August 29, 2006

Smithian Optimality Plus

The previous post is a great piece - - thanks, James.

We are so accustomed to the accomplishments of the industrial era that we tend to lump all pre-industrial cultures together as primitive. But there are huge differences between the pre-industrial cultures pushing the upper ends of Smithian optimality (i.e., everything you can accomplish with market economies and specialization of labor, a la Adam Smith, but without powered machines and deposited hydrocabons) and less productive societies -- such as those of the Dark Ages.

These cultures tht achieved Smithian optimality and pushed the bounds further without mechanization are interesting cases. Based on James's review of these authors, it sounds as if Rome achieved this "Smithian optimality plus" through the scale effects of its large trade area and the long-term absence of war in its Mediterranean heartland. Macfarlane's comparison of Japan and England (The Savage Wars of Peace) came to the conclusion that both quite different societies had achieved a very high degree of pre-industrial development because their island status allowed them to avoid much of the war damage their continental neighbors suffered. Over time, that addiional capital multiplies.

Posted by James C. Bennett at August 29, 2006 06:48 PM

Great Site...

Posted by: Alex at August 30, 2006 06:32 PM

I must recommend the work of Prof. Negley Harte of UCL on the proto-Industrial economy. He concentrates on the small downward-pressure on prices arising from improvements in agricultural techniques, precipitating a demand-led economic expansion which proved self-sustaining. The idea, as I remember it (he was my tutor at UCL for a time, as, funnily enough, was Peter Heather who has also been discussed lately on this forum), is that if people already have enough to eat and food prices fall, they do not spend the resultant disposable income on more food but on consumption - a girl buys a ribbon for her hair, a man buys shinier buckles from his shoes, and sooner or later the snowball becomes so big that it can't be stopped, and voila! The modern world economy is born.

I have to say, I'm not an economic historian - I was always more interested in diplomatic history - so I am certainly doing Negley an injustice by over-simplifying his arguments here. But I thought that he deserved a plug, anyway...

Posted by: Ed at September 3, 2006 03:21 PM
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