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A Farewell to Alms: A Brief Economic History of the World by Gregory Clark

23 Aug

A Farewell to Alms: A Brief Economic History of the WorldA Farewell to Alms: A Brief Economic History of the World by Gregory Clark

My Rating★★★☆☆ 

Jared Diamond should be given the Nobel. If not for anything else but for getting historians and economists up in arms shouting “Our field is not That simple, Mister!!”. He has kicked off so many responses and counter-responses that it has enlivened an entire gamut of fields. This is one more response/alternative to how the modern world is the way it is. In fact in the very beginning the author classes himself with the Diamonds, the Adam Smiths and the North & Thomass of the world and puts his own book in the same league. Talk about building up expectations.

The Malthusian World

To make a simple theory work – that is a major achievement. And for much of the book, Clark gives the impression that he is going to pull it off. The book builds its argument very painstakingly, with numerous diagrams and with a surfeit of statistics. A lot of effort is put in to build the foundations of the argument.

This foundation rests on proving that the whole world was more or less uniform before 1800 – that we were in a Malthusian trap (a long-term one, granted) from which no society could make a true break. A ‘true break’ being a sustained long-term deviation from the Malthusian norm.

This “Malthusian world’ is built on some very simple conditions. And it encompassed the human and animal world equally. Economically the whole world had the same constraints: that for any species, its population could never outstrip its food supply. Of course humans are ingenious and made many advances over the course of history. But for every technological advance that results in more food, the population would respond by rising until the extra food available is cancelled out. This means that in a Malthusian world, the living conditions (on average) could never rise above a certain level.

Tech improves:

=> (leading to) more food (or income)

=> more population

=> less food (or income) per person

=> back to earlier living conditions. Simple.

(Use the conditions from Engel Curve to derive changes in food from changes in income as required.)

So in this world, living conditions (on average) could never rise above the pre-agrarian levels in spite of any technological innovation. This persisted till the Industrial Revolution. So overall until 1800 there was in all societies an inherent, but shifting, trade-off between income and mortality rates that tied long-run incomes to the level which balanced fertility with mortality and maintained a stable level of standard of living.

The Industrial Escape Hatch

Then, around 1800, in northwestern Europe and North America, man’s long sojourn in the Malthusian world ends. The iron link between population and living standards, through which any increase in population caused an immediate decline in wages, was decisively broken. A new era dawned. The seemingly sudden and unpredictable escape from the dead hand of the Malthusian past in England around 1800, this materialist crossing of the Jordan, was so radical that it has been forever dubbed the Industrial Revolution.

The ‘Industrial’ part of the label is, Clark says, unfortunate and misleading. It was conferred mainly because the most observable of the many changes in England was the enormous growth of the industrial sector: cotton mills, potteries, foundries, steel works. There is, in fact, nothing inherently industrial about the Industrial Revolution. Since 1800 the productivity of agriculture has increased by as much as that of the rest of the economy, and without these gains in agriculture modern growth would have been impossible.

Clark says that we have to resign ourselves to the fact that one of the defining events in human history has been mislabeled.

The ‘Industrious’ Revolution

The Malthusian era was one of astonishing stasis, in terms of living standards and of the rate of technological change. Wages, returns, income and living standards – all should have remained the same on average from the dawn of market economies to the end of the Malthusian era. This only reinforces the puzzle of how the economy ever escaped the Malthusian Trap. How did stasis before 1800 transform itself into dynamism thereafter? This is the central question of the book.

The author has much to say about alternate theories, especial on researches such as Acemoğlu’s (review pending) who insist on Institutional explanations:

Commentators, having visited climate, race, nutrition, education, and culture, have persistently returned to one theme: the failure of political and social institutions in poor countries. Yet, Clark asserts, this theme can be shown to manifestly fail in two ways. It does not describe the anatomy of the divergence we observe: the details of why poor countries remain poor. And the medicine of institutional and political reform has failed repeatedly to cure the patient.

Yet, like the physicians of the prescientific era who prescribed bloodletting as the cure for ailments they did not understand, the modern economic doctors continue to prescribe the same treatment year after year through such cult centers as the World Bank and the International Monetary Fund. If the medicine fails to cure, then the only possible conclusion is that more is needed.

Strong words. And after all the build up, in answering this central question is where Clark disappoints.

Q: So what is the final solution to the great puzzle?

A: Sustained advances in efficiency.

And the reason for this unprecedented advance in efficiency of utilization of resources?

In answering this, Clark plays his final lame card. The answer is that there was no Industrial Revolution after all. It had been long in the making, this gradual advance in efficiency.

And how did this come about? Here we have to understand a bit more about the Malthusian world, we have to peer deeper into the society, look beyond the averages that was the basis of all discussion till now.

On the average, living standard might have been stagnant – but how was this average achieved? By the benefits of every advance in achievement being cornered by select groups. This would mean an advance in income for the privileged and a decrease in income for the underprivileged.

Now, what happens in a Malthusian world when income increases? You got that right: the fertility rates increases as well.

Hence, the rich consistently outproduced the poor throughout history. This might seem like a crazy thing to say, but Clark asserts that in the now counterintuitive world of the pre-industrial times, this was exactly what happened. There was a huge difference in offsprings by the rich and by the poor. So over the long-term, what would be the effect of this? The number of the relatively well-off keeps on increasing and that of the relatively worse-off keeps on decreasing. And since Malthusian pressures apply to the rich as well, they get less rich as time goose on. One would think that eventually they would fall back into the average, given enough time. But there’s the rub.

According to the author, the rich, even as they tend towards the average, also carry with them the values that enabled their fathers or forefathers to become rich in the first place. So this meant that these industrious values began to spread across the society. Eventually this accumulating industriousness of the people reached a tipping point around the time of the industrial revolution and society has not looked back since. And that explains the world.

Well, not quite. One more thing had to happen before the inevitable trend towards the mean by the rich could be checked. They had to stop out-producing the poor so that income wouldn’t be redistributed in Malthusian fashion as soon as it is accumulated by one generation.

The Demographic Revolution

Along the way somewhere, humanity seemed to realize that children was an ‘inferior good’ (anything that you consume less of as income increases) and this turned Malthusian logic on its head. What triggered the switch to the modern demographic regime with few children despite high incomes? This is where I feel the author finally trips comprehensively.

Clark has no explanation to offer on why this demographic revolution should have happened only in England. The only explanation forthcoming is that perhaps in England alone the diffusion (mentioned above) of values reached its tipping point earlier. Now this may well be the best explanation but it leaves the reader disappointed.

Conclusion

In the end, the reader has to applaud the statical dexterity of the author and the very creditable model that has been built up. The conclusion is unavoidably weak but it fits fairly well into the model itself and hence is acceptable within those frameworks.

As a critique on current models available, this book works well. But as an alternate theory, not so well.

Firstly, Clark brackets all of pre-1800 humanity into one single average. But history is not about the mean curve, it is about the people at the edges of the curve, continually creating it, changing it. Clark can surely learn a thing or two from Armesto on how history is much more about human drama than about statistics.

The progress that humanity was making was affecting radical changes at the edges of the curve even if the curve itself might not have ben shifting. So to me the Malthusian world is not so much different from today’s world – the difference has always been about how the gains from any advance in technology was apportioned among the population. It might well be the case that we are in a slightly prolonged deviation from the curve currently and will return to the curve once the free lunches that we have unearthed get exhausted. The Industrial Revolution might well then be called The Industrial Aberration by future historians. Cheers to the reviewer for the biased conclusion please. Thanks.

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Posted by on August 23, 2013 in Book Reviews, Books, Thoughts

 

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