usher - political economy (blackwell, 2003)

Over the last century and a half, people in most countries have acquired a cornucopia of new types of goods, have increased income per head by more than ten fold and have doubled life ex

Political Economy

Political Economy

D A N U S H E R

© 2003 by Dan Usher

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[People are better off today than at any time in the entire history of the world Over the last century and a half, people in most countries have acquired a cornucopia of new types of goods, have increased income per head by more than ten fold and have doubled life expectancy The competitive market is a necessary, though by no means sufficient, condition for our prosperity.]

[The importance of property rights is illustrated in an example where property is not secure People may devote resources to producing goods for consumption or to taking goods produced by others The example highlights the role of government as policeman and the danger – rarely averted until modern times – of the emergence of a predatory ruling class.]

[Once property is secure, the price mechanism can be counted on to direct resources for the production of goods and to allocate goods among people, automatically, without cen- tral direction and so efficiently that no planner, however knowledgeable, could redirect resources to make everybody better off simultaneously.]

[Demand and supply curves are the principal tools of economic analysis Both curves nect quantity and price, the demand curve in accordance with the utility, or preferences, of

con-vi C O N T E N T S

the consumer, the supply curve in accordance with the technology of the economy Together, demand and supply curves are employed in analyzing taxes, tariffs, rules for public projects, monopoly, patents and the gain from invention Different interpretations of the demand curve are compared.]

[As indicators of the preferences of the consumer, utility functions can accommodate many types of goods and situations: private goods, public goods, shared goods, externalities, risk, consumption today and consumption tomorrow The competitive economy is less efficient

in some circumstances than in others, and the role of the government may be established accordingly.]

[Production functions connect outputs of goods with inputs of labour, land and tal Firms maximize profit in choosing what to produce and what resources to employ Technical change is represented by a shift in the aggregate production function Prosper- ity and impoverization can be seen as the outcome of a war between population growth and technical change.]

[In the ideal competitive economy, people respond not to other people, but to clearing prices Beneath the price-guided economy is a sub-stratum of bargaining and deal-making in transactions that are to some extent unique Corporations, labour unions, charities and political parties are elaborate contracts within which price-taking

market-is dmarket-isplaced by hierarchy.]

[Evaluation of public policy requires a standard of what is best for society as a whole.

A person’s sense of the common good – called a social welfare function – can be identified through a generalization of the method, discussed in chapter 3, for identifying a person’s ordinary utility function ranking the different bundles of goods he might consume There should be some similarity in people’s sense of the common good, though full agreement is too much to expect.]

[Government by majority-rule voting is indispensable but potentially self-destructive It is

an indispensable component of what most people see as a good society It is potentially destructive because it may expose a minority – any minority identified by wealth, region, language or race – to expropriation at the hands of the majority Redistribution of income can be safely consigned to the domain of voting Other aspects of society must be protected from the electoral arena.]

self-C O N T E N T S vii

[Legislation is an incomplete guide to public administration Two subsidiary criteria are that all citizens be treated equally and that the available public revenue be assigned efficiently to projects within each category of expenditure Cost-benefit analysis acquires a political as well as an economic dimension The executive branch of government and the civil service must be constrained in their dealings with citizens not just for efficiency in the economy, but to avoid placing citizens at the mercy of the administrators.]

[The domain of political economy overlaps with the domain of law The law’s resolution

of disputes sheds light on the meaning of property rights Principles for choosing among public projects and policies can be extended to the choice among laws The “rule of law” is

a significant part of society’s defense against predatory government.]

[Markets with private ownership of the means of production, politics based upon rule voting, a rule-bound public administration and a degree of independence for the judiciary are mutually reinforcing ingredients of what most people see as a good society.]

FIGURES

F I G U R E S ix

4.12 Comparison of the price elasticities on the constant income demand

10.1 How the demand and supply for public expenditure determine the

11.3 Indifference curves for the cost of the criminal justice system and

increase in population, and how the average income per person

T A B L E S xi

community with three voters where taxable income may shrink in

.by directing industry in such a manner as its produce may be of the

greatest value, he intends only his own gain, and he is in this, as in many

other cases led by an invisible hand to promote an end which was no part

of his intention Nor is it always worse for society that it was no part of it.

By pursuing his own interest he frequently promotes that of society more

effectually than when he really intends to promote it.

Adam Smith,The Wealth of Nations, 1776

This book is an introduction to economics for university students As the name

“political economy” suggests, the book differs from other introductory texts in sizing connections between the organization of the economy and the conduct ofgovernment, but, like every other introductory text, its primary focus is upon the cal-culus of self-interest in the everyday business of life and upon the workings of theeconomy itself The book is intended to whet the student’s appetite for the study

empha-of economics and to supply a foundation for more advanced courses in the subject It

is also intended to convey the lessons of economics that will prove most useful to thestudent – whose main interest may lie in other subjects and who may not continuethe study of economics – in his role as citizen, voter and participant in the governance

of society Somewhat more difficult than other introductory texts, the book is no moredifficult than introductory texts in the sciences As the text for a full-year introductorylecture course, it should be comprehensible enough

The book would also serve as a text for a second-year course in political economynarrowly defined, with emphasis on the economics of voting, public administration,and law The chapters on markets and the competitive economy would then constitute

a review of essential background material

The main purpose of this book, like that of any introduction to economics, is

to explain the price mechanism: how market prices emerge spontaneously and howthese prices create “order without orders,” allowing the world’s business to be con-ducted without any central authority to direct the process in detail One might suppose

xiv P R E F A C E

that nothing less than an all-powerful central authority would be required to directmillions of people producing a virtually infinite variety of goods, to align produc-tion to consumption so that the mix of goods produced is precisely the mix of goodspeople want to consume, and to determine each person’s share of the pie Surpris-ing as it may seem to people unacquainted with economic ideas, that turns out not

to be so Instead, with private ownership of the means of production but withoutcentral control or conscious planning of the economy as a whole, self-interested peo-ple are guided by market-determined prices to deploy the resources of the world

to produce what people want to consume This assertion, made commonplace byrepetition, is so extraordinary and so completely counter-intuitive that it cannot bestrictly and unreservedly true A central task of economics is to show when the asser-tion is true, when public intervention in the economy might be helpful, and whenmarkets are best left alone because public intervention is likely to do more harmthan good

A second objective is to introduce the student to the tools of economic analysis.Demand and supply curves are derived in a simple framework and are then applied tothe task of showing the consequences for the economy of monopoly, tariffs, patents,technical change and alternative forms of taxation Demand and supply curves facilitatethe analysis of the role of the government in the economy, why some countries arerich and other countries are poor, how to foster economic growth, how to reduce thegap between the incomes of the rich and the poor, when to regulate markets, whenand how to reduce the level of pollution, how to identify the pros and cons of publicprovision of health care and education, and how to determine the appropriate publicprovision of the infrastructure of society – roads, bridges, the army, and basic research –that a market might not supply at all

