Brad DeLong

Econ 210a: Spring 2012: U.C. Berkeley: Question for April 25, 2012: The Great Divergence, the Great Moderation and the Great Recession:

Econ 210a: Spring 2012: U.C. Berkeley: Question for April 25, 2012: The Great Divergence, the Great Moderation and the Great Recession:

We have three topics for April 25, so try to sum up your thoughts on one--and only one of the three:

• What, in your view, is right and what is wrong with Lant Pritchett's attempt to document and account for the rise in global relative inequality from 1800 to 1980?

• Why didn't Raghu Rajan's fears about the dangers of increased "financial sophistication" have more purchase in economists' thought as of the mid-2000s?

• What do we really know and not know about why the economy falls to pieces after a financial crisis?

Office Hours This Week

Office Hours This Week:

• Tu 4-6, Qualcomm Cafe
• W 2-3, 601 Evans

Econ 210a: Spring 2012: U.C. Berkeley: March 21, 2012: Globalization and Crises

Econ 210a: Spring 2012: U.C. Berkeley: March 21, 2012: Globalization and Crises:

• Class Slides

Bordo and Eichengreen (2002): What Lessons from the Last Era of Financial Globalization?

Michael D. Bordo and Barry Eichengreen http://www.nber.org/papers/w8716.pdf:

Goodhart dates the first age of globalization to the laying of the transatlantic telegraph cable, which by providing a real-time communications link between England and North America transformed the information environment. ... There were other, perhaps equally important, factors at work. One was the growth of trade, stimulated by the Cobden-Chevalier Treaty of 1860 which was generalized to other countries through the operation of most-favored-nation clauses. In the four decades leading up to World War I, as transport costs fell and governments adopted trade-friendlier commercial policies, there was nearly a doubling of the share of exports in GDP.... Certainly the enthusiasm of British investors for Argentine railway bonds would have been less in the absence not just of cable traffic and refrigerated steamships but also of an open British market for chilled beef...

19th Century Financial Crises: How Do They Compare to Today's? Pegged exchange rates, high capital mobility, asymmetric information, and weak institutions clearly comprised a fertile environment for crises. In these respects if not others, the crises of the pre-1914 era bear no little resemblance to the Asian crisis of 1997-8 and other recent crises. But how extensive are the parallels?... We distinguish banking crises, currency crises and twin crises. For an episode to qualify as a currency crisis, we must observe a forced change in parity, abandonment of a pegged exchange rate, or an international rescue. For an episode to qualify as a banking crisis, we must observe either bank runs, widespread bank failures and the suspension of convertibility of deposits into currency such that the latter circulates at a premium relative to deposits (a banking panic), or significant banking sector problems (including but not limited to bank failures) resulting in the erosion of most or all of banking system collateral that are resolved by a fiscally- underwritten bank restructuring...

Compared to these pre-1914 cases, Asian countries in the 1990s fared less well because of the absence of an analogous rule. There, as Delargy and Goodhart put it, "the combination of a downwardly flexible exchange rate (raising the domestic burden of dollar debt) combined with efforts to keep the Asian countries from imposing moratoria on outward debt payments, plus high (often sky-high) interest rates has led to a cocktail of external/internal financial conditions far less conducive to rapid recovery than pre-1914..."

The major difference between then and now, we would argue, lay not in currency crises per se but in banking crises and their tendency to spill over to the currency market. Banking crises, although as frequent then as now, were less prone to undermine confidence in the currency in the countries that were at the core of the gold-standard system. Today, the outbreak of a banking crisis typically leads investors to anticipate that the authorities will engage in large-scale credit creation to bail out the banks. Banking crises undermine currency stability, creating the notorious twin crisis problem (Kaminsky and Reinhart 2000). This was not the case a century ago at the center of the gold standard system. Then, banks suspended the convertibility of deposits into currency, currency went to a premium (relative to deposits), and foreign capital -- undeterred by exchange risk -- flowed in to arbitrage the difference, so long as countries remained on gold (Gorton 1987)...

Where the pre-1914 system appears to have worked better (quoting Delargy and Goodhart, 1999, p.11) was in limiting the tendency for banking problems to destabilize the currency market.... A very hard currency peg, like that practiced in the countries at the core of the European gold standard in the late 19th century, could thus prevent financial problems arising elsewhere in the economy from also undermining the currency and then feeding back to the rest of the economy in destabilizing ways. Of course, even a very firm commitment to the peg was no guarantee against other financial problems, serious banking-sector problems in particular. This is an important lesson of history for emerging markets today...

Econ 210a: Spring 2012: U.C. Berkeley: March 21, 2012: Globalization and Crisis

March 21. Globalization and Crisis (DeLong)

Globalization:

• Douglas Irwin (1998), “Did Late Nineteen Century U.S. Tariffs Promote Infant Industries? Evidence from the Tinplate Industry,” NBER Working Paper no. 6835 (December). http://www.nber.org/papers/w6835

• Richard Baldwin and Philippe Martin (1999), “Two Waves of Globalization: Superficial Similarities, Fundamental Differences,” NBER Working Paper no.6904 (January). http://www.nber.org/papers/w6904

Crisis:

• Barry Eichengreen and Michael Bordo (2002), “Crises Now and Then: What Lessons from the Last Era of Financial Globalization?” NBER Working Paper no. 8716 (January). http://www.nber.org/papers/w8716

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Memo Question for March 21, 2012::

From our present perspective, what did Barry Eichengreen and Michael Bordo miss back in 2002 when they tried to draw lessons for the then future about financial crises from the pre-1914 record of growth, development, and financial deepening?

Econ 210a: Spring 2012: U.C. Berkeley: Globalization and Crisis: Memo Question for March 21, 2012: What Did Barry and Michael Miss?

