Tuesday, 16 July 2013

"Black Death: Political and Social Changes"

Economists aren't allowed to do real life experiments, and according to some people, they are not even allowed to propose thought experiments to illustrate a point, especially one as cruel as exterminating half the population.

However, the results of this unfortunate real life event are a good illustration of the general principles that...

a) Land rents are not somehow fixed, they are primarily a reflection of population density. Land rents are a ransom payment, so the more people you can exclude, the more you can charge that one person who is prepared to pay not to be excluded. So if half the population dies, rents will fall quite significantly.

b) Wages are competed downwards if there are too many (forced) unemployed and competed upwards if labour is scarce, but as long as people can travel around the country in search of work (which the landowners of the time tried desparately to prevent), wages (net of local accommodation costs) will tend to level out around the country.

c) The total value of output is split up between wages and rents. If half the population dies, total output falls, but the share going to rent falls disproportionately and the share going to wages increases in relative terms (the wages of those who survived went up quite markedly).

If these statements and observations were not true, in other words if...

a) land rents were fixed and independent of the availability of labour or population density (i.e. if land rents were somehow "earned" by whoever owns the land),

b) wages were unaffected by (forced) unemployment, and

c) Rents represented an addition to total output rather than appropriation from total output,

then following the Black Death, the rents enjoyed by landowners and wages paid to each labourer would stayed constant, and so the share of total output going to landowners would have increased rather than decreased.


Mark Wadsworth said...

Bonus points to the first Homey to point out that wages are no longer level around the country, they are e.g. £10,000 higher in London than in the north of England, as if that somehow disproved assertion (b).


Mediaeval agricultural wages included "free" accommodation, so wages net of accommodation costs were the same everywhere.

Nowadays, rents in London are £10,000 higher than in the north of England, so wages net of accommodation costs are still the same everywhere.


mombers said...

MW, does Japan present a good example of this? Shrinking population, land rents falling for decades.

Mark Wadsworth said...

M, possibly, but are Japanese land rents really falling that markedly?

We know that selling prices fell a lot, but there was a completely mad bubble so it's possible that rents are largely unchanged.

L fairfax said...

Would this be an argument against immigration? Or have I misunderstood something?

Mark Wadsworth said...

LF, the conclusion is that immigration tends to benefit landowners and hurt the low paid, esp. those on the waiting list for social housing.

So the "bad" economic effects of immigration largely happen because we have a Home-Owner-Ist economic system, and not because it is inherently bad (economically, immigration is very good, it's only culturally/socially that it can be bad, depending on who you let in).

L fairfax said...

So if we had LVT immigration would not be a problem?
I am not sure about this
" (economically, immigration is very good, it's only culturally/socially that it can be bad, depending on who you let in)."
Surely the wrong type of immigration is economically bad - look at the costs of dealing with Islamic terrorism which a more intelligent immigration policy over the last 60 years would have prevented.
(Look at the problems that Poland doesn't have with terrorism).

Mark Wadsworth said...

LF, agreed, but that is what I refer to as a social/culture problem.

Mark Wadsworth said...

LF, the answer to your first question is a resounding "yes", of course, with the caveat that you let the "right sort" of people in.

Morgan Charles said...

"(Look at the problems that Poland doesn't have with terrorism)."

Look at the number of countries that Poland has invaded in the last hundred years. However, I suppose you are right in that it is not a good idea to send your armies forth to kill people if their relations and co-religionists are living in your country and it is an even less good idea to continue to let their relations and co-religionists into the country subsequently. However, a simpler and more economically beneficial answer would be not to invade other countries in the first place.

Pablo said...

Further reading:
Land Tenure and Unemployment by Frank Geary

L fairfax said...

BTW Poland had more troops in Iraq in 2004 than Spain did and I think we all know what happened in Spain

I would agree with this
"LF, the answer to your first question is a resounding "yes", of course, with the caveat that you let the "right sort" of people in."
Sadly we don't only let the right type of people in

Morgan Charles said...

LF, fair enough, I stand corrected, but I suspect that, like the rest of the minority nations, no-one was really aware of their presence (as distinctly Poles, that is). Who would have thought that the Mongols would have got mixed up in it?However my point remains, that the states with a colonial history (UK, US, Spain, France etc) were the ones that were mainly viewed as the aggressors, presumably because they "had previous".

L fairfax said...

Canada unlike Poland did not support the war. They also don't have any colonial history but despite this they have had more attacks than Poland.
It shows the problem isn't history or foreign policy but the wrong type of immigrants.