Third – and here is where a text on political economy differs most from other nomics texts – a text on political economy emphasizes the mutual dependence ofeconomics and politics, how the virtues of a competitive economy are conditional onother institutions in society and how economic organization may foster or corrodedemocratic government Perennial questions of political economy are discussed: Howcan the personnel of the army and the bureaucracy – endowed with a monopoly of themeans of organized violence to protect citizens from one another and from aggres-sion abroad – be deterred from employing its authority to transform itself into a rulingclass that exploits the rest of society for its own prosperity and advantage? Throughoutmost of history, that is exactly what happened Why is this outcome avoided in somecountries today? How can democracy with majority-rule voting be sustained when amajority of the poor can employ the power of the vote to expropriate the rich? What

eco-is to prevent a majority based upon race, language, religion, locality or any badgewhatsoever from exploiting the remaining minority of the population? Until a fewhundred years ago, it was generally believed that democracy had no defense againstexpropriation of minorities by majorities, and democracy was widely opposed on thataccount Why, though some capitalist societies are not democratic, has no thorough-going communist society, with full public ownership of the means of production,ever been democratic, despite the intentions of its founders? A text on political econ-omy would be expected to raise these questions, even if no definitive answers can besupplied

P R E F A C E xvPolitical economy is the original name for economics, abandoned a hundred yearsago for the simpler term “economics” because the content of the subject had narrowed.The word “economy” is derived from a Greek word meaning “the management ofthe household.” Political economy would be the management of the nation In thenineteenth century, and frequently in the first half of the twentieth century as well,what we now call economics and what we now call political science would be stud-ied under the heading of political economy in the same department of the university.Over the last fifty years or so, the unified departments split into individual depart-ments of economics and political science, as each subject acquired a separate domain

of investigation and a distinct style of analysis The economy came to be studiedentirely on its own, as a great machine that reacts to political decisions about suchmatters as tariffs and taxes but that runs entirely in accordance with its own laws

of motion

Just as the divorce seemed complete, there emerged on the horizon new problemsthat straddled the two disciplines It became evident that voting could be usefullyanalyzed by methods that have more in common with economics than with politicalscience as practiced at the time The study of voting became the domain of scholarswho may have started out as economists or as political scientists but who needed famil-iarity with both disciplines It became evident that economic growth was as much aconsequence of political organization as of conditions in the economy It became evi-dent that society’s choice of laws could be explained on the same economic principlesused to explain society’s choice of roads, bridges, hospitals, and schools It becameevident that democratic government and civil liberties were intimately connected withthe organization of the economy

Nowadays, the term political economy may refer either to a sub-field of economics about overlaps with politics and law or to the entire field of economics broadened to

include the overlaps with politics and law Political economy may be an increment or

an expansion In this book, it is an expansion; it is economics with a political slant Thestudy of how markets supply goods and promote economic growth (the traditionaldomain of economics) is combined with the study of how markets depend on otherinstitutions in society and of how, together, property, public administration, votingand the law uphold what most of us see as a good society

The broadening of a field of study may or may not be desirable In some grandsense, all knowledge is one, but we compartmentalize knowledge into fields such asphysics, chemistry, biology, economics, political science, and philosophy for the samereason that different people do different jobs The world’s work is best accomplished

by a division of labour in learning as well as in toil But boundaries between fields

of knowledge are not fixed forever They change from time to time in response tonew interests and new discoveries, as, for instance, when psychology split off fromphilosophy or when biology and chemistry gave birth to bio-chemistry Whether it isuseful to recognize something called political economy is in the end a question of howbest to develop the student’s understanding of society A course in political economymay be a good beginning for the study of economics and a way to whet the student’sappetite for economics more narrowly defined Whether he begins with conventionaleconomics or with political economy should make little difference by the end of a solidthree or four year program

xvi P R E F A C E

It is customary to teach economics by telling little stories to illustrate the main ideas

of the subject Here, the practice (or vice, depending on how you look at it) is carried

to the extreme Predatory behavior is introduced by the story of the fishermen and thepirates The interaction of taste and technology is illustrated by the tale of RobinsonCrusoe Prices and markets are introduced in an economy with five people, each withhis own plot of land Problems in majority-rule voting are exemplified by a choiceamong sandwiches, the apportionment of the national income, the construction offive roads in five regions of the country, and deals in the legislature between militaristsand egalitarians The five roads reappear in the discussion of public administration,together with a story about safety in airports and bus stations The examples aremostly numerical rather than analytic They rely more upon made-up numbers thanupon smooth curves or functions By comparison with other introductory expositions

of economics, the style here is old-fashioned, less general and sometimes open to thesuspicion that different numbers might have yielded a different story; but it allows forthe presentation of ideas with much less recourse to formal mathematics The exam-ples are intended to convey economic ideas forcefully and memorably, supplying thestudent with templates or paradigms that can be applied in a variety of circumstances.After studying this book, a student of economics would proceed to solid, rigoroustexts in microeconomics and macroeconomics

The reader is expected to be familiar with high school algebra but not calculus,though some calculus ideas are developed from first principles The student with nocalculus at all will acquire a little familiarity with calculus ideas which should be of somehelp when he comes to study calculus later on The student with a little calculus willfollow the demonstrations more easily and will have his grasp of calculus strengthened

by its surreptitious application here The student with a strong foundation in calculuswill be able to skip some demonstrations as obvious

Chapter 1 is intended to motivate the student for the study of political economy

It calls attention to how extraordinarily fortunate we are to be living in this lar time and place, automatically raising the question of how prosperity and freedomare attained People today – primarily, but by no means exclusively, in the capitalistdemocracies of Europe and North America – are enormously better off in virtuallyevery respect than people have ever been before, with a higher standard of living,greater variety of goods, much longer lives, less pronounced inequality of income,status and rights, the elimination in most countries of torture and slavery, and greaterinfluence of ordinary people upon the choice of leaders and the conduct of govern-ment The common opinion that the twentieth century has been especially prone

particu-to devastation in war and civil strife is debatable; and the deficit of mortality, if any,

on that account is almost certainly outweighed by the alleviation of ordinary tion and disease A statistical summary of these advances in prosperity, longevity, andother aspects of society leads naturally to the study of whether and to what extentthe competitive economy is a necessary condition for economic, political, and socialprogress

starva-Chapter 2 is about predatory behavior The chapter may be seen as presenting adilemma or riddle to be solved in the rest of the course Life in a society withoutstrong government is “solitary, poor, nasty, brutish and short.” Resources and energymay be diverted from the production of useful goods and services to the struggle over

P R E F A C E xviithe allocation among people of the goods and services produced Government strongenough to contain private exploitation is also strong enough to exploit the commonman in the interest of a ruling class, as a shepherd exploits his sheep, allowing neitherliberty nor progress The picture of government as predator leads naturally to the study

of how a competitive economy might serve to constrain and humanize the potentiallycorrosive powers of government

