Population explosion - or is it implosion?

[DuncanK]

Originally posted by Ramo
I would argue that the black death postponed the end of feudalism by centuries. If you look at the 13th century, states all over Europe were freeing serfs. Land was in low supply and labor was in high supply, so freedom became more profitable than serfdom. Then came the Black Death, which completely upended the situation. Land was in high supply, and labor in low supply. So it became necessary to re-enserf peasants, take away their rights, tax the hell out of them, etc., etc.

Capitalism thrives during population explosions and falters during population declines.

I agree. It took some time after the Black Death for industrialization to take hold. I think that's because labor was in such short supply.

[Ramo]

The population decline, taken alone, causes a proportionate decliine in both the supply and demand for labor.

But the smaller pool of labor ensures a smaller demand for land, thus labor could bargain for higher wages more effectively.

[DuncanK]

Ramo,

Correct. Land became cheap and labor expensive. How did the land owners re-enserf the peasants?

[Ramo]

I don't know the specifics in most regions. In England's case, royal authority was used. There were laws capping wages, forcing peasants to accept contracts from landlords, etc.

[Dauphin]

Those actions lead to the peasants revolt though.

[Ramo]

Yep, and the revolt was brutally supressed.

[Dauphin]

The seeds were sown though.

And if we are making analogies to future population decline and forced reduction of labour, suppression of riots in modern democratic society would be difficult.

[Ramo]

I'm not sure what you're getting at with the peasant revolt...

[DuncanK]

Well, I think wage ceilings aren't impossible, but what would the purpose be except to control inflation?

[Ben Kenobi]

Yup. Consider what happened after the Black Death in Europe. Population fell by about one third, reducing aggregate demand. But real wages rose. Why? The same amount of productive capital was spread among fewer workers, so capital per worker rose. With more capital per worker, workers became more productive, leading to a rise in real wages.

Just a few questions, Adam Smith:

The population after the black death plummeted, followed by a surge quickly replacing the population lost.

We are not in that situation today. We have a large number of older people, combined with a declining percentage of workers.

Overall, the Black Death reduced the number of workers, but the proportion of working age after the plague is far different from today.

Could this difference in worker proportion affect the expected rise in real wages?

Secondly, without increased demand, would this rise in real wages suffer massive inflation?

Capitalism has benefited from an increase in workers throughout its existence. Can an economy continue to grow without an increase in workers?

[Ramo]

Well, I think wage ceilings aren't impossible, but what would the purpose be except to control inflation?

The "purpose" was to ensure that peasants didn't get to uppity.

[Adam Smith]

Duncan:

There is a difference between bargaining power and a change in the supply of labor. A change in the supply of labor would shift the supply curve. An increase in bargaining power would move wages off the supply curve, as if a union had been formed. I don't see any evidence of this after the Black Death.

A quick characterization of the situation would be that the price of labor rose relative to the price of land, and that the price of manufacutred goods rose relative to the price of agricultural goods. See North and Thomas, The Rise of the Western World, pp75-76.

North and Thomas make clear that all of these changes can be accounted for by changes in productivity

The rise in wages relative to [land] rents was caused by the increased productivity of labor in agriculture as inferior marginal lands were abandoned. .... While the productivity of labor increased in agriculture, .... the producitivity of labor in manufacturing became unchanged. This was due to the fact that little land was used in manufacturing. Since the productivity of labor in agriculture was relatively higher than previously, and since its productivity was unchanged in manufacture, the price of manufactures had to rise relative to the price of foodstuffs. (North and Thomas, p. 76).

If bargaining power was the issue, the price of agruiculture and maunfactures would have risen by the same amount.

Obiwan:

Originally posted by obiwan18


Just a few questions, Adam Smith:

The population after the black death plummeted, followed by a surge quickly replacing the population lost.

It is my understanding that it took more than 200 years for population to reach pre-plague levels, though intervening wars and famines may have had something to do with that.

We are not in that situation today. We have a large number of older people, combined with a declining percentage of workers.

Overall, the Black Death reduced the number of workers, but the proportion of working age after the plague is far different from today.

Could this difference in worker proportion affect the expected rise in real wages?

If I understand your question correctly I would say not really, since production, and hence wages, depends on the amount and quality of work provided, not on the total population.

Secondly, without increased demand, would this rise in real wages suffer massive inflation?

Good point. A rise in real wages caused workers to gain relative ot land owners. But the fact that you had fewer people, less production, but the same amount of wealth, caused substantial inflation in the economy as a whole.

Capitalism has benefited from an increase in workers throughout its existence. Can an economy continue to grow without an increase in workers?

Yes, with either an increase in the savings rate (which increases capital per worker), or an increase in productivity, through new technologies. (But research for these new technologies has to be financed out of the same pool of savings.)

[DuncanK]

Originally posted by Adam Smith
There is a difference between bargaining power and a change in the supply of labor.

Not the way I see it. Bargaining power has to do with supply and demand. When there is a surplus of labor workers have very little or no bargaining power, but when there is a shortage of labor they have much more bargaining power. If workers think their pay is too low they just quite and negotiate a new wage. They can only do this with a shortage of labor. If there is a surplus they will likely be unemployed if they quit.

[DuncanK]

Originally posted by Adam Smith
North and Thomas make clear that all of these changes can be accounted for by changes in productivity

Yes, that is what I was saying. Increases in productivity decrease wages (or in this case compensation from crop sales). Wages were higher because there were no productivity gains in manufacturing.

[DuncanK]

Originally posted by Adam Smith
Yes, with either an increase in the savings rate (which increases capital per worker), or an increase in productivity, through new technologies. (But research for these new technologies has to be financed out of the same pool of savings.)

Increasing the savings rate could be tough with declining profits and could cause a problem with demand by itself.