Econ 210a: Spring 2012: U.C. Berkeley: Globalization and Crisis: Memo Question for March 21, 2012:

From our present perspective, what did Barry Eichengreen and Michael Bordo miss back in 2002 when they tried to draw lessons for the then future about financial crises from the pre-1914 record of growth, development, and financial deepening?

Econ 210a: U.C. Berkeley: Spring 2012: Memo Question for February 29: The Uneven Spread of Industrialization

Memo Question for February 29: The Uneven Spread of Industrialization:

By the end of the nineteenth century, the classic Industrial Revolution technologies of coal, steam, textile machinery, rails, locomotives, and precision metalworking--plus a large number of follow-on technologies, as witnessed by the growth of a Johannesburg centered around leading-edge organic chemicals--were or could be profitable pretty much everywhere in the world, if the organization and resources could be assembled. Why then did industrialization spread from Britain in the years up to 1900 only to western Europe, the temperate zones of the Americas and Australasia, and Japan? What answers do this week's readings suggest to you?

Econ 210a: U.C. Berkeley: Spring 2012: February 29: The Uneven Spread of Industrialization

February 29. The Uneven Spread of Industrialization (DeLong)

• Tom Nicholas (2011), “The Origins of Japanese Technological Modernization,” Explorations in Economic History 48:2, pp. 272-291. http://www.sciencedirect.com/science/journal/00144983/48/2

• Justin Lin (1995), “The Needham Puzzle: Why the Industrial Revolution Did Not Originate in China,” Economic Development and Cultural Change 43:2, pp. 269-292. http://www.jstor.org/stable/i248445

• Carol Schiue and Wolfgang Keller (2004), “Markets in China and Europe on the Eve of the Industrial Revolution,” NBER Working Paper no.10778. http://www.nber.org/papers/w10778

• Indijrat Ray (2009), “Identifying the Woes of the Cotton Textile Industry in Bengal: Tales of the 19th Century,” Economic History Review 62:4, pp. 857-892. http://onlinelibrary.wiley.com/doi/10.1111/j.1468-0289.2009.00444.x/abstract

Econ 210a: Spring 2012: U.C. Berkeley: Memo Question for February 22: American Exceptionaism:

Econ 210a: Spring 2012: U.C. Berkeley: Memo Question for February 22: American Exceptionalism:

Robert Allen for Britain and Peter Temin for the U.S. (in Temin's case, channeling earlier historians like Rothbarth and Habakkuk) both argue that high real wages combined with abundant resources led to a distinctive pattern of industrialization. Along with obvious similarities, their arguments also display important differences. What are these differences and for what do they matter?

Robert Allen: The British Industrial Revolution in Global Perspective

Everytime I reread http://www.ehs.org.uk/ehs/conference2007/Assets/AllenIIA.pdf, I think: Robert Allen is a fracking genius!:

The Industrial Revolution is one of the most celebrated watersheds in human history. It is no longer regarded as the abrupt discontinuity that its name suggests, for it was the result of an economic expansion that started in the sixteenth century. Nevertheless, the eighteenth century does represent a decisive break in the history of technology and the economy. The famous inventions–the spinning jenny, the steam engine, coke smelting, and so forth–deserve their renown1, for they mark the start of a process that has carried the West, at least, to the mass prosperity of the twenty-first century. The purpose of this essay is to explain why they occurred in the eighteenth century, in Britain, and how the process of their invention has transformed the world... […]

The industrial revolution was fundamentally a technological revolution, and progress in understanding it can be made by focussing on the sources of invention.... [T]he reason the industrial revolution happened in Britain, in the eighteenth and nineteenth centuries, was not because of luck (Crafts 1977) or British genius or culture or the rise of science. Rather it was Britain’s success in the international economy that set in train economic developments that presented Britain’s inventors with unique and highly remunerative possibilities. The industrial revolution was a response to the opportunity… […]

What commercial success did for Britain was to create a structure of wages and prices that differentiated Britain from the continent and, indeed, Asia: In Britain, wages were remarkably high and energy cheap. This wage and price history was a fundamental reason for the technological breakthroughs of the eighteenth century whose object was to substitute capital and energy for labour. Scientific discoveries and scientific culture do not explain why Britain differed from the rest of Europe. They may have been necessary conditions for the industrial revolution, but they were not sufficient: Without Britain’s distinctive wage and price environment, Newton would have produced as little economic progress in England as Galileo produced in Italy... [...]

The working assumption of this paper is that technology was invented by people in order to make money.... [L]abour was particularly expensive and energy particularly cheap in Britain, so inventors in Britain were led to invent machines that substituted energy and capital for labour.... The scale of the mining industry in eighteenth century Britain was much greater than anywhere else, so the return to inventing improved drainage machinery (a.k.a. the steam engine) was greater in Britain than in France or China. Third, patents that allow the inventor to capture all of the gains created by his invention raise the rate of return and encourage invention... [...]

Britain was a high wage economy in four senses:1. At the exchange rate, British wages were higher than those of its competitors. 2. High silver wages translated into higher living standards than elsewhere. 3. British wages were high relative to capital prices. 4. Wages in northern and western Britain were exceptionally high relative to energy prices...

The different trajectories of the wage-rental ratio created different incentives to mechanize production in the two parts of Europe. In England, the continuous rise in the cost of labour relative to capital led to an increasingly greater incentive to invent ways of substituting capital for labour in production. On the continent, the reverse was true…. It was not Newtonian science that inclined British inventors and entrepreneurs to seek machines that raised labour productivity but the rising cost of labour... [...]

