Following along on my previous post ... .
Assuming that McCloskey has correctly described the historical evidence, per capita real income was roughly stable at a low level most of the time, over most of the world, for thousands of years. That ceased to be true starting about 1800 when, first in Northwestern Europe and then over a wider and wider area, real income began to rise. The global average is now, by a conservative measure, about ten times what it was through most of history, and about thirty times as high if we limit ourselves to the developed world.
This pattern raises two puzzles:
1. What mechanism kept it stable for so long?
2. What changed?
The obvious answer to the first is something along the lines suggested by Malthus. Increases in income caused increases in population, increases in population pushed income back down. The equilibrium income was thus at a level that produced a roughly constant population.
What could have made that mechanism stop working? In my previous post, I suggested that economic and technological developments made land a less important input to production than it had been in the past, hence made income less sensitive to population. One should add to the model positive effects of population density. A denser population increases the opportunities for specialization and economies of scale. It increases the number of people creating productive innovation, intellectual property broadly defined. Looking at the modern world, it is hard to see much evidence that population density has, on net, a net negative effect. A few sparsely populated countries get substantial income from their natural resources, but most rich countries are densely populated and the obvious exception, the U.S., does not derive a very large fraction of its income from agriculture, the most obviously land-intensive industry.
That suggests one simple answer to the puzzle. Changes were occurring which lowered the importance of land in production. As long as income remained sufficiently sensitive to population density for the Malthusian mechanism to work, the change slowed the speed with which higher incomes were eliminated by the resulting population growth but did not change the equilibrium level of income. When the negative effects of population growth became small enough to be at least balanced by the positive effects, the system hit a tipping point, since there was now no equilibrating mechanism holding incomes down.
This answer assumes that the feedback mechanism went through pressure of population on land, as per Malthus. Are there other interesting alternatives?
One is predation. Primitive societies have small governments because they cannot afford large ones—if a significant part of the population is in the business of living off others instead of producing, everyone starves. Perhaps what maintained the equilibrium was that, as soon as incomes got large enough to support a predatory state, such a state came into existence. To put it in less abrupt terms, whenever increased incomes allowed the state to grow, it grew. Its consumption then pushed average incomes back down.
That story appeals to my libertarian prejudices, but, unlike my first suggestion, it does not offer an obvious explanation of what eventually turned off the mechanism. Perhaps the answer is some variant of McCloskey's. Beliefs changed, rhetoric changed, social norms changed, in a way that made predation a less viable strategy than it had been before.
When I have finished reading her book I may have a clearer idea of how that might have happened. Until then, it is worth looking for other candidates, other mechanisms that could have held real incomes at an equilibrium level for a very long time, then stopped working. Any solution must explain not only my two points above, but also a third: The fact that, whatever the cause, it was contagious. Technology could explain that, as one society imitated another. So, perhaps, could ideology—economic success makes good advertising.
The effect of contagious diseases might depend on part on population density. Could one tell a version of the story based on that? On other mechanisms? Suggestions welcome.
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