Subsistence economies and surplus economies

by on April 23, 2013 at 7:22 am in Economics, History | Permalink

I am not sure this paper (pdf) is sound, and it is hardly in publishable form.  Still, it probably qualifies as the most interesting paper I have read this year to date.  It is by Lemin Wu, graduate student in economics at UC Berkeley, who appears to have links to Brad DeLong and Peter Lindert.  The title is “Millennia of Poverty: If Not Malthusian, Then Why?” and here is the abstract:

Living standards were constant for thousands of years before the industrial revolution. Malthus explained it this way: population grows faster when living standards rise; therefore, changes in technology alter the density of population but not the average welfare. This paper challenges Malthus’s explanation of the constancy and replaces it with the theory of group selection.

Malthusian theory is inadequate because it misses the fact that a dollar’s worth of diamonds contributes less to survival and reproduction than a dollar’s worth of grain. Grain is a subsistence commodity and a diamond is a surplus commodity. The Malthusian force anchors the average level of subsistence, but not that of surplus. If the surplus sector had grown faster than the subsistence sector, then living standards could have grown steadily before the industrial revolution, but they did not. The constancy of living standards thus implies that growth was balanced between subsistence and surplus, something Malthus did not explain.

To explain the balanced growth, I propose the theory of group selection. Selection of group characteristics, including culture and technology, goes on by migration and conquests. Since living standards rise with the ratio of surplus to subsistence, migrants and invaders usually move from places relatively rich in subsistence to those relatively rich in surplus. They spread the culture and technology of their subsistence-rich origin to the surplus-rich destination – the bias of migration favors the spread of subsistence over that of surplus. Even if surplus cultures and technologies would develop faster than subsistence ones in a local environment, the o setting biased migration balances the two sectors on a global scale. This explains the constancy of living standards.

My new theory reinterprets why living standards declined after the Agricultural Revolution and stagnated afterwards, how the Industrial Revolution happened and where the prosperity of Roman Empire and Song Dynasty came from.

I expect to hear more from Lemin Wu.

The paper is here (pdf), the slides to the paper are here, more pdf and 100 pp. at that.  I first saw this cited by @mattyglesias.

Andrew' April 23, 2013 at 8:04 am

” it is hardly in publishable form. Still, it probably qualifies as the most interesting paper I have read this year to date.”

Academia is weird.

saildrdave April 23, 2013 at 10:32 am

it’s different from a concept car or a blueprint that doesn’t have spec’d out supplies and workers hired yet?

mofo. April 23, 2013 at 8:17 am

worth reading:

http://www.fee.org/the_freeman/detail/whats-right-with-malthus#axzz2QqVUbj6s

His claim? People have been mus-interpreting Malthus since he first put pen to paper.

Tim Worstall April 23, 2013 at 8:24 am

“Malthusian theory is inadequate because it misses the fact that a dollar’s worth of diamonds contributes less to survival and reproduction than a dollar’s worth of grain.”

This isn’t true in a species where (male, at least) reproductive success is increased by the possession of bling. Or if you prefer, markets of high social status. They’re both worth a $ as they’re both worth a $.

david April 23, 2013 at 8:56 am

For much of human history, neither of those have been worth as much $ as the technology to discourage the tribe next door from seizing your diamonds, your grain, and your women by force.

Frederic Mari April 23, 2013 at 9:11 am

I was about to say…

I mean, what does “To explain the balanced growth, I propose the theory of group selection. Selection of group characteristics, including culture and technology, goes on by migration and conquests. Since living standards rise with the ratio of surplus to subsistence, migrants and invaders usually move from places relatively rich in subsistence to those relatively rich in surplus. They spread the culture and technology of their subsistence-rich origin to the surplus-rich destination – the bias of migration favors the spread of subsistence over that of surplus” mean, exactly?

Did the Norsemen bring subsistence techniques unknown to Anglo-Saxon British isles or France and all these other places they invaded or sacked? What about Attila and his Huns? The Mongols? The Conquistadores? Ah, yes, those ones might have… in a very long term kind of way…

Or am I just too thick and not getting the ‘relative’ bit of spreading of subsistence-rich bias?

