I have a massive beef with how we teach economic history today. 3 beefs to be exact:

• it normally starts around 1850 plus or minus 30 years
• it is European/American exclusive
• it normally deals with economic philosophy instead of economic quantification or structures

To be blunt, the difference in scope between world history and economic history is pathetic. However, in science there are times when you have very limited information so you have to make do with what you can find.

In today’s blog I will attempt to add a critical piece to the standard story of economic history. It is not as long reaching or global as I would like, but it is at least a minor improvement on what we have seen. Also, I will be completely ignoring economic philosophy. You’re welcome.

In antiquity, we have seen the rise and fall of empires. With the rise of empires we see a crescendo of culture, literature, and wealth. As the empire falls we see a “dark age” and stories of poverty. In modern times we have large government bureaus that gather and construct a detailed economic picture for us and from time to time we find fragments of that from the ancient world. When analyzing antiquity our mathematics is far more back of the envelope. Nothing you are about to read is cite worthy and take all of it with a grain of salt. If there was better information I would bring it to you but it just isn’t there.

Most empires, large and small, were about 90% devoted to sustaining themselves and the remaining 10% was nobility, culture, religion, etc. Arts, culture, and religion all gain from economies of scale. By centralizing the excess 10% from across multiple cities/towns into a single city, an empire will gain more of those “high society” elements at a higher average then if they were independent of each other. This mandatory centralization of cultural actors was why cultural elements rose and fell in tandem with empires.

This is a trend that we see across history, around the world, until Britain in the 1200’s and other parts of Europe soon after. Here we see a series of minor agriculture reforms that completely change the structure of their economy. Before this lords ruled peasants, directed their activities, and provided them with tools and food. Both groups were directly attached to the land they ruled/worked.

Around 1200 this attachment to the land was weakened. Lords became more like landlords and peasants were able to move between lords to rent specific fields. From this simple change we see a mix of micro-revolutions happening. First off, peasants now provided their own tools. What we see in the archeological record is a massive increase in the number, range, and variations of tools. It appears that once lords stopped buy tools and the farmers themselves started to make the purchases it sparked a massive change in tools design and production.

Secondly, we see an increase in people moving between towns. The reputations of the farmlands began to become important. As farmers began to move away from unproductive farmland to more productive farmland, an informal system of field rotation was created via market frictions. Bad fields would stay unused until the lord dropped the price so low someone would rent it simply because even if it produced less food, they would get to keep most of that smaller amount.

Rent was generally paid in the crop itself. Pre-1200, let’s say a piece of land could produce about 100 units if the peasant put in a medium level of work. However, the peasant got the same amount of food and shelter regardless of their work load. If they put in a high level of work they could get 120 units while at a low level of work the field would only produce 80 units. The incentive for the peasant is to put in the lowest level of work to get the standard pay. Since the pay is standard, the lord’s only choice to get the higher level of production is via fear or by taking more land.

So now let’s say we change incentive structure. The rent is 60 crops and yes, paying 75% to the lord was not uncommon. But since the peasants turned tenant farmer now get to keep the remainder of their corps the work to keep ratio changes dramatically. Now if you put in a low level of work you get to keep 20 crops, if you put in a medium level of you get to keep 40 units, and if you really work hard and put in a high level of work the peasant gets to keep 60 units of crops… the same as the lord gets from this piece of land via rent!

So from this mix of incentive structure, tool ownership, and field rotation productivity shifted dramatically. Instead of needing 90% of the population to sustain the nation only 60% was now needed. That means that instead of 10% being devoted to culture, religion, and the arts 40% of the population can now be used.

From 1300 to 1400 we see a massive increase in the number of monasteries, libraries, and universities. The roots of Oxford University are laid in 1280’s. Cambridge was officially founded in 1208 but its first college was established in 1284. English monasteries already had libraries before this time, but we see case after case of those libraries expanding as well as massive Cathedrals being built, collapse, and then being rebuilt again but this time with a bit better understanding of architecture.

From here we see the start of the trend. Agricultural reforms led to an increase in those engaged in intellectual pursuits. Intellectual pursuits led to the scientific age. The scientific age created the engineering need for the industrial revolution… which is generally where others begin the discussion of economic history.

And this is where the problem lies with starting a history lesson in the 1800’s. There are a massive number of microeconomics and efficiently lessons to be learned from the 1200 to 1400. Lessons on incentive structures, technology/efficiency, and simply understanding how you are distributing man hours. What is particularly striking is how many of these empirical phenomena, not “economics principles” or ideas but regularly observed outcomes, are ignored in various economic philosophies. But, I promised to not talk about economic philosophies so we will end this for today.

I hope to see you all again next month.