Project 2001: Significant Works in Economic History

Ester Boserup, The Conditions of Agricultural Growth: The Economics of Agrarian Change under Population Pressure. London, G. Allen and Unwin, 1965; Chicago: Aldine, 1965. 124 pp.

Review Essay by Giovanni Federico, Department of Modern History, University of Pisa.

Population, Agricultural Growth and Institutions: The Real Long-Run View

This may be an unusual review for the series. In fact, Ester Boserup was not a professional economic historian and this is not properly speaking a work of history. Boserup was part of the staff at the United Nations and she wrote the book out of her experience as a consultant in developing countries. The book does not discuss in depth any specific historical event, and quotations of historical works are rather rare. It nevertheless is one of the most widely quoted works in economic history. Usually, it is labeled as “anti-Malthusian” and encapsulated with a sentence such as “population growth causes agricultural growth.” This is undoubtedly an implication of her model and comes in handy to scholars who do not believe that the (human) carrying capacity of a given area is set, and cannot be exceeded. From this point of view, one can draw a parallel between The Conditions of Agricultural Growth and another highly influential book, Amartya Sen’s Poverty and Famines: An Essay on Entitlement and Deprivation (Oxford 1981), which dismantled another tenet of Malthusian theory — i.e. that famines were always (or mainly) caused by absolute deficiency of food.

However, Boserup’s book is much more than a simple rejection of Malthus. It aims at explaining all the characteristics of agriculture in any specific area and time according to the resource endowment — the land/labor ratio. The more dense population is, the more intensive cultivation becomes. Agrarian economists in the 1950s focused on the Western world, and thus they could appreciate only a relatively narrow range of techniques. Looking at less developed countries, Boserup could list five different agricultural systems, according to the length of fallow between periods of cultivation (pp.15-16): 1) forest-fallow or slash and burn (15-20 years of fallow), 2) bush-fallow (6-10 years); 3) short-fallow (1-2 years); 4) annual cropping (a few months); 5) multi-cropping (no fallow). Even if the original evidence comes from the observation of primitive societies in the 1940s, the leap from changes in space to changes in time is short. Thus the rest of the book explores the consequences of intensification — i.e. of the move from one stage to another caused by population growth. Each of them entails more labor per unit of (total) land, and thus the intensification increases the productivity of land and reduces that of labor. A household has to work more to keep the same level of income. The intensification brings about an improvement in tools (from the digging stick, to the hoe, to the plough) and in the long run also brings some investments in land improvement (e.g. irrigation schemes). With pre-industrial technology, land improvements had to be done manually by peasants. Thus, they are typical of the last stages of the process, when there is enough work-force and enough demand for food to justify them. Total factor productivity may increase in the long run, but surely most of the increase in total output is achieved with a massive growth of work effort by the agricultural population. Finally, the intensification also shapes institutions, and this is the most innovative aspect of Boserup’s model. The forest-fallow system is inconsistent with household property of any given plot of land. The land belongs to (or more precisely is exploited by) the tribe as a whole. Property rights have to be created only when the cultivation cycle is shorter, and the quality of each single piece of land begins to matter. In the later stages of development some people could cease to work, and be entitled to rights to a part of the product (a “two-tier” society). However, Boserup is not nostalgic about primitive societies. She makes it crystal clear that the “two-tier” societies are better, even if in these latter some men did not work as hard as others.

Some years later, Boserup extended her model from agriculture to the whole of society (Population and Technological Change: A Study of Long-term Trends, Chicago, 1981). She added the concept of economies of scale. Many technologies can be properly exploited only if the population is dense enough. Population growth makes urban civilization possible. The second book is highly interesting, and has many insightful passages. Yet it fails to reach the simple elegance of The Conditions of Agricultural Growth — that quality which makes this book really deserving of being added to this list of masterpieces.

Of course, one could quibble endlessly about the “details” of Boserup’s model such the number and the exact features of the “stages.” The overall view provides a short, but powerful, history of the world, from prehistory to the nineteenth century arranged around one of the basic principles of economic theory — that techniques (and much else) depend on resource endowments. As you would expect from a seminal work, The Conditions of Agricultural Growth launched and refocused many modern debates. Let me give two examples. When Boserup was writing, the British agricultural revolution (i.e. the change in rotations with the substitution of fodder crops for fallow) was considered an epochal change with far-reaching implications for the entirety of world history. This view is still diffused, if no longer dominant. In Boserup’s model, the change is only part of the long-run process of world-wide intensification, and Europe was trailing behind the two other major civilizations, India and China. In fact, the most advanced areas of Europe reached Stage 4 while China was already at Stage 5. Another, and perhaps less obvious, example may be Greg Clark’s thesis on the differences in work intensity between Eastern Europe and the West (including the US). He argues that in the early nineteenth century Eastern Europeans were less productive than Westerners, because they worked less hard, and that they worked less hard because “they were different” (Clark, “Productivity Growth without Technical Change in European Agriculture before 1850,” Journal of Economic History, Vol. 47, 1987, p. 431). The thesis is very controversial (see the subsequent debate with John Komlos in the Journal of Economic History, in 1988 and 1989), but let’s assume it is true. Is it not possible that the “different” work ethic had been shaped over the centuries by different land/labor ratios? Other examples could follow, but the main point is clear: Boserup’s book is a treasure-trove of ideas. Unfortunately, it is more often quoted than used in actual research. As far as I know, there are very few really “Boserupian” works — i.e., long-term analyses of agricultural change as driven by changes in factor endowments. The most ambitious is Kang Chao’s book on Man and Land in Chinese Economic History: An Economic Analysis (Stanford 1986).

Why this (relative) neglect in spite of the so frequent quotations? One can put forward three causes, which are not mutually exclusive. The first is academic specialization. Intensification lasted for centuries, even for millennia, and few scholars would feel at ease in discussing both pre-historical agriculture and nineteenth century techniques. This fate is common to all interpretations of long-term change (cf. J. L. Anderson, Explaining Long-term Economic Change, Basingstoke, 1991). Second, the evidence on early-stage societies is very scarce, and by its nature it is often unfamiliar to historians. “Real” historical sources exist for Western Europe, China and India in the last three stages.

Last, but not least, the model has its own weaknesses. It is surely convincing as an account of long-term growth. It is less convincing as an explanation of short-term trends, and in this case the “short” term can last for decades. Boserup speaks as if all the techniques were known since the beginning, so that the population had only to choose the one best suited to its resource endowment and adjust its institutions if necessary. On the contrary, new techniques had to be learned, and sometimes discovered or re-discovered. In backward economies, information travels very slowly or not at all, and thus a people may not know that another one, maybe hundreds or thousands of miles away, has successful managed to overcome a specific problem. And, even if it gets to know the right technique, plant, or implement, the population still may need time and effort to master it and to adapt it to its own environment. Thus a success in the long run may conceal several short-term crises. Outright failure cannot be ruled out entirely.

Second, Boserup assumes that population growth is exogenous, following a standard practice among economists in pre-Beckerian time. Today, however, most consider population growth to be endogenous, and largely affected by economic calculations. People could reduce population increase by delaying marriages, controlling births, migrating and the like. Slower population growth would, ceteris paribus, reduce the drive to agricultural intensification. This is, of course, an empirical issue.

Finally, Boserup seems to neglect the different nature of modern technology or, if you want, the new role of capital. Her world is a two-factor world — labor and land. As said, capital does exist either as simple tools or as labor-intensive investment projects — but not as labor-saving machinery and above all land-saving fertilizers. In her world, intensification is possible up to a point, but sooner or later it has to reach a limit. It is unclear whether in real history this limit had ever been reached, even if China in the eighteenth and nineteenth centuries may be a good candidate. Aside from China, even in, say, 1800 there was a lot of “free” land on the Earth and thus a “Malthusian” crisis was still far away for the world as a whole. But sooner or later, a limit had to be reached, and further population increase beyond it was bound to cause a Malthusian crisis (even if smart people may prevent it with birth control). As everyone knows, the solution was technical progress, which has increased the productivity of both land and labor. (One wonders whether there are ecological or maybe ethical limits to technical progress). Boserup should have added a Stage 6 to her intensification model. Of course, she was very well aware of the technical progress, but she did not. One may speculate that she was more interested in less developed countries than in advanced countries, or simply she did not want to add a stage which could not fit easily in a model based on the length of fallow.

It is too easy to criticize ex post with the hindsight of decades of research. In spite of all its shortcomings, The Conditions of Agricultural Growth remains a small masterpiece which economic historians should read — and not simply quote.