Therapsid April 23, 2013 at 10:39 am

The historian Peter Heather in “Empires and Barbarians:The Fall of Rome and the Birth of Europe” describes how the Germanic tribes experienced a kind of agricultural revolution in the first several centuries A.D.

Archaeological evidence suggests that whereas up to the time roughly contemporaneous with the transition from Roman republic to empire, the Germanic peoples had practiced low-yield extensive agriculture, by the 4th century they had developed a more intensive and pastoral/arable mixed agriculture. The latter made possible the maintenance of much larger, more permanent settlements, some of which lasted for centuries.

Heather argues that this Germanic agricultural revolution led to both a population explosion and to the creation of a specialized military class.

If this is true, it may be that Lemin Wu’s thesis has some applicability to understanding the fall of the Roman Empire.

mrmandias April 23, 2013 at 3:54 pm

Further, its a commonplace among historians that the German agricultural innovations *improved* the productivity of Roman lands in Northern Gaul and in Britain.

Its also generally accepted that the Muslim conquest improved agricultural techniques in Northern African and Southern Spain.

Beyond that, dunno.

Ray Lopez April 23, 2013 at 10:41 am

You are thick! (I think). Wu is saying that everytime somebody got a little surplus, Attila the Hun would come in, steal it, rape his women, and then everybody would sink back to living hand-to-mouth. I think the references to Song and Roman empires are that security (Hobbes Leviathan) was important in accumulating surplus between generations. Does make sense. Also Wu’s paper reminds me of a chapter in the excellent book A Farewell to Alms: A Brief Economic History of the World by Gregory Clark, which also made some mild eugenicist claims concerning economics.

Frederic Mari April 23, 2013 at 11:31 am

To Ray Lopez: I probably am but it’s still not nice and polite of you to say so. I will tell my mum… :)

Your ‘Attila the Hun’ as a success curse is interesting but it’s certainly not what I had understood of Wu’s abstract.

To Therapsid: Hmmm. Maybe but I had read that, actually, it was weather changes rather than pop. over-growth that had triggered the Great Migrations. Furthermore, if the Germans inheritors of the Roman Empire had superior agricultural techniques, how come we experienced a Dark Age, with lots of previously harvested land returning to the forests…

http://en.wikipedia.org/wiki/Deforestation_during_the_Roman_period

and http://en.wikipedia.org/wiki/Early_Middle_Ages

There were also reforestation and a retreat of agriculture that centred around 500. This phenomenon coincided with a period of rapid cooling, according to tree ring data.[2] The Romans had practised two-field agriculture, with a crop grown in one field and the other left fallow and ploughed under to eliminate weeds. With the gradual break-up of the institutions of the empire, owners were unable to stop their slaves from running away and the plantation system broke down. Systematic agriculture largely disappeared and yields declined to subsistence level.

JCW April 23, 2013 at 8:48 am

I’m a historian, so I (inevitably) have a few irritations with the macro-history analysis in this paper (grumble, grumble), and the finer points of the internal economics debate on Malthusian dynamics are obviously passing me by, but it’s a fun idea. I may bring the theory up in my summer World Civ section.

Memnon April 23, 2013 at 11:00 am

Indeed the model seems to be developed more as an excuse to play with mathematical tools than to actually fit with anything remotely similar to archeological and historical data, in part because the terms are defined only as correlating functions, not anchored to any empiricism. “My model explains why Rome fell, because the success of less surplus-focused invaders are assumed in my model”.
There is a joke here. Not reading much litterature of this kind, I am unable to say whether we are looking at ceuel sarcasm or good-natured playfulness. What do others think?

Ian Maitland April 23, 2013 at 9:28 am

Wu’s thesis is problematic because it assumes that the culture and technology of conquerors and migrants invariably displace those of the conquered groups. But more often than not (?) the conquerors assimilated to the culture and technology of the people that they conquered. Think of the Norse invaders/Normans in France or the Manchus in China or the Persianization of the Mughals.

roystgnr April 23, 2013 at 9:53 am

This theory works in situations where subsistence production and surplus production are not fungible at any exchange ratio, so even people worried about dying in the event of a crop failure have no ability to divert efforts from surplus production to insure against that.

