Grantham G. (1999) Contra Ricardo: unexpected growth

Grantham George (1999) “Contra Ricardo: On the macroeconomics of pre-industrial economies”, European Review of Economic History, 2/2, 199-232.


Introduction

The Classical Approach (Ricardian trap): “The narrative line of [European] history is driven by a sequence of exogenous productivity and mortality shocks that worked themselves out in time through the feedbacks between living standards and population density, in which periods of growth were succeeded by periods of contraction induced” by declining labour productivity.”

But what if: “far from being a consequence of persistent supply shocks, the long swings in Europe’s pre-industrial history can be plausibly represented as the result of endogenous fluctuations in the degree of market integration” (p.200).

Much more than expected

A number of elements allow the author to doubt that the pre-modern agricultural production capacities were as limited as it is often assumed by historian. On the contrary, supply seems to have been fairly elastic, demand on the other hand appear to be the issue (p.206).

An example : “The oxen were probably employed on large specialised farms and in road haulage. When the late Roman economy collapsed after 450, the market for large animals also collapsed, to the point where it no longer paid to breed them. In time heavy animals disappeared, to be replaced by smaller, less effective, but nevertheless economical stock suitable to the less commercialised circumstances of the ninth and tenth centuries” (p.207).

“The chief issue with respect to the canonical representation of European economic history in the agrarian age, then, is whether trade and scale economies were extensive enough to sustain large and persisting swings in production and productivity, and if so, whether the elasticity of agricultural supply was large enough to permit them to occur” (p.208).

Urban-rural linkage

“Lee (1993) finds that the real wage data do not support the hypothesis of a rapid homeostatic demographic response to random shocks in mortality and productivity. Instead of showing a pattern of relatively rapid movements in population damping the movement in real wages, the data instead reveal small movements in population and large swings in wages, which implies that the English agrarian economy was not dominated by Malthus’ positive checks.”

For instance, French and English farms before the 18th century sometimes reached a yield of 2 and punctually 3 tonnes per hectare (p.210). Theoretically, a much more important average productivity was well in reach of European farmers before 1750. Adoption of best practice could have sustained a much larger population (p.211). Betterment was labour- and capital-intensive, but accessible in terms of know-how. “The techniques had been around since the iron age” (p.212).

Market opportunities

Enhanced demand may have convinced the farmers to go the extra mile (capital and labour investment). Incentive may have originated in cities. The urban growth in Italy and Flanders implies a 0.25 productivity rise per year, or +100% from 1000 to 1300 (p.213). Urban demand could also trigger more specialized productions (pelts and high-quality barley in East Anglia). Clearly productivity was a function of the state of the market. Aggregate demand offered investment opportunities to farmers (p.214). “In short, even if they knew how to lower costs by expanding output, farmers in isolated districts were unlikely to take advantage of this knowledge because it was unlikely to be commercially profitable”.

Being next to a city: “Consider by contrast farmers endowed with the same technology but situated near a large town. Because they sell in the same market, the individual demand curves facing them are highly elastic. A farmer can thus sell as much as he can produce at prices that are unaffected by how much he supplies to the market. The pooling effect of a common market for regional food producers eliminates the impediment to growth imposed by imperfect competition. To the extent that the level of demand warrants, farmers can invest in better livestock, larger buildings, more intensive crop rotations, and even in legal proceedings undertaken to rearrange property rights and holdings in the interest of greater efficiency. Learning by doing of the kind hypothesised by Persson is also likely to be greater. The result is higher factor productivity.”

The advantages of specialization

Moreover, dense urban areas make for less volatile markets than sparsely populated regions. Compact farm localization also allowed to pool investments in infrastructure (an incremental process which could be sustained for several centuries and reach massive proportion, cf. Flanders) (p.216). In the developed parts of the continent, 1300 land transport costs were close from 18th century standards.

The level of specialization was essential to a region’s productivity; it also ensured the thickening of a given market (trade is easier and thus there were more buyers and more sellers) as a result densities increased. As these equilibria were self-sustaining, an economy could whether settle in a low level of specialization/low density equilibrium or in a high level of specialization/high density one (p.218-221).

This option between a high and a low equilibrium explains the high returns obtained at several periods (150 AD, 1300, 1750). At times, impressive industrial outputs were also reached. In the same way, massive trading networks developed over the years but were also absent for long periods (p.224).

