Economic medieval expansion: how it was possible economic growth during feudalism?

During the medium age there is an important growth (most of the cities founded during this period are the ones that we nowadays know).

What are the main reasons that produce this growth during this period?

Demographic expansion: along the IX and X centuries, the population has no growth, nevertheless during the centuries X to XIV the growth was higher.  Although this growth was difference if we take into consideration the country or area of study.

From the X century on, the peasant started to work in new lands.  Colonization enterprises were created by the lords to the detriment of hunting; law of diminishing returns explain this need to expand the land cultivated.

Agricultural expansion: to increase the agricultural production, it is needed an increase of the land, to be cultivated, trough the colonization.

There were three types of colonization:

• Enlargement of the land cultivated inside the area of the lords with major diversification of the goods, but the peasants must assume the cost of tilling the field (including the fallow).

• Foundation of new lands (Flandes, North of Italy, UK, Normandie,..).  New places, of hard access, are occupied by new enterprises, always funded by the Lords with the finality of collect the incomes from the work of peasants.

• Frontiers.  New lands are occupied beyond of current properties.  This fact allows to compensate diminishing returns and to increase the trading because of the excedent.

Technological change:

Introduction of heavy plow that allows a better and deeper furrow. Besides, the use of heavy plough makes that the land extracted is put out the furrow.  Another important introduction was the use of horses in detriment of oxes.

The culture system changes from a biennial rotation to a triennial rotation (wheat, legumes, fallow). The legumes allows that the land are not overusing (legumes have nutrients good for the land).

Both modifications allow an increase of the land productivity: the land cultivated is bigger and the farmers has the chance to organize the production in two periods of time: winter and spring.  Both periods allows too a better organization, and diversification of the land cultivated (it reduces the risk associated to bad crops).

The consequence of this change is well known: the population increase mean that the scarce resource, as labour, becomes abundant and the abundant resource, as the land, becomes scarce.  

The Lords are the owner of the lands, as consequence any excedent will be property of the people who has the lands, and not the ones who works in that lands.

Bibliography:

CAMERON, R. (1992): Historia Económica Mundial, Alianza (Madrid), caps. 1, 3, 5-10 y 12.

Causes of economic growth: little review of four models.

What we currently have, mainly depends of the economic growth of the past. The difference amongst the life levels is showed through the national income or the Gross National Product per capita.  The level of this magnitude is caused by the past of a country.

What are the causes of the growth?

Mokyr determines a key ingredient (but no essential): the technologic creativity.

As we have seen if the society is under the PFF the life level is lowest than the one we can wait (by that this situation is named inefficiency).

This autor determines that the growth depends of four factors regarding four authors:

• Investment: where the work productivity is directly related to the quality of the tools and the equipments as well as the quantity.  When the capital rythm of increase is bigger than the work force, there is economical growht; this growth is also known as "Robert Solow's growth".

• Expansion of the trading because of the interchange of goods, services and production factors. This is known as "Adam Smith's growth".  The trade determines the work division through the specialization.  The capacity to make specific labours means an increase of productivity.

• Scale economies: if there is a population increase it could be possible to increase the income per habitant where the regions are little.  The increase population allows to this region the speciality and the production increase (North and Thomas).  Besides that some public goods are only available when the population is big.  However the population increase does not mean economic growth, because that increase could lead to greater pressure on food

• Increase of knowledge: technical progress and institutions development.  The previous concepts are regarding the "Schumpeter's growth" where the capital expansion allows a continuos increase of innovation financed by the credits of the banks.

All of this growth models are perfectly compatibles among them.

Cameron R. (1992).  Historia Económica Mundial.  Alianza.  Capítulo 1.

Jones E.L. (1990). El milagro europeo. Alianza. Madrid. Introducción y cap. 12.

Mokyr. J. (1987).  La revolución industrial y la Nueva Historia Económica", "Revista de Historia Económica".  Vol. 2. pp 203-41; vol 3, pp 441-82.

North, D.C.,  y Tomas, R.P. (1989).  El nacimiento del mundo occidental.  Una nueva historia económica (900-1700).  Capítulos 1 y 2.

Technological change: how technology relates to economic change

New inventions, better production techniques than produce more efficiently, better organization and management of firms, better training, better transport and communications all come under the banner of technical progress.

All these things allow a country to increase output.  Progress and investments often go together when old machines are replaced by new, more sophisticated machines that can work faster.

However, is the technological change able to explain the economical change? is it the more importante factor?

Joel Mokyr (1946) states that the technological change is a very important factor but not the decisive one.  The institutional framework is the fundamental factor of technological change through the incentives.

The technological change, according to this author, is any change in the use of the information, regarding to the production, with the end to increase the efficacy.  The consequence of this process is to produce more with less resources or the production of new and better goods (innovation; concept that Mokyr links up with diffusion).

When the institutional framework allows the flow of information, the diffusion is posible.  According to Mokyr the invention is an exogenous factor; if the diffusion exists, the innovation is posible because the invention has been diffused.

