The Black Death

At VoxEU.org Mark Koyama is interviewed by Tim Phillips on the topic of The Black Death

Seven hundred years ago the worst pandemic in history killed almost half the population of Europe and the Middle East. Mark Koyama tells Tim Phillips about the centuries-long economic impact of the Black Death.

A millenium of history: Steve Davies from the Norman Conquest to the world wars

From History Twins Podcast comes this interview with Dr. Stephen Davies of the IEA involving topics from the Norman Conquest all the way through to the World Wars. Find out what's wrong with Rousseau, who started the First World War, and what we're missing about the Industrial Revolution.

John Nye on revisionist economic history and having too many hobbies

From Conversations with Tyler comes this audio in which Tyler Cowen interviews economic historian Professor John Nye.

Is John Nye the finest polymath in the George Mason economics department?

Raised in the Philippines and taught to be a well-rounded Catholic gentleman, John Nye learned the importance of a rigorous education from a young age. Indeed, according to Tyler he may very well be the best educated among his colleagues, having studied physics and literature as an undergraduate before earning a master’s and PhD in economics. And his education continues, as he’s now hard at work mastering his fourth language.

On this episode of Conversations with Tyler, Nye explains why it took longer for the French to urbanize than the British, the origins of the myth of free-trade Britain, why Vertigo is one of the greatest movies of all time, why John Stuart Mill is overrated, raising kids in a bilingual household, and much more.

Economists who changed the world

In this audio from the BBC History Extra magazine Linda Yueh discusses her new book, The Great Economists, which explores the work and legacy of some of history’s greatest economic thinkers, and reveals some of the lessons they might offer for us today


An interesting podcast, even if I'm not sure I would entirely agree with some of Yueh's discussion and interpretation of the writers she considers. On the other hand Tyler Cowen is quoted as saying, about the book, "The best place to start to learn about the very greatest economists of all time".

Collecting data: Domesday Book edition

When commenting on the data collection methods used to compile the Domesday Book in 1086 McDonald (1998: 1) writes,

As with many modern surveys, the data were compiled from answers to questionnaires; but, unlike most contemporary censuses, answers were not given in confidence but were scrutinised publicly in local courts. In many ways the checks on the accuracy of the data were more stringent than those for currently complied official data.

Maybe the old technology is still the best technology. StatsNZ could learn a thing or two from the William the Conqueror and the Normans.

Ref.:

• McDonald, John (1998). Production Efficiency in Domesday England, 1086, London: Routledge.

Trade, merchants, and the lost cities of the Bronze Age

An interesting new NBER working paper on Trade, Merchants, and the Lost Cities of the Bronze Age by Gojko Barjamovic, Thomas Chaney, Kerem A. Coşar and Ali Hortaçsu.

NBER Working Paper No. 23992
Issued in November 2017
NBER Program(s): ITI

We analyze a large dataset of commercial records produced by Assyrian merchants in the 19th Century BCE. Using the information collected from these records, we estimate a structural gravity model of long-distance trade in the Bronze Age. We use our structural gravity model to locate lost ancient cities. In many instances, our structural estimates confirm the conjectures of historians who follow different methodologies. In some instances, our estimates confirm one conjecture against others. Confronting our structural estimates for ancient city sizes to modern data on population, income, and regional trade, we document persistent patterns in the distribution of city sizes across four millennia, even after controlling for time-invariant geographic attributes such as agricultural suitability. Finally, we offer evidence in support of the hypothesis that large cities tend to emerge at the intersections of natural transport routes, as dictated by topography.

Alex Tabarrok writes on this paper at Marginal Revolution:

In a stunningly original paper Gojko Barjamovic, Thomas Chaney, Kerem A. Coşar, and Ali Hortaçsu use the gravity model of trade to infer the location of lost cities from Bronze age Assyria! The simplest gravity model makes predictions about trade flows based on the sizes of cities and the distances between them. More complicated models add costs based on geographic barriers. The authors have data from ancient texts on trade flows between all the cities, they know the locations of some of the cities, and they know the geography of the region. Using this data they can invert the gravity model and, triangulating from the known cities, find the lost cities that would best “fit” the model. In other words, by assuming the model is true the authors can predict where the lost cities should be located. To test the idea the authors pretend that some known cities are lost and amazingly the model is able to accurately rediscover those cities.

Palgrave studies in ancient economies

An interesting looking new book series from Palgrave.

Call for Proposals - Palgrave Studies in Ancient Economies

Announcing a new series

This series provides a unique dedicated forum for ancient economic historians to publish studies that make use of current theories, models, concepts, and approaches drawn from the social sciences and the discipline of economics, as well as studies that use an explicitly comparative methodology. Such theoretical and comparative approaches to the ancient economy promotes the incorporation of the ancient world into studies of economic history more broadly, ending the tradition of viewing antiquity as something separate or ‘other’.