Britain’s unusual wages and prices were due to two factors. The first was Britain’s success in the global economy, which was in part the result of state policy. The second was geographical–Britain had vast and readily worked coal deposits…. The superior real wage performance of northwestern Europe was due to a boom in international trade…. In a mercantilist age, imperialism was necessary to expand trade, and greater trade led to urbanization.... Coal deposits were a second factor contributing to England’s unusual wage and price structure…. First, inexpensive coal raised the ratio of the price of labour to the price of energy (Figure 4), and, thereby, contributed to the demand for energy-using technology. In addition, energy was an important input in the production of metals and bricks, which dominated the index of the price of capital services.... [C]oal is a ‘natural’ resource, but the coal industry was not a natural phenomenon.... It was the growth of London in the late sixteenth century, however, that caused the coal industry to take off. The Dutch cities provide a contrast that reinforces the point (Pounds and Parker 1957, de Vries and van der Woude 1997, Unger 1984). The coal deposits that stretched from northeastern France across Belgium and into Germany were as useful and accessible as Britain’s.... The pivotal question is why city growth in the Netherlands did not precipitate the exploitation of Ruhr coal in a process parallel to the exploitation of Northern English coal. Urbanization in the Low Countries also led to a rise in the demand for fuel. In the first instance, however, it was met by exploiting Dutch peat. This checked the rise in fuel prices, so that there was no economic return to improving transport on the Ruhr or resolving the political-taxation issues related to shipping coal down the Rhine. Once the Newcastle industry was established, coal could be delivered as cheaply to the Low Countries as it could be to London, and that trade put a ceiling on the price of energy in the Dutch Republic that forestalled the development of German coal. This was portentous: Had German coal been developed in the sixteenth century rather than the nineteenth, the industrial revolution might have been a Dutch-German breakthrough rather than a British achievement... [...]

The following generalizations apply to many inventions including the most famous: 1. The British inventions were biased. They were labour saving and energy and capital using.... 2. As a result of 1, cost reductions were greatest at British factor prices, so the new technologies were adopted in Britain and not on the continent.... [C]oke smelting was not profitable in France or Germany before the mid-nineteenth century (Fremdling 2000). Continuing with charcoal was rational behaviour in view of continental factor prices. This result looks general; in which case, adoption lags mean that British technology was not cost-effective at continental input prices. 3. The famous inventions of the industrial revolution were made in Britain rather than elsewhere in the world because the necessary R&D was profitable in Britain (under British conditions) but unprofitable elsewhere.... 4. Once British technology was put into use, engineers continued to improved it, often by economizing on the inputs that were cheap in Britain. This made British technology cost-effective in more places and led to its spread across the continent later in the nineteenth century.... The theory advanced here explains the technological breakthroughs of the industrial revolution in terms of the economic base of society–natural resources, international trade, profit opportunities. Through their impact on wages and prices, these prime movers affected both the demand for technology and its supply... [...]

Why did the French ignore the new spinning machines? Cost calculations for France are not robust, but the available figures indicate that jennies achieved consistent savings only at high count work, which was not the typical application (Ballot 1923, pp. 48-9). In France, a 60 spindle jenny cost 280 livre tournois in 1790 (Chassagne 1991, p. 191), while a labourer in the provinces earned about three quarters of a livre tournois per day, so the jenny cost 373 days labour. In England, a jenny cost 140 shillings and a labourer earned about one shilling per day, so the jenny was worth 140 days labour (Chapman and Butt 1988, p. 107). In France, the value of the labour saved with the jenny was not worth the extra capital cost, while in England it was. French cost comparisons show that Arkwright’s water frame, a much more capital intensive technique, was no more economical than the jenny. The reverse was true in England where water frames were rapidly overtaking jennies. The French lag in mechanization was the result of the low French wage… […]

Why did the industrial revolution lead to modern economic growth? I have argued that the famous inventions of the British industrial revolution were responses to Britain’s unique economic environment and would not have been developed anywhere else. This is one reason that the Industrial Revolution was British. But why did those inventions matter? The French were certainly active inventors, and the scientific revolution was a pan-European phenomenon. Wouldn’t the French, or the Germans, or the Italians, have produced an industrial revolution by another route? Weren’t there alternative paths to the twentieth century? These questions are closely related to another important question asked by Mokyr: Why didn’t the industrial revolution peter out after 1815? He is right that there were previous occasions when important inventions were made. The result, however, was a one-shot rise in productivity that did not translate into sustained economic growth. The nineteenth century was different–the First Industrial Revolution turned into Modern Economic Growth. Why? Mokyr’s answer is that scientific knowledge increased enough to allow continuous invention. Technological improvement was certainly at the heart of the matter, but it was not due to discoveries in science–at least not before 1900. The reason that incomes continued to grow in the hundred years after Waterloo was because Britain’s pre-1815 inventions were particularly transformative, much more so than continental inventions. That is a second reason that the Industrial Revolution was British and also the reason that growth continued throughout the nineteenth century.... The nineteenth century engineering industry was a spin-off of the coal industry. All three of the developments that raised productivity in the nineteenth century depended on two things–the steam engine and cheap iron. Both of these, as we have seen, were closely related to coal. The steam engine was invented to drain coal mines, and it burnt coal. Cheap iron required the substitution of coke for charcoal and was prompted by cheap coal. (A further tie- in with coal was geological–Britain’s iron deposits were often found in proximity to coal deposits.) There were more connections: The railroad, in particular, was a spin-off of the coal industry. Railways were invented in the seventeenth century to haul coal in mines and from mines to canals or rivers. Once established, railways invited continuous experimentation to improve road beds and rails. Iron rails were developed in the eighteenth century as a result, and alternative dimensions and profiles were explored. Furthermore, the need for traction provided the first market for locomotives. There was no market for steam-powered land vehicles because roads were unpaved and too uneven to support a steam vehicle (as Cugnot and Trevithick discovered). Railways, however, provided a controlled surface on which steam vehicles could function, and colliery railways were the first purchasers of steam locomotives. When George Stephenson developed the Rocket for the Rainhill trials, he tested his design ideas by incorporating them in locomotives he was building for coal railways. In this way, the commercial operation of primitive versions of technology promoted further development as R&D expenses were absorbed as normal business costs.... The reason that the British inventions of the eighteenth century–cheap iron and the steam engine, in particular–were so transformative was because of the possibilities they created for the further development of technology. Technologies invented in France–in paper production, glass, knitting–did not lead to general mechanization or globalization. One of the social benefits of an invention is the door it opens to further improvements. British technology in the eighteenth century had much greater possibilities in this regard than French inventions. The British were not more rational or prescient than the French in developing coal-based technologies: The British were simply luckier in their geology. The knock-on effect was large, however: There is no reason to believe that French technology would have led to the engineering industry, the general mechanization of industrial processes, the railway, the steam ship, or the global economy. In other words, there was only one route to the twentieth century–and it went through northern Britain...

