SP15 Exam 1 Review

1. (4 points, 2 each) List 2 data sources researchers use to estimate historical standards of living and explain what they can infer from these sources. (6 points, 2 each) List three indicators of economic development other than National Income measures (NI, GDP, or GNP, level, growth rate, or per capita) that are of interest to economists and explain what can be inferred from each of these indicators.
A.i. tax records (production information, shipping information, exports and imports, wealth) ii. 4. heights and skeletal remains (Professor Steckel’s research) Individual height is determined by “genetic potential” basically how tall were your mom and dad. In large numbers, we know that heights of humans does not vary by race or ethnicity. In large numbers differences are due to environmental factors like diet, nutritious, stress and work effort during growing years, diseases
B.i. Adult literacy, both female and total: Adult literacy is a good human capital measure (productive capacity of a society). Negatively correlated with child labor. If kids are in school learning to read, then they’re not in fields or factories, associated with more development economy Female literacy, good yardstick of gender equality ii. Life expectancy at birth Unambiguous measure of wellbeing. Long life a sign of good nutrition, and medical care, lower stress, etc. (other side: diseases, poverty) In USA: eat too much, move less: diseases and cancers. iii. Average annual rate of inflation: Measurement of the stability of an economy as well as the stability of the govt. A country with a high and volatile inflation rate is generally also politically unstable and often run by dictators who print money for their benefit to the detriment for their citizens. On the other hand, deflation is also a sign of economic trouble.
2. (6 points, 2 each) Explain in detail 3 weaknesses of per capita GNP (or GDP) as a measure of economic well-being. i. 1. Does not capture all economically important activities
1. Black market / informal market – much larger in less developed countries
2. Agriculture production for own consumption
3. House work ii. 2. Dollar value of a good does not always equal “social” value (e.g., no accounting for pollution costs)
1. Problem of externalities. Debate over the standards of living during the industrial revolution. Wages rose, prices dropped, but other aspects of life deteriorated iii. 4. Does not account for differences in “cost of living” across time and space
1. Even if GDP per capita were a good measure of average income, comparisons across space and time would be hindered by the fact that the “cost of living” – that is, the cost of a certain bundle of goods or a certain lifestyle – is not the same in different societies (prices – housing prices in particular, taxes, etc.) (4 points)Although this measure has the flaws you just listed (and others) it is the most oft-referenced statistic when considering standard of living differences across countries. Why?
i. **Despite these caveats, GDP still most oft-referenced measure of countries’ welfare for two main reasons:
1. It is available for most countries for many years (At least 50), back to 1840 for the US. Even further back for Britain and some other European nations.
2. Highly predictability correlated with any other measure.
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5. (4 points)Explain how the Neolithic revolution ultimately led to the formation of civilizations. (In other words, how did settlement evolve into civilization). (3 points) Provide 3 characteristics of civilizations (different from just settlement). (3 points) What was the hierarchical social structure of the early civilizations? (Who was at the top, in the middle, and on the bottom layers these societies?)
A. The earliest civilization emerged in Mesopotamia, the area between the Tigris and Euprates, about 3500 BCE (Mesopotamia) Sumerian cities of Ur, Uruk, Lagash, and Umma. First Empire of Sargon of Akkad (2350BCE - 2300BCE) brought cities of summer of Akkad under one rule. Eventually formed into the Babylonian Empire.
B.
a.Organized States - definite boundaries and systematic political institutions, under political and religious leaders who directed and maintained society.
b.Distinct social classes
c.Economic specialization and interdepence - farmer, trader and artisan each mutually dependent

C.Hierarchical Social Structure
TOP:Elites—priests and military. There was frequent warfare bet. Early city states leading eventually to imperialism. Military class rises to the top of the social structure.

MIDDLE:Agricultural peasantry. Small farmers occupy low social ranks. Much of their output was extracted by the machinery of the state and religion (temple dues).

BOTTOM:Slavery. Men forced to sell themselves or their children into slavery due to debt. Captives of wars also were made slaves. Slavery was essential for the extensive public building of early civilizations - monuments, walls, roads, etc.

