Economics 113 Slides J. Bradford Delong http://bradford-delong.com brad.delong@gmail.com @delong 2017-01-30 key: https://www.icloud.com/keynote/ 0CDQiI21n5A2CJ4ecF16hzdJw#2017-01-30_Econ_113_Slides
Outline… • Atlantic Trade • Administrivia… • British Colonial Settlement (and Dutch) • Review: Big Ideas • Toward Revolution
iClickers: Supply, Demand, and Surplus in Atlantic Trade in 1700 A Western European population of 80 million producing $3/day and an Americas population of 12 million producing $5/day in 1700. Atlantic trade 2.5% of Western European GDP —$0.075/person/day x 80M people = $6M/day • Americas produce New World crops— tobacco, (transplanted) sugar, (transplanted) coffee, chocolate, rum, high-quality timber, tobacco, indigo, silver (sold to China for tea), rubber, etc… • Which Europe cannot—Europe trades manufactures for them…
iClickers: 1700 Atlantic Trade: Equilibrium Price: • Per $1 of “value” in Europe in equilibrium Quantity: • $2B/year
iClickers: 1700 Atlantic Trade: Supply of New World Crops Supply: • Epidemics and conquest have left lots of free land • Simply sail to Africa and grab some slaves—trading guns to local potentates for them • Move them to the Americas (or enserf Amerindians) and set them to work • In the long run, constant returns to scale as long as the free land holds out…
iClickers: 1700 Atlantic Trade: Supply Curve Supply: • Elastic (long- run) supply of New World products • But what about demand?
iClickers: 1700 Atlantic Trade: Demand Curve Supply: P=1 Demand • Back in 1500, a very healthy demand for “spices and silks” at 5x 1700’s real price • P = 5 - 2Q
iClickers: 1700 Atlantic Trade: Equilibrium S: P= 1 D: P= 5 - 2Q What’s our equilibrium price & quantity? A. P*=3, Q*=2B/yr B. P*=1, Q*=2B/yr C. P*=5, Q*=2B/yr D. none of the above E. cannot be determined from information given
iClickers: 1700 Atlantic Trade: What’s the Producer Surplus? E: P* = 1, Q* = 2B/yr Remember: S: P= 1 • D: P = P d0 - d x Q • S: P = P s0 + s x Q D: P= 5 - 2Q • P* = P s0 (d/(s+d))+P d0 (s/(s+d)) • Q* = (P d0 - P s0 )/(s+d) 2 /(2(s+d)) • TS=(P d0 - P s0 ) A. $8B/yr • CS= (d/(s+d))TS B. $4B/yr • PS= (s/(s+d))TS C. $0 D. cannot be determined with information given E. none of the above
iClickers: 1700 Atlantic Trade: What’s the Consumer Surplus? Remember: E: P* = 1, Q* = 2B/yr S: P= 1 • D: P = P d0 - d x Q • S: P = P s0 + s x Q D: P= 5 - 2Q • P* = P s0 (d/(s+d))+P d0 (s/(s+d)) • Q* = (P d0 - P s0 )/(s+d) 2 /(2(s+d)) A. $8B/yr • TS=(P d0 - P s0 ) • CS= (d/(s+d))TS B. $4B/yr • PS= (s /(s+d))TS C. $0 D. cannot be determined with information given E. none of the above
iClickers: 1700 Atlantic Trade: Is This a Complete Welfare Accounting? E: P* = 1, Q* = 2B/yr Remember: S: P= 1 • D: P = P d0 - d x Q D: P= 5 - 2Q • S: P = P s0 + s x Q CS: $4B/yr • P* = P s0 (d/(s+d))+P d0 (s/(s+d)) PS: $0 • Q* = (P d0 - P s0 )/(s+d) • TS=(P d0 - P s0 ) 2 /(2(s+d)) A. Yes • CS= (d/(s+d))TS B. no • PS= (s /(s+d))TS C. maybe D. cannot be determined with information given E. none of the above
1700 Atlantic Trade: In Perspective W. Europe: 80M people, $80B/yr GDP Americas: 12M people, $20B/yr GDP Atlantic trade: $2B/yr • But that $2B/yr is providing $6B/yr in value to European consumers—$4B/yr in surplus • 7.5% of value—important, but not decisive • But half of that goes (or is about to go) to Britain—with 13M people. Now we are more than 20% • And all of that goes to the top half of the British population: a 30% boost to resources • Plus: inequality and exploitation in the Americas • Plus: what’s going on in Africa?
Catch Our Breath… • Comments? • Questions?