I can’t think of any situations where subsistence and surplus production aren’t fungible via “time” as an intermediary, except the situation where one literally runs across a diamond lying in the street. Can anyone else?

Memnon April 23, 2013 at 10:38 am

17th century peasants did not have higher calorie intake than stone age agriculturalists, but their masters did have better guns, bibles, church windows and furniture than the pharaohs did. These are all ‘surplus products’.

Since almost all surplus would be captured by the ruling / military caste or classes, increased non-agricultural productivity ought to show up in things like cathedrala and clockwork toys. I would say we see interrupted progress of this type throughout human existence.

Yancey Ward April 23, 2013 at 11:03 am

I am having trouble with this part:

Malthusian theory is inadequate because it misses the fact that a dollar’s worth of diamonds contributes less to survival and reproduction than a dollar’s worth of grain.

If it contributed less, then why is it worth the same as the grain? What if he had written:

“Malthusian theory is inadequate because it misses the fact that a dollar’s worth of knives contributes less to survival and reproduction than a dollar’s worth of grain.

Leon Kautsky April 23, 2013 at 11:13 am

Because marginal survival probability increase != marginal value.

In fact, it seems like Malthusian variables have the same problem mapping onto prices that labor values do…

Yancey Ward April 23, 2013 at 1:15 pm

In other words, it is just an assumption that is unsupported.

Daniel Klein April 23, 2013 at 12:05 pm

I only read the abstract. Sounds so much like Smith’s “diamond buckles” mechanism.

In WN, search on “diamond buckles”. In LJ, search on “luxury” (for example, see pp. 50, 227, 261).

Here is a quote from LJ:
“The power of the nobles however declind in the feudall governments
from the same causes as everywhere else, viz, from the introduction of arts,
commerce, and luxury.–Their power consisted in the number of their
retainers and tenents. The number of their retainers and even of their
dependents was owing to their plain and hospitable way of living.” (261)

Once the lords and nobles could buy diamond buckles, they stopped supporting the mass of retainers and depends who would defend them from invaders.

tt April 23, 2013 at 12:46 pm

” and it is hardly in publishable form”
why ? are there excel errors in it ?

Merijn Knibbe April 23, 2013 at 2:29 pm

The article, though interesting, suffers from what might be called the neo-classical rite: lots of theory – and an empirical analysis which in no way either proofs this theory or uses this theory in an rigorous analytical sense (are preferences really transitive, are these supposed indifference curves indeed smooth, how do I define these preferences, how do I estimate them, can utility be estimated anyway, is what I call ‘utility’ in the graphs consistent with the neo-classical concept of utility etcetera). I first encountered this surprising habit, decades ago, in Salter’s ‘Productivity and technological change’. Things did not really progress since.

Matt April 23, 2013 at 2:31 pm

If I am understanding this phrasing (and it’s entirely probably I am not):

Since living standards rise with the ratio of surplus to subsistence, migrants and invaders usually move from places relatively rich in subsistence to those relatively rich in surplus.

They spread the culture and technology of their subsistence-rich origin to the surplus-rich destination – the bias of migration favors the spread of subsistence over that of surplus.

Even if surplus cultures and technologies would develop faster than subsistence ones in a local environment, the offsetting biased migration balances the two sectors on a global scale. This explains the constancy of living standards.

then it seems more or less of an idea that as soon as local surpluses of non-subsistence goods begin to establish in a region, lots of subsistence level peasants migrate in to horn in on the goods, overwhelming the local culture’s capacity to accumulate surpluses of non-subsistence goods and a high level of personal (non-subsistence) wealth. When the level of non-subsistence wealth is equal between the two regions, migration stops, but not until then.

This explains why non-subsistence level wealth tends to even out (subsistence level wealth evens out because the more you have, the more people you end up having to consume it, so it per capita equilibriates).

That seems very…. uh.. “Sailerian”. I don’t think it’s true, historically (as a separate, observation not consequential of the first).

