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The World Economy: A Millennial Perspective

Author(s):Maddison, Angus
Reviewer(s):Brezis, Elise S.

Published by EH.NET (November 2001)

Angus Maddison, The World Economy: A Millennial Perspective. Paris:

OECD, 2001. 384 pp, $63 (hardback), ISBN: 92-64-18654-9; $26 (paperback),

ISBN: 92-64-18608-5.

Reviewed for EH.NET by Elise S. Brezis, Department of Economics, Bar-Ilan

University.

In the past few years, there has been a resurgence of interest in long-term

economic growth, and consequently, the need for long-term data on the

countries of the world has become more acute. The data provided by the

Heston-Summers Penn World Tables are available, but they start in 1950, which

is too short a period to analyze the elements that are important to

development and growth. So those who study macroeconomics and economic growth

and who use long-term data have anxiously awaited the arrival of The World

Economy: A Millennial Perspective. This book, which provides data on GDP

and population growth for the past millennium, enables quantification of

long-term changes, and is therefore of exceptional interest; for research, it

is a must.

World Economy is a continuation of Maddison’s 1995 book, Monitoring

the World Economy, which covers the period 1820-1992 (which itself was a

continuation of his 1991 book Dynamic Forces in Capitalist

Development). What is new in World Economy is that the data are

provided from the year 1000 (although not for all countries).

Like his other two books, there are two distinct parts to World

Economy: In the first part, Maddison presents a succinct historical view

of world economic development, while the second part provides data, which is

Maddison’s specialty.

In Part One, Maddison attempts to identify the factors that explain the

economic success of some countries, and he analyzes the reasons for the

backwardness of others in light of the new data. He places the main onus of

economic performance on conquest, international trade, and technological

innovations.

In the first chapter, Maddison presents an extensive survey of world economic

development from 1 CE to the present, but focuses mainly on the last

millennium. He analyzes the data on population and GDP per capita, pointing

out the differences over the continents — the Western strength and Asian

weakness around 1800. Comparing the two millennia, he shows that in the last

millennium, the world’s population increased 22-fold, world GDP nearly

300-fold and per capita income increased 13-fold, while in the first

millennium there was no advance in per capita income.

In the second chapter, Maddison attempts to explain changes in the character

of economic leadership that have occurred over the past millennium. He

presents four case histories: the Venetian Republic, Portugal, the

Netherlands, and Britain, and shows how it is misleading to treat the Western

experience as universal. This chapter describes at length the geographic

discoveries and trade that took place in the middle of the millennium; it also

focuses on colonialism.

The third chapter treats the second half of the twentieth century, a period

for which data are easier to find, but still not as easy for some non-Western

countries as for the West. Consequently, Maddison focuses on Asia and Africa,

as well as on the transition process in the countries of Eastern Europe.

Writing a history of the world for 1,000 years in 170 pages is an admirable

achievement which nevertheless has its unavoidable flaws. Maddison does not

attempt a full listing of the various elements that play a role in

development, but rather places an emphasis on what for him is important in

light of his new data. Therefore, he concentrates on discoveries and on trade,

a subject on which he goes into much detail. For example, describing

discoveries, he mentions that “Da Gama got back to Lisbon in August (having

stopped to bury his brother in the Azores)” (p.62). However, treatment of

other subjects, such as government policies and institutions, is absent.

Despite including details that are not relevant to economic development, Part

One is indeed fascinating, and it is interesting to see where Maddison now

places his emphasis, which is very different than in his 1991 and 1995 books,

which focused more on the factors of production.

The second part of the book is the appendices with the data provided by

Maddison, who is the expert today on providing economy-related data on

the past. Producing data is important, since it permits us “?to separate

stylized facts from stylized fantasies which are sometimes perceived to be

reality” (p.45). Maddison’s main contribution to the field is his data on

population, GDP, and likewise, on GDP per capita (although the book also

contains some other data such as data on exports, but these series are not as

lengthy).

Appendix A presents data on 1820-1998. As in his 1995 book, Maddison explains

the way the data are converted into PPP values, permitting a comparison

between countries and over time. He also explains the differences in the

population and GDP data between World Economy and his 1995 book. There

are substantial revisions to the data on Asia, where the detailed coverage has

increased from 11 countries to 37. (As a small but upsetting detail, I was

astonished to see the West Bank + Gaza listed as a country. Because the

amounts involved are small and without any influence on the regional data, I

think that Maddison could have avoided this faute de gout). For African

countries, the coverage has increased from 10 to 57 countries. This increase

will certainly encourage economic research on these countries.

