Chapter 1 Flashcards
(20 cards)
What is economic growth
Defined as a SUSTAINED rise in national income per hear (GDP per capita) where each generation should be richer than the one before ( no eventual fall back to the initial or standard of living)
Must be R&D / innovation (changes in techniques or tech in production or otherwise) it should survive individually without intervention or reliance on external agency or intervention.
What are the exceptions of economic growth?
- A run of good harvests (like that of the Tudor era where there were a culmination of good harvests)
- Annexing of land (conquering of regions and subjugation of their assets) i.e. the Roman Empire
- Good recovery from natural disaster; the recovering region likely goes right back to the standard of life they were originally at before the disaster occurred
Note; these exceptions are NOT self- perpetuating and therefore do not fall under economic growth
What is extensive growth?
A rise in input=a rise in output; An increase in land, with the same number of people working it, population growth. An increase in the factors of production to emulate an increase in output of the economy. NOT MODERN ECONOMIC GROWTH
What is intensive growth?
Arise in output caused by an increase in productivity and not in input, no increase in the factors of production. Increase in the output to input ration, higher productivity and efficiency.
- Division of Labour (Smithian growth)- speaks on specialisation and a chance to optimise a skill to become better at that particular thing, streamlining the production process, increasing productivity.
- Technological innovation and advancements
- Better management (Very common factor in increasing productivity)-Just by streamlining or simplifying certain processes or better leadership can lead to higher productivity.
What is Smithian growth?
- Solves the problem of inefficiency, focuses on increasing productivity through specialisation, leading to optimisation and ultimately increases in productivity (modern economic growth)
- Urbanisation can be a proxy for specialisation since it is based on a market economy focused on money and not a simple economy with a barter system
What does specialisation need?
Specialisation needs trade which requires money (market-based economy
TRUST is also required in trade- there must be a mutual understanding that through that transaction, both parties will be better off, there is something to gain for both parties from the initial trade
What is purchasing power parity?
Takes into account cost of living rather than just exchanging currencies in line with the exchange rate - tends to inflate poorer countries since the cost of living there is much lower compared to their richer counterparts
Examples:
- GKS- Geary- Khamis Dollar, cost of living in the US in that year compared to other years.
Grain Wages- wages expressed in how much grain/wheat one could purchase; a useful measure for earlier economic income, it measures how hungry people are and what they could afford.
It also focuses on what is available in that region; Connects to the Malthusian trap through food-production.
What is the Malthusian theory?
The population uses up all the new income growth causing income per person to fall back to initial levels
When technology etc improves food production leading to higher incomes, living standards become better, more food is available for the average person so less people die, (old and young, with more food to go around) resulting in population growth until the levels of income per head and food per person return back to the exact same stage they were before the tech advancement.
What is path development?
Matters in the short term, outcome of present is determined by the outcome of the past (i.e today vs yesterday)
GDP and technology can both be path dependent (GDP particularly in the short run)
Shocks (2008 financial crisis, the Great Depression, COVID-19 etc) can change the path an economy or technology are on
What is the california school and their opinions?
- They argue that Europe and Asia were in similar states prior to the IR (around the time of the Great Divergence)
- The answer to ‘WHY EUROPE’? Is LUCK
- Asia, which had though to have been ahead in the 1400s had fallen back by 1700 so it did not follow the behaviour of Europe when it forged ahead.
China
- Ming voyages- Had no European equivalent. 7 Ming Voyages, 1405-33
- The dynasty turned inwards, costs of building the forbidden city, Bad harvest and flooding, with external threats such as the Mongols, they destroy their fleet in 1525, knowledge was lost.
Yangtze delta v England 1800
England was ahead in agricultural productivity- yet China was relatively close
In China they grow rice (labour intensive but high yield per acre, In England they grow barley and wheat (vice versa compared to the Yangtze delta)
Incentives are different-
England- low fertility rate, high age of marriage with many unmarried
China- high natural fertility and large families
No demographic transition
Large families are not usually associated with economic growth, smaller families induce higher rates of education
Chance
Most countries burn wood for fuel, England runs out and use coal which is easier quicker and more accessible
Neolithic leaders
WAS IT ALL PATH DEPENDENT? NO
Did all areas that were economic leaders remain economic leaders?
Overtime some regions fell behind or slipped back, through changes in economic leaders- WHY?
Started in the fertile crescent in the middle East (Syria, Israel etc). The are 5000 years between where it started and when it reached the UK
Inverse correlation, between when the Neolithic revolution and modern wealth within the regions
Being a Neolithic leader did not mean that you would become one of the global economic leaders
Portugual
- Major power in 1400-1600, led Europe’s voyages and conquests of discovery
- Escapes Malthusian Trap
- Rising in urban percentages
- Rising in non-agricultural work
Things take a turn
- Wages fall after 1600- turns out to have not escaped the Malthusian trap
- Moves from intensive to extensive growth (increase in working hours), increases standard of living but not economic growth.
How to Study the Great Divergence - The California School?
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What is the Marxist view of the great divergence?
Outside of Europe, counrties lacked the dynamics to feaciliates the change and transition from feudalism to capitalism
Wat is the eurocentric viewpoint?
The west underwent a process of burecratic ststes and disenchnated culture
Intense pricess if rationalisation that resulted in the emergence of capitalist market economies
Capitalism was the motor of modern economic growth
What is the viewpoint of the California school?
Prior to the great divergence china and Europe were at a similar development points infact China were more developed with 7 ming voyages to India and Africa
Europe was lucky
What is the opinion of Victor Courts?
Biographical determinents: Local climate, disease rates, land suitability, sea access all increased production and trade leading to growth
Contigent conjunctural determinants - black death and its conseuqences
Allens viewpoint
China produced rice and was labour intensive therefore it was cheaper
England produced wheat which required less labour
England had cheap coal which made the production process cheaper
California school tends to exaggerate the similarities between the west and the rest
Little divergence
Peer Vries response:
Change in the imporance of three factors
Biogepgraphy
Culture instituons
Contigency conjecture
