Lesson 1

From the first economic revolution to

the decadence of the ancient world

The first economic revolution

The shape of the ancient world
Boom and decadence of the Roman
Empire
 The first economic
revolution
VMP
labor

VMP agriculture

VMP hunting/ gathering

O
Qd Qc Population / labor force

Within the context of a comparative static economic model

Conditions that would account for the First Economic Revolution
Purpose of the model:
model
to derive the conditions under which the scarce labor resource of the band
would shift from its traditional occupation of hunting/gathering to agriculture
 The first economic
revolution
VMP
labor

VMP agriculture

VMP hunting/ gathering

O
Qd Qc Population / labor force

The total effective Demand for the bands labor can be viewed as the solid line
This schedule, when combined with the quantity of labor available, determines
the marginal-value product of labor and how the available labor will be
allocated between the two sectors
 The first economic
revolution
In sum, there are three changes that could account for the
transition from hunting to agriculture. Individually or acting in
concert:
1. A decline in the productivity of labor in hunting
2. A rise in the productivity of labor in agriculture,
agriculture or
3. A sustained expansion of the size of the labor force could have
resulted in the transition of man from being exclusively a hunter
to increasingly a farmer
 The first economic
revolution
Crucial difference to an explanation of the First Economic
Revolution: comon property rights in hunting
exclusive communal rights in agriculture

To border upon private property in

its influence upon mans behavior

The difference in the nature of the two types of property rights

governing hunting and agriculture respectively has important
implications for the effect technological change would have
upon the bands welfare in the long run (no doubt that
prehistoric man was inventive) Testimony: development of tools
LEARNING BY DOING AND BY
EXPERIMENTATION
 The first economic
revolution
Over the long-run however the increased rewards to pursuing
agriculture would remain while those in hunting would be
dissipated by the effects upon the resource base of increased
effort in that area
Read the final paragraph, pp. 82-83

The different types of property rights in hunting as against

agriculture ensure that technological change would eventually
causes a shift of labor into agriculture
 The first economic
revolution
Thus, the human population of the
prehistoric era had built into its behavior,
whenever the standard of living permitted,
a collective tendency for population to
grow
 The first economic
revolution
Many groups probably failed to make this
transition, but some by luck or chance
managed to make the transformation;
It is from these beginnings that we see the
development of civilization and economic
growth that has occurred in the ten
thousand years since
 The first economic
revolution
The incentive change stems from the
different property rights under the two
systems
When common property rights over
resources exist, there is little incentive for
the acquisition of superior technology and
learning
 The first economic
revolution
In contrast, exclusively property rights which
reward the owners provide a direct incentive to
improve efficiency and productivity, or, in more
fundamental terms, to acquire more knowledge
and new tchniques
It is this change in incentive that explains the
rapid progress made by mankind in the last
10,000 years in contrast to his slow
development during the long era of primitive
hunting/gathering
 The shape of the ancient
world A.D. anno Domini; B.C. before Christ

Ancient epoch is considered as a period of

aproximately 8,000 years, since the beginnings of
sedentary agriculture until the splendor of the
Roman empire
Population was growing at a very high rate during
this period (neolithical revolution; unprecedent
high growing rates)
In addition the human settlement area grew-up
 The shape of the ancient
world
The size of the State was growing until
the Western world remain articulated
around the Roman Empire
8,000 years: development of tecnology
Bronze era followed the Iron era

Trade expansion and development

In the long run, impersonal markets were
created for resources allocation
The shape of the ancient
world
Population growth was the most fundamental
underlying factor in ancient economic history

The expansion of the food supply with settled

agriculture led to an increase of the rate of
population growth
Concentration in settled villages would
But population grew have increase the spread of
and the migrations that communicable diseases

created and overturned the early Empires in the

Tigris-Euphrates valleys were at least partly a
response to population pressure (as indeed Dorian
expansion in Greece)
The shape of the ancient
world
As long as there was an available supply of good
quality land we would expect that the cost incurred in
migrating,
colonizing, and
creating individual property rights
would not make such endeavors worthwhile

But in periods of diminishing returns there could be

an acceleration in such activities

Population pressure, then and now, is a two-edged sword

The shape of the ancient
world
The widespread extension of slavery
itself is an indication that free
laborers were themselves above a
subsistence standard

Otherwise, slavery would not have

been a viable institution
The shape of the ancient
world
The rate technological change- was slow in
comparison to that in the modern world
A few highlights of the immense
The shift from bronze to iron technological transformation of
these millennia
The development of writing
(from pictographs to hieroglyphics)
The improvements in agricultural techniques
The developments in engineering