Giovanni Federico is the author of An Economic History of the Silk Industry, 1830-1930 (Cambridge University Press, 1997) and (with Jon Cohen) The Economic Development of Italy, 1820-1930 (Cambridge University Press, forthcoming for the Economic History Society).

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Published by EH.Net (August 2015)

Stephen Broadberry, Bruce M. S. Campbell, Alexander Klein, Mark Overton and Bas van Leeuwen, British Economic Growth, 1270-1870. Cambridge: Cambridge University Press, 2015. xxxix + 461 pp. $40 (paperback), ISBN: 978-1-107-67649-7.

Reviewed for EH.Net by Karl Gunnar Persson,  Department of Economics, University of Copenhagen.

This collective work is an ambitious and careful attempt to reconstruct historical national income accounts for England/Britain over six centuries — from 1270 to 1870. GDP is estimated from the output side unlike the study by Gregory Clark (2010), which covers approximately the same period and reconstructs national accounts from the income side. The major results from these two studies differ profoundly: Clark is an advocate of “Malthusian stagnation,” while British Economic Growth presents a more dynamic view of the pre-industrial economy. The contrasting results are a reminder that historical national accounting is marred by the fragility of the underlying data and is sensitive to approximations and assumptions needed to reach an end result.
British Economic Growth, 1270-1870 begins by establishing population levels (chapter 1) and by implication population growth rates. It acknowledges that population level estimates differ by a wide margin for the medieval period and the authors opt for estimates in the middle of the existing range.

In chapters 2 and 3 agricultural volumes are reconstructed by first establishing the area of agricultural land in use, the share of different crops, the number of cattle, etc. Output for the different components can then be estimated using yields and conversion ratios for various crops and animals. The final step is to aggregate these outputs into an agricultural sector output. All this is done in a transparent way, largely based on primary sources.  The incremental nature of agricultural progress is visible in increasing yields and reduced fallows. However, for the medieval period the documentation stems from the estate sector which is a relatively small part of the agrarian sector, less than a quarter. Was the non-estate sector, run by tenants, sharecroppers and free-holders, more efficient? The authors indicate that there is some evidence that this was the case, but they nevertheless assume that conditions in the estate sector prevailed in agriculture at large. For the post medieval period, paradoxically perhaps, the documentation is thinner and farm accounts do not appear until the end of the eighteenth century

Chapters 4 and 5, which are devoted to industry and services, rely more on the secondary literature. Output volumes in the various subsectors are established in chapter 4, and then aggregated to GDP and GDP per head in chapter 5. The resultant pre-1700 GDP series are, of course, a major accomplishment of synthesis, while the post-1700 figures differ only marginally from those established by Nicholas Crafts and Knick Harley and they all rely heavily on Walther G.  Hoffmann’s (1955) pioneering work.

Part 2 of British Economic Growth, 1270-1870 has a more analytical approach, discussing how the new results compare to those of other studies. The central claim in the book is to stress the resilience of the growth process even when faced with continued population growth and resource constraints. When GDP per head increased after the Black Death, because of a softening of resource constraints, the Malthusian expectation would be that income would fall when population stated to grow again in the sixteenth century. The authors take an explicit non-Malthusian position showing that the expected reversal did not happen. In fact the authors argue that income per head doubled from the pre-Black Death period to the mid eighteenth century. Their target here is the argument of Clark (2010) and Michael Postan before him, that pre-industrial income per head was stationary in the long run. That is, income increases were transitory and the only permanent effect of technological change would be an increase in population. Chapter 6 is devoted to comparing real wages series with GDP per head. Clark’s reconstruction of GDP is driven by his real wage series which tend to support the Malthusian thesis. However, wage data are constructed from day wages and British Economic Growth argues that you can reconcile a stationary day wages series with increasing GDP per head by adjusting for known increases in days worked in the sixteenth to eighteenth centuries. The authors do not seriously challenge the validity of the day wage series as such, even if there is a discussion in the literature. One major problem is that the salaried working class was a quite small proportion of the labor force. Most people were tenants, free-holders and self-employed, and very little is known about their income and whether it tracked day wages.

How do you assess the accomplishment of this study in the face of alternative interpretations? One way is to look at the general consistency of the many claims made. One surprising result in chapter 7 is that kilocalorie use per head implied by the agrarian output and population series is more or less stable over the entire period. The implication is that the increase in income per head did not spill over into increased demand for calories, but only into more expensive calories, say, beer instead of porridge.  The calorie intake throughout is not far off the minimum requirement for an active life, and at the same level as in France in the eighteenth century, although French workers were known as being less productive in physically demanding work in that period. There are in fact a number of recent assessments of calorie supplies, reviewed by Morgan Kelly and Cormac Ó Gráda (2013), and while all studies apply the same methodology results differ too much for comfort. The most optimistic ones by Robert A. Allen and Craig Muldrew end up at calorie intake about 70 percent higher in the eighteenth century. Kelly and Ó Gráda suggest that agricultural output might in fact be underestimated in British Economic Growth.

Another puzzle refers to the sharp increase of the relative share of the non-agricultural labor force in the sixteenth and seventeenth centuries (chapter 9). Such a change would presumably have generated changes in consumption patterns in favor of industrial goods and services. However, changes in the consumption pattern of that magnitude are not entirely plausible given the reported slow growth of income. Is income growth underestimated for this period? Other indicators point in that direction. For example per capita consumption of metals had tripled by 1700 compared to its peak medieval level, which you would suspect to be associated with more vigorous growth of income.

British Economic Growth, 1270-1870 will be a work of reference, inspiration and controversy for decades to come. Some results will undoubtedly be challenged and revised. Others will stand the test of time. The claim that England/Britain was on a trajectory of slow income growth from medieval times is one of the results which probably will last.

References:

Gregory Clark (2010). “The Macroeconomic Aggregates for England, 1209-1869.”  Research in Economic History, 27: 51-140.

Walther G. Hoffmann (1955). British Industry, 1700-1950. Oxford: Basil Blackwell.

Morgan Kelly and Cormac Ó Gráda (2013). “Numerare est Errare: Agricultural Output and Food Supply in England before and during the Industrial Revolution.” Journal of Economic History, 73: 1132-63.

Karl Gunnar Persson is Professor Emeritus of Economics at University of Copenhagen.  A revised and enlarged edition of his book An Economic History of Europe: Knowledge, Institutions and Growth, 600 to the Present (in collaboration with Paul Sharp) was published in 2015 by Cambridge University Press.  karlgunnar.persson@econ.ku.dk

Copyright (c) 2015 by EH.Net. All rights reserved. This work may be copied for non-profit educational uses if proper credit is given to the author and the list. For other permission, please contact the EH.Net Administrator (administrator@eh.net). Published by EH.Net (August 2015). All EH.Net reviews are archived at http://eh.net/book-reviews/

Published by EH.NET (February 2008)

Christophe Lecuyer, Making Silicon Valley: Innovation and the Growth of High Tech, 1930-1970. Cambridge, MA: MIT Press, 2005. x + 393 pp. $40 (cloth), ISBN: 0-262-12281-2.

Reviewed for EH.NET by Glenn Bugos, Moment LLC.

In this remarkable introduction to the early history of Silicon Valley, Christophe Lecuyer weaves a rich tale around the centrality of manufacturing ? sometimes mass manufacturing, but more often batch manufacturing to precision and reliability. He argues that manufacturing expertise diffused through the Valley through tacit knowledge and engineers in motion between firms. Planar technology for manufacturing integrated circuits in the late 1960s, he concludes, represented the pinnacle of manufacturing in Silicon Valley.

Lecuyer has multiple goals for this book. He seeks to define Silicon Valley as an industrial district, akin to the Marshallian industrial districts that economic historians have begun to explore. Also, he integrates into his story the many extant, divergent strands of Silicon Valley historiography. Into his manufacturing-driven narrative, we see the trends other historians have emphasized ? military funding, the shake-out following the McNamara consolidation, the role of Stanford University in generating expertise, and the importance of workplace culture.

His chapters are structured around firm histories, beginning in their start-up years. These are concise histories of the early years of Litton, Fairchild, Varian, and Intel. These firms reflect broader trends in their industry and, Lecuyer shows, their founders thought hard about an ideal of Silicon Valley culture.

The first chapter discusses the power tube industry in the 1930s and 1940s, focusing on Eitel-McCullough in the context of the region’s amateur radio community. Eitel-McCullough’s manufacturing prowess positioned them to become the largest manufacturer of vacuum tubes for radar during World War II. Lecuyer does a great job describing these pre-silicon electronics technologies.