The next five chapters are a simple, self-contained account of the mechanism, thevirtues and the weaknesses of markets with private ownership of the means of pro-duction Chapter 3 is an almost unconscionably brief description of the competitiveeconomy It is the story of the invisible hand referred to in the quotation from AdamSmith above It is the story of how prices govern production and allocation of goods,determining at once how scarce resources are deployed, what is produced, and howgoods are allocated among people The principal tools of analysis are the demandcurve as a reflection of taste and the supply curves as a reflection of technology Theseare introduced in an economy with only one person who produces two goods on fiveplots of land with different productivities Then, after a brief digression on bargaining,the five plots of land are reassigned to five different people, allowing for the emergence

of a competitive market where prices guide production and trade Simple as they are,these models are sufficient to display the virtues and vices of the competitive economyand to show how markets enable most of the world’s work to be done and most ofthe national income to be allocated without detailed and comprehensive direction by

a central authority

Demand and supply curves are a flexible and versatile tool of analysis In Chapter 4they are put to work in measuring the gain from trade, the full cost of taxation, thesocial loss from monopoly and social gain from invention Taste and technology arestudied in more detail in chapters 5 and 6 Chapter 5 is about the diversity of types ofgoods and the implications for the role of government in society Chapter 6 is abouthow different types of resources are combined to produce goods and about the sources

of economic progress Chapter 7 is about how people bargain and about how ations – corporations, trade unions, and political parties – supplement or circumventmarkets when direct bargaining is prohibitively costly The world’s work is facilitated

associ-by a combination of taking and deal-making The clean implications of taking in the simple economy discussed in the earlier chapters require considerablemodification once bargaining is required

price-The benefits of a competitive market are realized because, and only to the extentthat, property is secure Security of property is typically postulated in expositions ofeconomic analysis The postulate is often valid in practice, but never completely soand always because other institutions in society create an environment where mar-kets can flourish These institutions and their connections with the economy are thesubject of the last four chapters Chapter 8 is about criteria for economic policy Wecannot reason with one another about laws, rules or policies without some generallyrecognized notion – however vague or imprecise – of the common good, but there

is, unfortunately, no unambiguous and universally acceptable measure An attempt ismade to be as precise as possible about the common good and its implications for eco-nomic policies or institutions Chapter 9 is about voting People nowadays are inclined

to think of voting as unambiguously righteous, but it turns out, on close inspection,

xviii P R E F A C E

to be much more problematic than is often supposed Voting supplies laws and ers, but could itself become the instrument by which one group of people exploitsanother The emphasis of the chapter is on how this dismal outcome is in practiceaverted Diseases of voting (the reasons why government by majority-rule voting mayself-destruct) and defenses of voting against disintegration are examined Chapter 10

lead-is about adminlead-istration Not all public declead-isions can be made by voting The army,the police, the roads, the redistribution of income, and, in most societies, the hos-pitals, the schools, and many other aspects of life are publicly administered Publicadministration requires detailed regulation that can only be supplied by a hierarchi-cally organized bureaucracy that may turn despotic unless confined by clear principles

of governance that only the legislature can provide Cost-benefit analysis is discussed

as a surrogate for the common good and as a defense against excessive discretion bythe bureaucracy

The final chapter is about how the law protects property and preserves the ment for majority-rule voting by punishing crimes, adjudicating disputes and guarding

environ-a constitutionenviron-ally specified line thenviron-at no environ-administrenviron-ative environ-appenviron-arenviron-atus environ-and no legislenviron-ature menviron-aycross Law is the guardian of rules that would otherwise be violated and misused Forproduct liability and for murder, it is shown how, and to what extent, laws can bedesigned and evaluated with references to their consequences in promoting the com-mon good The chapter ends with a discussion of cases pertaining in one way oranother to civil rights and to the role of the courts in interpreting the constitution.Two large interconnected themes run throughout the book The first is the dis-tinction between economic rights that people hold unequally and political rights thatpeople hold equally Economic rights are entitlement to property acquired by inher-itance or by purchase Political rights include the right to vote, to equal treatmentunder the law, to equal access to public education, to run for office, and so on Theserights clash at the edges They clash over the progressivity of the income tax, or, moregenerally, over society’s decision about how much of each person’s earnings are hisown to spend as he pleases and how much are to be shared with the community at largethrough tax-financed redistribution of income, welfare for the poor, the old age pen-sion, unemployment insurance, public provision of health care, and so on The clashbetween these rights is at the root of an ancient objection to democracy, the fear thatthe right to vote will be used by the poor to expropriate the rich, destroying prosper-ity and democracy in the process These rights are studied together in contemporarypolitical economy

The other major theme is the mutual dependence of private property, voting, istration, and law Together, these institutions constitute the foundation of what wesee as the good society, defending us against anarchy on the one hand and despotism

admin-on the other Though the competitive ecadmin-onomy is often studied in isolatiadmin-on from ical institutions, it cannot really stand alone because private property cannot defenditself Property is a creature of the state None of the virtues of a competitive economycan be realized without public administration to protect property rights, compensatefor the “failures” of an unfettered competitive economy, redistribute income to someextent, and supply types of goods that markets can never supply The law specifies theboundaries between people’s property rights, resolves disputes and protects peoplefrom predatory government as well as from one another, tasks that the law cannot

polit-P R E F A C E xixperform without some degree of independence for the judiciary Voting is required

as the only alternative to despotic government But the defense is not just one-sided.Our political institutions cannot cope with the allocation among citizens of the entirenational income, and can only be maintained in conjunction with an economy wheremost of the allocation of income to people is outside the political arena The consensus

in society to accept the will of the majority in voting, the decisions of the bureaucracyand the judgments of the courts as binding on each of us could not otherwise withstandthe pressure of self-interest

Dan Liang, now a graduate student in the Queen’s School of Business, prepared thediagrams and assembled most of the data on life expectancy in chapter 1 Jill Hodgson,

my secretary, miraculously preserved her cheerfulness and her sanity through revisionafter revision of the text My colleague Marvin McInnis proved an inexhaustible source

of information about the matters discussed in chapter 1 Charles Beach, CarolineMiller, Jim Pritchard, and Lucien Karshmar suggested sources of data Suggestions byBarbara Goldberg have been incorporated in the chapter on law Thank you all Formore years than I care to admit, the economics department at Queen’s University hasprovided me with a pleasant and challenging environment for research and writing.The Social Science Research Council of Canada provided financial support

C h a p t e r O n e

HOW DREADFUL LIFE USED TO BE

Political Economy or Economics is a study of mankind in the ordinary

business of life: it examines that part of individual and social action

which is most closely connected with the attainment and the use of the

material requisites of well being.

Alfred Marshall, 1890

In the ordinary business of life, mankind thrives as never before Over the last fewhundred years, first in Europe and America and then increasingly throughout theworld, people have become substantially better off – materially, politically, and cul-turally – than they have ever been in the entire history of the world We live longer

We eat more nutritious food We are better clothed We are better housed We haveaccess to a far greater variety of goods We have more leisure We are healthier Wehave infinitely greater access to information We watch television, drive cars, and fly

to vacations thousands of miles away from home Ordinary folk enjoy a standard ofliving to which the nobility in the great empires of the past could not aspire Our lawsare more just and humane We have greater respect for one another We are moreinclined to recognize a common humanity between rulers and ruled, and betweenrich and poor We govern ourselves collectively, and are less frequently subjected tothe whim of tyrants Our present conditions of life are uniformly better than those ofour ancestors

The source of our prosperity is the organization of our economy I claim this as

a necessary rather than as a sufficient condition But for the institution of privateproperty and the intricate web of rules we call capitalism, none of what we now enjoywould be possible To make such a claim is not to deny that other similar claims may

be equally valid But for the progress of science and technology, none of what we nowenjoy would be possible But for the development of political liberty and democracy,none of this would be possible I would deny neither of these other claims Claims

on behalf of capitalism, technology, and political organization may all be true, asnecessary conditions, simultaneously This chapter does not discuss markets or explain

Political Economy

Dan UsherCopyright © 2003 by Dan Usher

2 H O W D R E A D F U L L I F E U S E D T O B E

how markets foster prosperity and economic growth These matters will be discussedthroughout this book The main purpose of this chapter is to set the stage by reviewingthe record of mankind’s achievements