Appendix B is the main new offering of World Economy. It presents the

data from 1500-1800 as well as aggregate data from the year 1. Maddison shows

the alternative estimates of world population, comparing his results with

other research. This appendix is certainly the main contribution of this book.

The other four appendices present the GDP estimates for 1950-1998, the data

for the Eastern European countries during the transition, data on employment,

on labor productivity, and data on exports for 1870-1998.

Today Maddison is nearly the only source for historical macro data of the

world, and only he could rise to the challenge of presenting data for the

entire millennium, even if there are still holes. David Landes in his recent

book (1998) wrote that Paul Bairoch and Angus Maddison are the collectors and

calculators of the numbers of growth and productivity. Since Bairoch is not

with us any more, Maddison now has a “monopoly” on this field.

In World Economy Maddison presents not only data “created” by others

but mainly much data of his own “creation.” The accuracy of his data might

occasionally be questionable, since some of it is merely educated guesswork. A

couple of illustrations of Maddison’s simply guessing are: “For Western Europe

as a whole, I made proxy estimates for Austria, Denmark, Finland, and Sweden,

assuming that per capita real GDP increased at 0.17% a year for 1500-1820″ (p.

248); “For the other Western Offshoots, Canada, Australia, and New Zealand .

. . I assumed a per capita GDP of 400$ for 1500, 1600 and 1700″ (p.249); “For

the Americas . . . and the area of the former USSR, I have assumed that more

or less subsistence levels of income (400$ per capita) prevailed from the

first century to the end of the first millennium” (p. 260).

Despite the many approximations, only Maddison could carry off guessing data

for this period, yet readers will accept his guesses favorably. However, two

issues should be raised.

The first is: If the data that we have are fraught with errors, should we

present data at all? Should we publish data that are highly problematic, or is

it better not to publish data at all? These are serious questions and the

answers are not clear-cut. Data by Maddison have an immediate impact, and

research will be immediately launched based on it. Conclusions and

implications will be drawn in light of these data, and if they are flawed, the

resulting studies could be completely wrong.

On the other hand, there is such a demand for data now that many macro

specialists are engaged in the subject of economic growth, and they certainly

need data to test their models. In the past, the subject of economic growth

and industrialization was mainly studied by economic historians, who were

aware of the danger of working with erroneous data, and so were more cautious.

The field is now studied mainly by economic growth theorists, who are less

cautious, and will make use of whatever data can be found. Since the field

needs data, more and more will be produced. In other words the demand will

create the supply. If data are going to be “created,” better that they come

from Maddison than anyone else.

Moreover, Maddison studiously presents the way he “creates” his data. He

explains what he calls the “proxy procedure to fill gaps in the data set,” and

is aware that proxy estimation is problematic, since one can fill gaps in many

ways. Furthermore, after Maddison presents a first guess and estimate, it is

usually a catalyst for improving the data. His data estimation should

therefore be seen as a trial-and-error mechanism.

This brings me to the second issue: If the first guess leads to more research

and therefore to better data, then this would seem to be a positive outcome.

However, the theoretical question that should be asked is: Does the first

move, i.e., the first estimate influence the entire ensuing quest for the

“true” data? In other words, does the first guess influence the data estimated

even after many corrections? If the first guess can affect the ensuing

research, then despite the fact that Maddison is the best candidate “to throw

the dice and create” the data, then — like every monopoly — this one is also

undesirable. In order to reduce first-move error by removing this “monopoly,”

I suggest that the next book should be the result of the work of an entire

group of specialists. The OECD Development Centre, which is aware of and

understands the importance of data, should organize seminars for each

historical period, where experts from different parts of the world would meet

and discuss the various alternatives, and then publish their common “guess.”

This procedure would result in a better first approximation of the entire

trial-and-error mechanism, and lead therefore to better data.

References:

Landes, D.S. 1998. The Wealth and Poverty of Nations. London: Little

Brown.

Maddison, A. 1982. Dynamic Forces in Capitalist Development. Oxford:

Oxford University Press.

Maddison, A. 1995. Monitoring the World Economy, 1820-1992. Paris: OECD

Development Centre.

Elise S. Brezis is editor (with Peter Temin) of Elites, Minorities and

Economic Growth (1999, Elsevier) and author of “Social Classes,

Demographic Transition and Economic Growth,” European Economic Review,

45, 2001, 707-17.

Subject(s):Economic Development, Growth, and Aggregate Productivity
Geographic Area(s):General, International, or Comparative
Time Period(s):General or Comparative