Litton Industries, powered by hard-charging entrepreneur Charlie Litton, is the focus of the next chapter on microwave tubes and magnetrons in the post-war period. The third chapter looks at Varian Associates and the manufacture of klystrons, a type of microwave tube used in defense applications. Perhaps most notable about Varian is the explicit idealization of an engineering republic ? of a cooperative approach to engineering that remained a fixture of Silicon Valley start-up culture.

Fairchild Semiconductor in the 1950s and 1960s adopted the same structure and work culture of the earlier vacuum tube makers, but moved it into an entirely different material and technology ? silicon semiconductors. High frequency silicon transistors were needed for guidance and control systems for missiles and aircraft. As reliability grew paramount, Fairchild developed a new manufacturing technology, leading to the planar process and the integrated circuit.

Chapter 5 looks not at one firm, but rather at the previously highlighted firms in their transition from military to commercial markets, battered by macro-economic forces in the wake of the McNamara procurement reforms of the early 1960s. Eitel merged with Varian, which itself diversified into instrumentation and medical equipment. Fairchild created new customers for its integrated circuits, and moved from a precision manufacturing model to a mass manufacturing model. Litton surrendered to the cyclical nature of its business yet sought to manage it by becoming a defense conglomerate.

Lecuyer ends with a short chapter on Apple Computer and how it shifted these manufacturing ideas into a new generation of personal computing technology. His notes and sources are also fascinating reading, reflecting the richness of primary materials now available on Silicon Valley firms. Lecuyer started this book as a graduate student in the history of science and technology at Stanford University, and is now an economic policy analyst with the University of California.

What about the book that Lecuyer did not write? This book is limited in time. It’s the story of the Valley in the late 1940s, 1950s and 1960s, when the leading industrial sector was fairly well defined around tubes and silicon. The explosive growth in the Valley came after this period, when personal computers, software and internetworking soared as industries in the 1980s and 1990s, supplemented by biotechnology and medical devices. Yet Lecuyer expertly shows how the preconditions for these later industries emerged years earlier. More importantly, even within his limited time frame, Lecuyer shows how the concept of “generations” is important in understanding the Valley. Silicon Valley has never been about just silicon. New types of technologies constantly appear, and follow similar cycles of boom and bust, only to be replaced by the next generation of technology.

Furthermore, this is good, but not great business history in that he says little about the rampant innovation in firm structure and financing. A constant refrain is frustration, or glee, in getting stock options, with little discussion of where stock options came from. Still, Lecuyer has a good ear for the importance of customers, and emphasizes the role of marketing and sales people in defining new markets for products. For example, Fairchild wrote “operational notes” that hesitant customers could use to manufacture consumer products around the new silicon chips: what he calls “educating consumers rather than occupying their space” (298).

He neglects broader trends that enabled the rapid growth of electronics manufacturing. The machinery industry that emerged in The Valley of Heart’s Delight, as the agricultural pre-history of Silicon Valley is known, trained a labor force able to build plants around clean, batch processing. The tilt-up architecture that flourished in the Valley enabled constant reconfiguration of laboratory and fabrication space. Lecuyer does discuss Hewlett Packard as an instrumentation company, but says little on the importance of test and measurement precision to other Valley manufacturers. And Lecuyer does discuss Lockheed Missiles and Space, the largest employer in the Valley in the 1960s, but only incidental to his narrative.

This book should become, nonetheless, the new starting point for those seeking to emulate Silicon Valley in their regions. What can they learn? The Valley pioneers truly cared about being able to make the first of anything. Office space was less important than lab space and fab space. Silicon Valley enjoyed less a culture of conspicuous consumption, and more a culture of conspicuous production.

Glenn Bugos is historian with Moment LLC, a corporate history consultancy based in Silicon Valley.

Published by EH.NET (December 2006)

Steven P. Erie, Beyond Chinatown: The Metropolitan Water District, Growth, and the Environment in Southern California. Stanford, CA: Stanford University Press, 2006. xvii + 364 pp. $22 (paperback), ISBN: 0-8047-5139-0.

Reviewed for EH.NET by Gary D. Libecap, Bren School of Environmental Science and Management, University of California, Santa Barbara.

Steven Erie, of the Department of Political Science at UC-San Diego, is the foremost authority on the Metropolitan Water District (MWD) and water politics in Southern California. And water is everything in Southern California. It is a region blessed with a benevolent climate, good soil, arable land, and magnificent harbors, but cheated by nature with too little water. Annual precipitation ranges from 10 to 15 inches. To support Southern California’s booming cities, burgeoning local economies, and bountiful agricultural production water had to be brought from elsewhere — the Colorado, Sacramento, and San Joaquin Rivers and their tributaries, as well as from Owens Valley, in the Sierra Nevada Mountains, just east of Mount Whitney. As the region’s giant water wholesaler and policy maker, providing water for twenty-six cities and water districts representing eighteen million people in six counties, the Metropolitan Water District has played a direct role in bringing and distributing water to Southern California. Water markets historically have been limited, in part due to the lack of clearly specified property rights to water which would underlie voluntary exchanges, and there have been many competing claims for scarce water. Bringing the water to San Diego and the Los Angeles Basin also has required the construction of elaborate infrastructure investment in canals, pumping stations, and reservoirs. For all of these reasons, most delivery and allocation has involved politics and bureaucratic decision-making, making water the most political of resources.

Erie’s new book is an important addition to the literature on western water. There are three parts and eight chapters in the book. Part I, with Chapters One through Three, addresses the historical development of the Metropolitan Water District and its efforts to bring water to Southern California. Part II, with Chapters Four through Six, addresses recent contemporary problems facing the regional agency — opposition to the delivery of additional water from the Colorado River and Northern California to Southern California from environmental groups, as well as from expanding agricultural and urban areas in Arizona, Nevada, and the Bay Area, and the rise of water markets that provides opportunities to secure more water and, at the same time, threatens to undermine the authority and structure of the MWD. Part III, with Chapters Seven and Eight, summarizes the rise of other problems and the efforts of the utility to respond to them. This book represents a major scholarly endeavor, with extensive endnotes, tables, and figures.

In Parts I and II of the book, Erie describes the formation of the MWD in 1928 to coordinate access and delivery of Colorado River water to Los Angeles and ten other cities via the 242-mile Colorado River Aqueduct. In the 1970s the regional cooperative also imported water from Northern California via the State Water Project and the California Aqueduct. It now supplies 60 percent of the water for Los Angeles, Orange, Ventura, San Bernardino, Riverside, and San Diego Counties. Erie traces the historical development of the MWD as it replaced the Los Angeles Department of Water and Power as the region’s chief water organization. He describes the political and bureaucratic pressures placed on the agency, which have molded its behavior. While it is an extremely powerful organization, the MWD is subject to internal conflicts among member water agencies reflecting the sometimes competing demands of San Diego, Los Angeles, and Orange County, among others. It also is affected by changing external political conditions elsewhere in California and the West, including the Supreme Court’s ruling in Arizona v. California that reduced the amount of Colorado River water available to California, the Endangered Species Act which requires more water be left in the San Francisco Bay Delta rather than being shipped to Southern California, as well as overall resistance to water transfers from rural areas to urban ones. Erie describes how the MWD addresses these conflicting demands as it has responded to its mandate for providing water to Southern California’s urban regions. An especially useful part of the book is his description of the long and contentious negotiations between the MWD and the Imperial Irrigation District Board (IID) for the transfer of agricultural water to San Diego. The IID uses about 80 percent of California’s allocation of Colorado River water, which is about 75 percent of the total water available to all lower basin states. Erie describes the underlying political pressures and institutional objectives that made the bargaining between the MWD and the IID Board so difficult. Understanding these factors will help make future water trades less controversial and perhaps quicker. Certainly, more water will have to be re-allocated from IID and other similar organizations as Southern California’s urban areas expand. Erie also points out that these water exchanges are complicated by climate change that adds uncertainty to any long-term arrangement regarding water.

The final chapter in Part II, Chapter 6, discusses how the MWD is responding to the rise of water markets and the opportunities afforded it to lease water or purchase water rights from irrigators in California’s vast Central Valley and along the Colorado River. Many of these purchases have been highly controversial, especially among those who oppose the flow of water from rural areas to support greater urbanization and population growth in Southern California.