A subsidiary purpose is to balance this triumphant view of contemporary capitalism

as a producer of goods and services (including non-material goods such as leisure,health, and longevity) with a brief account of mankind’s far less successful record indistribution Inevitably, the apportionment among people of the benefits of materialprogress leaves some gap between the prosperous and the unprosperous and entailssome wastage of resources, goods, effort, and lives in the struggle of each personagainst every other person to procure for oneself the largest possible share Withinthe nation, the bread and the cheese, the cars and the bicycles, the access to medi-cal services, and the access to higher education all have to be apportioned, so muchfor you, so much for him, so much for me The nation’s tasks have to be assigned.Explicitly or implicitly, society must decide who is to be the butcher, the baker, thedoctor, the day laborer, the cop on the beat, the prime minister, and the beggar

on the side of the road Privileges and responsibilities have to be assigned ety must decide who participates in the choice of laws, who obeys whom, when,and in what circumstances obedience is withdrawn In the world at large, territo-ries must be assigned to peoples, countries’ borders must be established, citizenshipmust be recognized together with rights, if any, to migrate from one country toanother

Soci-The next few chapters are about how markets attend to production and distributionautomatically with no central authority to determine who does what and who gets what

as long as there is a prior allocation among people of the property of the nation Thedistribution of property is not God-given or just in itself It can be nothing other thanthe outcome of a gradual evolution through a complex interaction of skill, industry,chicanery, and theft It is accepted (in so far as it is accepted) as the foundation ofprosperity and as the only peaceful and efficient alternative to the wasteful and lethalscramble over allocation among people and among groups of people identified by race,religion, language, wealth, or territory of residence Wars occur when the distribution

of goods, property and privilege – within the nation and, especially, among nations –

is not universally accepted A sketch of the record, prosperity, equality, and conflict ispresented in this chapter as preference to the analysis of these phenomena in the rest

at the time of William the Conqueror The improvement in the standard of living

is equally spectacular Real national income per head – the standard measure of theavailability of goods and services – has increased a full ten-fold over the last hundredand fifty years Until very recently, a typical person came close to starvation at sometime in his life, was illiterate, and rarely strayed more than a few miles from his place

H O W D R E A D F U L L I F E U S E D T O B E 3

of birth Today, in Europe, America, and elsewhere, starvation is a distant memorythough it remains unbanished elsewhere in the world

Under the heading of customs, I call attention to the dependence of our judgments

of right and wrong upon the circumstances of the economy What is right in a poorcommunity may become wrong once a degree of prosperity is attained We need nolonger resort to patricide and infanticide for the survival of the community Crimescan be punished less cruelly than at a time when imprisonment was, for the ordinaryrun of crimes, prohibitively expensive Less obviously connected to the degree ofprosperity, but connected nonetheless, are the institution of slavery, class privileges,heresy, and political inequality Slavery, once prevalent throughout the world, has nowbeen almost eliminated Civil rights and property rights supply a degree of protectionagainst predatory neighbors or predatory government Political inequality is distinctlyless pervasive than it once was, though economic inequality still flourishes

Under the heading of mass destruction, I discuss the loss of life in war and the ton extermination of large numbers of people by their own governments Here therecord of the twentieth century is much less admirable, though better comparativelyspeaking than is often supposed The advance of technology has brought us prosper-ity but has made war more lethal and has supplied governments with new vehicles foroppression of the ordinary citizen Death in war has been greater during the twentiethcentury than ever before, but not significantly so as a percentage of total population,and the depressing effect of war on life expectancy is almost negligible by comparisonwith the general improvement due to advances in medicine and to prosperity itself.Such matters are usually ignored in economics texts because they are not part of theordinary business of life Economics is above all the peaceful science with no place in itsformal models for violence, terrorism, war, or extermination These matters find theirway, albeit peripherally, into a text on political economy because technical change is atonce the foundation of material progress and the source of an ever-greater capacity toharm one another, creating an ever-greater challenge to hold that capacity in check.This chapter is written with special reference to Canada, the United States, andGreat Britain, in part because data for these countries are readily available but primarilybecause these are the countries I know best An author with a different geographicalfocus could tell much the same story about other countries elsewhere Broad trends aresimilar in these three countries and in many other countries as well Most countriesthroughout the world have shown significant improvement in mortality rates andmaterial well-being, but not all countries have been equally fortunate Some world-wide trends will be examined

Longevity

“Once a distracted mother came to the All-Compassionate one with her dead babe inher arms, and besought him it might be restored to life He listened to her pleading;then sent her forth to fetch a grain of mustard seed from a house where no children

Thou knowest the whole wide world weeps.

The grief which all share grows less for one.’ ”

for millennia been a consolation to people in grief Today, however, the moral is notwhat it once was The intended moral of the story was that every mother has seenthe death of some of her children, and that no mother can expect to be exemptedfrom this sad condition of life That can no longer be the moral because the bowl ofthe grieving mother would now be full rather than empty To be sure, children stilldie, but the death of a child is now a rare event, and most houses have not seen suchdeaths Science, technology, and prosperity have rendered the story obsolete

An almost unconscionably selective history of life expectancy from the cave dwellers

to the present day is presented in table 1.1 with England as the “representative”country from the middle ages to the present day The remarkable features of thestory are how so little happened from the start of civilization to the beginning ofthe nineteenth century and how much has happened in the last two hundred years.Ten thousand years ago hunter-gatherers had a life expectancy of just over 30 years

By the year 1800, English life expectancy had crept up to 37 years It rose steadilyover the course of the nineteenth century, but, by the end of the century, was still only

50 years Then, during the twentieth century, life expectancy increased by almost 30

to 79 years in 2000 This was the greatest increase in longevity in the entire history ofhumankind In most countries throughout the world, life expectancy today is greaterthan ever before

The information in table 1.1 is from three sources For the years before the middleages, the early data are ingenious estimates by anthropologists and archeologists fromthe study of ancient bones The English data from the thirteenth century to 1841 arechurch records and graveyards Thereafter, the data are from censuses of population.The experience of the twentieth century will be examined in greater detail below, butwith reference to the United States rather than to England

The main story in the table is of ups and downs with no long-term trend until theend of the middle ages, very slow growth for the next few hundred years, acceleration

in the nineteenth century and rapid growth in the twentieth century There are twosub-plots: the long-term fall in life expectancy associated with the transition fromhunter-gathering to agriculture (a decline of five years from the mesolithic to theneolithic periods) and the sudden plunge in life expectancy during the Black Death

in the fourteenth century A school of anthropologists maintains that ordinary peoplewere better off as hunter-gatherers than they were for millennia afterwards until quiterecent times People were taller than they have been at any time prior to the twentiethcentury Their health was better – as measured, for example, by the number of missingteeth in their skeletons Their diet was better, meat rather than grain The numbers in

H O W D R E A D F U L L I F E U S E D T O B E 5

Table 1.1 Life expectancy at birth from ancient times to the present

1 Palaeolithic, 500,000BC–8,000BC, cave men with primitive stone tools 19.9

3 Neolithic, 6,000BC–1,500BCagriculture and domestication of animals 26.9

5 Bronze Age, 2,500BC–500BC, ancient Egypt and Mesopotamia 32.1

10 England and Wales, generation of males born 1348–75, during the Black Death 17.3

Sources: 1–6, A C Swedlund and G J Armelagos, Demographic Anthropology, Dubuque, Iowa,

W C Brown, 1976, table 4.6 The stages of civilization are defined by technology, attained in different places at different times The ages are mapped in “Archelogy,” an entry in Collier’s Encyclopedia.