The series not only focuses on the ancient Mediterranean world, but also includes studies of ancient China, India, and the Americas pre-1500. This encourages scholars working in different regions and cultures to explore connections and comparisons between economic systems and processes, opening up dialogue and encouraging new approaches to ancient economies.

Series Editors:
Paul Erdkamp, Vrije Universiteit Brussel, Belgium
Ken Hirth, Penn State University, USA
Claire Holleran, University of Exeter, UK
Chunyan Huang, Yunnan University, China
Michael Jursa, University of Vienna, Austria
J. G. Manning, Yale University, USA

Contact for Proposals
Submissions are ideally between 60,000 and 110,000 words, although shorter submissions (25,000-50,000 words) will be considered for our Palgrave Pivot publication format.

Authors interested in submitting a proposal should contact the series editors directly or Laura Pacey (laura.pacey@palgrave.com)

The emergence of the corporate form

An interesting new article from the Journal of Law, Economics and Organisation -- Volume 33, Issue 2 May 2017: 193-236.

The Emergence of the Corporate Form
Giuseppe Dari-Mattiacci; Oscar Gelderblom; Joost Jonker; Enrico C. Perotti

Abstract
We describe how, during the 17th century, the business corporation gradually emerged in response to the need to lock in long-term capital to profit from trade opportunities with Asia. Since contractual commitments to lock in capital were not fully enforceable in partnerships, this evolution required a legal innovation, essentially granting the corporation a property right over capital. Locked-in capital exposed investors to a significant loss of control, and could only emerge where and when political institutions limited the risk of expropriation. The Dutch East India Company (VOC, chartered in 1602) benefited from the restrained executive power of the Dutch Republic and was the first business corporation with permanent capital. The English East India Company (EIC, chartered in 1600) kept the traditional cycle of liquidation and refinancing until, in 1657, the English Civil War put the crown under strong parliamentary control. We show how the time advantage in the organizational form had a profound effect on the ability of the two companies to make long-term investments and consequently on their relative performance, ensuring a Dutch head start in Asian trade that persisted for two centuries. We also show how other features of the corporate form emerged progressively once the capital became permanent. (JEL: G30, K22, N24).

Mark Koyama on the macroeconomics of ancient Rome

From David Beckworth’s new podcast series, Macro Musings comes this audio of an interview with Mark Koyama

Mark Koyama is an Assistant Professor of Economics at George Mason University and a Senior Fellow at George Mason University’s Mercatus Center. He joins the show to discuss his research on the economic history of ancient Rome from the rise of the Roman Republic to the transition to the Roman Empire to the Empire’s eventual fall.

1776 was more about representation than taxation

A question not often asked about the American Revolution, Did Monarchists resisting an incipient democracy movement in Britain prevent a compromise that could have placated the American colonists?

Jen Deaderick writes in the December 2016 NBER Digest:

"No taxation without representation" — the rallying cry of the American Revolution — gives the impression that taxation was the principal irritant between Britain and its American colonies. But, in fact, taxes in the colonies were much lower than taxes in Britain. The central grievance of the colonists was their lack of a voice in the government that ruled them.

The political underpinnings of the American Revolution have been discussed and debated for more than two hundred years, and there are multiple explanations of the causes and multiple analyses of the revolutionary dynamic. One question about the revolution that has remained difficult to answer is why, if a little representation in Parliament could have prevented a war for independence, did King George III not grant it?

This question is the motivation for Sebastian Galiani and Gustavo Torrens' study Why Not Taxation and Representation? A Note on the American Revolution (NBER Working Paper No. 22724). They note, in drawing attention to the role of representation as a spark for revolution, that the average British citizen who resided in Britain paid 26 shillings per year in taxes, compared with only one shilling per year in New England, even though the living standard of the colonists was arguably higher than that of the British.

Most accounts of the events that led to the American Revolution depict a conflict between the colonies and a unified British government. In fact, the researchers argue, the reality was more subtle. They draw on a variety of historical accounts to describe the tension between two rival British interest groups, the landed gentry and the democratically inclined opposition, and to explain the failure to reach a compromise that would have granted representation to the colonies. In particular, they focus on how extending representation would have affected the relative influence of these two groups.