Econ 210a: Spring 2012: U.C. Berkeley: The Industrial Revolution: February 15, 2012

February 15. The Industrial Revolution (DeLong):

• Robert C. Allen (2011), “Why the Industrial Revolution Was British: Commerce, Induced Invention and the Scientific Revolution,” Economic History Review 64, pp. 357-384. http://onlinelibrary.wiley.com/doi/10.1111/j.1468-0289.2010.00532.x/pdf

• Jeffrey Williamson (1984), "Why Was British Economic Growth So Slow During the Industrial Revolution?" Journal of Economic History 44:3, pp. 687-712. http://www.jstor.org/stable/2124148

• Nicholas Crafts (2002), "The Solow Productivity Paradox in Historical Perspective," CEPR Discussion Paper no.3142. http://www.j-bradford-delong.net/articles_of_the_month/pdf/Newsolow.pdf

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Industrial Revolution Memo Question

Econ 210a: UC Berkeley: Spring 2012: Memo Question: To what extent should we view the late eighteenth and early nineteenth centuries in Britain as a unique turning point in economic and social development?

Econ 210a: UC Berkeley: Spring 2012: Memo Question:

To what extent should we view the late eighteenth and early nineteenth centuries in Britain as a unique turning point in economic and social development?

It looks as though my office hours will be interrupted at 3 by a (hopefully) brief faculty meeting...

It looks as though my office hours will be interrupted at 3 by a (hopefully) brief faculty meeting...

Office hours today: 2-3, 4-6.

Memo Question for February 8, 2012: Slavery and Serfdom

Memo Question for February 8, 2012: Slavery and Serfdom:

Adam Smith in the Wealth of Nations has a theory about unfree labor. It is, he says, economically inefficient. But wherever demand is very high relative to supply masters will resort to slave labor because it yields them powerful psychic income:

The experience of all ages and nations, I believe, demonstrates that the work done by slaves, though it appears to cost only their maintenance, is in the end the dearest of any…. Whatever work he does beyond what is sufficient to purchase his own maintenance, can be squeezed out of him by violence only, and not by any interest of his own. In ancient Italy, how much the cultivation of corn degenerated, how unprofitable it became to the master, when it fell under the management of slaves, is remarked both by Pliny and Columella….

The pride of man makes him love to domineer, and nothing mortifies him so much as to be obliged to condescend to persuade his inferiors. Wherever the law allows it, and the nature of the work can afford it, therefore, he will generally prefer the service of slaves to that of freemen. The planting of sugar and tobacco can afford the expense of slave cultivation. The raising of corn, it seems, in the present times, cannot. In the English colonies, of which the principal produce is corn, the far greater part of the work is done by freemen…. The profits of a sugar plantation in any of our West Indian colonies, are generally much greater than those of any other cultivation that is known either in Europe or America; and the profits of a tobacco plantation, though inferior to those of sugar, are superior to those of corn, as has already been observed. Both can afford the expense of slave cultivation…

Was he right? Was he wrong?

Economics 210a: U.C. Berkeley: Spring 2012: Apropos of the Agricultural Revolution in Britain

Food for thought related to Allen on nitrogen:

Henry Farrell and Cosma Shalizi, "Evolutionary Theory and the Dynamics of Institutional Change"

Econ 210a: Spring 2012: U.C. Berkeley: The Agricultural Revolution

• Class Slides

Econ 210a: UC Berkeley: Spring 2012: Readings for February 1, 2012: The Agricultural Revolution

February 1. The Agricultural Revolution (DeLong)

• Donald McCloskey (1972), “The Enclosure of Open Fields,” Journal of Economic History 32, pp. 15-35. http://www.jstor.org/stable/2117175

• Robert Allen (2008), “The Nitrogen Hypothesis and the English Agricultural Revolution: A Biological Analysis,” Journal of Economic History 68, pp. 182-210. http://journals.cambridge.org/action/displayIssue?jid=JEH&volumeId=68&issueId=01&iid=1740956

• Robert C. Allen (1999), “Tracking the Agricultural Revolution in England,” Economic History Review , New Series 52:2 (May), pp. 209-235 http://www.jstor.org/stable/2599937

Econ 210a: U.C. Berkeley: Spring 2012: Memo Question for February 1, 2012: Agricultural Revolution

Does the Agricultural Revolution deserve its "R"? That is, is it well-conceptualized as a "Revolution" rather than as something much slower and much more gradual?

