement, and yet in which income and productivity differences between societies have grown enormously. What, in your judgment, are the possible big-picture theories for explaining this phenomenon that are worth investigating?