Essential for the specification of contracts and

the measurement costs which permitted the
growth of impersonal change
LESSON 1
FROM THE FIRST ECONOMIC REVOLUTION TO
THE DECAENCE OF THE ANCIENT WORLD

Boomand decadence of the

Roman Empire
Boom and decadence of the
Roman Empire
A distinguishing feature of the ancient world was that
war often paid off for the victor
Roman triumphs were a dazzling display of the spoils
of victory (slaves; gold)
Land adquired by these conquests also was distributed
among the victors (faithful underlings and soldiers)
The barbarians, in the latter period of Roman empire,
could extract huge sums of gold from the Romans,
simply by threatening invasion
Just as enlargement of the subject area provided
a larger tax base as well as
a cheap supply of labor in the form of slaves
 Boom and decadence of the
Roman Empire
Commerce did not rate highly in the Roman system of values
It was left in the hands of inferior classes, foreigners and
even slaves (peculio)

Nevertheless, the Roman legal system allowed considerable

freedom of enterprise and did not penalize commercial activities
Adapted to an agrarian regime; gradually modified by the
incorporation of Greek elements
it provided for strict enforcement of contracts and property rights
and prompt settlement of disputes

As Roman law spread, in the wake of the conquering legions, it

provided a uniform, coherent legal framework for economic
activity throughout the empire some regions, notably Egypt were subject
to special regimes in which their traditional
customs and usages are retained
 Boom and decadence of the
Roman Empire
One major consecuence of pax romana was population growth
Estimation of the population of the empire at its height range
from 60 million to mor than 100 million
The population of the empire at the death of Marcus Aurelius(180
A.D.) was at least double that of the same area at the death of
Julius Caesar (44 B.C.) Growth was most marked in the western
Mediterranean, including Italy, beacause the East
was already well populated

To what extent the average standard of living improved

concurrently with demographic growth is a much more difficult
question
Undoubtedly there was some improvement, which both permitted
and encouraged population growth
 Boom and decadence of the
Roman Empire
The absolute and relative numbers of slaves varied considerably
over time: slaves were numerous in the expansive phase of the
empire,
empire when war captives and hostages were plentiful, but much
less so in later periods when the empire was on the defensive
The ratio was also affected by the rate of manumission and
the relative birth rates of the slave and free populations
Birth rates among slaves are not as high as those of free people
The relative numbers of slaves also affected the price of free labor
Freemen rarely worked in such unpleasant and unsafe occupations
as mining, but in other areas they might have to compete with the
subsistence standards of slaves
Another possible measure of material well-being is
the average length of life In the best years of empire:
about 25 years
(incomplete o inconclusive statistics)
 Boom and decadence of the
Roman Empire
When the relative decline in military superiority is taken together
with the growing costs of bureaucratic control of the Empire,
it seems clear that the result was a disequilibrium followed by
increasing local autonomy and autarky

The Roman line of defense along the Rhine and the Upper Danube
imposed an increasingly heavy financial burden as time went on
Not only were larger and larger payments in gold made to
barbarian groups to bribe them not to invade,
invade
But the expenses of the legions rose:
rose the army under Diocletian
may have numbered 350,000 men
At the same time, Rome was feeding 120,000 of its citizens free
(panes et circenses),
circenses and
Therefore demands on the tax structure, were continuing, the tax
base was eroding
 Boom and decadence of the
Roman Empire
A more apt description is that the gains to individual constituents
of being members of the world-wide empire called Rome had
significantly declined as their taxes had grown and the protection
of trade that they enjoyed had eroded

More and more parts of the empire found that local units provided
them with more protection than they could get from the bickering,
internally agonized Roman state Thus they came to the conviction that their
well-being depended upon local autonomy
The short-run result was
endoubtedly that they no longer bore the burdens of the Roman state
But the long-run consequences were
the growth of local autarky
A decline in trade (as there was no longer protection for a long-distance trade)
A fundamental shift and transformation in economic structure
 Boom and decadence of the
Roman Empire
These exceptions, and the short-lived Carolingian
Empire, do not, however, gainsay the major point that
the economies of scale that made possible a single
empire governing the entire Mediterranean world had
disappeared

We would say that the reasons for the Roman Empires

existence simply disappeared
as its military advantages evaporated and
the large-scale state no longer provided for the protection and
enforcement of property rights