Part III summarizes the current demands and dilemmas facing the agency. It has a mandate to provide water to a growing population in a semi-arid region at a time of increasing scarcity and competing uses. Indeed, as Erie points out, there is a fine balancing of water demand and supply that could unravel if climate change brings more serious drought. In the face of this, the MWD is moving forward ambitiously to secure additional water sources for, as Erie describes, a growing “desert civilization.”

Beyond Chinatown is a valuable blend of economic history, policy analysis, and political science about a huge governmental institution charged with bringing water to the part of the country that best typifies the American economy and society in the latter half of the twentieth and early twenty-first centuries — Los Angeles and Southern California.

Gary D. Libecap, of the Bren School of Environmental Science and Management, University of California, Santa Barbara, is working on the extent and development of water markets in the American West and the role of legal and regulatory factors in molding water markets. He also is exploring the transaction cost advantages of the rectangular survey of land, put into place by the Land Ordinance of 1785, relative to the previous use of metes and bounds in demarcating property boundaries. Similar property bounding issues arise in contemporary economic development policies.

Published by EH.NET (May 2004)

Stephen Haber, Armando Razo, and Noel Maurer, The Politics of Property Rights: Political Instability, Credible Commitments, and Economic Growth in Mexico, 1876-1929. New York: Cambridge University Press, 2003. xx + 382 pp. $75 (hardcover), ISBN: 0-521-82067-7.

Reviewed for EH.NET by Gary Libecap, Department of Economics, University of Arizona.

A large body of research, summarized in Acemoglu, Johnson, and Robinson (2004) underscores the importance of institutions — property rights, rule of law, stable political structures — for economic growth. In this book, Haber, Razo, and Maurer examine what they claim is a puzzle in political economy: why is it that political instability does not necessarily translate into economic stagnation or collapse? As such, the book raises a challenge to the institutions and growth literature. By focusing on political instability in Mexico between 1876 and 1929 when some sectors, at least, advanced, the authors argue that governments in many less developed countries do not have to enforce property rights as a public good. Rather, they can enforce them selectively as private goods, with the resulting rents shared among politicians and the asset holders. Property rights enforcement allows for investment and trade to take place within the privileged sectors, and it occurs through a variety of commitments made by politicians, even in the presence of broad political instability. The book offers a well-written analytic economic history of this period in Mexico and the authors argue that they have provided a generalizable framework about the interaction of political and economic institutions for better understanding economic history and growth.

In Chapter 1, Haber, Razo, and Maurer claim the prediction that political instability will have strongly negative impacts on economic growth is not borne out empirically. This lack of fit sets the stage for the case study presented in their book. Especially during the period 1911-1929, when Mexico underwent extreme instability after the fall of Dictator Porfirio Diaz until the rise of the Partido Nacional Revolucionario, the economy should have performed badly. Investment and output should not have grown, and the rate of growth should have declined relative to the ten-year period before 1911. But many important industries, such as mining, petroleum, and textiles, performed well. The authors admit that they do not examine the difficult question of whether or not observed Mexican growth equaled what it might have been had there been political stability and broad enforcement of property rights. They advance two arguments in the chapter. One is how political and economic elites form coalitions to sustain economic activity on their behalf and how these coalitions endure political instability. I think that in this argument the authors are on solid ground. The second argument is that there is no necessary connection between political instability and economic stagnation. This is the key point of the book, but I am less convinced of this claim and not quite sure what lessons might be drawn from it for understanding the broader bases for sustained economic growth.

Chapter 2 outlines the analytical framework, drawn from political science and economics on instability, credible commitments, and economic growth. The authors describe various ways in which private commitments might work to constrain government from arbitrarily confiscating property rights and the rents associated with them. One option is third-party enforcement, such as by an outside government with an interest in a particular economic sector. Another is vertical political integration (VPI) whereby government officials and asset holders form coalitions, sharing the returns from protecting those assets, restricting entry, and barring (likely) disruptive technological change. Chapter 3 discusses VPI coalitions from 1876 to 1929 in Mexico, detailing how political and economic elites interacted to assist and constrain one another. Conditions during Porfirian Mexico, the revolution of 1910-1914 against Porfirio Diaz, the civil war of 1914-1917, and post civil war instability (1917-1929) are described. Chapter 4 begins the analysis with discussion of the Mexican financial system. Banks were protected from new entrants and segmented monopolies were enforced. State politicians with economic and political ties to the banks helped constrain the actions of the federal government. Forced loans nevertheless were required. Detailed measures of financial risk and return are provided in this chapter, characteristic of the empirical richness of the book. Chapter 5 turns to cotton textiles, paper, steel, brewing, cement, cigarettes, and power generation. Again the authors conclude that political instability did not bring about the collapse of manufacturing, but rather industry did well with protections provided through VPI coalitions. Chapters 6, 7, and 8 examine the all-important petroleum, mining, and agricultural sectors, where production and investment expanded. Mafia-like organizations protected the oil fields, refineries, and mines, and the U.S. government acted as a third-party source of guarantees. In agriculture staple production expanded and exports boomed. Major land reform did not take place until the more politically stable 1930s. Chapter 9 sums up the historical evidence and returns to the puzzle raised earlier. Haber, Razo, and Maurer conclude that the effects of political instability vary depending on which polity is affected, the technological and organizational features of the economy, and the nature of the political system that specifies and enforces property rights. In the case of Mexico the VPI networks sustained critical industries during political upheaval.

All in all this is an impressive volume with useful and clever statistical measurements of the performance of various parts of the economy, and it certainly is a valuable addition to the economic history of Mexico. The authors are persuasive when they conclude that key parties were able to do reasonably well during chaotic times. My concern is how this case study and the analytical framework associated with it fit within the literature on the institutional underpinnings of economic growth. The efforts of the VPI coalitions and U.S. intervention in Mexico did not place the country on the path for long-run development, as the authors admit. Rather, the descriptions provided in the book are similar to what is commonly refereed to as “gangster capitalism” in Russia after 1989. They also seem descriptive of the protections provided the Nigerian oil industry in the past twenty years, yet little broad-based growth improving the lives of the country’s population has taken place. And there are many other examples. This book provides an especially well-done description of political and economic maneuvering, or rent seeking, in Mexico. But the case for effective institutions and economic growth remains.

Reference: Daron Acemoglu, Simon Johnson, and James Robinson, Institutions as the Fundamental Cause of Long-Run Growth, May 2004 NBER Working Paper 10481, forthcoming in the Handbook of Economic Growth.

Gary D. Libecap is Anheuser Busch Professor of Economics and Law at the University of Arizona and Research Associate, NBER. Current publications include “The Allocation of Property Rights to Land: U.S. Land Policy and Farm Failure in the Northern Great Plains,” with Zeynep Hansen, Explorations in Economic History, April 2004 and “Small Farms, Externalities, and the Dust Bowl of the 1930s,” with Zeynep Hansen, Journal of Political Economy, June 2004. He is currently working on the Owens Valley water transfer to Los Angeles, 1905-1935, the source of Los Angeles’ growth and the background for the movie Chinatown. It is part of a broader study of the role of legal and political institutions in promoting or blocking development of water markets.

Published by EH.NET (July 2003)

Li Bozhong, Agricultural Development in Jiangnan, 1620-1850. New York: St. Martin’s Press, 1998, and

Li Bozhong, Jiangnan de zaoqi gongyehua (Proto-Industrialization in the Yangzi Delta). Beijing: shehui kexue wenxian chubanshe, 2000.

Reviewed for EH.NET by Kenneth Pomeranz, Department of History, University of California at Irvine.

Like most other aspects of Chinese intellectual life, economic history suffered badly during the 1960s and 1970s. In the generation that began rebuilding the field thereafter, probably the single most productive scholar has been Li Bozhong, now of Qinghua University. Professor Li has also been noteworthy for his efforts throughout the last twenty years to encourage Chinese scholars to engage seriously with the very different paradigms favored by most of their colleagues in the West, Taiwan and Japan — and vice versa. Yet only a fraction of Li’s massive scholarly output is available to those who do not read Chinese. The following review attempts to hit many of the highlights of his work by considering two recent complementary volumes, only one of which is translated: Agricultural Development in Jiangnan, 1620-1850 and Jiangnan de zaoqi gongyehua (Proto-industrialization in Jiangnan). Together, they paint a fascinating, though incomplete, picture of the economy of the Yangzi Delta (or Jiangnan),1 which was the richest region in China, and among the richest regions in the world from roughly 1000 until the mid-nineteenth century, when the Opium Wars, Taiping Rebellion (1851-64 — probably the most destructive civil war in history, killing perhaps as many as 20,000,000 people), and the onset of rapid industrialization in Northwestern Europe fundamentally changed the social, political, and economic landscape.

