Why should we aggregate income comparisons by country (or the whole world) rather than by city? World history looks very different if we do the latter. Aren’t most countries relatively recent inventions anyway? More generally, I would like a more disaggregated look at the data. Big chunks of the urbanized human population — pre 1800 — seem to have violated Malthusian precepts for centuries on end.
I think that this is a very important question, even though it gets more interesting for the later part of Clark’s book (Cowen’s post only covers the first part). When you look at country data, the process of economic development seems to be very sudden. One of Gregory Clark’s arguments is that England industrialized within a very short span of historical time. Countries that developed later developed even faster.
My point is that when you look at the data from a country perspective, it appears that there are two modes of economic development: imperceptible improvement (what Clark calls the Malthusian trap); or rapid, accelerating gains in the standard of living.
Why do we observe this pattern? Possible explanations:
1) It could be an artifact of looking at country data. Perhaps if instead of grouping people by national borders you grouped them by, say, IQ cohorts, the pattern would look different.
2) It reflects “tipping points.” Clark’s “tipping point” explanation is that when enough people become sufficiently educated, disciplined, and nonviolent, you can have manufacturing.
3) Institutions matter. This is the view that Clark argues specifically against. However, it would seem to me that if the country is the relevant unit of observation, then institutional explanations are almost impossible to resist. One way to test this would be to compare development gaps between neighboring provinces within countries with gaps between neighboring provinces that are divided by national borders. If institutions do not matter, then the gaps should be no bigger across borders than within borders. I haven’t done a formal study or considered examples from the 19th century, but the modern examples that stand out in my mind (North and South Korea, East and West Germany) seem to support an institutional view.
Just to repeat, if Clark does not believe that institutions matter, then why does he choose a country as his unit of analysis? Why not choose a unit that more closely maps to his thesis of population characteristics and tipping points?Tyler also writes,
Isn’t part of the historical inability to boost long-run living standards simply the result of recurring wars and depredations?
Part of the improvement in human character that Clark credits for industrial revolution is a reduction in the propensity for violence. But Clark believes that wars actually increase living standards in the short run. See below.
Tyler goes on to say,
Should I reject the Julian Simon model I grew up with? In that view there are increasing returns to scale within cities, where people usually don’t starve. The countryside languishes in poor countries, in part because it is underpopulated. Rather than having a “one population model” with an aggregate “n,” labor markets are local. The “plagued by diseconomies of scale rural folk” cannot sufficiently connect with the “economies of scale urban sophisticates,” mostly because of bad institutions and backward infrastructure. And the cities prove unable to protect themselves against all ongoing predations. Doesn’t that model fit the data too, and fit the disaggregated and shorter-run data better?
In Clark’s view, there was more labor mobility in England prior to the Industrial Revolution than there was in other countries. This would be a positive factor in any model of development.
Tyler asks,
what is the short-run claim about the response of population to real wages
This question tripped me up for a long time while reading Clark’s book. I always thought that the “Malthusian” model was one in which there was a strong response of population to the availability of food. So when times are good, people over-breed, until the food supply is no longer adequate. I had in mind a model in which shocks (weather-related?) to agricultural output caused cycles in population.
The way Clark uses the Malthusian model, the availability of food is essentially fixed in the short and medium run. The main shocks are to population–plagues, wars, and what have you. I use the metaphor of a meadow with humans grazing like a herd. When the herd is thinned by plagues or wars, the remaining humans get more to eat.
I think that to grok Clark, you have to shift from what I used to think of as Malthusianism to the metaphor of the meadow.
READER COMMENTS
shayne
Aug 21 2007 at 10:08am
Institutions do matter and one need not investigate Asia or Europe to examine the phenomena in real time.
Montana is a marvelous example of a dysfunctional economy attributable to dysfunctional institutions. The state has “wealthy” neighbors all around, relatively highly educated population (six public universities, over five private colleges and over 25 community colleges), is relatively “disciplined” and “non-violent”, and still manages to come in last of the 50 states in per capita wage. Additionally, Montana is almost the country’s most accomplished welfare recipient, receiving about $2 in federal handouts for every $1 paid in federal taxes. Quite frankly, if federal handouts were eliminated, or even held to a 1 to 1 ratio, Montana’s economy would collapse completely, according to an often cited economist from the University of Montana.
Unfortunately, the institutions that prevail here are welfare and protectionism – protection from anything that might inspire or allow economic growth. It’s an interesting economic study point. As an aside, Montana is an agricultural state (to the exclusion of all else) so food is not a Malthusian limiting factor.
Unit
Aug 21 2007 at 1:48pm
Tyler is on to something with the rural/urban dichotomy. What about a city-state like Venice, which was a international powerhouse in the period 1200-1800 considered by Clark?
notsneaky
Aug 21 2007 at 3:46pm
“So when times are good, people over-breed, until the food supply is no longer adequate.”
I think, more accurately, people under-die when times are good since it’s the mortality rate that falls rather than the fertility rate increasing.
[Mistyped home-page link fixed–Econlib Ed.]
Leif
Aug 21 2007 at 5:45pm
150 years ago national borders didnt have the significance that they do now, as most governments lacked the logistical ability to enforce things like tarrifs and immigration as effectively as they can today (as hinted at by the fact that city people typically used to speak at least 3 languages). i think that, if you are going to ask questions about the influence of institutions, that you should start with the cities – and then start aggregating numbers by looking at groups of cities that are in close proximity to eachother, once ignoring national borders and then again by accounting for it. for example you might find that prague and leipzig have more in common than leipzig and cologne, despite the fact that they have long belonged to different nation-states (in this case i guess you would define regions of study by webs of cities that had similar numbers, instead of those contained within political borders). on the other hand, you may find some significant diferences (institution-wise), providing a defense of studying regions in terms of defined borders.
on sort of a related note i think that studying the spread of institutions pre, say, 1870, might tell you some interesting things about how modern western institutions were developed and transmitted. it would be a control for modern techniques of information transfer and management, which i see as the as the biggest difference between the period in which modern western institutions matured and the modern era in which they still function, but in application to an environment in which info transfer is instantaneous (thus enabling management of MUCH more complicated and efficient resource management and production). in other words, a test to figure out whether instutitions are having the same effect on things (economically) as they are today.
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