A Note on Office Hours

A Note on Office Hours

OK. It is now clear the way office hours are going to work. They are going to start in either Evans 597 or Evans 601 at 2 PM on Wednesdays (depending on where I am at that moment), and then I will gradually drift upward to Evans 601--with occasional runs into Evans 611 to grab cookies and coffee.

Econ 210a: UC Berkeley: Spring 2012: The Commercial Revolution

January 25. The Commercial Revolution (DeLong): Readings

• Karl Marx (1867), "The So-called Primitive Capital Accumulation," Capital, Vol. 1, Part VIII, Chapters 26-32. http://tinyurl.com/dl20090112k

• Daron Acemoglu, Simon Johnson, and James Robinson (2005), "The Rise of Europe: Atlantic Trade, Institutional Change, and Economic Growth," American Economic Review 95:3, pp. 546-79. http://www.jstor.org/stable/i387682

• Jan de Vries (2010) "The Limits to Globalization in the Early Modern World," Economic History Review 63:3, pp. 710-33. http://web.ebscohost.com/ehost/results?sid=2ed5a63b-2aff-4c71-9e08-a3ca196c942a%40sessionmgr104&vid=2&hid=125&bquery=(JN+%26amp%3bquot%3bEconomic+History+Review%26amp%3bquot%3b+AND+DT+20100801)&bdata=JmRiPWJ0aCZ0eXBlPTEmc2l0ZT1laG9zdC1saXZl

• Jeffrey Williamson and Kevin O'Rourke (2002), "After Columbus: Explaining Europe's Overseas Trade Boom, 1500-1800," Journal of Economic History 62, pp. 417-56. http://www.nber.org/papers/w8186

Discussion Powerpoint

Econ 210a: Spring 2012: Memo Question for January 25: Commercial Revolution

Subject: Memo Question for January 25

"The treasure captured outside Europe by undisguised looting, enslavement and murder, floated back to the mother-country and were there turned into capital." -- Marx, Capital, Vol. 1 Ch. 32.

Do the assigned readings provide any basis for assessing the general truth of this passage from Marx? In what sense did colonial trade in the 1497-1800 period contribute to capital formation in Europe?

Econ 210a: Readings and Topics

Spring 2012: U.C. Berkeley:

January 18. The Malthusian Economy (Eichengreen)

• Thomas Malthus (1798), An Essay on the Principle of Population, Chapters 1-2, pp.1-11, Electronic Scholarly Publishing Project, 1998. http://www.esp.org/books/malthus/population/malthus.pdf

• E. Anthony Wrigley (1992), “Why Poverty Was Inevitable in Traditional Societies,” in Ernest Gellner, John Hall and I.C. Jarvie (eds.), Transition to Modernity, pp. 71-110. Cambridge: Cambridge University Press. On reserve at Graduate Services.

• Gregory Clark (2007), A Farewell to Alms: A Brief Economic History of the World, Chapters 2, “The Logic of the Malthusian Economy,” pp. 19-39 and Chapter 3, “Living Standards,” pp. 40-70. Princeton: Princeton University Press. On reserve at Graduate Services. An earlier draft (not preferred) is available at http://tinyurl.com/dl20090112e (chapter 2) and http://tinyurl.com/dl20090112j (chapter 3).

January 25. The Commercial Revolution (DeLong)

• Karl Marx (1867), "The So-called Primitive Capital Accumulation," Capital, Vol. 1, Part VIII, Chapters 26-32. http://tinyurl.com/dl20090112k

• Daron Acemoglu, Simon Johnson, and James Robinson (2005), "The Rise of Europe: Atlantic Trade, Institutional Change, and Economic Growth," American Economic Review 95:3, pp. 546-79. http://www.jstor.org/stable/i387682

• Jan de Vries (2010) "The Limits to Globalization in the Early Modern World," Economic History Review 63:3, pp. 710-33. http://web.ebscohost.com/ehost/results?sid=2ed5a63b-2aff-4c71-9e08-a3ca196c942a%40sessionmgr104&vid=2&hid=125&bquery=(JN+%26amp%3bquot%3bEconomic+History+Review%26amp%3bquot%3b+AND+DT+20100801)&bdata=JmRiPWJ0aCZ0eXBlPTEmc2l0ZT1laG9zdC1saXZl

• Jeffrey Williamson and Kevin O'Rourke (2002), "After Columbus: Explaining Europe's Overseas Trade Boom, 1500-1800," Journal of Economic History 62, pp. 417-56. http://www.nber.org/papers/w8186

February 1. The Agricultural Revolution (DeLong)

• Donald McCloskey (1972), “The Enclosure of Open Fields,” Journal of Economic History 32, pp. 15-35. http://www.jstor.org/stable/2117175

• Robert Allen (2008), “The Nitrogen Hypothesis and the English Agricultural Revolution: A Biological Analysis,” Journal of Economic History 68, pp. 182-210. http://journals.cambridge.org/action/displayIssue?jid=JEH&volumeId=68&issueId=01&iid=1740956

• Robert C. Allen (1999), “Tracking the Agricultural Revolution in England,” Economic History Review , New Series 52:2 (May), pp. 209-235 http://www.jstor.org/stable/2599937

February 8. Slavery, Serfdom and Agriculture (DeLong)

• Evsey Domar (1970), "The Causes of Slavery or Serfdom: A Hypothesis," Journal of Economic History, pp. 18-32. http://www.jstor.org/stable/i310677

• Stefano Fenoaltea (1984), “Slavery and Supervision in Comparative Perspective: A Model,” Journal of Economic History 44:3, pp. 635-668. http://www.jstor.org/stable/2124146