6. (2.5 each) List 4 contributions of the earliest civilizations (those that eventually formed the Babylonian Empire) and explain how each was important to continued economic growth.
a. Writing
i. Bureaucratic necessity: state needed to keep records of tax collections and tributes ii. Script used to set down other languages besides Sumerian. Phonetic symbols allowed script to be used to write other ancient languages
b. Arithmetic. Necessary for keeping track of accounts.
c. Weights and measures. Standard units of trade.
d. Codes of Law.
i. Civilization required the development of law–codified rules to regulated interactions. ii. Many laws dealt with Economic life. Regulation of contracts, specifying irrigation procedures, regulation of lending practices (33 1/3 % interest on loans of grain, 20% on loans of silver), setting of maximum wages. iii. This shows the extent of development of commerce as well the role of the state in the economy

7. (2 points) What were the major contributions to economic development of the Phoenician Empire? (4 points)Of the Greeks? (4 points)Of the Romans? A.
i. Phoenicians: the first merchants and colonists. Port empire
1. Phoenicians (from 3,000 B.C.), then Greeks and Romans built their empires along the Mediterranean. ii. Greeks and Romans adopted Phoenician alphabet and other commercial techniques.
B. i. Literacy
1. Human capital ii. Colonization of trade ports (increased trade)
1. Greek city-states extensively colonized Asia Minor and the Italian peninsula, prime source of economic gains.
a. Motivations.
i. To deal with excess population ii. To deal with shortages of foodstuffs in founding cities; to obtain a supply of grain and other agriculture products for founding cities. iii. To develop trading relationships and extend markets
2. Founding cities did not try to maintain political control over colonies; instead maintained ties of kinship and commercial interaction.
3. Consequences
a. Extension of trade (further distances than every before)
b. Expansion of production—colonization increased their resources available (land, labor, raw materials)
c. Diffusion of technology–spread of agricultural techniques, writing and literacy iii. Coinage
1. Greeks introduced coinage around 600 B.C. to facilitate trade. Huge contribution!
a. Standard of account. Using goods (grain) s.t. quality differences. Gives uniform unit of payment
b. Medium of exchange. In a barter economy, you have to rely on the “double coincidence of wants” (instead of needed a 3-4 way trade to get what they need for their goods, money gives a medium of exchange)
c. Easily transported store of value. *
C. i. Law Order & Justice
1. Social/political structure military focus, not trade. Interestingly, however, the military focus and prowess of Rome contributed to commercial growth during the Roman Empire.
2. 1. Conquest leads to spread of Roman law. Roman law throughout Mediterranean fosters trade expansion–enforcement of contracts over long distances, standardization of weights & measures, currency, etc. Important for the facilitation of trade ii. Peace extended trade
1. 2. pax Romana (31 BCE - 181 CE).The long period of peace during the peak of Roman empire also contributed to the extension of trade (as well as the cultivation of the arts). This peace included a practical elimination of piracy on the Mediterranean Sea. Peace reduced the riskiness of long distance trade. iii. Improved transportation for trade
1. 3. Military infrastructure facilitated commerce Shipping technology, ROADs (built to move troops, were used for trade)
8. (3 points) What is meant by technological stagnation in the Greek and Roman Empires? i. Short list of new products in the 1,500 years of Greek and Roman rule. ii. Not too impressive refinements to existing technology. iii. Surprisingly little application of water-mill power using aqueducts. (2 points) How could “an Overdose of Slavery” be the cause? (2 points) i. Under slavery labor was relatively cheap, no incentive for the elites to replace human power with machine power (labor and capital as substitutes). ii. Slaves themselves had no incentive to make labor-saving devices, since their labor would be elsewhere directed. iii. A puzzle that the elites would not want to increase the output of each slave (labor and capital as complements). iv. Proponents of this theory attribute the fall of the Roman Empire to the labor shortage as parasitical classes swelled.
List 2 flaws of the slavery explanation. (3 points) Provide an alternative explanation.
The case against the slavery explanation.(flaws)
1. Slavery not all that prevalent until the Roman conquests - doesn’t explain earlier stagnation.
2. Slavery used for massive projects (temples, fleet building, etc.) not widely in agriculture in which most of the labor force was engaged.

Alternatives explanations for technological stagnation.: i. The value system of the great philosopher-scientist-mathematicians which favored theory over practice. ii. A great disconnect between the thinkers and the producers in a stratified society. iii. The practical applications of the new scientific discoveries were mostly in weaponry in response to duress.

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