flyingchicken
Deity
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Question: Wartime economies in pre-industrial times?
NES Economics Thread
- Thread starter Masada
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Question: Wartime economies in pre-industrial times?
das
Regeneration In Process
Addendum to above question: is it really that different from peace-time economy in a suitably large empire and a war that does not threaten its very survival?
Ancient Greek economy is, ofcourse, something different entirely, at least before the decay of the classical polis. I forget; did the state even have any permanent income, except perhaps from tolls and, hypothetically, tributes, with voluntary contributions and financial levies being the main source of money whenever such was needed?
Ancient Greek economy is, ofcourse, something different entirely, at least before the decay of the classical polis. I forget; did the state even have any permanent income, except perhaps from tolls and, hypothetically, tributes, with voluntary contributions and financial levies being the main source of money whenever such was needed?
Well the first thing is what do people want the model to do? And be specific, if you want inflation or deflation or employment or unemployment specify it.
In the meantime here is a relatively simple model one could use to determine the break down of GDP and GDP if necessary.
The Keynesian Model is probably the easiest for the layman, Y=C+I+G+(X-M)
Where Y=Aggregate Expenditure
C=Consumption
I=Investment
G=Government
X=Exports
I=Imports
Punch those values in, and you have a GDP value, since GDP=Aggregate Expenditure=Aggregate Income=Chain Volume. That will give you a snapshot of the economy frozen in time, useful for updates and statistics.
I’ll change the model into a closed system (no trade) to make it easier to understand.
Y=C+I+G
So Y=Aggregate Expenditure (which is equal to GDP)
C=Consumption Expenditure by households
G=Government spending on goods and services
The difficulty is figuring out precisely what goes where, how does one know the ratio of investment to consumption in a given economy, what are its effects and how might the ratio’s shift?
You just make up a formula, since Y is typically known, and G is fairly easy to figure out (even if one only looks at the historical taxation rates of the period).
I would have a formula typically like this for any period before 1750
Y=C4/6+I1/6+G1/6
So consumption by the population is around 4/6th of the economy, investment in new factors of production or technology makes up around 1/6th, while government expenditure makes up around 1/6th (a deliberate over-estimation by around a factor of maybe double, NESer’s need something to play around with).
Consmuption alone does not lead to growth, investment however does, one could then come up with a means of calculating growth according to this method with a formula like
I=% Change in Y-(Markets x Property Rights x Monetary Exchange x Legal Systems x Transportation x NESer Mistakes)
So I alone would equal around 16% assuming it was 1/6th of Y, much to high, to move it down to NESing levels (people do not want a growth rate significantly below 1 like it was before the industrial revolution in aggregate) I would deduct points for each missing factor of growth, all listed in the above formula and assign them all a weighting.
I=% Change in Y – (M1/9,PR1/9,Mo1/9,LS1/9,T1/9,NESM4/9)
So now you could using your judgement calculate the growth of the economy. Any government expenditure that is invested in the economy could also be rolled into I with regards to growth, perhaps at a reduced rate call it 2/3rds of the initial value or some such.
International trade, that’s the difficult bit, I’m yet to come up with a simple means of managing trade. For the moment just filling in arbitrary export and import values might work, with import and exports being = to 0 if the one is taken from the other for the system as a whole.
Much as I want to answer your question FC (Das this might help as well), its to general to answer properly, I can tell you that typically in pre-industrial economies (at least before the United Provinces came into being and before the Glorious Revolution in England at least with regards to Europe), states had no sure form of income. Some had reasonably stable ones, as Das has noted, tolls, and tribute are really only the stable sources of income open to a pre-industrial state. Typically all a state did in wartime was get it’s predatory on, some states had “usual” means of sourcing funds, a favourite was a special tax on certain goods, other favourites included increasing inheritance taxes (another reasonably stable source of income in normal times), forced loans and a whole other gambit of means. What is essential to remember is this tended to be extraordinary taxes, in that they were dismantled after the extraordinary event which created them ended. Some states have relatively speaking have a more advanced system of taxation, since the natural proclivity of states is just to take from the areas under threat, a special tax on coastal shipping to stop pirates etc, the more efficient states tended to be able to spread this risk out between a much large share of taxpayers spreading the economic damage of a confiscatory tax.
So in short states did not have stable finances, on a year to year basis they might fluctuate hugely, since the majority of the states income came from agricultural sources which vary from year to year significantly. Having these sources paid in cash helps a great deal, since when one is the state one does not need to have a sliding scale, you just specify an amount, and regardless of the leanness of the system or the bounty everyone pays that amount (some flexibility is typically built in, if only note to bankrupt your whole peasant underclass when they get a few bad seasons in a row).