In Agricultural Development, Li argues forcefully against two basic views of the Delta’s agriculture in the Ming (1368-1644) and Qing (1644-1912) periods: 1) the claims of some Chinese Marxist scholars that the Delta remained a subsistence-oriented “feudal” economy in which most peasants had very limited contact with the market until the nineteenth century; 2) the claim of some Western scholars that Malthusian pressures and very limited technological change produced a slow but steady trend of immiseration over the period from roughly 1250 (when the rate of technological progress seems to have slowed considerably) until at least the mid-nineteenth century, and perhaps until well into the twentieth century. (A variant of this latter view, sometimes called the “involutionary” position, claims that living standards remained basically unchanged over the long haul, while the amount of labor required to obtain this standard kept increasing, so that immiseration came in the form of more work for the same rather limited per capita output rather than in the form of a decline in per capita output.) Li argues instead that: a) positive technological change continued in Jiangnan agriculture throughout this period, particularly in the areas of fertilizer use and water control; b) local factor markets continued to become more efficient, facilitating the increasingly rational allocation of labor and capital; c) long distance trade in various products expanded dramatically, allowing the region to benefit by pursuing its comparative advantage in cotton and silk production, and importing rice, timber, soybeans, etc.; d) the gradual decline in farm size as population increased did not lead to under-employment.2 On the contrary, increased double-cropping and other measures meant that the labor year for peasant males stayed about the same, while output per labor day actually rose; meanwhile women increasingly exited agriculture (in which they had never been very productive anyway), and earned more per day by moving into rapidly-growing textile trades; e) deliberate fertility control became fairly widespread by the eighteenth century, considerably reducing any Malthusian pressures and; f) because of all these factors, both aggregate and per capita income increased slowly but steadily during this period. (Li does not attempt to calculate total factor productivity, but makes it clear that he thinks growth in output outstripped the rate of growth in inputs.) He sees these positive trends coming to an end — and even then, only a temporary end — with the coming of the Opium War (1839-42) and the Taiping Rebellion (1851-64), which he argues aborted the development of a national market, and led to the breakdown of law and order. (In a more recent paper, he has suggested a slightly earlier turning point, arguing that a prolonged period of exceptionally bad weather and flooding began about 1820, doing lasting ecological damage and contributing to the calamities of the mid-nineteenth century.)

The basic arguments of Proto-Industrialization are similar in spirit. Li’s most basic point — that handicraft production for the market by Delta households grew enormously between the mid-Ming and mid-Qing — is not much in doubt, but he adds a number of important further observations. First, he broadens the scope of inquiry beyond the relatively well-studied silk and cotton cloth industries, providing very useful discussions of food-processing, tool-making, bleaching and dyeing, residential construction, boat-building, and so on. While he does not have the level of detail on any one of these sectors that one would hope for, his work on most of these industries is a significant advance over anything we had before.

Second, Li shows us that the growth of production in almost all of these sectors was accompanied by increasing levels of specialization, in two senses: a) in the sense that the tasks of production were increasingly sub-divided; and b) that consumers were increasingly purchasing these goods rather than making them for themselves, and so increasingly concentrating their work effort on production for the market rather than “Z-goods” for auto-consumption. (The latter point is less well documented than the former; while Li is able to show burgeoning urban markets, both in the Delta and beyond, for all sorts of ready-made goods, the evidence on rural consumption is sparser.) Along with this increased specialization, Li also assembles evidence that the average size of production units was growing in most of these sectors. In the case of spinning and weaving, where most production continued to be done in households, he makes a generally convincing case that an increasing share of output was controlled by merchants operating on a large scale, who controlled access to often distant markets, imposed increasingly exacting quality standards in order to maintain those markets, and thus had an increasing influence on the production process, even without using credit and the provision of raw materials to control direct producers the way that European “putting-out” merchants often did.

Third, Li’s surveys of specific industries other than textiles make a strong case showing slow but continuing technological development, expansion of markets, and an increasingly complex division of labor. In contrast to an older version of Chinese economic history (pioneered by Japanese scholars in the 1930s, but later widely accepted around the world), which saw an enormous spurt of technological change during the Song dynasty (960-1279), followed by stagnation or even regression thereafter, Li argues that the Song revolutions have been over-emphasized: not because they weren’t important, but because the diffusion and subsequent small improvements of many major inventions pioneered in that period took centuries, and it was those processes that gave Song-era breakthroughs much of their impact. This, too, is a revision of the conventional wisdom that is gaining adherents among both Chinese and Western scholars. While Li has not unearthed enough quantitative data to let us make reliable estimates of, for instance, labor productivity for most of these sectors, what little we can do with this data tends to suggest continued improvements in most sectors, and snapshots of productivity levels in particular sectors that would compare well with other advanced areas in the world until probably some time in the eighteenth century. What we do not see, however, is a shift over time among sectors toward more capital intensive and energy intensive pursuits — and this, as we shall see, is crucial to Li’s overall argument.

Fourth, Li argues that the combination of proto-industrialization and rising yields in agriculture (discussed above) propelled a significant improvement in per capita income and standard of living between 1550 and 1850, despite significant setbacks in the mid-seventeenth century ( a period of civil war, foreign invasion, and massive epidemics) and a decline in the average size of family farms. Here he not only disagrees with the still-regnant Chinese Marxist orthodoxy, which insists that China remained essentially a subsistence economy until the Opium War, but also with American partisans of “involution,” who maintain that the late imperial period was characterized by miniscule gains in income achieved at the expense of very large increases in labor inputs. By contrast, his position comes much closer to what is sometimes called the “California school” of social and economic historians, who argue that economic development in the Delta more or less kept pace with that in the most advanced parts of Europe until the onset of widespread factory industrialization. (Full disclosure statement: this reviewer is a charter member of the California school.) But in some ways, he goes even further than they do: while most of the “Californians” see economic expansion (or at least per capita economic growth) in the Delta slowing by the late eighteenth century, Li’s argument in these two books (though not always since then) suggests that the basic dynamics of growth continued unchanged until China’s mid-nineteenth-century catastrophes.

But while Li is content to rely on largely exogenous factors to explain the decline of the Delta after 1840, he does devote considerable attention to analyzing why the highly productive agriculture, commerce and handicrafts he describes did not spawn something more like classical English industrialization sometime before that date. He argues that institutional structure, surplus available for investment, and the educational level of the workforce were all quite adequate, and that there was widespread interest in productivity-enhancing technological change. Consequently, he looks beyond social, intellectual, and political factors, and finds his answers in geography and the supply of natural resources. In particular, he emphasizes a dearth of energy sources that he says gave Jiangnan production a marked bias away from anything energy-intensive, creating what he calls “a super light industrial” economy. Being very densely populated (and to a great extent reclaimed from marshes, rather than by clearing forest), the Delta had relatively few trees and not very many large work animals; it had no coal or peat, and, being at sea level, relatively little water power. Conditions were even unfavorable for the large-scale use of wind power, though some windmills were established. Thus, Jiangnan did what it was best at: sustaining a very productive agriculture (especially in rice: cotton yields do not seem to have been outstanding), mobilizing the large numbers of people it could feed to produce handicrafts, and taking advantage of its location at the mouth of a river system draining roughly a third of China, plus the coastline and the one thousand mile Grand Canal, to engage in very widespread trade. That it did not shift much labor into areas in which it had serious natural deficiencies, such as energy-intensive heavy industry, should not blind us to what it did achieve, or to the ways in which, Li argues, Jiangnan’s “proto-industrialization,” like its Western counterpart, laid the basis for the growth of modern industry in the region later on.

