ILRLE 344 Midterm_StudyGuide - Study Guide ILRLE 344...

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Study Guide ILRLE 344 Pre-Industrialized European Economy – Futile Europe Society was poor. There was low labor productivity is all sectors of the economy especially in agriculture. People lived at subsistence level with no savings or social security to aid them. 60-80% of family income was spent of food. Distribution of wealth was extremely unequal. There was no system in place to provide subsistence to the poor. Charity from the church was the only form of transfer to the poor. Productivity was low. 80-90% of the population was employed in agriculture. Employees produced enough to feed themselves and little to nothing was left over to feed other people. (8 people produced enough food for 10 mouths to feed). People were uneducated. Society was so poor that sending a child to school had such a high opportunity cost in the form of forgone income that he/she could have produced if working. Did no experience sustained periods of rapid economic growth. Society experienced long periods of slow growth followed by catastrophic periods of decline ( Malthusian Cycles ) Population Growth vs Economic Growth (GDP Growth = output per person or pop ) From 1000BC to 1800: Population grew at a rate of 0.10% per year. Real GDP per capita grew at a rate of 0.016% per year From 1800 to 2000: Population grew at a rate of 1.0% per year Real GDP per capita grew at a rate of 1.76% per year. Growth in pre-industrial Europe was arithmetic Malthusian Cycles Due to lack of technological change, pre- industrial societies went through cycles of GDP/POP levels. Because most of the population lived at subsistence level, any event that would raise the subsistence level (famine, disease, war) is magnified in intensity due to the fact that everyone producing and consuming enough nutrients just to stay alive. The subsistence level will naturally increase over time because of small technological advances. The population will follow that level and grow exponentially (geometric growth). At the point of intersection where pop = subsistence, population will fall and another cycle will begin.
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Medieval Ethic All aspects of life are subordinate to religion. The main purpose to life is the get to heaven. Any action such as making a profit would be deemed evil. Private individuals have no incentive to get wealthy and move up into other economic classes because they believed that you were born into a class and moving up or down in a class was evil and unnatural. (Ex: At a market, a merchant and buyer will settle on a “just price”. This price should be around the cost of production for such a good. If the buyer pays more that the just price, then that is considered evil in the eyes of god for the merchant because he is making a profit. And the other way around, if the buyer buys a good for too cheap, that is evil…reverse haggling) Max Weber (Founder of Sociology) – “You can’t have economic growth with medieval ethics… you need a society that accepts and promotes profit and growth.” “The Capitalist Spirit” is needed for large economic growth.
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This test prep was uploaded on 02/20/2009 for the course ILRLE 3440 taught by Professor Boyerg during the Fall '08 term at Cornell University (Engineering School).

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ILRLE 344 Midterm_StudyGuide - Study Guide ILRLE 344...

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