References

  • ACEMOGLU, D. and ZIUBOTTI, F. (1997). Was Prometheus unbound by chance? Risk diversification and growth. Journal of Political Economy 105, pp. 709-31.
  • AULEN, R. AND O’GRADA, C. (1988). On the road again with Arthur Young: English, Irish, and French agriculture during the industrial revolution. Journal of Economic History 38, pp. 93-116.
  • AMBROSOLI, M. (1997). The Wild and the Sown. Botany and Agriculture in Western Europe, 1350-1850. Cambridge: Cambridge University Press.
  • AMOURETTI, M.-C. (1991). L’attelage dans l’antiquite: le prestige d’une erreur scientifique. Annales ESC 46, pp. 219-32.
  • AUDOIN-ROUZEAU (1995). Compter et mesurer les os animaux. Pour une histoire de l’élevage et de l’alimentation en Europe de l’Antiquité aux Temps Modernes. Histoire et Mesure 10, pp. 277-312.
  • BAILEY, M. (1988). The rabbit and the medieval East Anglian economy.
  • Agricultural History Review 36, pp. 1-20.
  • BAIROCH, P. (1989). Les trois revolutions agricoles du monde developpé: rendements et productivity de 1800 a 1985. Annales ESC 44, pp. 317-53.
  • BARKER, G. (1985). Prehistoric Farming in Europe. Cambridge: Cambridge University Press.
  • BRAUNSTEIN, P. (1972). Le fer et la production du fer en Europe de 500 a 1500. Annales ESC 27, pp. 407-14.
  • CAMPBELL, B. M. S. (1991). Land, labour, livestock, and productivity trends in English seigniorial agriculture, 1208-1450. In B. M. S. Campbell and M. Overton (eds), Land Labour and Livestock. Historical Studies in European Agricultural Productivity. Manchester: Manchester University Press.
  • CAMPBELL, B. M. S. (1997). Matching supply to demand: crop production and disposal in the century of the Black Death. Journal of Economic History 57, pp. 827-58.
  • CAMPBELL, B. M. S., GALLOWAY, J., KEENE, D. and MURPHY, M. (1993). A Medieval Capital and its Grain Supply: Agrarian Production and Distribution in the London Region c. 1300. London: Institute of British Geographers. Historical Geography Research Series, no. 30.
  • CHORLEY, G. (1981). The agricultural revolution in northern Europe, 1750-1880: Nitrogen, legumes, and crop productivity. Economic History Review 34, pp. 71-93-
  • CHORLEY, G. (1987). The cloth exports of Flanders and northern France during the thirteenth century: a luxury trade? Economic History Review 50, pp. 349-79.
  • CITARELLI, A. (1993). Merchants, markets and merchandise in southern Italy in the high middle ages. In Mercati e Mercanti nelll’Alto Medioevo. Settimani di Studio del Centro di Studio SulVAlto Medioevo, pp. 239-84. Spoleto.
  • COMET, G. (1997). Technology and agricultural expansion in the middle ages: the example of France north of the Loire. In Grenville Astill and John Langdon (eds), Medieval Farming and Technology. The Impact of Agricultural Change in Northwest Europe. Leiden, New York, Koln: Brill.
  • DELATOUCHE, R. (1977). Regards sur l’agriculture aux temps Carolingien. Journal des Savants, pp. 73-100.
  • DERVILLE, A. (1987a). Dimes, rendements du ble et ‘revolution agricole’ dans le nord de la France au moyen age, Annales ESC 42, pp. 1411-32.
  • DE VRIES, J. (1994). The industrial revolution and the industrious revolution. Journal of Economic History 54, pp. 249-70.
  • DIAMOND, P. (1984). A Search-equilibrium Approach to the Micro-foundations of Macroeconomics. Cambridge, MA: MIT Press.
  • DIXIT, A. (1992). Investment and hysteresis. Journal of Economic Perspectives, pp. 107-32.
  • DIXIT, A. and STIGLITZ, J. (1976). Monopolistic competition and optimum product diversity. American Economic Review 67, pp. 297-308.
  • EDWARDS, J. and HINDLE, B. (1991). The transportation system of medieval England and Wales. Journal of Historical Geography 17, pp. 123-34.
  • EVANS, L. T. (1993). Crop Evolution, Adaptation and Yield. Cambridge: Cambridge University Press.
  • FERDIERE, A. (1991). Gaulois et Gallo-Romains: techniques et outillages agricoles. In Jean Guilaine (ed.), Pour une Archeologie Agraire. Paris: Armand Colin.
  • GOLDSTONE, J. (1984), Urbanization and inflation: lessons from the English price revolution of the sixteenth and seventeenth century. American Journal of Sociology 89, pp. 1122-60.
  • GOLDSTONE, J. (1990). The causes of long waves in early modern economic history. In J. Mokyr (ed.), The Vital One: Essays in Honour of Jonathan R. T. Hughes. Research in Economic History, suppl. 16. Greenwich, CT: JAI Press.