7–8, G Ascadi and J Nemeskeri, History of Human Life Span and Mortality, 1970, tables 121

and 130 9–11, J C Russell, British Medieval Population, 1948, tables 8.4, 8.7 and 8.10 12–16,

E A Wrigley and R S Schofield, The Population History of England, 1541–1871, 1981, table A3.1.

1377, it had fallen to about two and a half million Additional waves of the plaguedrove the population down to about one and a half million by the end of the century.The huge worldwide improvement in longevity in the twentieth century is exem-plified by the experience of the United States summarized, for males and for females,

in tables 1.2 and 1.3 The tables themselves are largely self-explanatory In bothtables, the right-hand columns show life expectancy Over the century, life expectancyincreased from 46.3 years to 73.9 years for men, and from 48.3 years to 79.4 yearsfor women By the end of the century, men lived 27.6 years longer than their greatgrandfathers a hundred years before By the end of the century, women lived 31.1years longer than their great grandmothers a hundred years before Women not only

5 and 14 years of age and becomes steadily higher thereafter.

At every age, mortality rates are significantly lower in the year 1999 than in the year

1900, but the drop in mortality rates is most dramatic for infants and young children.With minor variations, the reduction from 1900 to 1999 in the risk of death is lesspronounced as one grows older For male children in the first year of life, the risk ofdeath in the year 1999 had fallen to less than a twentieth (specifically, as shown inthe first column of table 1.2, the ratio is 802/17,914 or 4.5 percent) of what it hadbeen in the year 1900 The percentage fall is even more pronounced for the muchsafer period of life between one to four years of age For that age group, the risk ofdeath in the year 1999 had fallen to about one-fiftieth (39/2,045 or 1.9 percent)

of what it had been in the year 1900 Thereafter the percentage gains diminish By theend of the twentieth century, the risk of death between 5 and 14 years of age wasonly 6.3 percent of what it had been at the beginning The comparable figures are19.5 percent between 15 and 24 years of age, 34.8 percent between 45 and 54 fouryears of age, and 62.9 percent among people 85 years and older The same pattern

is evident for females in table 1.3

The rows show mortality rates every tenth year with the exception of the yearsaround the great flu epidemic of 1918 Male life expectancy which had been 48.4 years

in 1917 fell abruptly in 1918 to 36.6 years, not significantly different from what ithad been before the invention of agriculture 20,000 years ago Among young menaged 25 to 34, the mortality rate rose from 708 per 100,000 in 1917 to 1,902 per100,000 in 1918, an extra risk of death of just over 1 percent per year The figuresfor women are essentially the same By contrast the rise in the death rate among men

of that age group during the Second World War (not shown in table 1.2) was about

50 per 100,000 or about a twentieth of a percent These figures must be interpretedwith care To say that life expectancy fell from 48.4 years in 1917 to 36.6 years in 1918

is not to suggest that people born in 1918 had markedly shorter lives than people bornthe year before It is, rather, to say that people would have had markedly shorter lives

if these temporarily higher mortality rates had persisted throughout their lives.For young adults, male and female, the principal sources of the decline in the mortal-ity rates are shown in table 1.4 The combined mortality rate from all causes togetherfell in the course of the century to about an eighth of what it had been at the beginning,from 819.8 per 100,000 people in the year 1900 down to 108.3 per 100,000 people

in the year 1999, that is, from just under one person per hundred to just over oneperson per thousand The greatest triumph for this age group was the elimination oftuberculosis, which killed about one person per three hundred in the year 1900 The

and child- birth

Motor vehicle accidents

10 H O W D R E A D F U L L I F E U S E D T O B E

death rate from Aids has never exceeded the death rate from tuberculosis a centuryago, and was lower in the year 1999 than syphilis in the year 1930 Mortality fromrheumatic fever, diabetes, stroke, influenza, appendicitis as well as complications ofpregnancy has been all but eliminated Mortality from cancer and heart disease hasbeen reduced but not comparably to the reduction in mortality from other diseases

By contrast, the incidence of violent death remains more or less the same Death ratesfrom accidents, suicide, and homicide do not change much over the century, thoughthere seems to be some considerable improvement in the last few decades

The great increase in life expectancy in the United States is by no means unusual.Similar increases have occurred in most of the countries in Europe and America aswell as in Japan and elsewhere in Asia Most advanced countries have by now attainedlife expectancies of about 75 years for men and 80 for women A sample of histories

of life expectancies is presented in table 1.5 Russia is an exception In 1965, lifeexpectancy in Russia was about the same as in the United States Since then, Americanlife expectancy has risen from 66.8 to 72.0 for men, and from 73.7 to 78.8 for women

By contrast, Russian life expectancy remained about the same until 1989, falling from64.5 to 64.2 for men but rising from 73.7 to 74.6 for women Then Russian lifeexpectancy plummeted to 58.9 (a fall of 5.3 years) for men, and to 71.9 (a fall of2.7 years) for women in 1998

For the period since the Second World War, the increase in life expectancy out the world is summarized in table 1.6 for three groupings of countries, moredeveloped, less developed, and least developed Average life expectancy has increasedsubstantially in all three regions, and the spreads between regions are narrowingsomewhat, but significant differences among regions remain

through-Table 1.5 Life expectancy at birth in several countries, 1750–2000

Sources: M Livi-Bacci, A Concise History of World Population, Oxford, Blackwell, second edition,

1997, tables 4.3 and 4.8, supplemented by data from Angus Maddison,Monitoring the World

Econ-omy, 1820–1992, Paris, OECD, 1995, table A-3a; R Bourbeau, J Legare, and V Emond, New Birth Cohort Life Tables for Canada and Quebec, 1801–1991, Statistics Canada, 91 F0015MPE;

V Shkolnikov, F Mesle, and J Vallin, “Health crisis in Russia,” Population, vol 8, 1999, INED,

appendix table 1; Canadian Historical Statistics, table, 65 and 66 (for 1966), Statistiska byran (www.scb.se for 1961–70); Queensland, Office of the Commonwealth Actuary (www.oesr.qld.au

central-for 1965–7) and www.odci.gov/cia/publications/factbook/country.html

H O W D R E A D F U L L I F E U S E D T O B E 11

Table 1.6 Worldwide life expectancy at birth, 1950–1999

More developedregions

Less developedregions

Least developedregions

Sources: United Nations, World Population Prospects, The 1994 Revision, p 117,

supplemented by current data from www.prb.org/pubs/wpds99/wpds99_world.htm

Demographic catastrophe

The Black Death was by no means the only or the worst epidemic in the history ofmankind Even more dramatic was the epidemic brought by Europeans to the indige-nous people of North America Smallpox, measles, typhus, tuberculosis, influenza,and chicken pox – diseases that Europeans had coped with for millennia – were hith-erto unknown in the Americas and very much more lethal It has been estimated thatcontact with the Europeans diminished the indigenous population of the United Statesfrom 5 million to a low of 60,000, from which it substantially increased once peoplebecame accustomed to European-borne disease From 1532 to 1608, the indigenous