Steve Sailer April 23, 2013 at 7:27 pm

Benjamin Franklin’s 1754 essay “Observations Concerning the Increase of Mankind” anticipated much of Malthus, although from a happier, more American perspective. Franklin noted that the low density of population in America relative to Europe meant that land was cheap and wages were high, which meant that more people could afford marriage, homeownership, and a middle-class lifestyle in America than in Europe. He went on to suggest that one way to maintain America’s advantage in living standards was to limit immigration, advice accepted in the 1920s, which helped lead to amazingly wide spread of middle class prosperity in the decades after WWII.

Adrian Turcu April 24, 2013 at 9:58 am

“that one way to maintain America’s advantage in living standards was to limit immigration, advice accepted in the 1920s, which helped lead to amazingly wide spread of middle class prosperity in the decades after WWII.”
AS IF nothing else happened in that period, And there were no other forces at work.

whatsthat April 23, 2013 at 3:06 pm

Take it easy, it’s just a grad student.

FC April 23, 2013 at 4:05 pm

That’s what they said about Ted Kaczynski’s paper on subsistence economies.

whatsthat April 23, 2013 at 5:53 pm

Had to look up this Kaczynski fellow.

Don’t see how this could lead to paper bombs, but whatever rocks your boat.

LeonK April 24, 2013 at 3:02 pm

I thought it was pretty funny.

mrmandias April 23, 2013 at 4:00 pm

One implication here is that this model only applies where its easier to move people than it is to move bulk goods. Unless you make the additional assumption that people won’t trade off subsistence goods for surplus goods.

Steve Sailer April 23, 2013 at 7:29 pm

Or, the sovereign nations could refuse to accept hordes of subsistence migrants, which is what happens in most non-crazy countries.

Matt April 24, 2013 at 4:26 am

Although if your nation, like China in the Middle Ages, just happens to be vast have loads of potential subsistence migrants living in it, then you’ll have a tough time limiting the hordes of subsistence migrants (the Mandarins may have tried their best, bless ‘em, but it’s hard to make country internal migration difficult). Small countries like Holland, Belgium and England may have less of this kind of problem.

Adrian Turcu April 24, 2013 at 10:48 am

This type of economists are the new classical philosophers: they build systems, almost from scratch, that explain everything in one theory. And each system demolishes all the previous systems.
I thought poverty did not need an explanation. It is the natural state of things.
This particular theory is predicated on the author’s distinction between subsistence and surplus commodities, one I find very hard to understand. Why are living standards only improved by more surplus commodities? Would not more and better food, housing and clothing improve standards much more then temples and jewellery? Isn’t it simple to call “surplus” just luxury? If accumulation of surplus defines cultures that get out of historic poverty, why did it not happen in mezzo America, where there was plenty of precious metals, temples and powerful states that kept immigration and conquest at bay?
Let me quote a few stunning assertions in the paper, at almost every paragraph he explains some swath of history:
“The division of surplus and subsistence is universal.” -like good and evil I guess;
“Culture is the social norm that sorts out winners and losers.” -this sound right out of seduction community forums;
“Surplus culture makes people better o . It requires one to spend more on surplus
and less on subsistence” -the solution to poverty then is to stop eating and start buying diamonds? And it is all choice.
“Roman and Song civilizations later collapsed not because their population exceeded
the capacity of land but because the neighboring groups invaded and conquered them.” -it’s all sorted then, I should stop reading “Rome -an empire’s story” by Greg Woolf.

An on it goes.
I would call this “pop geo-macro-economics”.

Roger April 25, 2013 at 4:45 pm

As several comments have already mentioned, this theory seems to require that surplus goods are unable to be converted into subsistence goods. Every society will increase in population during the good years. During the bad years, surplus goods will be traded for subsistence goods. In the end, this leads to subsistence living.

I do agree that surplus can lead to net in migration and that surplus can be a prize for conquest. Of course it can also be converted into subsistence and thus to higher out migration. Or surplus can be converted to armies and swords, and conquest or defense.

In the end, Malthus has explained it nicely.

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