Thoughts for September 25, 2022
Good afternoon. Today’s topics are the economic impacts of the Black Death, missile defense, and ecosystem services.
Economic Impacts of the Black Death
The Black Death, believed to have been bubonic plague spread by the bacterium Yersinia pestis through fleas and rats that carry them, was one of the worst, if not the worst, demographic shock in recorded history. It is estimated to have killed anywhere from 75-200 million people, or 40% of Europe’s population at the time. Such figures are hard to imagine; by comparison, COVID-19 is estimated to have killed 0.2-0.35% of the world’s population. Such an event is expected to have major long-term consequences, though exactly what those consequences are is still debated.
One point, on which there seems to be scholarly consensus, is that the Black Death in Europe created conditions that greatly improved the position of labor (I hesitate to use the term “labor shortage” because it is subjective), which manifested in rising wages. See this and this for illustrations of the common wisdom. It is not clear a priori that the Black Death should improve the position of labor. Yes, the supply of labor went down, but so did the demand. Furthermore, the Black Death did not destroy land or much capital, so the amount of land and the number of tools per laborer increased, which should have (and apparently did) raise their productivity.
Perhaps the best way to think about this is in that the Black Death reduced the supply of labor relative to other factors of production, improving the position of laborers relative to land-owning nobles. We’ll come back to this in a minute.
A second economic effect that is part of common wisdom is that the reduction of the labor supply forced improvements in labor productivity, catalyzing a process of technological improvement that would characterize modernity. Unlike the first point, this one is more disputed in the literature. I’ll start by referring to this 2016 paper which shows that the tight labor market conditions had ended before economic growth took off, indicating that there is not a connection between the two.
This recent paper by Jedwab, Johnson, and Koyama is quite readable, and it has much useful discussion of the socioeconomic impacts of the Black Death. JJK posit two frameworks for thinking about the economic impact.
The Malthusian framework (Thomas Malthus). The Black Death reduced the GDP in Europe, but it increased the GDP per capita because there was now more land per person.
The Smithian framework (Adam Smith). By decimating cities and disrupting trade networks, the Black Death destroyed agglomeration economies and reduced the GDP per capita.
This paper is very much in line with the Malthusian framework. Prior to the Black Death, Europe was already showing signs of Malthusian pressure. Deforestation was at a high point, marginal lands were being farmed, and famines became more frequently, especially the Great Famine of 1315-1317 (the setting of Hansel and Gretel). Malnutrition may have weakened the European immune system and contributed to the death toll of the Black Death. This paper documents that as a result of the Black Death, the labor force decreased proportionally more than the total population and output per capita increased. The author argues that as a result of labor conditions, more women worked, which meant later marriages and smaller families, helping to set conditions for modernity. Production shifted toward luxury goods, interest rates fell, and journeyman gained more power in guilds relative to masters, all conditions that contributed to long-term growth. For reasons that the paper goes into in depth, Holland was the region best suited to take advantage of labor-saving innovations, which explains why Holland was the first to develop a proto-industrial economy (Dutch Golden Age).
This paper finds that cities generally recovered in population faster than the countryside, even though they had a higher death toll, indicating that the Black Death spurred country-to-city migration. This is consistent with a Malthusian model in which resource pressures limited city growth.
JJK note that, while output per capita rose in the long run, the effect during and for the first few years after the Black Death was a drop in output per capita, as the disruption to trading networks outweighed any positive effects. They argue that the rise in the standard of living, though real, has been overstated. They find a correlation between the death rate of the 1350s and the level of urbanization in the 1750s, a sign that the Black Death led to long-term growth, but that the correlation is weak.
Looking elsewhere in the world, JJK find that Egypt and the Middle East suffered a long-term decline as a result of the Black Death. A major factor is that, unlike European agriculture that was mostly rain-fed, Egyptian and Middle Eastern agriculture was mostly irrigated, which requires a large and fixed amount of labor to maintain. Thus these regions has more Smithian conditions than Europe.
In his 1997 book, David Herlihy helped popularize the view that the Black Death was a watershed moment for Europe socially, catalyzing changes that would propel the start of modernity. JJK document ways in which in the Black Death led to the decline of the manorial system, the centralization of theretofore highly fragmented states, and the decline of the Catholic Church as a dominant political institution. However, each of these trends had many causes; for example, a few weeks ago I discussed the role of the Hundred Years’ War in centralizing government authority in England and France.
It seems reasonable that the decline of manorialism, which was not caused entirely but accelerated by the Black Death, boils down to the increased bargaining power of laborers in the new reality. Nobles tried to reassert power over laborers. Several wage control laws, such as the Statute of Laborers in England in 1351, resulted, though they had limited effect. But in Eastern Europe, which was also hit hard by the Black Death, serfdom increased and remained prevalent into the 19th Century. Obviously there are more factors at play; JJK go into some depth about social differences between East and West that would explain this.
There are many more analyses of the economic impact of the Black Death that I would have liked to review but haven’t (yet) had time for. But I come away from this exercise with several conclusions.
Despite being well studied, there are still many open questions around the long-term impacts of the Black Death.
If you want a Malthusian reading of preindustrial history, 14th Century Europe is one of the best places to look.
Even if we had a complete and certain view of the impact, much of it varies across Europe and is contingent on particular circumstances. We have very limited ability to generalize, especially to demographic trends in a postindustrial context.
Missile Defense
There are several development in missile defense in the last few weeks, as well as several developments that make the topic as timely as ever.