• Ralph Austen and Woodruff Smith (1992), "Private Tooth Decay as Public Economic Virtue: The Slave-Sugar Triangle, Consumerism, and European Industrialization," in Joseph Inkori and Stanley Engerman (eds.), The Atlantic Slave Trade: Effects on Economies, Societies, and Peoples in Africa, the Americas, and Europe , pp. 183-203. Durham, NC: Duke University Press. http://www.jstor.org/stable/1171366

• Stanley Engerman and Kenneth Sokoloff (1994), "Factor Endowments, Institutions and Differential Paths of Development among New World Economies: A View from Economic Historians of the United States," NBER Working Paper no. 10066. http://papers.nber.org/papers/h0066.pdf

February 15. The Industrial Revolution (DeLong)

• Nicholas Crafts (2002), "The Solow Productivity Paradox in Historical Perspective," CEPR Discussion Paper no.3142. http://www.j-bradford-delong.net/articles_of_the_month/pdf/Newsolow.pdf

• Robert C. Allen (2011), “Why the Industrial Revolution Was British: Commerce, Induced Invention and the Scientific Revolution,” Economic History Review 64, pp. 357-384. http://onlinelibrary.wiley.com/doi/10.1111/j.1468-0289.2010.00532.x/pdf

• Jeffrey Williamson (1984), "Why Was British Economic Growth So Slow During the Industrial Revolution?" Journal of Economic History 44:3, pp. 687-712. http://www.jstor.org/stable/2124148

February 22. American Exceptionalism (Eichengreen)

• Peter Temin (1966), “Labor Scarcity and the Problem of American Industrial Efficiency in the 1850s,” Journal of Economic History 26, pp. 277-298. http://www.jstor.org/stable/2115648

• Kenneth Sokoloff (1984), “Was the Transition from the Artisanal Shop to the Non-Mechanized Factory Associated with Gains in Efficiency?” Explorations in Economic History 21, pp. 351-382. http://www.nber.org/papers/w1386

• Robert Fogel (1964), Railroads and American Economic Growth: Essays in Econometric History, Chapters 1 and 6, pp. 1-6 and 207-249. Baltimore MD: Johns Hopkins University Press. On reserve at Graduate Services.

• Alfred Chandler (1990), Scale and Scope, Chapter 3, pp. 47-89. Cambridge MA: Harvard University Press. On reserve at Graduate Services.

February 29. The Uneven Spread of Industrialization (DeLong)

• Tom Nicholas (2011), “The Origins of Japanese Technological Modernization,” Explorations in Economic History 48:2, pp. 272-291. http://www.sciencedirect.com/science/journal/00144983/48/2

• Justin Lin (1995), “The Needham Puzzle: Why the Industrial Revolution Did Not Originate in China,” Economic Development and Cultural Change 43:2, pp. 269-292. http://www.jstor.org/stable/i248445

• Carol Schiue and Wolfgang Keller (2004), “Markets in China and Europe on the Eve of the Industrial Revolution,” NBER Working Paper no.10778. http://www.nber.org/papers/w10778

• Indijrat Ray (2009), “Identifying the Woes of the Cotton Textile Industry in Bengal: Tales of the 19th Century,” Economic History Review 62:4, pp. 857-892. http://onlinelibrary.wiley.com/doi/10.1111/j.1468-0289.2009.00444.x/abstract

March 7. Capital Markets (Eichengreen)

• Naomi Lamoreaux (1986), “Banks, Kinship, and Economic Development: The New England Case,” Journal of Economic History 46, pp. 647-667. http://www.jstor.org/stable/2121478

• Hugh Rockoff (1974), “The Free Banking Era: A Reexamination,” Journal of Money, Credit and Banking 6, pp. 141-167. http://www.jstor.org/stable/1991023

• Lance Davis (1965), “The Investment Market, 1870-1914: The Evolution of a National Market,” Journal of Economic History 25, pp. 355-393. http://www.jstor.org/stable/2116175

• Gareth Campbell and John D. Turner (2011), “Substitutes for Legal Protection: Corporate Governance and Dividends in Victorian Britain,” Economic History Review 64:2, pp. 571-597. http://onlinelibrary.wiley.com/doi/10.1111/j.1468-0289.2010.00545.x/abstract

• Jeremy Edwards and Sheilagh Ogilvie (1996), “Universal Banks and German Industrialization: A Reappraisal,” Economic History Review 49:3, pp. 427-446. http://onlinelibrary.wiley.com/doi/10.1111/j.1468-0289.1996.tb00576.x/abstract

March 14. Labor Markets (Eichengreen)

• Sanford Jacoby (1984), “The Development of Internal Labor Markets in American Manufacturing Firms,” in Paul Osterman (ed.), Internal Labor Markets, pp. 23-69. Cambridge, MA: MIT Press. On reserve at Graduate Services.

• Susan Carter and Elizabeth Savoca (1990), “Labor Mobility and Lengthy Jobs in 19th Century America,” Journal of Economic History 50, pp. 1-16. http://www.jstor.org/stable/2123435

• John James (1994), “Job Tenure in the Gilded Age,” in George Grantham and Mary McKinnon (eds.), Labour Market Evolution, pp. 185-204. London: Routledge. On reserve at Graduate Services.

• Joshua Rosenbloom (1990), “One Market or Many? Labor Market Integration in the Late-19th Century United States,” Journal of Economic History 50, pp. 87-107. http://www.jstor.org/stable/2123439

• Joshua Rosenbloom (2002), “Employment Agencies and Labor Exchanges: The Impact of Intermediaries in the Market for Labor,” in Joshua Rosenbloom, Looking for Work, Searching for Workers: American Labor Markets during Industrialization, Chapter 3, pp. 46-79. Cambridge, MA: Cambridge University Press. On reserve at Graduate Services.