The researchers consider events a century before the American Revolution to have set the stage for the domestic tensions in Britain at the time of the colonial protests. In 1649, during the English Civil War, a rebellion of Parliamentarians overthrew — and beheaded — King Charles I. Oliver Cromwell, who ruled for most of the subsequent decade, supported expanding representation in government beyond landowners, and his government was sympathetic to grievances like those raised by the American colonies many decades later. Following Cromwell's death in 1658, however, Royalists returned to power and sought to restore the historical ruling class.

When the colonies asked for representation in the middle of the 18th century, the monarchy was still recovering from its dethroning, and the landed gentry, now returned to primary power, still felt vulnerable. The researchers point out that the Royalists were contending with factions that sought to bring democracy to Britain. While these opposition groups did not hold significant power, if representatives from the American colonies were invited to join Parliament, they likely would have sympathized with the opposition and expanded their influence. The researchers see this tension as critical to understanding why Britain was so reluctant to enfranchise the colonists.

There were proposals to settle the colonial crisis peacefully, most notably by Thomas Pownall and Adam Smith. Smith, for example, proposed "a system in which the political representation of Great Britain and America would be proportional to the contribution that each polity was making to the public treasury of the empire." Such proposals were rejected by the ruling coalition in Britain. "The landed gentry, who controlled the incumbent government, feared that making concessions to the American colonies would intensify the pressure for democratic reforms, thus jeopardizing their economic and political position," the researchers find.

Ultimately, the opposition of the landed gentry to the demands for representation by the American colonies pushed the colonies to rebellion and independence, but helped to delay the development of the incipient democratic movement in Britain.

Joel Mokyr interview

An interview of Joel Mokyr by Ana Swanson from the Washington Post.

Why did the industrial revolution start in Europe, rather than in China? In part because,

It isn’t just that China doesn’t have an Industrial Revolution, it doesn’t have a Galileo or a Newton or a Descartes, people who announced that everything people did before them was wrong. That’s hard to do in any society, but it was easier to do in Europe than China. The reason precisely is because Europe was fragmented, and so when somebody says something very novel and radical, if the government decides they are a heretic and threatens to prosecute them, they pack their suitcase and go across the border.

So exit options can matter. One government doesn't like your ideas, move onto the next.

Economic freedom in the long run

An interesting paper on Economic freedom in the long run: evidence from OECD countries (1850–2007), by Leandro Prados De La Escosura, is available in The Economic History Review: Volume 69, Issue 2, pages 435–468, May 2016.

The abstract reads,

This article presents historical indices for the main dimensions of economic freedom and an aggregate index for the developed countries of today, specifically pre-1994 OECD members. Economic liberty expanded over the last century-and-a-half, reaching more than two-thirds of its possible maximum. However, its evolution has been far from linear. After a substantial improvement from the mid-nineteenth century, the First World War brought a major setback. The postwar recovery up to 1929 was followed by a dramatic decline in the 1930s. Significant progress took place during the 1950s but fell short of the pre-First World War peak. After a period of stagnation, steady expansion since the early 1980s has resulted in the highest levels of economic liberty of the last two centuries. Each of the main dimensions of economic freedom exhibited a distinctive trend and its contribution to the aggregate index varied over time. Overall, improved property rights provided the main contribution to the long-run advancement of economic liberty.

Section XI of the paper sums things up by saying,

An expansion of economic liberty, nearly three-fourths of its possible maximum, has taken place in the OECD during the last one-and-a-half centuries. Its evolution, however, has been far from linear. After a substantial improvement from the mid-nineteenth century that peaked in 1913, the First World War brought with it a major setback. A postwar recovery up to 1929 was followed by a dramatic decline in the 1930s and, by the eve of the Second World War, economic freedom had shrunk to its 1850 levels. Significant progress in economic freedom during the Golden Age (1950–73) fell short of the pre-First World War peak. A steady advance since the early 1980s has resulted in the highest levels of economic liberty in the last two centuries.

Dimensions of economic freedom exhibited different trends, which confirm their complementarity in composing a complex image of economic liberty. During the period 1850–1914, improvements in property rights enforcement represented the main contribution to its progress. In the interwar years, the collapse of freedom of trade and regulation accounts for practically all the contraction in economic liberty, but from 1950 onwards liberalization of trade and factor flows has been the main force behind its advance. Over the whole period 1850–2007, the main contribution to the increase in economic liberty has come from legal structure and property rights.

A new historical index of economic freedom raises pressing questions. Are there any trade-offs between economic freedom and other kinds of freedom? Have increases in economic freedom had a cost in terms of growth, inequality, well-being, and democracy, or, conversely, have these increases contributed to their enhancement? The next challenge for researchers is to provide answers to these questions. (Emphasis added.)