Much of Li’s argument here parallels the arguments of Western scholars in the so-called “California school,” including myself: thus it is not surprising that I find most of his argument convincing, and welcome the wealth of additional data he has brought to bear. His reconstructions of agricultural productivity and factor inputs, while certainly open to question, are generally the best we have: in particular, I think his claim that both male and female labor productivity rose significantly between the sixteenth and eighteenth centuries, despite a large increase in population, is at least well-enough based that the burden of proof should now rest on those who wish to argue for stagnation or decline. (The problems with these estimates are that a) the documentary base is fairly narrow, and b) because this was an agriculture with both very high inputs of labor, fertilizer, etc., and very high outputs per acre, relatively small percentage changes in assumptions about either yields or the costs of inputs can lead to uncomfortably large changes in estimates of net output.) The particular care that Li has lavished on changes in fertilizer use and their effects has important implications for environmental history as well as economic history. In terms of industry, his attempt to broaden discussion beyond textiles is particularly welcome, as is his general argument that we should look at what happened within the major sectors of this economy, rather than focusing on why the relative size of light and heavy industrial sectors did not shift. And his attention to environmental and resource problems is also quite helpful, though I think there is evidence that these problems began to constrict the Jiangnan economy somewhat sooner than Li allows, and that some of them were exacerbated by state policies (especially restrictive mining policies, and very limited government investment in transportation infrastructure beyond maintaining the massive Grand Canal) in ways that he does not address. His discussion of the conditions for technological change also seems to me a bit too hurried. While he has certainly made an important contribution by showing that such change had not stopped in Qing-era Jiangnan, there is still some reason to think that its pace had slowed, and no sign that it was speeding up the way it was in Europe. And while Li makes a good case for enough literacy, availability of various manuals, and so on to perpetuate continued diffusion of best practices, we need to know considerably more than we currently do about the rate at which new innovations were being introduced, and about such matters as patterns of association among artisans, the extent to which they were aware of elite science, and what was happening in that science, among other things. But this is only to say that no one scholar can do everything. The main problem, for the foreseeable future, will remain data: Li’s re-interpretations of Chinese economic history have generated new hypotheses considerably faster than we have been able to find material that will satisfy skeptics. But this simply means that we can thank Li, along with his other contributions, for keeping ourselves and our students employed for quite some time to come.

Notes: 1. Technically, these two expressions are not synonymous, but they are now used interchangeably in Chinese studies. “Jiangnan,” meaning “South of the (Yangzi) River,” in Chinese, refers to only part of the geographic Delta, omitting the generally less prosperous North Bank. Most Westerners now use “Yangzi Delta” to refer to Jiangnan, rather than to a more geographically accurate, inclusive region. Jiangnan is also somewhat vague, since it does not refer to a political jurisdiction with officially set boundaries. Professor Li uses a fairly broad definition of the area, though still not as broad as that used by, for instance, Wang Yeh-chien or myself; some other scholars, such as Philip Huang, have adopted a much narrower definition, including only the most densely populated prefectures near Suzhou. Li’s Jiangnan, with an area of roughly 43,000 square kilometers (16,000 square miles), had perhaps as many as 36,000,000 people by 1850.

2. Li favors a population figure of 20,000,000 for Jiangnan in 1620, and 36,000,000 in 1850, for a 0.3 percent per annum growth rate. These figures roughly match those of Cao Shuji’s recent work on Chinese population (Zhongguo renkou shi (History of Chinese Population), Shanghai: Fudan daxue chubanshe, 2000), and appear to be widely accepted among Chinese scholars. Many Western scholars, however, favor a lower figure for 1850, following G. William Skinner’s argument that mid-nineteenth century population totals for various parts of China were seriously inflated. (“Sichuan’s Population in the Nineteenth Century: Lessons from Disaggregated Data,” Late Imperial China, 8:1 (1987): 1-79.) Population growth appears to have been minimal in the region after about 1770.

Ken Pomeranz is author of numerous works including The Great Divergence: China, Europe, and the Making of the Modern World Economy, Princeton University Press, 2000 and The Making of a Hinterland: State, Society, and Economy in Inland North China, 1853-1937, University of California Press, 1993.

EH.NET BOOK REVIEW

Published by EH.NET (August 1997)

Richard A. Easterlin, Growth Triumphant: The Twenty-first Century in Historical Perspective. Ann Arbor, MI: The University of Michigan Press, 1996. Pp. xiv + 200. $37.50 (cloth), ISBN: 0472106945.

Reviewed for EH.NET by Dora Costa, Department of Economics, MIT.

In this masterful synthesis, Richard Easterlin (Department of Economics, University of Southern California) draws on the disciplines of economic history, demography, sociology, political science, psychology, and the history of science to present an integrated explanation of the origins of modern economic growth and of the mortality revolution. His emphasis is on long-term factors and on similarities across nations. His book should be easily accessible to non-specialists and will give them a sense of why economic history can inform our understanding of the future.

Richard Easterlin convincingly argues that technological change underlies both modern economic growth and the morality revolution. Underlying this technological change is a set of procedures and attitudes that include reliance on experiments and observed facts. In the case of modern economic growth, this technological change should not necessarily be equated with industrialization, but rather is simply the introduction of new technology, including agricultural, in the economy. This technological change has produced certain commonalities in development, including the gradual acceleration in real per capita income growth, urbanization, and the growth of a white collar work force.

According to Easterlin, modern economic growth began before the modern rise in life expectancy because technological change in the physical sciences preceded technological change in health and medicine, simply because the conceptual state of the physical sciences was far more advanced. Easterlin argues that although modern economic growth may have increased resistance to disease (for example, by increasing food intake), it also increased exposure to disease. In contrast, in developing nations the mortality revolution has often preceded economic growth both because we know how to control disease (e.g. sewage and clean water) and because the necessary public health investments are inexpensive. Because urbanization created demand for public municipal services, he views the rise of government as a direct consequence of technological change.

Once mortality, particularly childhood mortality, fell, Easterlin argues that we moved from a society of high to low fertility. At first the increase in the number of surviving children caused fertility to fall after families realized that they could achieve their target number of children with fewer births, then the target number of children fell as children became more expensive thanks to advances in education, urbanization, and the introduction of new goods. The population explosion of developing countries should, therefore, slowly reverse.

Easterlin presents a very optimistic picture of the future, arguing that modern economic growth will spread to all countries of the world and neither declining population growth nor an aging population will lead to economic stagnation. We have the technology and many of the preconditions for economic growth, such as institutions for the accumulation of physical and human capital and the mobility of labor and capital, are already present in developing countries. In an example of the sort of long-run perspective that the book is best at, Easterlin shows that even the aging of the baby boomers will not produce a dependency burden that is high by historic standards.

Within this optimistic scenario, he sees two causes for concern. One is that the spread of economic growth shifts the balance of power to newer, more populous developing countries that do not share our commitment to democracy and human rights and this may produce political as well as military clashes. The other is that income cannot buy happiness and that despite previously unimaginable levels of affluence, material concerns are as pressing as ever. According to Easterlin technology will always produce new goods that we will want and, because people measure happiness in relative terms, they will forever be stuck on a hedonic treadmill.

It is this last point, “the triumph of material wants over humanity” that I found controversial and whenever there is controversy, the drawbacks of a synthesis become readily apparent. The reader wants to know more, wants further breakdowns of the data. Easterlin cites surveys that show that people in both the United States and abroad are no happier than they were twenty years ago despite increases in per capita income. He also cites surveys that show that personal income, family, and health are individuals’ primary concerns in all countries surveyed. But, what about recent polls showing that 48 percent of U.S. workers had either cut back on hours of work, declined a promotion, reduced their commitments, lowered their material expectations, or moved to a place with a quieter life during the preceding five years? What about the tremendous decline in market hours of work, whether measured in terms of weekly hours, increased vacation time or sick leave, or increasing number of years spent in retirement? As wages have risen so has the opportunity cost of these hours. The history of modern economic growth is not just one of increasing numbers of consumer goods, but also one of increasing hours of leisure. These hours of leisure have enabled more and more individuals to achieve some kind of self-realization. There will always be individuals who will not know what to do with their free time or spend it in ways we disapprove of, such as watching television. But, what of the individuals who work in order to be rock climbers or who teach classes in order to do research? I am not surprised that when surveyed individuals state that they would like more money (more is always better than less), but the question that we must ask is whether they are willing to trade off time that could be spent with family members or in enjoyable pursuits for more material goods and how this trade-off has changed over time.

Dora L. Costa Department of Economics Massachusetts Institute of Technology

Dora Costa is author of a forthcoming (1998) book, The Evolution of Retirement: An American Economic History, 1880-1990.

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Project 2001: Significant Works in Economic History

North, Douglass C. and Robert Paul Thomas, The Rise of the Western World: A New Economic History. New York: Cambridge University Press, 1973. viii + 171 pp. ISBN: 0-521-29099-6.