In a recent press release, Raytheon trumpeted their success in developing a Glide Phase Interceptor for hypersonic missile interception. A ballistic missile has three phases of flight: boost, glide (or midcourse), and terminal, which are respectively the phases after launch, while cruising, and while descending to its target. A robust missile defense system seeks capabilities against missiles in each phase, as the greatest security comes in a layered defense. The success is only in a Systems Requirements Review - Prototype, which means that the system only exists on paper at this point. It will be some time before such a system is built, deployed, and tested. See this article for slightly more elaboration.
Hypersonic weapons are of particular concern from a missile defense perspective. Russia and China both have robust hypersonic programs. The first use of a hypersonic missile came this year against Ukraine. At this point, hypersonics may be more of a terror weapon, like the German V-2 in World War II, than of great strategic importance, but it is early days and the concern is very real.
A few weeks ago, Lockheed Martin delivered a 300 kW laser system to the Department of Defense. The system is geared toward anti-ballistic and anti-UAV capabilities for tanks and ships, and maybe aircraft later on if the system can be miniaturized. It is not yet suitable for long-range missile defense. However, combat lasers are advancing rapidly, and it is conceivable that megawatt-class lasers will be available by the end of the 2020s. These lasers could potentially be suitable for satellite-based missile defense, bringing to reality the vision for the Strategic Defense Initiative that Ronald Reagan outlined in a 1983 speech.
The Missile Defense Agency originated in 1983 with SDI, and took its present form in 2002 after George W. Bush (wisely, in my view) abrogated the Anti-Ballistic Missile Treaty. Bush, as well as Barack Obama and Donald Trump, sought to reassure the Russians and the Chinese that this decision was meant to counter threats from rogue states such as Iran and North Korea, and not them, though this line now seems to be changing.
Also recently, Russia released a new, intentionally ambiguous, nuclear strategy. Defense experts in the West are struggling to read the tea leaves. While details are unclear, it appears that the Russians are more comfortable with the prospect of using tactical weapons than NATO is. Meanwhile, Vladimir Putin reiterated nuclear threats against the West in his speech announcing the mobilization, and there are examples, such as this one, of prominent Russian military leaders fantasizing about destruction of NATO countries. The urgency of a strong missile defense should be apparent.
Some arms control advocates will argue against missile defense. I won’t belabor the case here, which has logic to it, but I would start with the smell test. The idea that nuclear security can be best attained by refusing to build defensive systems against nuclear attacks is so offensive to common sense as to invite strict scrutiny out of the gate.
If one really believes in arms control, then one must recognize that the present time is not fortuitous. Relations between the U.S. and Russia are in the sewer, and China currently expresses little interest in arms control. Therefore, an aggressive buildup today insures that the U.S. will be in a stronger negotiating position tomorrow, when conditions might be more ripe. Reagan’s first term brought an arms buildup, and the second term brought the INF Treaty.
Ecosystem Services
I recently discussed oceanic plastic pollution and noted some of the flaws in the estimates of a “social cost of marine plastic”. In discussing the estimates of Beaumont et al., I said
It is not at all clear how reliable the ecosystem service figures of Costanza et al. are. That would be a good subject for another day.
Now it’s another day. Costanza et al. refer to their 1997 work and 2014 update, the latter of which Beaumont et al. use, to estimate ecosystem service valuation. ESV is an attempt to put a monetary value on the functions that nature provides, such as pollination, pollution reduction, tourism value, provisioning, and others. It is a heroic effort to estimate these quantities, and while I think there could be some value in principle, the exercise has many problems.
Efforts continue with the Ecosystem Services Valuation Database, a database of studies that puts a monetary value in the form of dollars per hectare for various types of biomes. First of all, the averages used by Costanza et al. and others are based on a wide range of studies that operate in different geographic locations and use different methodologies. Thus averaging is done for values that are not really comparable. To make matters worse, the results vary so widely that we run into a power law problem: a single outlier can dramatically skew the average even over a large number of studies. Thus, even though there are hundreds of studies in the database, the averages are not reliable.
The researcher David Simpson wrote this critique a few years ago. Of several important issues raised, I think the most important is the distinction between marginal and average values. A decision for which valuation is relevant will impact a small portion of the ecosystem services provided in a context, but values in the literature are generally reported as averages, which is general are much greater. As the number of species and the number of acres of a biome grow, there are diminishing returns in their value, in the same way that if my annual income grows from $0 to $50,000, that is a far bigger gain than growing from $450,000 to $500,000. This issue is generally neglected. Thus when Beaumont et al. assert that 1-5% of the ecosystem services of the ocean and coast are lost due to plastics (again, these numbers appear to be little more than wild guesses), that does NOT mean that 1-5% of the of $49.7 trillion value of marine ecosystems are lost; the actual value is almost certainly far less.
This paper also gives some criticism. A major point, which they express in several ways, is that conservation is generally motivated by non-anthropocentric concerns, and ESV is an anthropocentric concept that values nature in human-instrumental terms. This criticism is fair enough. The ESV framework makes some attempt at non-anthropocentric valuation under the heading of “cultural” services, but these efforts are weak.
I have sympathy for the problem that ESV is trying to solve. Any decision with environmental implications will necessarily value environmental quality alongside other factors, and by thus necessity will have an implicit valuation on nature. The framework seeks to make it explicit. The Environmental Protection Agency has long used cost-benefit analysis in its rulemaking process. But the practical problems to applying this technique to ecosystem services are most likely insurmountable.
Circling back to marine plastics, we have a subject that gets a lot of media attention, but are devoid of any reliable way to quantify the seriousness of the issue. The estimates of Beaumont et al. and the WWF estimate built on that are completely unreliable and almost certainly too high, perhaps by orders of magnitude.