Here’s a general rule, most something like 90% of all state expenditure throughout history has been for military purposes. In terms of total economic output, the state seldom took more than 5% of GDP creeping up to 10% in the most militarised states. Increases could not be much higher in a great many cases, since people could not pay for them in cash or in transportable goods… taking peoples homes and other fixed assets is a sure way to lose any support.
In the meantime here is a relatively simple model one could use to determine the break down of GDP and GDP if necessary.
The Keynesian Model is probably the easiest for the layman, Y=C+I+G+(X-M)
Where Y=Aggregate Expenditure
C=Consumption
I=Investment
G=Government
X=Exports
I=Imports
Punch those values in, and you have a GDP value, since GDP=Aggregate Expenditure=Aggregate Income=Chain Volume. That will give you a snapshot of the economy frozen in time, useful for updates and statistics.
I’ll change the model into a closed system (no trade) to make it easier to understand.
Y=C+I+G
So Y=Aggregate Expenditure (which is equal to GDP)
C=Consumption Expenditure by households
G=Government spending on goods and services
The difficulty is figuring out precisely what goes where, how does one know the ratio of investment to consumption in a given economy, what are its effects and how might the ratio’s shift?
You just make up a formula, since Y is typically known, and G is fairly easy to figure out (even if one only looks at the historical taxation rates of the period).
I would have a formula typically like this for any period before 1750
Y=C4/6+I1/6+G1/6
So consumption by the population is around 4/6th of the economy, investment in new factors of production or technology makes up around 1/6th, while government expenditure makes up around 1/6th (a deliberate over-estimation by around a factor of maybe double, NESer’s need something to play around with).
Consmuption alone does not lead to growth, investment however does, one could then come up with a means of calculating growth according to this method with a formula like
I=% Change in Y-(Markets x Property Rights x Monetary Exchange x Legal Systems x Transportation x NESer Mistakes)
So I alone would equal around 16% assuming it was 1/6th of Y, much to high, to move it down to NESing levels (people do not want a growth rate significantly below 1 like it was before the industrial revolution in aggregate) I would deduct points for each missing factor of growth, all listed in the above formula and assign them all a weighting.
I=% Change in Y – (M1/9,PR1/9,Mo1/9,LS1/9,T1/9,NESM4/9)
So now you could using your judgement calculate the growth of the economy. Any government expenditure that is invested in the economy could also be rolled into I with regards to growth, perhaps at a reduced rate call it 2/3rds of the initial value or some such.
International trade, that’s the difficult bit, I’m yet to come up with a simple means of managing trade. For the moment just filling in arbitrary export and import values might work, with import and exports being = to 0 if the one is taken from the other for the system as a whole.
Much as I want to answer your question FC (Das this might help as well), its to general to answer properly, I can tell you that typically in pre-industrial economies (at least before the United Provinces came into being and before the Glorious Revolution in England at least with regards to Europe), states had no sure form of income. Some had reasonably stable ones, as Das has noted, tolls, and tribute are really only the stable sources of income open to a pre-industrial state. Typically all a state did in wartime was get it’s predatory on, some states had “usual” means of sourcing funds, a favourite was a special tax on certain goods, other favourites included increasing inheritance taxes (another reasonably stable source of income in normal times), forced loans and a whole other gambit of means. What is essential to remember is this tended to be extraordinary taxes, in that they were dismantled after the extraordinary event which created them ended. Some states have relatively speaking have a more advanced system of taxation, since the natural proclivity of states is just to take from the areas under threat, a special tax on coastal shipping to stop pirates etc, the more efficient states tended to be able to spread this risk out between a much large share of taxpayers spreading the economic damage of a confiscatory tax.
So in short states did not have stable finances, on a year to year basis they might fluctuate hugely, since the majority of the states income came from agricultural sources which vary from year to year significantly. Having these sources paid in cash helps a great deal, since when one is the state one does not need to have a sliding scale, you just specify an amount, and regardless of the leanness of the system or the bounty everyone pays that amount (some flexibility is typically built in, if only note to bankrupt your whole peasant underclass when they get a few bad seasons in a row).
Here’s a general rule, most something like 90% of all state expenditure throughout history has been for military purposes. In terms of total economic output, the state seldom took more than 5% of GDP creeping up to 10% in the most militarised states. Increases could not be much higher in a great many cases, since people could not pay for them in cash or in transportable goods… taking peoples homes and other fixed assets is a sure way to lose any support.
das
Regeneration In Process
Das was technically talking about Greece, though to a lesser extent this might apply for other civilisations as well. Still, the advanced bureaucratic empires did usually have a centralised, relatively stable system of taxation (or so I recall/am led to understand, anyway).