British Settlement (and Dutch) • Too far south to have good furs • Thus nothing great to trade for/ with • Too far north to raise staple plantation crops • Except for tobacco • Which kills your soil stone dead in a remarkably short time • No gold or silver—and few Amerindians • Algonquin: 24K in 1607 —> 2K in 1669 • Wampanoag: 12K in 1607 —> 400 in 1676 • Settlement…
Administrivia… • bCourses • bCourses unacceptable because it does not indicate its state • You can be logged out with no sign… • In which case you lose all your work if you try to save it… • We will keep it for: • Assignment turn-in • iClicker grading integration • Messages • Home page • If those can be made to work • Otherwise, moving things back to my own website…
Administrivia: Time… • Ten hours/week • Three in lecture • One in session • Six outside • Reading • Reviewing • Exercising
Administrivia: Lectures… • Mix of • Exercises • Review • Lectures proper • Background • Lecture slides • Lecture notes—when they are ready enough to be useful (they may not be until the next time I teach this)
Administrivia: Outside Class… • Readings • Reading notes • Review! • Structured repetition and review… • Exercises • Map exercise out tomorrow… • Sample midterm out on Friday…
Administrivia: Cognitive Science • Is the home page useful? • Building an intellectual web • Things you can use • Things you know • Things you can remember • Things you can refresh • Things you know where to look up • Things you do not understand • Things you cannot find…
An Investment • This is an investment by the human race • The value to us of your getting a liberal education • This is an investment by the state of California • The value to us of your getting a liberal education • This is an investment by you in you • Expected benefits • Surprise benefits • A “liberal education” • The value to you (and us) of a “liberal education”
A Liberal Education a Valuable Thing • At a $40,000/year average earnings level… • 82.2% x $40,000/year =$32,884/year • Go to college: invest $15K/yr (tuition and fees) + $20K/yr (earnings not made) for 5 years = $175,000 • Get an extra $32,884/ year for 40 years if you’re the kind of person who can graduate • Plus: freedom, depth of experience…
Catch Our Breath… • Comments? • Questions?
Settler Population of British North American Colonies • 1610: 350 • 1650: 50,000 • 1700: 250,000 • 1750: 1,170,000 • 1780: 2,780,000 • 1810: 7,240,000 • 1840: 17,000,000 • 1860: 31,000,000 • Union: 22 million (21 million free white; 0.4 million free black; 0.4 million slave) • Confederacy: 9 million (5 million free white; 0.1 million free black; 3.9 million slave)
Three Important Strains • “ Virginia ”—tidewater plus piedmont • “ Kentucky ” • “ New England ”—Puritan, followed by commercial • Two more: • Slave society: Georgia and Carolina, plus Caribbean slave colonies • Middle colonies: Maryland, Pennsylvania, New Jersey, and New Amsterdam (York)
Immigration: Virginia • A quarter of white population “free” • Three quarters indentured • But how do you hold on to the indentured? • Ferocious mortality: 1620-40 VA population 7K —> 14K with 25K indentured servants • Slaves: 300 in 1650 —> 13000 in 1700 —> 150000 (40%) by 1750 • What did VA export? Tobacco (and corn)
Settlement: New England • Building a utopia… • Godly and prosperous… • Timber, fish, shipbuilding, shipping… • In return for British manufactured goods… • And Caribbean and other colonial staples… • 20,000 migrants by 1640— thereafter natural increase • Not young, unskilled young men on the make… • Not indentured servants… • Healthier and closer to gender balanced…
Catch Our Breath… • Comments? • Questions?
Big Ideas • Structured repetition • All of our big ideas live in the future still, except for two • Which big ideas have we brushed so far? A. American nationalism and American exceptionalism B. American exceptionalism and American slavery C. The tyranny of geography and American nationalism D. Social democracy and Gilded Ages E. None of the above
BIG IDEAS • Which of these do you think will turn out to be most important in this course? A. Narrative: We are animals that live by it—hence by studying history… B. American nationalism : There are three: A. The City Upon a Hill: “Let it be as it was in New-England…” A. A place where we can live freely… B. “But here was Old Kentucky!” C. American exceptionalism: The American project has been astonishingly successful—in Trotsky’s words: “the furnace where the future is being forged…” D. American slavery: But the American project has been much worse than shadowed by plantation slavery and its echoes down the centuries…
BIG IDEAS II • Which of these do you think will be most important? A. Immigration: One big contributor to the success of the American project has been immigration… B. Liberty: American society has generated a large—in comparative context—but unevenly distributed quantum of liberty… C. Opportunity: American society used to deliver an unusually large quantum of opportunity—but not any more… D. Prosperity: American society has delivered an unprecedented and unequalled quantum of prosperity E. Public Interest: Growth: The story of industrialization requires focusing on growth-oriented industrial policy…
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