Review Essay by Philip R. P. Coelho, Department of Economics, Ball State University. <00prcoelho@bsu.edu>

New or Old Economic History? Incentives and Development

This is a landmark book on the impact of property rights on European economic development. Published over a quarter of a century ago, its stated goal is “… to suggest new paths for the study of European economic history rather than … either [a detailed and exhaustive study or a precise empirical test that are the] … standard formats” (p. vii). North and Thomas attempt to identify the elements that allowed the Western European economy to rise to affluence. Their argument is made transparent in Chapter One (Theory and Overview): the key to growth was and is an efficient economic system. Efficient in the sense that the system of property rights gives individuals incentives to innovate and produce, and, conversely inhibits those activities (rent-seeking, theft, arbitrary confiscation and/or excessive taxation) that reduce individual incentives. They argue that property rights are classic public goods because: (1) once a more efficient set of property rights is discovered the marginal cost of copying it is low (compared to the cost of discovering and developing it); (2) it is prohibitively expensive to prevent other political jurisdictions from emulating a more efficient set of property rights regardless of whether they contributed to their construction; (3) and finally, the idea of a set of property rights, like all ideas, is non-rival — we can all consume the same idea and the “stock” of the idea is not diminished. These public good aspects lead them to conclude that there may be under investment in the attempts to create more efficient sets of property rights because the jurisdiction that invests in the development of property rights pays the entire cost of their development but receives only benefits that accrue to its jurisdiction, while other jurisdictions can get the benefits without any of the developmental costs. Thus, the problems of public goods and the “free riders.”

Chapter Two (“An Overview”) sets the historical stage for their analysis. North and Thomas begin with tenth-century Europe and an examination of the classic feudal system. They contend that relatively low population densities and the absence of security (both economic and personal) led to a retreat from market exchange to one of self-sufficiency and to the development of feudalism. Protection was valuable and had to be paid for, but in the absence of markets it was paid for in kind rather than money. Since agricultural output could not be exchanged in the market (land) lords demanded labor services (dues) rather than output shares. Labor dues could be used to produce a more desirable set of consumables than output shares. Lacking market exchange, manorial labor was more fungible than agricultural output. The authors argue that from kings down to peasants, the absence of markets was the mid-wife to feudalism. The second prong of their thesis is that in feudalism, as in any societal arrangement, there existed a myriad of details, known as the custom of the manor that allowed the system to function. Once established, these customs became the set of property rights that molded the economic and personal relationships of feudalism.

As the centuries progressed populations grew and manorial economies replicated themselves. North and Thomas contend that land was available at the constant marginal cost (the cost of clearing land) up to the thirteenth century. At the end of this period diminishing returns to labor employed in agriculture manifested itself. The growth of population densities and the establishment of political order allowed markets to emerge. Diminishing returns and emergent markets gave feudal lords incentives to convert their serfs’ labor dues into fixed money payments. The lords were better off receiving a fixed payment rather than labor dues because the market price for labor was falling due to Malthusian diminishing returns to labor in agriculture. The commutation of labor services into money payments could not be reversed when labor became more valuable during the plagues of the fourteenth century. Amending the custom of the manor was subject to severe transactions costs, consequently by the sixteenth century servile labor in Western Europe was not viable.

Part Two (Chapters 3-7) presents evidence to buttress this thesis. Chapter 3 explores property rights in humans and land, Chapters 4 and 5 develop the frontier movement and the settling of land. Chapter 6 explores diminishing returns to agriculture in the thirteenth century, and Chapter 7 the devastation associated with the fourteenth century. Part Three of the book deals with the period 1500 to 1700 and covers the “unsuccessful” national economies of Spain and France and the successful ones of Holland and England. North and Thomas argue that inefficient sets of property rights hindered economic growth in Spain and France, while more efficient sets promoted the economic growth of England and Holland.

The paragraphs above are a rough sketch of the North-Thomas thesis on the growth of Western Europe. How well have the last 25 years of the twentieth century treated it, and how much consideration should it be given? The first question is relatively easy to answer. Texts and books in European economic development and history generally cite The Rise of the Western World, with the notable exceptions of David Landes and Rondo Cameron. In the academic literature it is frequently cited: The Social Science Citation Index for the years 1986-1990 gives the book about fifteen citations per year (68 total citations in the entire five year period), and for the last decade of the twentieth century (and subsequent to North winning the Nobel Prize in economics) citations rose to about twenty per year.1 But how big is that? It is larger than most, but not in the league of scholarship that alters the way a subject is considered. A relevant example is Ester Boserup’s The Conditions of Agricultural Growth that, for the same period (1986-90), was cited 158 times, or more than twice as frequently as North and Thomas. I believe the citation count assessment of the significance of this book is relatively accurate. The Rise of the Western World is an addition to the historiography of property rights, but it does not accomplish its stated goal: to explain the rise of the West. Furthermore there are significant gaps in its argument.

First, its reliance on Malthusian population theory may be misplaced. In 1966 the aforementioned Ester Boserup published her work The Conditions of Agricultural Growth (not cited in North and Thomas). From empirical evidence she argued that increasing populations led to the intensification of economic activities: From hunting and gathering, to a long-cycle agricultural rotation mixed in with hunting and gathering, to settled agriculture. In Boserup’s analysis output per man-year rises in agricultural societies relative to hunting and gathering societies, but output per hour devoted to the acquisition of food may have fallen. Boserup’s thesis is much more sophisticated than (and contradictory to) the simple Malthusian framework that North and Thomas rely upon. She points out that it is extraordinarily difficult to compare outputs in societies with different levels of production intensity. Population densities lead to different modes of production and entirely different societies. An increase in population density increases the range of productive activities that can be produced for market exchange, and as Adam Smith explains increased specialization leads to increased output and the size of the market limits specialization. North and Thomas recognize this interdependency explicitly. They state that increasing specialization due to increasing population densities may have partially offset Malthusian diminishing returns. How do they know it was a partial offset? The evidence they offer on diminishing returns and a Malthusian crisis in medieval England is primarily derived from the works of James E. Thorold Rogers, who investigated six centuries of wages and prices in England.2

As a source, Rogers is an excellent compilation of manorial roles and other data sources, however he is not a transparent writer and he is difficult to interpret. In volume one of A History of Agriculture and Prices in England (1866) he states, “… we may… conclude that the price of the service [wage labor], in so far as it was affected by competition, represents fully the economical conditions of supply and demand, and is interpreted by the evidence of prices” (p. 253). This may be interpreted to mean that wages are an accurate representation of the laborers’ incomes, but that does not seem to be what Rogers meant. Two pages later he writes that: “In many cases the labourer or artisan was fed. In this case, of course, he received lower wages. … At Southampton, the various artisans are almost invariably fed, … [In 1385] we read … of an allowance instead of food. As a rule, however, the wages paid are irrespective of any other arrangement. Sometimes, but very rarely, and only in the earlier part of the period, the labourer is paid in kind.” And in Six Centuries of Work and Wages (1884), Rogers indicates that feeding workers was considered routine (pp. 170, 328, 354-55, 510, 540-541, etc.).

I interpret Rogers to mean that in the early centuries of his study day laborers did not normally receive family food allowances, but that they were typically fed on the job. Given the nature of work (agricultural labor from shortly after sunrise to sunset) and medieval food preservation and preparation technology, not feeding workers would have forced them to devote significant amounts of time away from working to food preparation and to feeding themselves (just getting bread would be a formidable task given their work hours and the work hours of bakers). Besides being fed on the job laborers frequently had other perquisites such as gleaning, allotments of beer, and small amounts of land for individual agricultural activities (kitchen gardens). All these in-kind payments are mentioned in Rogers (1866) and are considered normal. North and Thomas base their work not only on the wage data from Rogers, but also on his price data for agricultural products.3 In order to determine real wages, money wages are divided by an index of agricultural prices.4 Notice that the numerator typically ignores payments in kind and the denominator is exclusively a food index. Medieval workers’ consumption bundles had a heavy food component, but if one is being partially paid in food and resources devoted to food (kitchen gardens), then real wage indexes that focus solely on the costs of food may be seriously distorted unless the income (both in money and in kind) elasticity for food is one and the overwhelming preponderance of the budget is devoted to food. Mildly put, the data that North and Thomas rely upon to show Malthusian diminishing returns are not entirely adequate to the task.

Other sources question the use of the Malthusian paradigm. James Z. Lee and Wang Feng unequivocally deny that Chinese agriculture from 1300 to 1800 experienced Malthusian crises. Similarly, Julian L. Simon disputed the empirical validity of the Malthusian model. Others question the North and Thomas view of medieval English agriculture. Gregory Clark questions the view of a primitive English agriculture running into diminishing returns in the early fourteenth century.5 Certainly the fourteenth-century plague was a disaster to the European economy, but it does not follow that the plagues that devastated it were direct consequences of Malthusian diminishing returns. More likely it was, as William McNeill hypothesized, a result of an integrated Old World economy that led to the introduction of a “new” pathogen to a dense, flea-ridden European population.6

So there are difficulties with North and Thomas’s belief that the diseases of the fourteenth and fifteenth centuries are a manifestation of declining living standards (Malthusianism). They do not consider that the plague may have been exogenous, that pathogens are subject to their own dynamics and evolution and not necessarily a result of human intervention.7 North and Thomas simply assert that the plague was a result of over population, diminishing returns, and declining living standards. But if that is so, why did the plague reoccur after population had declined and (according to the data they rely upon) wages had increased? And why did plague occur earlier — in the mid-sixth century? North and Thomas do not have answers.