That seems about right, but what about maintenance for the bureaucracy?
Do we include the addition of monopolies, the ability to raise taxes on behalf of ones government etc... or are we looking at plain old simple revenue.
If were looking at all the apparatus of state finances, then if you can pay your bureaucrats in cash they’re likely to be significantly less corrupt and more transparent, but it costs more to do this, if you can’t pay them in cash you pay them in privileges and well then you’re likely to end up with problems.
Size I think is the key indicator of stable finances, if one is reasonably large then its unlikely that a crop failure in area A is going to bankrupt your whole state, but not to large that administration becomes inefficient.
If were looking at all the apparatus of state finances, then if you can pay your bureaucrats in cash they’re likely to be significantly less corrupt and more transparent, but it costs more to do this, if you can’t pay them in cash you pay them in privileges and well then you’re likely to end up with problems.
Size I think is the key indicator of stable finances, if one is reasonably large then its unlikely that a crop failure in area A is going to bankrupt your whole state, but not to large that administration becomes inefficient.
das
Regeneration In Process
Please clarify paying them with privileges; do you mean something like what happened in the Late Roman Empire?
Things like paying them with a monopoly on a certain good, or not having them pay tax etc, non monetary compensation. I think the Later Roman Empire had a system of paying bureaucrats and even their soldiers in non-cash terms, allowing the taking of slaves, land grants etc all fall into this.
das
Regeneration In Process
Yes, that was what I was referring to.
das
Regeneration In Process
I meant mostly the paying in goods and slaves rather than money (not sure about the correct English term here; in Russian it's called something like "natural payment" or "payment with nature", which entirely coincidentally and confusingly is also sexual innuendo).
Well that goes even further back. Many of what approached a Roman farming class (those who could equip themselves as legionaries) were constantly at odds with lenders because they were always gone from their fields, fighting off in the siege of Veii and similar long-term actions. In order to get enough to pay off the lenders, taking goods and slaves by plunder and giving a significant (greater, IIRC, than was common at the time, even though the soldiers weren't, per se, paid at all, being levies) portion to the soldiers was a large part of early and middle Republican practice. Plus, it helped motivate the legionaries to fight better. 'Course, that means that failure to sack cities or win battles regularly will push you into a social crisis, with the plebs demanding debt relief cause they can't ransack the money to pay the loans on their own. Which was what drove the Roman political reforms; about every half-century to a century the plebeians wouldn't do well enough in the wars and then would demand representative powers to fight their debtors.
...kind of off-topic, ish, from the original point, which had to do with alternate methods of payment by the government, on which my view for the Roman Republic is that it worked the other way, with the influx of cash making politics decidedly less transparent and the earlier privileges being slightly better on the whole republican government, but that's probably colored by long-term exposure to Polybius.
das
Regeneration In Process
No, it's all good. Incidentally, politics aside, could the Gracchian reforms have worked out well for the economy in the long term if introduced?
Politics aside is kind of the big thing there.
I assume you mean 'succeeded' instead of 'introduced', because the Gracchi managed to push their reforms through, by and large (except for the Italian citizenship bill that was passed due to the Social War later on); in the aftermath of Opimius' counterrevolution, the portions of land that had been meant to be more evenly divided among the Roman protoproletariat ended up in the hands of the big landowners anyway. In any event, successful maintenance of the reforms probably would have resulted in less civil strife in Rome, probably a decreased power of the tribunate because they'd have fewer mobs to base their power off of (so Milo and Clodius can't do their war, sadly; that was one of the most interesting episodes in Roman urban politics IMHO). I'm pretty sure the rich would end up acquiring the land originally set aside for the urban poor anyway, but it'd take longer, and in the mean time they'd be going overseas and extending Roman commercial ties even further than OTL (dragging them into an early Pontic war, maybe?). As for the military aspect of the reforms, the increase in the legion recruitment pools, in all probability that'd work out to be a temporary solution on the road to professionalization, because the Romans just can't rely on what are essentially reservists as their main army when they're campaigning constantly in Spain, Africa, Asia, and southern Gaul; they need long service professional soldiery, as exemplified dramatically at Numantia and the siege of Qarthadast.So, in sum: they'd help, but only in the midterm, not with much of a significant effect longer, I think. You'd probably want somebody who knows more about economics in here, though.
Symphony D.
Deity
Speaking as I do for the "Realist" camp, one with both, and one with just employment/unemployment, as accurate as possible using modern theory. (Inflation presents problems with purchases of items at fixed cost--then again there are things like mass manufacture lowering costs of batch orders, so they may be more problems there than initially visible beyond inflation)
das
Regeneration In Process
Okay, some vague questions for Masada (and anyone else) from my list:
- What are the economic consequences of conquering a province with some trade-important resources?