From time to time over the last two millennia, China has experienced similarly rapiddeclines in population, but with a different cause China has been no less subject thanEurope to epidemics, but the standard explanation of the ups and downs in population

is political Variations in population are attributed to the establishment and gration of public order, referred to by historians as the dynastic cycle An establishedruling dynasty is said to possess the mandate of heaven As long as the dynasty pre-serves the mandate of heaven, public order is maintained and the population grows.Eventually, dynasties lose the mandate of heaven Public order is then dissolved, theland is preyed upon by armies of bandits that the government can no longer suppress,crops are stolen or destroyed, people are displaced, starvation stalks the land, andpopulation declines until such time as a new dynasty is established, making way forfresh population growth once order is restored The root cause of the cycle is debat-able The traditional explanation is that, with time, dynasties grow corrupt and effete.Population growth itself may be destabilizing as the standard of living is reduced,choking off the farmers’ surplus production required for the provisioning of the armyand the bureaucracy of the state Disease and starvation reinforce one another in thepopulation decline

disinte-The story is told in table 1.7, showing the history of the population of Chinaclassified by the six principal dynasties during the last two thousand years For eachdynasty, two estimates of population are shown, one near the beginning of the dynastyand the other near the end It is immediately evident from these data that populationgrew substantially within each dynasty, and then fell between dynasties, sometimes

Population late

in the dynasty(millions)West Han (206BC–AD8) 14.0 (206BC) 58.0 (AD2)

Sources: Cheng-chui Lai, “Man/land ratio and dynastic cycle in Imperial China:

a Malthusian interpretation,” Archives of Economic History, 1992, vol 2, no.

1, 113–25, table 1.

about 75 percent from 58 million to 15.1 million Population recovered over the next

80 years during the East Han dynasty, but then fell once again between the end of theEast Han dynasty and the beginning of the Tang dynasty, five hundred years later.The last imperial dynasty was followed by the Republic of China, which lasted until

1953, when it was replaced by the Peoples’ Republic of China, which rules to this day

In 1953, the first year of the Peoples’ Republic of China, the population of China was

266 million people

Today, epidemics are contained, but by no means eliminated The world’s encounterwith Aids is instructive The experience of the epidemic in the rich countries was verydifferent from that of the experience in the poor countries When the epidemic firststruck the United States in the early 1980s, it was not recognized as a new disease, andits cause was completely unknown In time, though no cure has yet been discovered,scientists learned the nature of the disease, its cause, and the means to contain it.Before 1980, there were in the United States no known deaths from Aids Thereafter,the number of deaths from the infection increased steadily to a peak of 51,000 in 1995.Aggressive treatment reduced deaths to 9,000 in 2000, the latest year for which dataare available The rate of infection with the HIV virus has been reduced and expensivetreatment has contained the virus so that it does not give rise to full-blown Aids.About 800,000 to 900,000 Americans out of a total population of 280 million arenow thought to be infected It is terrifying to think what might have happened if theAids epidemic had struck a century ago when the nature of the disease could not havebeen discovered and when people would be unlikely to associate disease today withsexual activity as much as a dozen years before the onset of the disease

The rate of infection with the HIV virus has been much higher in Africa It is mated that, by the year 2000, a full 8.5 percent of the adult population of sub-SaharanAfrica was infected with Aids and that, during the year 1999, a third of a percent

esti-of the population (2.2 million people out esti-of a total population esti-of 596.3 million) died

H O W D R E A D F U L L I F E U S E D T O B E 13

without massive foreign assistance

Prosperity

A rough indicator of prosperity in England over the last seven centuries is supplied

by the time series of average real wages in table 1.8 If people consumed nothing

but bread, the real wage each year would be the number of loaves consumed or,equivalently, the money wage divided by the price of bread When people consume

many different goods, the real wage each year becomes the money wage deflated

by a price index to reflect wage-earners’ standard of living The price index and the

corresponding index of real wages are constructed with reference to an arbitrarily

chosen base year In the base year, real wages and money wages are, by definition, the

same In any other year, the real wage is the money wage one would require in thebase year (when confronted with prices in the base year) to be as well off as one would

be with the average wage in that other year Suppose the year 2000 is the chosen baseyear With respect to the year 2000 as the base year, the average real wage in the year

1950 is said to be $18,000 per year if the average worker in the year 1950 – with pricesand wages as they were in 1950 – was as well off as a person who earned $18,000 inthe year 2000 Actual money wages in the year 1950 may have been very much less

If prices had increased six-fold in the intervening fifty years, then the actual moneywage in the year 1950 would have been only $3,000

To deflate money wages by prices is to divide money wages each year by the value

of an appropriately scaled price index In the example in the preceding paragraph,the price index is set at 1 for the year 2000, ensuring that the average money wageand the average real wage are the same in that year As prices are assumed to have

year 1950 Thus, if the money wage is $3,000 in the year 1950, the corresponding

index might be scaled to set the real wage at 100 in some chosen base year If theaverage money wage was $36,000 in the year 2000, it would be said that real wagesgrew by 100 percent – or 1.39 percent per year – over the entire 50-year period Theconstruction of a time-series of real wages is straightforward when all prices changeproportionally, up or down, from year to year The measurement of real wages becomesproblematic when prices vary at different rates – some up, some down – each year,

a matter to be taken up at the end of chapter 5 once the required theory of tasteand demand has been developed For the moment, think of real wages as moneywages deflated by a reasonable price index without being too concerned about what

“reasonable” means in this context

Table 1.8 is a time series of real wages in England from 1340 to 1977, specifically ofbuilders’ wages corrected for changes over time in prices of commodities that buildersare likely to buy The procedure tracks standards of living satisfactorily if and in sofar as percentage changes over time in the real wages of builders are not too differentfrom percentage changes over time in average real wages for all occupations and forall regions of the country The information is acquired from a sample of records of

Sources: Real wages [1340 to 1950]: H Phelps-Brown and S Hopkins,

“Seven centuries of prices of consumables compared with builders’ wage-rates,”

Economica, 1956, included as “Labour force, 31” in B R Mitchell, British

Historical Statistics, Cambridge, Cambridge University Press, 1988 [1997]

Statistical Yearbook, 1997, United Nations, tables 33 and 35 and B R.

Mitchell, International Historical Statistics, Europe, 1750–1993, London,

Macmillan, 1998, tables B1 and H2 Population [1340, 1377 and 1421]: D.

Coleman and J Glass,The British Population: Patterns Trends and

Pro-cesses, Oxford, Oxford University Press, 1992 [1552–1950], Mitchell, British

Historical Statistics, “Population and vital statistics, 1.” [1997] Statistical

Yearbook, 1997, United Nations, table 7 for the entire United Kingdom.

monasteries and other institutions Sketchy and incomplete, it is the only informationavailable for such a long stretch of time To construct the time series of real wages,money wages were deflated by a price index scaled so that the average real wage isset at 100 over the period from 1451 to 1475 The choice of dates in the early years

is determined in part by the availability of data and in part to show data before andafter the Black Death For each year in the table, population is shown as well Figuresfor the early years are necessarily judgmental because there was no adequate census ofpopulation

The history of real wages and population in England can be divided into three mainepisodes The first episode was the Black Death which, as discussed above, wipedout half the population of England in the middle of the fourteenth century Fromthe beginning to the end of the fourteenth century, the population of England fellfrom about 5 million to about 2 million The fall in population created a scarcity

of labor, leading to a rise in the real wage from about 50 in the early part of thefourteenth century to a peak of over 100 in the fifteenth century, the highest level

of real wages until the middle of the nineteenth century The next episode was thegradual rise in population throughout the seventeenth and eighteenth centuries, butwith no corresponding rise in real wages Potential gains in the early years of the

H O W D R E A D F U L L I F E U S E D T O B E 15industrial revolution were eaten away in population growth In the third episode fromabout 1800 to the present day, technical change outdistanced population growth, andreal wages rose steadily from a low of 38 in 1800 to 460 in 1997, over 12 timeswhat they were in the beginning of the nineteenth century and almost 4 times ashigh as they had ever been up to the twentieth century Until about a hundred yearsago, wages rose in good times and fell in bad times, with no discernible long-termtrend one way or another Only in the last hundred years or so has technical changeoutdistanced population growth, providing the common man with a standard of livingunprecedented in the entire history of the world.