There is a straightforward explanation to these questions that is grounded in epidemiology: It is that the plague was a “new” disease to fourteenth-century Europe and its relatively dense population resulted in high rates of infection and mortality. These rates decreased as immunities (both acquired and genetic) became more predominant in the populations of Europe. What has this to do with Malthus and diminishing returns? Nothing: The simple Malthusian doctrine correlating high death rates with low living standards is suspect. It assumes that diseases are a function of poverty while there is evidence that the causation runs from diseases to poverty, and it is contradicted by data which show areas with high money incomes (cities) having higher death rates than those areas with low money incomes (rural areas). Consequently any line of reasoning that relies upon the Malthusian doctrine, as does The Rise of the Western World, is suspect.

There are other flaws in their thesis, some minor, some major. A minor omission is that they do not specify why the servile labor force accepted the original commutation of labor services to money payments. According to their high transactions cost model, “the custom of the manor” would have made the initial negotiations prohibitively costly. A simple observation that personal freedom to the individual was worth more than the value of the money payments would correct this omission. And, such an observation would reinforce their claim that when the purchasing power of a unit of money fell (inflation) the lords were unable to switch back to servile labor.

A more significant difficulty with their thesis is their claim that while diminishing returns to labor existed in the countryside, urban areas had constant returns. These are inconsistent with declining real wages, because migration from village to town will prevent agricultural wages from falling.8 Another difficulty is their lack of knowledge of antiquity: They seem to believe that institutional innovations such as insurance and bills of exchange were medieval innovations, but these were known and used at least by the Hellenistic era, and the ancients developed many contractual forms that were resurrected and used again during the European Renaissance.9

So North and Thomas’s book is not without its flaws, but blemishes and all it still makes significant contributions in its emphasis on an efficient set of property rights as a necessary condition for economic development to take place. In this emphasis North and Thomas returned to the fundamentals of economics and its founding father, Adam Smith, who said: “Little else is requisite to carry a state to the highest degree of opulence from the lowest barbarism, but peace, easy taxes and a tolerable administration of justice; all the rest being brought by the natural course of things.”

The Rise of the Western World is right to echo these sentiments. Since its publication in 1973 the modest increases in economic and personal freedom that the Chinese have experienced have led its population to a degree of affluence entirely unanticipated a quarter of a century ago. Similarly, the decline in law and order has bought economic and personal disasters to many in parts of Asia and Africa. The lesson seems a hard one to learn: the protection of the liberties of people to both their persons and properties is the most effective way to promote the general welfare in the long run. Short-run policies that restrict these liberties inevitably reduce welfare in both the short and long run. By focusing on this lesson in The Rise of the Western World, North and Thomas have done the profession and humanity a meritorious service.

Endnotes:

1. Counting citations is a tricky business because a slight change in the citation can result in an entry separate from the main one. Thus D.C. North and R.P. Thomas may be counted differently from D. North and R. Thomas.

2. North and Thomas cite other evidence, but much of this is ultimately derived from Rogers’s work. For example E.H. Phelps Brown and Shelia Hopkins’s works on wages and prices are based on data gathered from Rogers.

3. North and Thomas rely on the Phelps Brown and Hopkins works (1955, 1956, 1957) on real wages whose data are derived from the wage and price data of Rogers.

4. “Index” may not be a completely accurate term because the index frequently contains only one commodity; then, to be specific, it is a wage series expressed in wheat units.

5. Clark (1991) using labor inputs in harvesting as a proxy for wheat yields finds little change in output per acre over the medieval era. He observes that: “Interestingly the labour input on reaping wheat from 1250 to 1450 seems to have risen little, implying a constancy of yields over this period. This is consistent with the work of Titow and of Farmer on the Winchester and Westminster estates over the medieval period. … Wheat yields were fairly constant over the medieval period, the population losses of the Black Death having little impact on yields” (p. 454, footnotes omitted).

In another article, Clark (1988) observes that relatively low yields per acre in medieval England could be attributed to the relatively high interest rates. Taken together these observations do not lend support to the thesis that medieval Europe was in a Malthusian crisis because, if it were so, we would expect to see declining mean output per unit of labor and increasing mean output per unit of land as diminishing returns makes labor relatively abundant and land relatively scarce. The opposite would occur if, as a result of the Black Death, labor became relatively scarce.

6. North and Thomas do not recognize that the plague may have been the result of increasing living standards. As incomes rose trade increased and disease pools in different regions became integrated. Mortal diseases newly introduced to an area frequently have a devastating impact on the native population. For more on this see McNeill.

7. Exogenous in the sense that the plague was not a disease endemic to fourteenth-century Europe, although, most likely, it had appeared in Europe in the first millennium CE; see J. C. Russell for further information.

8. For a complete specification of this model see Chambers and Gordon.

9. Edward F. Cohen argues and presents persuasive evidence that these institutional forms were abundant in fourth-century BC Athens.

References:

Boserup, Ester. The Conditions of Agricultural Growth: The Economics of Agrarian Change under Population Pressure. Chicago: Aldine, 1965.

Cameron, Rondo. A Concise Economic History of the World. New York: Oxford University Press, 1989.

Clark, Gregory. “Yields per Acre in English Agriculture, 1250-1860: Evidence from Labour Inputs,” Economic History Review 44 (1991): 445-60.

Clark, Gregory. “The Costs of Capital and Medieval Agricultural Technique,” Explorations in Economic History 25 (1988): 265-94.

Chambers, Edward J. and Donald F. Gordon. “Primary Products and Economic Growth: An Empirical Measurement,” Journal of Political Economy 74 (1966): 315-32.

Cohen, Edward E. Athenian Economy and Society: A Banking Perspective. Princeton: Princeton University Press, 1992.

Lee, James Z. and Wang Feng. One Quarter of Humanity: Malthusian Mythology and Chinese Realities, 1700-2000. Cambridge, MA: Harvard University Press, 1999.

Landes, David S. The Wealth and Poverty of Nations: Why Some Are So Rich and Some So Poor. New York: Norton, 1998.

McNeill, William H. Plagues and Peoples. New York: Anchor Books, 1976.

Phelps Brown, E. H. and Shelia V. Hopkins. “Seven Centuries of Building Wages,” Economica 22 (1955): 195-206.

Phelps Brown, E. H. and Shelia V. Hopkins. “Seven Centuries of the Prices of Consumables, Compared with Builders’ Wage-Rates,” Economica 23 (1956): 296-314.

Phelps Brown, E. H. and Shelia V. Hopkins. “Wage-Rates and Prices: Evidence for Population Pressure in the Sixteenth Century,” Economica 24 (1957): 289-306.

Rogers, James E. Thorold. Six Centuries of Work and Wages. New York: G.P. Putnam’s Sons, 1884.

Rogers, James E. Thorold. A History of Agriculture and Prices in England. Oxford: Clarendon Press, 1866.

Russell, Josiah C. “That Earlier Plague,” Demography 5 (1968): 174-84.

Simon, Julian L. The Economics of Population Growth. Princeton: Princeton University Press, 1977.

Simon, Julian L. Population and Development in Poor Countries: Selected Essays. Princeton: Princeton University Press, 1992.

Simon, Julian L. The Ultimate Resource 2. Princeton: Princeton University Press, 1998.

Simon, Julian L. and Herman Kahn (editors). The Resourceful Earth: A Response to Global 2000. New York: Oxford, 1984.

Philip R. P. Coelho has written on long-run economic growth (“An Examination into the Causes of Economic Growth,” Research in Law and Economics 1985) and is currently working on the impact of morbid diseases on economic history and growth (see: “Biology Disease and Economics: An Alternative History of Slavery in the American South,” with Robert A. McGuire, Journal of Bioeconomics Vol. 1, 1999; “Epidemiology and the Demographic Transition in the New World,” Health Transition Review, Vol. 7, 1997; and “African and European Bound Labor in the British New World: The Biological Consequences of Economic Choices” with Robert A. McGuire, The Journal of Economic History, Vol. 57, 1997.)

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