March 21. Globalization and Crisis (DeLong)

• Richard Baldwin and Philippe Martin (1999), “Two Waves of Globalization: Superficial Similarities, Fundamental Differences,” NBER Working Paper no.6904 (January). http://www.nber.org/papers/w6904

• Douglas Irwin (1998), “Did Late Nineteen Century U.S. Tariffs Promote Infant Industries? Evidence from the Tinplate Industry,” NBER Working Paper no. 6835 (December). http://www.nber.org/papers/w6835

• Barry Eichengreen and Michael Bordo (2002), “Crises Now and Then: What Lessons from the Last Era of Financial Globalization?” NBER Working Paper no. 8716 (January). http://www.nber.org/papers/w8716

April 4. International Money and Finance (Eichengreen)

• Arthur Bloomfield (1959), Monetary Policy under the International Gold Standard, pp. 1-62. New York, Federal Reserve Bank of New York. On reserve at Graduate Services.

• Barry Eichengreen (1992), Golden Fetters: The Gold Standard and the Great Depression, 1919-1939, Chapter 2, pp. 29-66. New York: Oxford University Press. On reserve at Graduate Services.

• Hugh Rockoff (1984), “Some Evidence on the Real Price of Gold, Its Costs of Production and Commodity Prices,” in Michael Bordo and Anna J. Schwartz (eds.), A Retrospective on the Classical Gold Standard,” pp. 613-650. Chicago: University of Chicago Press. http://ideas.repec.org/h/nbr/nberch/11139.html

• Albert Fishlow (1985), “Lessons from the Past: Capital Markets During the 19th Century and the Interwar Period,” International Organization 39, pp. 383-439. http://journals.cambridge.org/action/displayFulltext?type=1&pdftype=1&fid=4281908&jid=INO&volumeId=39&issueId=03&aid=4281900

• Juan-Huitzi Flores (2007), “Lending Booms, Underwriting and Competition: The Baring Crisis Revisited,” Working Paper in Economic History 07/01, Department of Economic History and Institutions, Universidad Carlos III de Madrid (January). http://docubib.uc3m.es/WORKINGPAPERS/WH/wp07-01.pdf

April 11. Origins of the Great Depression (Eichengreen)

• Milton Friedman and Anna Schwartz (1963), A Monetary History of the United States, 1867-1960, Chapter 13, pp. 676-700. Princeton: Princeton University Press. On reserve at Graduate Services.

• Christina Romer (1990), "The Great Crash and the Onset of the Great Depression," Quarterly Journal of Economics 104, pp. 719-736. http://www.jstor.org/stable/10.2307/2937892

• Ben Bernanke (1983), "Nonmonetary Effects of the Financial Crisis in the Propagation of the Great Depression," American Economic Review 73:3, pp. 257-276. http://www.jstor.org/stable/1808111

• Ben Bernanke (1995), “The Macroeconomics of the Great Depression: A Comparative Approach,” Journal of Money, Credit and Banking 27:1, pp. 1-28. http://www.jstor.org/stable/i336266

April 18. Recovery from the Great Depression (Eichengreen, with a possible cameo appearance by C. Romer)

• Barry Eichengreen (1992), Golden Fetters: The Gold Standard and the Great Depression 1919-1939, Chapter 1, pp. 3-28. New York: Oxford University Press. On reserve at Graduate Services.

• Christina Romer (1992), “What Ended the Great Depression?” Journal of Economic History 52, pp. 757-784. http://www.jstor.org/stable/2123226

• Gauti Eggertsson (2008), “Great Expectations and the End of the Great Depression,” American Economic Review 98:4, pp. 1476-1516. http://www.jstor.org/stable/i29730117

• Harold Cole and Lee Ohanian (2004), “New Deal Policies and the Persistence of the Great Depression: A General Equilibrium Analysis,” Journal of Political Economy 112:4, pp. 779-816. http://www.jstor.org/stable/10.1086/jpe.2004.112.issue-4

April 25. The Great Divergence, the Great Moderation and the Great Recession (DeLong, with a possible cameo appearance by C. Romer)

• Lant Pritchett (1997), "Divergence, Big Time," Journal of Economic Perspectives 11:3 (Summer), pp. 3-17. http://www.jstor.org/stable/2138181

• Raghuram Rajan (2005), “Has Financial Development Made the World Riskier?” in Proceedings of Jackson Hole Symposium, pp. 313-369. Federal Reserve Bank of Kansas City. http://ideas.repec.org/a/fip/fedkpr/y2005iaugp313-369.html

• Ben Bernanke (2004), “The Great Moderation,” Speech to a meeting of the Eastern Economic Association, Washington, DC (20 February). http://www.federalreserve.gov/boarddocs/speeches/2004/20040220/default.htm

• Robert E. Hall (2010), “Why Does the Economy Fall to Pieces after a Financial Crisis?” Journal of Economic Perspectives 24, pp. 3-20. http://www.aeaweb.org/articles.php?doi=10.1257/jep.24.4.3

Econ 210a: Course Policies

Introduction to Economic History

Economics 210A: J. Bradford DeLong and Barry Eichengreen: Spring 2012: University of California, Berkeley

Wednesday 12:00-2:00 p.m. Formerly 608-7 Evans Hall
Economics 210a is required of Ph.D. students in the first year of the graduate program. The course is designed to introduce a selection of themes from the contemporary economic history literature, not to present a narrative account of world economic history. Emphasis is on the uses of economic theory and quantitative methods and on the insights that a knowledge of history can provide to the practicing economist.

Class meetings will consist of a mixture of lecture and discussion. When the course goes well, it is primarily discussion; when the course goes badly, it is primarily lecture. Because discussion will focus on issues raised by the assigned readings, readings should be completed before class.

