Helsinki: August 2006 International Congress of Historical Sciences, Sydney, July 2005 International History Associatio Settler Economies in World History Part A, General Conceptual Themes usan B. Carter Richard Sutch ersity of California Riverside Preface: Rethinking Global History from an American Perspective as a Puzzle, as a Clue The Demographic Gift: The Dynamics of and Rethinking Global History from an American Perspective American Exceptionalism 1
Settler Societies Large-scale from well-established states Initially Land Abundant and Politically Unorganized Temperate Climate Indigenous Peoples overwhelmed Settlers establish Institutions to promote their own political, economic, and social well-being Net Immigrants per Thousand Resident Population per 1000 60 40 Argentina Australia 20 United States 0 Settler Societies North America: U.S., Canada South America: Argentina, Uruguay, Chile Africa: South Africa Oceania: Australia, New Zealand Generalization: -20 1820 1830 1840 1850 1860 1870 1880 1890 1900 1910 1920 1930 Sustained during Era of Mass Sources; Carter and Sutch 2005, Series Aa7 and Ad16-24; Vanplew 1987, pp. 6-7; Maddison 2003, pp. 81-83 and 121-122; Ferenczi and Willcox 1929, pp. 539-540 and 544; and Mitchell 1983, pp. 51, 55-56, and 142-3. 2
10000 5000 Real GDP per Capita Australia (Haig) Connections between the characteristics of Settler Societies and their generally favorable history of economic growth 3000 2000 United States (Carter-Sutch) Argentina (Maddison) Geography/Natural Resources/Disease Environment Acemoglu-Johnson-Robinson [AER 2001] 1000 500 300 200 Australia (Butlin) 1780 1800 1820 1840 1860 1880 1900 1920 1940 Source: Carter-Sutch 2005, Maddison 2003. Good Institutions/Mass Education Sokolo f-engerman [JEP 2000] Easterlin [JEH 1981] Settler Societies Large-scale from well-established states Initially Land Abundant and Politically Unorganized Temperate Climate Indigenous Peoples overwhelmed Settlers establish Institutions to promote their own political, economic, and social well-being. Settler Societies Large-scale from well-established states Initially Land Abundant and Politically Unorganized Temperate Climate Indigenous Culture overwhelmed Settlers establish Institutions to promote their own political, economic, and social well-being. 3
Settler Societies arge-scale from well-established states Initially Land Abundant and Politically Unorganized Temperate Climate Indigenous Peoples overw helmed Settlers establish Institutions to promote their own political, economic, and social well-being. Endogenous Theory [Romer JPE 1986] Motivations: Better fit for the data. Better explanation for international differences in nations rates of economic growth. Better modeling of the economics of knowledge accumulation. Better modeling of implications of macroeconomic policy for economic growth. Good Summary: Paul Romer, The Origins of Endogenous. Journal of Perspectives 8 (Winter 1994): p. 5. Endogenous Theory Endogenous Economies of Scale [Abramovitz JEH 1993] Size of the Market [ Smithian ] Roundabout Methods [Young EJ 1928] Technological Externalities [ Promethian ] More invention [Simon Consequences 1989] Knowledge spillovers Non-rival nature [Arrow RES 1962] Learning by Doing [David Technical Choice 1975] Y = A(R,K,H,P) F(R j,k j,h j,l j ) where R j is stock of results from expenditure on R&D by firm j and R is aggregate R j where Kj is stock of K owned by firm j and K is aggregate Kj where P is the aggregate population of the common market 4
Unit costs Increasing Returns as an Economy Grows 160 Index Real Cost of Producing 10,000 Lumen- Hours of Illumination from Least-Cost Technology 1800 = 100 Hand Production 120 Simple Tools 80 Endogenous Technical Change as an Economy Grows Complex Tools & Organization Quantity Produced 0.029 40 0 1800 1840 1880 1920 1960 2000 Source: Nordhaus Most empirical research generated by endogenous growth theory has tested earlier [old] growth models, rather than testing endogenous theory itself. Most of the empirical work has utilized observations across countries and imposed extremely strong assumptions about international production functions. Howard Pack. Endogenous Theory: Intellectual Appeal and Empirical Shortcomings. Journal of Perspectives 8(1) (Winter 1994): 55-72. Unless there is some demonstration forthcoming that the theory is useful in explaining the growth pattern over time of national economies, [endogenous growth theory] will remain a rich expansion of existing growth theory rather than a powerful organizing framework for thinking about actual growth phenomena. Howard Pack, Endogenous Theory: Intellectual Appeal and Empirical Shortcomings. Journal of Perspectives 8(1) (Winter 1994): 55-72. 5
Endogenous Theory Puts at the Center of Settler Economy Dynamics Y = A(R,K,H,P) F(Rj,Kj,Hj,Lj) expands the market J. Simon Consequences of 1989 Knowledge Spillovers Y = A(R,K,H,P) F(Rj, Kj, Hj, Lj) Learning by Doing Embodiment More inventions increases the division of labor permits an increased exploitation of the country s comparative advantage in international trade Four Additional Mechanisms that Link Expanded Capital Formation and Increases the Return on and Demand for Capital Capital dilution [Borjas JEP 1995] Population sensitive investment [Kuznets ProcAmPhilSoc 1958] Increases Saving Rate More middle-aged savers with suboptimal wealth [Modigliani SocRes 1966] Import Human Capital Rearing and educating cost [Neal and Uselding OxEP 1972] Decrease Dependency Ratio Demographic Gift [Lee, Mason and Miller PopDevRev 2000] Y = A(R,K,H,P) F(Rj, Kj, Hj,Lj) Decreased Dependency Ratio Importation of Human Capital Y/P = L/P A(R,K,H,P) F(R/L, K/L, H/L) 6
Land Abundance And Climate Imported Human Capital Family and Friends Population Expanded Markets Population Expanded Markets More Inventions Spillovers Learning Roundabout Methods Roundabout Methods Investment Demand Industrialization Adam Smith. An Inquiry into the Nature and Causes of the Wealth of Nations, 1776. High Entry- Level Wages = High Saving Demographic Gift Allyn A. Young. Increasing Returns and Progress. Journal 38 (1928): pp. 527-542. Paul M. Romer. Increasing Returns and Long-Run, Journal of Political Economy, 1986. Expanded Markets Population Spillovers Learning More Inventions Roundabout Methods Ronald Lee, Andrew Mason, and Tim Miller. "Lifecycle Saving and Demographic Transition." Population and Development Review 26 (2000). Industrialization Julian L. Simon. The Consequences of, Blackwell 1989. Industrialization Demographic Gift 7
Imported Human Capital Land Abundance And Climate Larry Neal and Paul Uselding. : A Neglected Source of American, 1790 to 1912, Oxford Papers 1972. Family and Friends D. Acemoglu, S. Johnson, and J.A. Robinson. The Colonial Origins of Comparative Development: An Empirical Investigation, American Review 2001. Franco Modigliani. The Life Cycle Hypothesis of Saving, the Demand for Wealth, and the Supply of Capital, Social Research 1966. Investment Demand = High Saving Simon Kuznets. Long Swings in the of Population and in Related Variables, Proceedings of the American Philosophical Society 1958. D. Acemoglu and J.A. Robinson. Reversal of Fortune: Geography and Institutions in the Making of the Modern World Income Distribution, Quarterly Journal of s 2002. Land Abundance And Climate Imported Human Capital Family and Friends Population Expanded Markets More Inventions Spillovers Learning Roundabout Methods Investment Demand Industrialization High Entry- Level Wages = High Saving Demographic Gift 8