Chinese Economic History in a Long-term Perspective

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Presentation transcript:

Chinese Economic History in a Long-term Perspective Needham Puzzle: Why the Industrial Revolution Did not Originate in China

China in pre-modern history The sophisticated agriculture, having highest yields. Highest output per land (per seed) in the world. Based on rice farming & innovations (seed, etc). Remarkable achievement in pre-modern technology. (J. Needham). Gunpowder, magnetic compass, paper, printing. Francis Bacon: Printing, gunpowder and the compass: These three have changed the whole face and state of things throughout the world; the first in literature, the second in warfare, the third in navigation; ---- no empire, no sect, no star seems to have exerted greater power and influence in human affairs than these mechanical discoveries

China in pre-modern history (cont’d) Development of industry (iron, textile), commerce & urbanization. Per capita iron output 5-6 times higher than Europe. Water-powered reeling machine in 13th century. Well-functioning market (state) institutions: ownership, contract, bureaucrats, etc. China at a threshold for major breakthrough in science and industry in the 14th century, but not realized. Industrial revolution in Europe after the 17th century. Why? A grand question raised by J. Needham.

Hypothesis 1: High level equilibrium trap (focusing on demand side of technology) Prime cause: High man-to-land ratio. Labor intensive rice farming- prefer son (labor)– extended family system with early marriage & high fertility- rapid population growth with limited land. Reached a high level equilibrium trap (subsistence level living standard of large population with high level of traditional technology). Price of labor decreases- demand for labor saving technology decline (little incentive for innovation). Higher man/land ratio- lower labor productivity- smaller surplus per capita- little surplus left for investment (in technology, industry).

Hypothesis 1 (cont’d)- Lin’s criticisms. Their implicit assumption of bounded potential of agriculture technology not valid. There does not exist “equilibrium trap”, if technology is progressing. Lack empirical evidences on “rising man-to-land ratio hindered inventive creativity”. Technology advanced in population-increasing period (800-1200), while technology retardation in population-stagnating period (1200-1400). Not clear whether there were labor surplus (labor shortage observed in peak season & for double-crop). Not clear whether high man/land ratio had depleted agriculture surplus for investment for new technology.

Model of Technological Invention: Basis of Hypothesis 2 Supply of technology comes from trial of inventive activity. A trial can be perceived as a random draw from the invention distribution The probability of inventing a better technology by a trial can be measured by the shaded area The Invention distribution Curve The location of a invention distribution curve are determined by the existing stock of scientific knowledge. * Increases in the stock of scientific knowledge shifts out the curve.

Hypothesis 2: focusing on supply side of technology In pre-modern times, technology progress can be achieved by more trial and errors. Population was a major factor for innovation. Larger population imply more farmers, more artisans, more tinkers, etc, therefore more trial and errors Larger population also implies larger no. of gifted people Populous China had higher probability of technology progress. Marginal returns to the probability of invention from larger population eventually diminishes. However, modern technology advance results from different channels.

Hypothesis 2: (focusing on supply side of technology) Modern industrial revolution is based on science revolution. Science revolution: Galilean-Newtonian physics, Mendelian genetics, etc.- body of systematic knowledge about nature. Mathematization of hypothesis & controlled experiment (to test the hypothesis). The number of experiments by one inventor for one year can be larger than many thousands farmers. Science revolution required large investment (human, material) for scientific research. Expensive and time-consuming (not just a few genius).

Hypothesis 2: Incentive structure hindering science development (cnt’d) In pre-modern China, the incentive structure of its politico-economic system diverted the gifted people & resources away from scientific research. China had bureaucratic system, which had highest authority, governing the large/complex society. Gifted people tend to prepare civil service examination for tens of years (to become gov’t official). The examination is all about Confucian classics. Two additional minor factors. Traditional ideology discriminate against merchants and artisans (Needham). Discrimination not so strong in reality. The unified ideology (“Confucian”) hindered competition. Not so much unified (eg. Wang Yangming’s thought).