Your grade will be based 50 percent on one-page memos due at the beginning of each class meeting (other than the first, when you will take the pop quiz instead), and 50 percent on the research paper (where the latter 50 percent will be based both on the synopsis you submit prior to spring break and the paper you submit at the end of instruction). Extra credit will be given for informed, constructive classroom discussion.

Weekly Memos

A memo on each week’s readings is due at the beginning of the class during which those readings are discussed. You will find the memo questions on Professor DeLong’s (http://econ161.berkeley.edu) and Professor Eichengreen’s (http://www.econ.berkeley.edu/~eichengr/index.html) websites. Typically the week’s question will be posted on the Thursday six days before the class meeting when your memo is due. The memo is due at the start of the class meeting; your instructors will not read late memos.

You are to write a memo of no more than two pages (in12-point type) on each question. Two-page memos cannot be exhaustive, nor can they provide definitive answers. But they can explain why a question is important, summarize how one or more articles assigned for the upcoming lecture approach it, and provide a provisional assessment of their conclusions.

Research Paper

Your research paper is due on Wednesday, May 2nd (one week after the last class meeting). Please put one copy in Professor DeLong’s and Professor Eichengreen’s mail boxes in the Economics Department main office in 530 Evans Hall. The office is open 9:00-4:00. Please provide hard copies; papers submitted as email attachments will not be accepted. The paper should not exceed 25 pages. Your instructors will not read late papers.

The writing and submission process requires that you meet two benchmarks. You should discuss your paper topic during office hours with one of your instructors during the first half of the semester and then submit a brief paper prospectus before spring break. That prospectus should motivate the topic (explain why it is important), state your hypothesis, and describe the historical materials that you will use to analyze it. Your paper grade will depend in part on the quality of your prospectus.

The paper should provide new evidence and analysis of a topic in economic history. It should not simply summarize an existing literature. You should use the tools of economics to pose and answer, to the best of your ability, an historical question. The paper must have historical substance. This is not a requirement in applied economics or econometrics that can be satisfied by relabeling the variables in theoretical models taught elsewhere or by mechanically applying new statistical techniques to old data.

Topic: The paper can cover almost any topic in economic history. The only requirement is that the topic must genuinely involve the past. Comparisons of past and current events are fine, but studies of developments solely after, say, 1973 are likely to be problematic.

Evidence: Historical evidence comes in many forms. The key evidence could be a list of goods traded or statements by government officials of what they were trying to accomplish. While economic historians sometimes use econometrics, tables and graphs displaying important variables can be enough to make a compelling argument. Successful Paper Topics from Previous Years Identifying a promising paper topic is arguably the most useful and difficult part of this requirement. Your entire graduate career (indeed your entire career) will center on identifying interesting questions. For this reason we will not give you a list of topics (although we will toss some out in class discussions). Instead, we describe here some topics that have been successful in the past and suggest ways of finding similarly successful topics.

• The easiest type of paper to write is probably a comment on an existing paper. Such comments often turn out to be as important as the original work. Think about flaws in some paper that you read. Is there selection bias? Has the author left out a crucial variable? One year a student noticed a footnote in a paper that said one observation had been left out of the figure because it was large relative to the others. This same extreme observation was included in the empirical analysis. The student got the data and showed that his results depended crucially on this one observation.
• Few events have no historical antecedents. If there is a modern development you are interested in, you could look for its historical roots or counterparts. For example, much has been written about the rise of the Internet and the revolution in communication in the 1990s. How do these developments compare to the rise of the telegraph and the telephone? The rise of TV and radio? Did investment and financial markets response similarly?
• While it is not a good idea to let data availability drive your topic, it is reasonable to let serendipity play a role. Have you come across an unusual source in the library or during your undergraduate years? Is there an interesting question that this source could be used to answer? One year a student came across the catalogs for the 1851 World’s Fair. She had the idea that these descriptions of what each country exhibited could be used as a measure of innovation. She wrote a paper looking at the industrial composition of innovation across countries. (She is now a professor at Stanford.) Another student was looking through newspapers from San Francisco in the 1870s. He found many classified ads that read something like: "Wanted—man to work in store and loan store $1000." This student wondered why companies would tie employment and loans. He wrote a paper investigating whether ads such as these were a sign of credit market imperfections or a way of ensuring worker loyalty and honesty. (He is now an economist at the World Bank.) Both of these papers went on to be published in top journals.
• You might take some interesting debate in economic history and come up with a new way of testing it. If everyone has been using quantities, for example, consider using prices. An example of this type of paper involves the debate over how business cycles have changed over time. One researcher suggested that instead of fighting over very imperfect estimates of real GDP, one could look at stock prices as an indicator of the volatility of the macroeconomy.
• Just as one should be on the lookout for interesting sources, one should also be thinking about interesting events. History is full of natural experiments--a weird tax is imposed, a war is fought, a new regulation is imposed. Often such experiments can be used to answer crucial questions in economics--for example, what the changing speed with which liberty ships were built during World War II tells us about the size of learning-by-doing effects.

Readings

Readings are available either on the web or on reserve at Graduate Services http://www.lib.berkeley.edu/doemoff/grad/index.html at 208 Doe Library. Access to readings available through JSTOR and other proprietary sources may require you to log on through a university-recognized computer and/or enter your Calnet ID. There can be high demand for the readings on reserve at peak times, and the library can make available only limited numbers of copies. In past years students have found it useful to purchase some of the books from which material is assigned through their favorite online book seller and to assemble the materials for reproduction at a local copy shop. (Note that readers produced for earlier versions of this course will contain only a subset of this year’s material.)

Econ 210a: Introduction to Economic History: Spring 2012: U.C. Berkeley

Syllabus:

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