With regard to the importance of property rights the paper notes,

Over the one-and-a-half centuries examined, improvements in the definition and enforcement of property rights emerge as the driver of long-term achievements in economic liberty.The only exceptions were the US and the UK, in which trade liberalization made the most distinctive contribution, and Australia and New Zealand, in which it came from deregulation.

So New Zealand's economic liberty was helped by deregulation. Who knew?

TEC Lectureship on Europe and the World 2015

Here are two lectures given by Joel Mokyr, the Robert H. Strotz Professor of Arts and Sciences and Professor of Economics and History at Northwestern University.

The first is "Culture of Gowth: Origins of the Modern Economy"


The second is "Long-Term Economic Change in China and Europe: The Needham Paradox Revisited"

Is history is more or less bunk? 3

I ended the post Is history is more or less bunk? 2 with two questions to do with why Gary Becker's argument that competitive labour markets would force employers to keep their prejudices out of their business decisions does not work in this case and what social mechanisms could be at work to perpetuate the discrimination we see in the labour markets. I emailed these questions to the author of the paper, Cornelius Christian, and he has kindly given his permission for me to reproduce his answers below:

Gary Becker's model, I think, is only part of the story. I am quoting from Gavin Wright's Sharing the Prize (p. 76-77), which is about the Civil Rights movement:

"segregation in such facilities as lunch counters, restaurants, and hotels was rarely required by law, and when statutes or municipal ordinances did exist, enforcement was generally at the discretion of proprietors... Businessmen feared that serving blacks, particularly in socially sensitive activities such as eating and sleeping, would result in the loss of white customers."

In the conclusion of the chapter, Wright says the following:

"The interpretation advanced in this chapter is that southern businessmen were locked into a low-level equilibrium, the stability of which was bolstered by the fact that they did not see it that way themselves. Both as firms and as downtown collectivities, businesses balanced the loss of black consumer spending against anticipated losses of white patronage."

Now, regarding present-day labour market outcomes, there is possibly a similar mechanism operating.

Regarding your question on a social mechanism, I am currently in the process of developing a model, and then subjecting it to empirical tests. I hope to have that done very soon!

Is history is more or less bunk? 2

Further to my previous post I have now found a copy of the paper The Economist was talking about, “Lynchings, Labour and Cotton in the US South” (pdf) by Cornelius Christian.

In the paper Christian notes that in the short term the advantage of lynchings to whites was via the labour market. The evidence presented by Christian demonstrates that lynchings prevented black workers from fully participating in the labour market to the advantage of white workers. Lynchings cause blacks to migrate away, not too surprising, lowering labour supply and increasing wages for white labourers.

Using the fact that world cotton prices are exogenous from a single county’s perspective, I find that cotton price shocks strongly predict lynchings. More precisely, one standard deviation decrease in the world cotton price results in a 0.095 to 0.16 standard deviation increase in lynchings within a cotton-producing county. The findings are robust to the inclusion of controls, and to the use of tests with white-on-white lynchings and California lynchings. Cotton price shocks also do not predict legal executions of blacks, suggesting motives for lynching were different. These ffects are more pronounced in counties that had railroads in 1890, suggesting that links to world markets and greater local labour demand had an impact on lynchings. Disenfranchisement attempts such as the poll tax and literacy tests do not strengthen this effect, suggesting the substitutability of informal violence with formal institutions as a way to control workers. All this is indicative that greater numbers of lynchings served, at least in part, as a way of controlling black workers.

Using these observations as a guide, I claim that lynchings had labour market effects that benefitted white workers. During years of low cotton prices, wages are low. When whites lynch blacks, this causes other blacks to migrate out of a county, thus reducing labour supply and increasing wages. I show in my data that lynchings predict greater black out-migration, and higher state-level agricultural wages. A one standard deviation increase in lynchings within a county leads to 6.5 to 8 % more black out-migration, and a 1.2 % increase in state-level wages.

Given these short-run effects what are the long-run outcomes?

I then turn to the long-term effects of lynchings, starting with the Civil Rights era. Although lynchings became very rare in the 1930s, discrimination against blacks continued. I focus on the 1964 Mississippi Summer project, a campaign to register African Americans to vote - the campaign’s organisers encountered violence and discrimination throughout the summer. I show that Mississippi counties with more 1964 violence also had more lynchings in the past. Using datafrom the 2008-2012 American Community Survey, I also show that lynchings in the past predict white-black wage and income gaps today. This is robust to the inclusion of various controls and state fixed effects. Furthermore, I test the sensitivity of the coefficient estimates to control variables using Altonji, Elder, and Taber (2005) statistics. My results are shown to be robust to these tests, strongly suggesting that labour market discrimination has persisted from lynchings to the present day.

and

The modern-day and Mississippi Summer results suggest that the effects of lynchings persist up until the present day. This is consistent with a mechanism in which discrimination continues to affect African Americans. Such prejudice starts with lynchings of African Americans, and subsequently manifests in violence when Civil Rights community organisers went to Mississippi in 1964. It continues to affect contemporary black incomes, relative to their white neighbours.