Real wages are a less than ideal measure of prosperity for a country as a whole

When available, a better measure of general prosperity is real national income per head

where “national income” is the value of all goods and services produced by ment as well as by the private sector, and for investment as well as for consumption.Time series of national income do not reach as far back as time series of real wagesbecause national income statistics are built up from vast amounts of primary datacollected by national statistical agencies that did not exist until the nineteenth century.For Canada, from the year 1870 to the year 2000, a time series of real nationalincome is presented in table 1.9 National income can be thought of as a family ofclosely related statistics, each giving rise to a somewhat different time series The vari-

govern-ant of national income in table 1.9 is real gross domestic product per head expressed

in dollars for the year 2000 Domestic product is the dollar value of all goods and

ser-vices produced in the country (including non-residents’ entitlement to domesticallyproduced goods and services, but excluding residents’ entitlement to goods and ser-

vices produced abroad) Gross means that there is no correction for depreciation of

the capital stock Conversion from money national income to real national income isessentially the same as conversion from money wages to real wages The choice of theyear 2000 as the base year of the time series is arbitrary but, nonetheless, informative,because the user of statistics of real national income wants to know how well off peopleused to be by his standards today, not how well off he is by theirs He wants to knowhow much income grandma and grandpa would need today to be as well off as theywere back in 1950, not how much income he would need in 1950 to be as well off as

he is today

Inevitably, the measurement of real national income is fuzzy because the price index

is never quite what we would like it to be, because different people consume differentproportions of goods, because new types of goods are introduced from time to time,and because the quality of goods changes over time Statistics of real national income

do not have the precision of, for example, distances between cities Statistics of realnational income are interesting and instructive nonetheless

Table 1.9 is largely self-explanatory For example, the number 2,554 in the top row

of the fourth column means that people in the year 1870 were on average as well off

as one would be with an annual income of $2,554 in the year 2000 Actual moneyincome per head in the year 1870 was very much less, but prices were less too Onlyfor the year 2000, shown on the bottom row of the table, are money income and realincome the same

The right-hand column of table 1.9 shows the rate of growth each decade in realgross domestic product per head The average rate of growth over the entire 130 years

Gross domesticproductper head atprices in theyear 2000 ($)

Annual growth rate

of gross domesticproduct per head(average sincethe year in thepreceding row: %)

Sources: M C Urquhart, Gross National Product, Canada 1870–1926, Kingston and

Mon-treal: McGill-Queen’s University Press, table 1.2, updated with data from CANSIM, Statistics Canada Several time series covering less than the entire period from 1870 to 2000 and with dif- ferent base years are spliced together to produce one consistent time series in 2000 dollars 1870

to 2000 and with different base years are spliced together to produce one consistent time series in

2000 dollars.

of the time series was about 2 percent per year Such is the power of compound interestthat this annual growth of 2 percent was sufficient to generate a more than 15-foldincrease in real income per head, from $2,254 in the year 1870 to $34,942 in the year

2000 The typical Canadian today is over 15 times as well off as Canadians used to be

130 years ago This unprecedented prosperity is broadly consistent with the pattern

of real wages in England in table 1.8

As the overall measure of prosperity tends to be somewhat abstract and distantfrom everyday life, it may be helpful to supplement the table with information aboutthe specifics of the improvement in the standard of living The increase in real grossdomestic product per head is a summing up of the changes over time in the quantitiesand qualities of a thousand different goods and services A few of these changes areshown in table 1.10 for several years between 1935 and 1997 for which the data happen

to be readily available This was a time of rapidly increasing prosperity in a number

of dimensions Ownership of automobiles increased four-fold Housing improvedmarkedly, as indicated by the increase in the proportion of dwellings with flush toiletsfrom just over half to almost 100 percent The old term “cold water flat” has gone out

of use because virtually all apartments are now supplied with hot water The switchduring the last quarter of the twentieth century from red meat to poultry is in part due

H O W D R E A D F U L L I F E U S E D T O B E 17

Table 1.10 Selected indicators of prosperity in Canada, 1935–1997

Red meat, pounds per person per year 115.5 126 150 169.7 154.6 130

Sources: D Usher, The Measurement of Economic Growth, Oxford: Blackwell, 1980, table 10.2, and Tanis Day,

“Substituting capital for labor in the home: the diffusion of household technology,” Ph.D dissertation, Queen’s sity, 1987, table A la Supplemented with data from Statistics Canada: Road Motor Vehicles, 53–219; Education in

Univer-Canada, 81–229; Household Facilities and Equipment, 64–202, Food Consumption in Univer-Canada, 32–230, Historical

Statistics of Canada.

to a substantial fall in the price of poultry relative to the price of beef, and in part due achange in peoples’ perception about what constitutes a healthy diet General prosperityand improvements in food storage have resulted in large increases in consumption offruits and vegetables As a percentage of the population, the number of undergraduates

in university increased four-fold and the number of graduate students increased fold Equally important, though not so easily quantified, is the improvement in thequality of goods and the introduction of new goods We have much better cars andrefrigerators than we had in 1935, and we have TV sets and home computers whichour grandparents in 1935 did not have at all Progress in medical science has increasedthe quality as well as the length of life New and better anaesthetics save us frompain our ancestors had no choice but to endure We need no longer fear a toothextraction or die in agony Among the few goods consumed less today than in the pastare potatoes and cigarettes In 1981, 38.1 percent of Canadians smoked an average of20.6 cigarettes per smoker In 1996/7, 28.9 percent of Canadians smoked an average

A similar story is told for the entire world in table 1.11 There is a ten-fold growth

in western Europe and ‘western offshoots’ (meaning United States, Canada, Australia,and New Zealand) and a less spectacular but still substantial growth in the rest of theworld Asia more or less stagnated for the first hundred years, but grew faster inthe last thirty years than any other region Africa did the least well over the entireperiod, trebling income per head but falling relatively from 82 percent (450/661) to

24 percent (1318/5539) of the world average

EasternEurope

LatinAmerica Asia Africa Average

Sources: A Madison, Monitoring the World Economy, Paris: OECD, 1995, table E-3, 210 “Western

offshoots” refers to United States, Canada, Australia, and New Zealand The comparable figures for Japan are 704 in 1820 and 19,425 in 1992 The comparable figures for the United States are 1,287 in 1820 and 22,569 in 1992 The comparable figures for Canada are 1,225 in 1820 and 18,159 in 1992.

Table 1.12 Life expectancy at birth and the number of children per woman inCanada, 1700–1999

Life expectancy

at birthYear Males Females

Number ofchildren perwoman(fertility rate)

Number of childrenper woman wholives to the end

of child-bearing age

Population

of canada(thousands)

Sources: Demographic data from Y Lavoie “Two centuries of demographic change,” Report

on the Demographic Situation in Canada, Statistics Canada, 91-209-E, 1992 and 1996.

