Monday, June 15, 2009

Bob Allen's New Book Discussion Thread

OK, so Bob Allen made my summer reading list. 17 pages in, however, and I'm already discouraged...

For, on page 4, Allen writes "[Greg] Clark... claims that medieval institutions were almost perfect for economic development." Now, this isn't a wholly inaccurate representation of Clark, but it would be more accurate to say that if the key institutions and keys for development are as the IMF/Washington Consensus sees them, then medieval european institutions were pretty good. Low inflation. Free, well-integrated markets. Low government spending. Very low tax rates (generally 0% on wage income, compared to 50-60% as a top tax rate in many modern european countries). But if these things aren't really the causes of economic growth (as at least I do not believe), then it's inappropriate to say that they are "perfect for economic development", and certainly wrong to say that Clark thinks that. This is just a small issue, however, compared to what comes next...

Allen then writes that "One can reach an optimistic conclusion about medieval institutions only by glossing over their most characteristic forms -- e.g. serfdom. For most of the middle ages, a majority of English were serfs..." But there are two major problems with using this as your key example about how it was poor institutions which held back the world economy before 1760 -- serfdom ended in most of europe by 1450-1500, due to the Black Death-induced high wage economy (thereafter it revived in eastern europe which didn't have the European marriage pattern nor as high of wages). So, there's a 300 year gap between the end of the key institutions Allen sees as holding back economic growth and the start of the modern world, which is problem number one. Problem number two is that if as powerful an institution as serfdom could be eradicated due to the shock of the black death, then does that not imply that institutions also are malleable, and reply to economic shocks?

The next example Allen brings up is about property rights -- he paints a picture whereby commoners had no incentive to invest in things such as land b/c it could just be taken by their lords. While this might be true, since there was a very active land market in England in the late middle ages we can actually test this theory by looking at Clark's series on property prices, and by looking at the variability. What we see, of course, is that property prices were extremely stable for most of the entire period from 1200-1800. (in the netherlands, which experienced more warfare over the same period, prices rose and fell much more...) Stability of prices implies lack of risk of expropriation.

And those are basically the only examples allen has of "institutions" holding back medieval england.

Another thing which caught my eye is on page 16, when he seems to have said that around 1500, "productivity and incomes were low" in britain. That couldn't be further from the truth. We know from clark's time series, eye-witness accounts, and various other series on wages that they were extraordinarily high around 1500 owing to the black death and decimated populations. I suspect this was just an innocent slip-up, however.

I am also sad to see that he modeled his thesis on Paul David's work -- he writes that "David's approach has strongly influenced my own views." This is unfortunate, b/c as Alan Olmstead has shown, a long, careful look at the relative prices of agricultural inputs & output prices in the US failed to support David's hypothesis...

Hopefully the next 250 pages will be better. The book is on an interesting topic and does contain interesting data, however, so I do recommend it!

I'm curious to see what other people think...

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