If labour market discrimination today, driven by prejudice from the past,  is the cause of the income gap between blacks and whites then there are a couple of questions to ask. First is there some social mechanism at work to perpetuate the discrimination? and second what is preventing Becker type effects from reducing the gap? Gary Becker pointed out many years ago a competitive labour market provides strong incentives to keep our prejudices out of our business decisions. The force of competition will make even the most racist/sexist/homophobic/ employer see that by hiring only heterosexual men of Anglo-Saxon descent, they limit the talent pool accessible to them, which is not good business. What market imperfections are preventing such competitive forces working in the South?

An interesting paper which shows history is not bunk and has relevance even today.

Shares in companies are an old idea

It turns out that shares are more than 700 years old, at least. From the BBC website comes this picture of what is the oldest known share in a company. In 1288, Stora Enso issued this share giving a bishop an eighth of a copper mountain.

Is history is more or less bunk?

The Economist magazine reports on a paper given at the recent Economic History Society's annual conference in the U.K. This work suggests history matters and matters for a long time. The paper looks at the effect of lynchings before 1930 in the U.S. on income distribution today.

The first, by Cornelius Christian of Oxford University, looks at the consequences of the lynching of black Americans between 1882 and 1930. Mr Christian found that this history of racial violence still echoes down the decades. He also found that the higher an area’s lynching rate before 1930, the wider the income gap between blacks and whites remained in 2008-12, even when adjusted for factors such as the education and employment levels of a local area. A high rate of lynching widens this gap by as much as 15% in some cases.

While an interesting empirical result, the question this raises is What is the mechanism that brings this effect about? Just how can something like lynchings 80-120 years ago be affecting income distribution today? It is not obvious what the link is. We need a theory to explain the data.

How did the west get so rich?

In this audio Deirdre McCloskey is interviewed on the Tom Woods Show. Deirdre McCloskey, author of The Bourgeois Virtues, among many other books, discusses the real reason for why west got rich and why the traditional explanations fail.

Forum on McCloskey

The Liberty Fund via its Online Library of Liberty site hosts a "Liberty Matters" forum which currently consists of a discussion of Deirdre McCloskey's two recent books Bourgeois Virtues (2006) and Bourgeois Dignity (2010). There is a Lead Essay by Don Boudreaux, "Deirdre McCloskey and Economists’ Ideas about Ideas", and comments by Joel Mokyr and John Nye, and replies to her critics by McCloskey.

The key issue is to try to explain why “the Great Enrichment” of the past 150 years occurred in northern and western Europe rather than elsewhere, and why sometime in the middle of the 18th century. Other theories have attributed it to the presence of natural resources, the existence of private property and the rule of law, and the right legal and political institutions. McCloskey’s thesis is that a fundamental change in ideas took place which raised the “dignity” of economic activity in the eyes of people to the point where they felt no inhibition in pursuing these activities which improved the situation of both themselves and the customers who bought their products and services.

The conversation following on from the lead article and comments is available here. All interesting stuff, well worth the time to read.

Free banking in New Zealand

The following comes from a blog post, by Kurt Schuler, at the Free Banking blog,

Since the revival of interest in the history of free banking begun by Hugh Rockoff's work in the 1970s on American "free banking" of the early 19th century and Larry White's 1984 book on the far freer Scottish system of the same period, economists have studied a number of other free banking episodes in some depth. New Zealand has not been among them, though it has received passing attention. We are fortunate, then, that Harry D. Bedford's 1916 dissertation "The History and Practice of Banking in New Zealand" is now available online. Until this year only paper copies were available at the University of Otago, where it was submitted for the doctorate, and a few other libraries in New Zealand. The university has digitized the dissertation and readers around the world can now find it here.

The work was submitted for the higher doctoral degree Doctor of Letters at Otago in 1916. The Table of Contents reads:

Volume 1: Principles of English Banking current in the “Forties” – Commerce without Banks – Early Banking – Government Debentures as Currency in New Zealand – A State Bank of Issue – Several Banks – the Gold Discoveries – Years of Expanding Credit – Banks and Credit

Volume 2: Movements towards Crisis – The Assets Realisation Board – The Colonial Bank – The National Bank – The Causes of the Crisis – Commercial Influences – Bank Notes – Exchange – The Government Account – Since 1895

Who knew banking history was big back then?!