To understand the future of economic development, we must better understand economic history. So contends Peter Temin,Gray Emeritus Professor of Economics at MIT. In a column at Vox, Temin takes us back to the 14th century, when the Black Death prompted an historic shift.
The rise in wages as a result of the Black Death was sustained by a shift in marriage patterns that increased the age of women’s marriage, and reduced the rate of population increase. The adaptation to the initial shock led to a durable rise in people’s income. This, in turn, led to a demand for more meat in their diet, which, of course, was accommodated by more husbandry. The whole pattern fit together with the Black Death as a shock that shifted households and the economy from one demographic equilibrium to another.
This research dovetails with Allen’s argument that the initial innovations of the Industrial Revolution emerged from tinkering by producers to reduce the costs of expensive labour and reap the benefits of cheap power. In response to the awareness that wages were generally high in western Europe, Allen (2009) went to some lengths to show that the small gains from these initial innovations were not profitable in either France or the Netherlands.
Allen (2013) also argued that wages and energy prices in North America were close enough to the British pattern for policy initiatives – tariffs, education, and infrastructure investments – to create conditions hospitable to industrialisation. This was definitely true for countries in western Europe that followed the British pattern once industrial productivity advanced from its initial level. Although these countries did not have the factor prices to make the initial innovations of the Industrial Revolution profitable, the further development of these innovations rendered them profitable at factor prices close to those in Britain. And, as Allen noted, policy changes helped industrialisation along as it spread.
But this was all within the high-wage area described by Voigtländer and Voth. They noted that the European marriage pattern extended only from the Atlantic to a line from St. Petersburg to Trieste. Other countries in Asia or Africa were low-wage economies, subject to Malthusian pressure on wages, and their factor prices were not close to the English ones. Small changes in economic policies were not sufficient to make industrialisation profitable in India or Egypt. The story that links the Black Death to the Industrial Revolution, therefore, is also a story telling why Europe industrialised in the past two centuries.
Read The Black Death and industrialisation: Lessons for today’s South here.
Filed under: innovation, vox, growth, VoxEU, mit, disruption, economic history, Industrial Revolution, technological advancement, economic development, Peter Temin, agrarian economy, the black death, marriage, agricultural economy, advancement of women