Population data from W L Marr and D G Paterson, Canada: An Economic

His-tory, Toronto: Macmillan of Canada, 1980, table 6-1 updated from Annual Demographic Statistics, 1999, Statistics Canada, 91-213- XPB, table 1.1 All data for 1999 are from

www.odci.gov/cia/publications/factbook/ca.html#people

The increase in longevity and prosperity over the last two hundred years would havebeen impossible without a marked decline in fertility rates, defined as the number ofchildren per woman Consider the Canadian experience as set out in table 1.12 Inthe year 1700, women in Canada who lived until the end of their childbearing agewould have given birth to just over eight children With mortality rates as they were

at that time, the actual number of children per woman was 4.3, equivalent to about2.15 female children per generation Suppose the length of a generation, from child-birth to childbirth, to be 25 years Had that rate of increase been maintained over

H O W D R E A D F U L L I F E U S E D T O B E 19

Table 1.13 A fall in fertility rates and a rise in population

Fertility rates Population (millions)

Sources: United Nations, World Population Prospects: The 1994 Revision, pp 101 and 117,

supplemented by current data from www.prb.org/pubs/wpds99/wpds99_world.htm

the twelve generations from 1700 to 2000, the original population of 18 thousand

year 2000, over five times the present population of Canada The Canadian resourcebase could not support that many people at the present standard of living Despitesubstantial immigration over the past three hundred years, the population of Canada isonly 32 million today Worse still, if mortality rates among women had been the same

in the year 1700 as they became in the year 2000 (so that almost all women surviveduntil the end of their childbearing years) and if the number of children “per womanwho lives to the end of the childbearing age” remained as it was in the year 1700, thepopulation would have increased over four-fold per generation The Canadian popu-

population would have reached about 407 billion people, more than sixty times thepresent population of the world

Until quite recently, recognition of the consequences of this bizarre mathematics ofpopulation growth led thoughtful people to despair about the prospects for permanentprosperity or long-term economic growth A small upper class could be kept wealthy.Forces beyond anybody’s control would keep the vast majority of people permanentlyimpoverished Technical change may raise the standard of living for a time, but notpermanently Inevitably, prosperity lowers mortality rates, the fall in mortality ratesbrings population growth, population growth reduces resources per head, and thereduction in resources per head brings prosperity to an end, driving down the standard

of living to whatever level is sufficient to stop population growth

Little faith was placed in people’s ability or willingness to restrict population untarily, though that is exactly what happened Population has grown rapidly in thelast few hundred years, but not nearly as rapidly as our mathematics would suggest,because fertility rates fell The story is told for Canada in table 1.12 and for the entireworld in table 1.13 Table 1.13 shows that fertility rates have been declining every-where, but not sufficiently to stop population growth Fertility rates in Africa havebeen especially high: enough to generate a three-fold increase in population over the

vol-20 H O W D R E A D F U L L I F E U S E D T O B E

last fifty years Fertility rates in Europe and America have been much lower: enoughthat the population will soon decline if not shored up by immigration In view of theenormous increase over the last few hundred years in the population of Europe and oflands occupied by Europeans, a period of voluntary decline may be no tragedy Thelarger picture is that technical change has enabled national income per head to increasedespite the pressure of population on land and resources There is no assurance thatpast trends will continue, for current fertility rates are still well above what is required atpresent mortality rates to stop the growth of population The mechanics of economicgrowth will be discussed in chapter 6

The doubling of the length of life and the ten-fold increase in gross national productper head over the last two hundred years are beneficial to humankind directly and byvirtue of the customs and institutions they permit Patricide, infanticide, brutal pun-ishment for crime, torture, persecution of witches and heretics, a rigid class structure,and slavery have been eliminated in much of the world because people are for the firsttime in a position to do without them

Patricide and Infanticide

For our custom up here is that all old people who can do no more, and

whom death will not take, help death to take them And this is not merely

to be rid of a life that is no longer a pleasure, but also to relieve their

nearest relations of the trouble they give them.

A Netsilik Eskimo6

Today, old folks retire to a life of leisure in Florida Traditionally, the Eskimos doned their old folks, who were younger than most Canadians and Americans retiringtoday, to freeze There is nothing unusual about such behavior The story is toldthat, among the Visigoths, ancestors of much of the population of Europe and North

aban-America, old men weary of life would be expected to throw themselves off The Rock of the Forefathers on the understanding that a delightful abode in heaven awaited those

who committed suicide and a horrible subterranean cavern awaited those who died ofsickness or decrepitude Such practices are common among poor primitive peoples,

Similar considerations may lie behind the ancient Hindu custom of immolating widows

on their husbands’ funeral pyres

Nor can we condemn our ancestors for these practices A community close to sistence may be confronted with the stark choice between the old and the young.The very survival of the group may depend on a willingness to slough off its weakermembers “The Eskimos of Baffin Island have a great respect for the aged and treatthem well But when a woman becomes so old that she is a burden, she may calmly

sub-H O W D R E A D F U L L I F E U S E D T O B E 21resign herself to death, allowing herself to be walled into a snow hut and left to die.

The content of our ethics depends upon the productivity of our economy Rightand wrong depend upon the level of prosperity humankind has attained Provision forthe old always draws upon resources that might be used for the benefit of the younginstead Whether that provision is warranted depends on what else those resourcesmight procure Today, patricide is evil because the sacrifice to the young in sendingthe old folks to a retirement home rather than to the ice flows is a smaller car or ashorter vacation, not life itself Today the trade-off is between lives and goods Atother times it has been between the lives of the old and the lives of the young Wesympathize with the plight of the Eskimos in circumstances as they used to be, though

we would unreservedly condemn patricide by Eskimos following the old traditions, or

by anybody else, today Patricide has become an abomination because we can afford

to dispense with it

Infanticide was equally necessary The human female is biologically programmed

to produce many more children than is consistent with the very low rates of tion growth observed throughout most of history Without modern methods of birthcontrol, it is unlikely, bordering on impossible, that a population of hunter-gatherers

maintain more young children than can be carried for long distances There is pological evidence of infanticide among the many tribal societies Some societies didnot recognize children until enough time had elapsed after birth for a decision to bemade whether the child should be allowed to survive, drawing the line between birthcontrol and murder at, for example, the tenth month after conception Prosperity hasdistinct moral consequences

anthro-The severity of the law

A similar observation can be made about the law Prosperity and longevity cannot besustained without a modicum of public order, and that, in turn, requires that crime

be significantly deterred The incidence of crime must be held to some tolerable limit

by the prospect of punishment Today, we can afford a police force, and we can afford

to put convicted criminals in prison In times gone by, both were prohibitively costlyand other means had to be found to deter crime As the risk of detection was low, thepunishment had to be correspondingly severe

Consider an amoral person deciding whether to steal $100 If he is sure to becaught, a fine of as little as $1 (over and above the return of the stolen $100) issufficient deterrence because the thief is made $1 worse off by stealing than by notstealing But if the probability of detection and punishment is only 10 percent (and ifthe would-be thief is risk neutral), the fine must exceed the loot by a factor of at leastnine to ensure that crime does not pay To deter a theft of $100, a fine of over $900would be required The general principle is that crime can only be deterred when theexpected cost of punishment to the would-be criminal exceeds his expected benefitfrom crime The preservation of society requires that punishment be severe enough todeter most crime, though, for reasons to be discussed later on, not all crime is deterred

in practice