  • GRANT, A. (1988). Animal resources. In A. Grenville and A. Grant (eds), The Countryside of Medieval England. London: Basil Blackwell.
  • GRANTHAM, G. (1989a). Agricultural supply during the industrial revolution: French evidence and European implications. Journal of Economic History 49, pp. 43-72.
  • GRANTHAM, G. (1989b). Capital and agrarian structure in nineteenth-century France. In G. Grantham and C. Leonard (eds), Agrarian organization in the century of industrialization, supplement to 11. Research in Economic History I. Greenwich, CT: JAI Press.
  • GRANTHAM, G. (1997a). Espaces privilegies: productivity agricole et zones d’approvisionnement urbains dans l’Europe pre-industrielle. Annales: Histoire, Sciences Sociales 3, pp. 697-725.
  • GRANTHAM, G. (forthcoming). The shards of trade, archaeology and the economic history of the super-long run. Annales, Histoire, Sciences Sociales. Proceedings of the Economic History Association Annual Meetings, Rutgers, NJ (September 1997)-
  • GREENE, K. (1990). Perspectives on Roman technology. Oxford Journal of Archaeology 9, pp. 209-220.
  • HALL, R. T. (1991). Booms and recessions in a noisy economy. New Haven, CT: Yale University Press.
  • HARRIS, W. V. (1980). Roman terra cotta lamps: the organization of an industry. Journal of Roman Studies 70, pp. 126-45.
  • HARRISON, D. F. (1992). Bridges and economic development, 1300-1800. Economic History Review 45, pp. 240-61.
  • HOFFMAN, P. (1996). Growth in a Traditional Society. The French Countryside 1450-1815. Princeton: Princeton University Press.
  • HONG, S., CANDELONE, J.-P., PATTERSON, C. and BOUTRON, C. (1994). Greenland ice evidence of hemispheric lead pollution two millennia ago by Greek and Roman civilization. Science 265, pp. 1841-3.
  • HONG, S., CANDELONE, J.-P., PATTERSON, C. and BOUTRON, C. (1996). History of ancient copper smelting pollution during Roman and medieval times recorded in Greenland ice. Science 272, pp. 246-9.
  • KRUGMAN, P. (1991). Geography and trade. Leuven and Cambridge, MA: MIT Press.
  • KRUGMAN, P. (1995). Development, geography, and economic theory. Cambridge, MA and London: MIT Press.
  • KRUGMAN, P. (1996). The Self-organizing Economy. Cambridge (MA) and Oxford: Blackwell.
  • KRUGMAN, P. and VENABLES, A. (1995). Globalization and the inequality of nations. Quarterly Journal oj Economics no, pp. 857-80.
  • LAVELY, W. and WONG, R. B. (1998). Revising the Malthusian narrative: the comparative study of population dynamics in late imperial China. Journal of Asian Studies 57, pp. 714-48.
  • LEE, R. (1993). Accidental and systematic change in population history: homeostasis in a stochastic setting. Explorations in Economic History 30, pp. 1-30.
  • MASSCHAELE, J. (1993). Transport costs in medieval England. Economic History Review 46, pp. 266-79.
  • MORICEAU, J.-M. (1994). Les Fermiers d’ile de France XV-XVIIe siecle. Paris: Fayard.
  • MORICEAU, J.-M. and POSTEL-VINAY, G. (1992). Ferme, Entreprise, Famille. Grande Exploitation et Changements Agricoles XVIF-XIX siecles. Paris: Editions de L’Ecole des Hautes Etudes en Sciences Sociales.
  • PARKER, W. N. (1982). Opportunity sequences in European history. In C. P. Kindleberger and G. DiTella (eds), Economics in the Long View. Essays in Honour of W. W. Rostow, vol. II. London: Macmillan.
  • PERSSON, K. G. (1988). Pre-industrial Economic Growth. Social Organization and Technological Progress in Europe. Oxford: Basil Blackwell.
  • PERSSON, K. G. (1991). Labour productivity in medieval agriculture: Tuscany and the ‘Low Countries’. In B. M. S. Campbell and M. Overton (eds), Land, Labour and Livestock. Historical Studies in European Agricultural Productivity. Manchester: Manchester University Press.
  • RAEPSET, G. (1995). Les premices de la mecanisation agricole entre Seine et Rhin de l’antiquite au I3e siecle, Annales, HSS 50, pp. 911-42.
  • VAN ZANDEN, J. L. (1993). The regional pattern of agricultural development, 1500-1800, Paper presented to the Table-Ronde on ‘L3 evolution des rapports entre les regions de l’Europe, I4e-i8e siecles3, March 1993. Paris: Maison des Sciences de 1’Homme.
  • VAN ZANDEN, J. L. (1997). Pushed or pulled on the market? Why peasants commercialize. Paper presented at the European Review of Economic History Conference at Montecatini, 24-25 October.
  • ZILIBOTTIJ F. (1994). Endogenous growth and intermediation in an ‘archipelago’ economy. Economic Journal 104, pp. 467-73.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: