Lecture5
November 6, 2018
Masayuki Kudamatsu
Chapter 4 & pp. 208-212
Black Death and
the divergence of Western and Eastern Europe
Rise of Atlantic trade
and the divergence of England and Spain
Critical junctures
and the divergence of institutions
Term paper preparation #1
Black Death and
the divergence of Western and Eastern Europe
Rise of Atlantic trade
and the divergence of England and Spain
Critical junctures
and the divergence of institutions
Term paper preparation #1
Source: Figure 1 of Cesana, Benedictow, and Bianucci (2017)
Wiped out about half of the population in Europe
King
Lords
Peasants
(Serfs)
Land
Military services
Unpaid labor,
Fines, Taxes
Land
Peasants need permission from lords to move out
cf. Ethiopia's gult system (Lecture 4)
Feudalism
economic institutions | ||
---|---|---|
Secure for everyone |
Property rights | Insecure for majority of people |
Free | Occupational choice |
Forced labor |
Free | Entry of new businesses | Prevented by monopolies |
Unbiased | System of laws | Biased for the powerful/rich |
Promoted | Public service provision | Discouraged |
Economic Institutions
Inclusive
Extractive
Property rights
Secure for everyone
Insecure for
majority of people
Occupational choice
Free
Forced labor
Entry of
new businesses
Free
Prevented by
monopolies
System of laws
Unbiased
Biased for
the powerful / rich
Public service provision
Provided
Limited
However, Western and Eastern Europe were not completely the same at that time
Source: Frederic Delouche ed. (2001) Illustrated History of Europe (2nd ed.) Cassell & Co, p. 147
Peasants in Western Europe could escape into these towns
Western Europe:
Rise of towns
Peasants have bargaining power
Eastern Europe:
Dominantly rural
Lords (relatively) powerful
NOTE:
Chapter 4 of Why Nations Fail does not
(1) mention peasants' bargaining power
(2) explain why towns made a difference
This lecture note is based on Acemoglu and Wolitzky (2011), which is cited as the source for Chapter 4 (page 469)
Western Europe:
Rise of towns
Peasants have bargaining power
Eastern Europe:
Dominantly rural
Lords (relatively) powerful
Black Death
Peasants' demand for freedom prevailed
End of Feudalism
Statute of Laborers of 1351
Punish peasants for leaving employment w/o permission of lords
Peasants' Revolt of 1381
Rebels, led by Wat Tyler, captured most of London
The English state gave up enforcing Statute of Laborers
Image source: luminarium.org
Western Europe:
Rise of towns
Peasants better-organized
Eastern Europe:
Dominantly rural
Lords (relatively) powerful
Black Death
Peasants' demand for freedom prevailed
End of Feudalism
Lords intensified forced labor
Second Serfdom
Western Europe:
Rise of towns
Peasants better-organized
Eastern Europe:
Dominantly rural
Lords (relatively) powerful
Black Death
Peasants' demand for freedom prevailed
End of Feudalism
Lords intensified forced labor
Second Serfdom
Rising demand for foods
in Western Europe after 1500
e.g.
Korczyna in Poland
About 50% of works in 1600
Mecklenburg in eastern Germany
1 day per week in 1550
3 days per week in 1600
Hungary
By legislation, 90% of rural population forced to work unpaid
1 day per week in 1514, 2 days in 1550, 3 days by 1600
Black Death and
the divergence of Western and Eastern Europe
Rise of Atlantic trade
and the divergence of England and Spain
Critical junctures
and the divergence of institutions
Term paper preparation #1
"Discovery" of the Americas
by Christopher Columbus
in 1492
Massive trade opportunities opened up
Precious metals (gold, silver, etc.)