Lynn White (1907 - 1987) treats to explain how the stirrup invention is caused by the feudalism.  In many occasions the invention already exists, however there is no application for it, as consequence there is no technological change because there is no diffusion.

http://licn.typepad.com/my_weblog/2012/09/technical-progress-john-dunn-consultant-ambertec-pe-pc.html

During the feudalism because of costs maintenance of the defence, the feudal lords decided to use the stirrup because the cost of horse rider maintenance is lower than a soldier; this is mainly because of the quantity of them to defence the lands, it is needed less horse riders than soldiers.

Bibliography:

Cameron R. (1992).  Historia Económica Mundial.  Alianza.  Capítulo 1.

North, D.C.,  y Tomas, R.P. (1989).  El nacimiento del mundo occidental.  Una nueva historia económica (900-1700).  Capítulos 1 y 2.

Population: cause or consequence of economic change?

There are some theories to explain how the population is related to the economic change. We are going to expose two theories: the pessimist, from Malthus, and the optimist, from Boserup.

Thomas Malthus (1766 - 1834): the main ideas about their theory are included on "an essay on the principle of population" where the malthusian trap is the base of his principles:

"Population, when unchecked, increases in a geometrical ratio. Subsistence increases only in an arithmetical ratio. A slight acquaintance with numbers will shew the immensity of the first power in comparison of the second."

The population grows steadily whenever there are resources, however the productivity could be increased whenever the law of diminishing returns allows it.

To explain this, the author uses two factors: land and work.

The main critique to this theory is that the author does not take into consideration neither the technology nor the demographic changes that could have any kind of consequence on technology or production.

Ester Boserup (1910 - 1999): The production could be increased as an answer to a demographic growing.  In a following step, the jump from a small society to another big one will be determined by resources increase, at consequence, the population could increase more.

Her arguments are defended through the scale economics that appears when the population grows. The scale economics allows to develop the specialization and the trade.

However with this growth, it appears a unequal distribution of incomes.  There is more habitants by area.  As consequence the value of the land will be increased, and the propietaries of land will have more incomes.

Bibliography:

Cameron R. (1992).  Historia Económica Mundial.  Alianza.  Capítulo 1.

North, D.C.,  y Tomas, R.P. (1989).  El nacimiento del mundo occidental.  Una nueva historia económica (900-1700).  Capítulos 1 y 2.

Market as the key of growth.

One of several theories that try to explain the growth was developed by Adam Smith (1723 - 1790).

According to this economist (1723 - 1790), the key of growth is related to the market expansion.

The market accomplishes three functions: 

• It gives incentives to people to increase their productivity. 

• Any efficiency of production in any place of the market is immediately known for the rest (flawless information).

• The concentration of the demand allows to increase the specialization linked to the idea of trade.  People deals with that goods which have more productivity.

Smith considered that the growth of market had some limits.  For example, regarding technology he said that from XIX century on, it would not be more progress.  It means that the PPF could not be improve and the progress could be stopped.

The main critique to this theory is the non consideration of the technology.  Anothe critique is that the existence of a market does not warrant growth.

One of the contributions of Adam Smith was the "invisible hand". This "hand" means that the individual interest, that explains certain behavior of people, are guided, unwittingly, to contribute to the maximun wellness of population.

Bibliography:

Cameron R. (1992).  Historia Económica Mundial.  Alianza.  Capítulo 1.

North, D.C.,  y Tomas, R.P. (1989).  El nacimiento del mundo occidental.  Una nueva historia económica (900-1700).  Capítulos 1 y 2.

The economic development in historical perspective

Through the following two points we are going to introduce the economic development in historical perspective.

• Economic History.
• Growth and development.

Economic History.  Purpose.

"Explain the structure, operation and the outcome of the economies" (Douglas North)

An economist is worried about the general characteristics of a society (structure), studies the institutional working (families and state), the technology operation, ideology of society and the preferences (institutional scope of oportunities and restrictions).

There is not only a concern about the economic performance but also about the factors needed for the economic growth and development (because of the existence of countries rich and poor).

The classical economy stablished a tripartite classification of the production factors: land, work and capital.  The total production of a economy is determined by the quantity of this factors used.

            

Growth and development.

The growth is possible thanks to the technology application because of capital investments.  These investments can be:

• Extensive: when the investments is made over more than one particular factor (land, work and capital).
• Intensive: when  the resources are used in a more effective way (that is to say, we have the same resources, but we are able to use better).

By other hand the development is the economic growth with a structural change.  This changes are substantial regarding to the structure and the organization of the economy.

Growth and development are not the same concepts.  As a rule, in countries where the industrialization is being born, to a certain extent, there is a big change in the Economy (development), while the growth is only starting to emerge (for example in UK during the first step of its industrialization).

The progress is linked to the development.  The growth of the economy is a reversible process, that is to say, the decadency could follow to this growth.  However when we speak about development and progress of economy, unfrequently it appears a regresive cycle wherein a country is able to lose out structures or organizations created in the past.

By other hand the progres (according to Cameron) is related to moral or subjective issues, unlike the growth and development which correspond to objective issues.

To understand the difference between growth and efficiency we will use the support of the production-possibility frontier example:

Bibliography:
Cameron R. (1992).  Historia Económica Mundial.  Alianza.  Capítulo 1.
North, D.C.,  y Tomas, R.P. (1989).  El nacimiento del mundo occidental.  Una nueva historia económica (900-1700).  Capítulos 1 y 2.