Raeman Banaik
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EH101 Annotated Bibliography
Landes, David S. "Why Europe and the West? Why Not China?" Journal of Economic Perspectives 20, no. 2 (2006): 3-22.
Summary: Landes argued that China and Europe possessed similar pre-requisites prior to the industrial revolution. But somehow, China never experienced the take-off stage like Europe did because it did not capitalise on two major opportunities. The first, to technically develop its native traditions and second, “to learn from European science and technology once the foreign barbarians entered China in the 16th century”. It failed both times. Landes goes on to associate this failure with the totalitarian political climate in China during this period. He claimed that China lacked the necessary free market and incentives to innovate which were present in Europe at the time.
Connection: Lande shows that although China was far ahead of Europe prior the 16th century, it still had a significant time lag before industrialising due to its socio-political factors which were not present in Europe at the time.
Allen, Robert C, Tommy E Murphy, and Eric B Schneider. "The Colonial Origins of the Divergence in the Americas: A Labour Market Approach.” The Journal of Economic History 72, no. 4 (2012): 863-94.
Summary: Allen, Murphy and Schneider argue that the initial wage difference among the Americas is the cause of the Great Divergence between them. During the colonial era, “there were two streams of migrations; one from North-Western Europe at high wages and the other from Iberia at lower wages- created early difference in income levels in British and Spanish America”. This difference in income levels influences the incentive to innovate and therefore the ability to transition to capital-intensive production. Thus, the high wage path from Europe colonised North America and the low wage path from Iberia colonised South America resulting in a divergence.
Connection: They show that the initial wages within countries is the main driving force for the Great Divergence, as areas with high wages incentivise greater innovation and thus is more prone to capital production than areas with low wages.
Allen, Robert C. "The Industrial Revolution in Miniature: The Spinning Jenny in Britain, France, and India." The Journal of Economic History 69, no. 4 (2009): 901-27.
Summary: Allen argues that high-wage countries such as England were more likely to experience greater technological development due to increased incentives to innovate. In specific, Allen extends that the “pricing structure created unique incentives to develop machines that substituted capital for labour”. Whilst this increase in capital was profitable for England, countries such as India and France were unable to replicate this outcome. This is because they were low wage economies with a low capital-labour ratio and thus unable to capacitate technological advancements. Furthermore, the low wage economy meant that incentives to innovate were low which further extended the time lag between Britain and the rest.
Connection: Allen shows that industrial technology spread quickly in Britain as it harboured a high wage economy which relied upon a capital-intensive production system so could accommodate technological advancements.
Engerman, Stanley L., and Kenneth Lee Sokoloff. "Factor Endowments, Inequality, and Paths of Development among New World Economies." Economía 3, no. 1 (2002): 41-109.
Summary: Engerman and Sokoloff argue that factor endowment led colonisation is the root cause for dissimilar long-run paths of development across the Americas. Colonisers chose to set up inclusive institutions based in areas that presented the most profitable land crops. For example, the Caribbean and Brazil experienced the optimal climate and soil settings for the growth of sugar crop which is highly demanded in the global market. This meant that “its production was most efficiently produced on large slave plantations” setting up a slave dominated population. In contrast, Spanish America when colonised by the Spanish was rich in rice mineral crops which were awarded to the elite allowing them to set up extractive institutions.
Connection: Engerman and Sokoloff show that the root cause of unequal development is the geography (factor endowments). These factor endowments determine where institutions decide to settle creating strategic economic locations which develop at a faster rate, resulting in spatial inequality.
Acemoglu, Daron, and Robinson, James A. Why Nations Fail: The Origins of Power, Prosperity, and Poverty. London: Profile, (2012).
Summary: Acemoglu and Robinson argue that colonisers set up either inclusive or extractive political and economic institutions which determines whether a nation can develop economically. Inclusive political systems directly lead to inclusive economic systems which allows for things such as “secure property rights, rule of law and freedom to contract”- making it possible for nations to develop. However, extractive political systems leading to extractive economic institutions hoard wealth between the elite, essentially forming a totalitarian society. Thus, poverty in that nation is kept perpetual and the economic development stunted.
Connection: Acemoglu and Robinson show that geography has little to no role in shaping the economic development of a country but rather it depends on the type of institution set up. This can be inferred from the example of Nogales, a city on the US-Mexico border.
Lipsey, Richard G., Carlaw, Kenneth, and Bekar, Clifford.” What requires explanation?”. Chapter 2 in Economic Transformations: General Purpose Technologies and Long-term Economic Growth. Oxford; New York: Oxford University Press, (2005):15-54.
Summary: Lipsey, Carlaw and Bekar argued that GPTs had the potential to influence long-term economic growth if they had certain characteristics. Firstly, the GPT must have a wide variety of uses, e.g. “dynamo provides mechanical power for electric motors, lighting and heating”. Secondly, it must have wide range of uses e.g. lasers are used in medicine, shop checkouts and computer outputs. The GPT should have strong technical complementarities with current or future technologies. Lastly, it should display Hicksian complementarity; whereby it reduces the cost of an input z as well as increasing the demand for all the other inputs in complement to the input z.
Connection: They show that GPTs are important in influencing economic growth as long as they have the necessary characteristics. All four characteristics cannot be mutually exclusive and a GPT must have all of them to successfully impact economic growth.
Sen, Amartya. Development as Freedom. Oxford; New York: Oxford University Press, (2001).
Summary: Sen argues that the existence of freedom is both conducive to development and a by-product of it. The degree to which that freedom exists is representative of the quality of life in a given place; this degree is determined by different and distinct branches of freedom such as economic and political. “Political freedoms such as free speech and the right to vote can provide economic security”. Economic freedoms such as contribution in trade and production can stimulate a source of income and resources required for opportunities. These freedoms can be described to have a positive correlation whereby they reinforce one another.
Connection: Sen shows that development and economic growth are similar in the sense that they positively correlate with freedom-higher degrees of freedom usually results in higher levels of development and economic growth. Thus, Sen’s argument shows they move in the same direction.
Abramovitz, Moses. "Catching Up, Forging Ahead, and Falling Behind." The Journal of Economic History 46, no. 2 (1986): 385-406.
Summary: Abramovitz argues for the concept of conditional convergence- eventually, everyone will be on the same income levels. This can be achieved using his catch-up hypothesis where a country can measure its potential growth via the difference in its capital stock and productivity. The more backward the country, the higher its growth potential. These backward countries are follower economics who have a chance to catch-up through updating capital stock with latest technology. However, “the pace of realisation of a potential catch-up depends on a number of other conditions that govern the diffusion of knowledge, the mobility of resources and the rate of investment”.
Connection: Abramovitz shows that the state is key to providing the necessary levels of education and rate of investment needed for a country to reach its potential. This is important because the populous of follower economies must be able to exploit the updated technology to reap the benefits.