Plantation crops
Slaves
Landing of Columbus (12 October 1492), painted by John Vanderlyn
Image source: Wikimedia Commons
Both had an assembly of citizens
Parliament in England (Lecture 3)
Monarch needed to consult with them to raise new taxes
Monarch was (only slightly) weaker in England than in Spain
Scope of taxation: larger in England
Representation by parliament: broader in England
England:
(relatively) Strong
Parliament
Spain:
(relatively) Weak
Cortes
Rise of Atlantic Trade
Merchant class emerged
Monarch monopolized trade
702 exporters &
1283 importers
in London
by 1688 (p. 210)
Spanish monarch
financially
independent
from Cortes
England:
(relatively) Strong
Parliament
Spain:
(relatively) Weak
Parliament
Rise of Atlantic Trade
Merchant class emerged
Glorious Revolution of 1688
Crown monopolized trade
Absolutism persisted
England:
(relatively) Strong
Parliament
Spain:
(relatively) Weak
Parliament
Rise of Atlantic Trade
Merchant class emerged
Glorious Revolution of 1688
Crown monopolized trade
Absolutism persisted
English privateers challenged Spanish monopoly of Atlantic trade
The Spanish Crown
sent its Invincible Armada
to attack England
Image source: Wikimedia Commons
England:
(relatively) Strong
Parliament
Spain:
(relatively) Weak
Parliament
Rise of Atlantic Trade
Merchant class emerged
Glorious Revolution of 1688
Crown monopolized trade
Absolutism persisted
Spanish Armada in 1588
Bad
weather
Last-minute appointment
of Spanish command-in-chief
English privateers challenged Spanish monopoly of Atlantic trade
The Spanish Crown
sent its Invincible Armada
to attack England
England defeated Spanish Armada, largely by chance
+
Image source: Wikimedia Commons
England:
(relatively) Strong
Parliament
Spain:
(relatively) Weak
Parliament
Rise of Atlantic Trade
Merchant class emerged
Glorious Revolution of 1688
Crown monopolized trade
Absolutism persisted
Defeat of Spanish Armada in 1588
Black Death and
the divergence of Western and Eastern Europe
Rise of Atlantic trade
and the divergence of England and Spain
Critical junctures
and the divergence of institutions
Term paper preparation #1
Society A:
(slightly) more inclusive
Society B:
(slightly) more extractive
No two societies create the same institutions
Society A:
(slightly) more inclusive
Society B:
(slightly) more extractive
Critical Juncture
Black Death in 14c
Rise of Atlantic trade in 15c
Industrial Revolution in late 18c
European colonization
Examples
Society A:
(slightly) more inclusive
Society B:
(slightly) more extractive
Critical Juncture
Power balance tilted for the ruled
Power balance tilted for the rulers
Society A:
(slightly) more inclusive
Society B:
(slightly) more extractive
Critical Juncture
Power balance tilted for the ruled
Inclusive institutions
Power balance tilted for the rulers
Extractive institutions
Black Death and
the divergence of Western and Eastern Europe
Rise of Atlantic trade
and the divergence of England and Spain
Critical junctures
and the divergence of institutions
Term paper preparation #1
And discuss whether
Theory of Why Nations Fail
So you need to know that in the country of your choice...
Are political institutions
inclusive
or
extractive?
So you need to know that in the country of your choice...
Are economic institutions
inclusive
or
extractive?
So you need to know that in the country of your choice...
Is the economy
growing
or
stagnated?
If it turns out, for example, ...
If it turns out, for example, ...
Evidence is consistent with the theory if
Evidence is consistent with the theory if
So you need to find information on
So you need to find information on
Today we learn where to learn economic performance
Average annual income of a person living in the country
For detail, pick any introductory textbook on macroeconomics such as Jones (2017), Mankiw (2018), Acemoglu et al. (2018)
Published by the World Bank
1. Click the link above
2. Click
3. Type "GDP per capita"
Which should you choose?
Then you'll see this:
You need to understand "current", "constant", and "PPP"
"Current" doesn't take into account inflation
Economic growth typically comes with inflation
Ignoring inflation will overrepresent economic growth
100 yen in 1960 = 568.29 yen in 2018 (source: InflationTool.com)
e.g.
Some poor countries suffer from hyperinflation
e.g.
1,000,000% in Venezuela in 2018 (source: Reuters)
"Constant" does take into account inflation
GDP
(constant 2010 $)
GDP
(current $)
Inflation rate
since 2010
=
Used for international comparison
Foreign exchange rate
Many services (e.g. haircut) are not exported or imported
Investors speculate in the currency market
Japanese yen appreciates
whenever the world economy becomes uncertain
e.g.
price level difference across countries
PPP is the "real" exchange rate
e.g.
Very simple version of PPP: the Big Mac index
Image source: The Economist
WDI's PPP is based on
cross-country price surveys by International Comparison Program
Then which indicator should you use?
Once you choose the indicator, click it.
Then click "DataBank" on the lower right.
Select "Country" and "Time". Click "Chart" on top right
WDI dates back to 1960 at most
provides the best estimates of historical GDP data
October 30
Chapter 4
November 6
Chapter 1
November 13
Chapter 10
United States
vs Mexico
from colonization
to early 20c
Western
vs Eastern Europe
after Black Death
in 14c
Spain vs England
after Rise of Atlantic
Trade in 16c
Australia
French Revolution
and its spread to
Western Europe
Japan vs China
in 19c
Next week
Pick a country for your term paper
and post it on Prulu (if you haven't)
Read Chapter 1
and post questions on Prulu
1
2
3
Visualize the economic performance of the country of your choice