- What are the effects of a continuous, major influx of loot on the economy (how major and/or prolonged does it have to be to make the economy dependent on it to any significant extent)?
- What would be the economic consequences of forbidding slavery, or abolishing it after it becomes reasonably widespread (not on the Roman level, mind you)?
All of this relates to the same period as before, ofcourse.
- What are the economic consequences of conquering a province with some trade-important resources?
- What are the effects of a continuous, major influx of loot on the economy (how major and/or prolonged does it have to be to make the economy dependent on it to any significant extent)?
- What would be the economic consequences of forbidding slavery, or abolishing it after it becomes reasonably widespread (not on the Roman level, mind you)?
All of this relates to the same period as before, ofcourse.
Disenfrancised
Beep Beep
Depends on the context, but some broad stroke if the resource was being imported to your polity over a tariff wall then obviously it now comes in cheaper with knock-on effects. The conqueror, assuming no disruption or obstinance, now gets what if anything was taxed from that resources production and export.
Depends on the context, an economy flush with fungible loot would be able to buy things from outside more easily which might depress local development as people instead invest their capital and effort in the loot-producing activity. So it depends on the size of the input relative to the economy, the connections with other economies, the relationship of the polity with the input, plus oodles of noise
. Well people would be pissed for starters, they paid good money for those slaves!
But probably wages could change (depending on how much below the freeman's wage a slave maintenance cost and the size of the now released slave labour pool), which certain business would become uneconomic and the increased cost of labour could mean fewer are willing to risk on a new development leading to a general slow down in a pre-consumerist economy...again context is king.Dis has hit it on the head for the first point; I can’t really add more without more information.
Dis has hit it on the head again as well, if the loot is easy to acquire relative to business opportunities (your looking at the return on investment) then it’s very likely that the loot making activities will be popular at the cost of business. In the short term this is not such a bad thing, if it continues for a prolonged period then it’ll kill your internal industry. Any increase in the money supply will also lead to inflation, a large increase in a short period might, and I stress might be soaked up by an uptick in imports (doubtful) but is likely to cause inflation. A small increase over a long period is likely to just add to the money supply and increase the ability of the populace to access hard currency not all together a bad idea (but any expansion of the money supply is inflationary by definition, course this in the pre-industrial world can generally be soaked up by population increases, or expanded production possibilities).
In almost any situations conceivable, wages would fall; the impetus to keep slaves when freemen are cheaper would swiftly do away with the need for slaves.
Dis has hit it on the head again as well, if the loot is easy to acquire relative to business opportunities (your looking at the return on investment) then it’s very likely that the loot making activities will be popular at the cost of business. In the short term this is not such a bad thing, if it continues for a prolonged period then it’ll kill your internal industry. Any increase in the money supply will also lead to inflation, a large increase in a short period might, and I stress might be soaked up by an uptick in imports (doubtful) but is likely to cause inflation. A small increase over a long period is likely to just add to the money supply and increase the ability of the populace to access hard currency not all together a bad idea (but any expansion of the money supply is inflationary by definition, course this in the pre-industrial world can generally be soaked up by population increases, or expanded production possibilities).
In almost any situations conceivable, wages would fall; the impetus to keep slaves when freemen are cheaper would swiftly do away with the need for slaves.
das
Regeneration In Process
That much is obvious, but I was more curious about further development of trade; am I to understand that with the integration of such an area by a growing empire, its external trade connections will expand further? How soon and by how much? What time is needed to take advantage of such a gain?
A prolonged period being approximately how long?
Thanks for the answers, and incidentally, Disenfrancised, way back you promised to give me some more ideas on how to ruin well-off nations. I'm presently collecting those again, so any more contributions would be appreciated to say the least.
Assuming you do little or no damage in your taking of the province and assuming that the enterprise isn't in the opposing states back pocket and assuming it integrates reasonably quickly then internally it should work its way into your trade network. Of course there are a few issues; your merchants might not have the requisite expertise to deal in said good, enforcing tariffs is easier said than done in a newly conquered area (the locals generally have a far better knowledge of the land, then there’s the inevitable preference for merchants trading with there former nation. But given your turns are 25 years I would expect that these annoyances would be dealt with, though your external trade routes need not expand, if its going to expand then 25 years should be enough, but its no guaranteed.
It depends, it could be as little as one turn, or it could be as much as three (perhaps even longer) the quicker it happens the more overall danger there is to the state, a sharp uptick in inflation will hurt your poor and rich alike, it will put people out of jobs and stunt your internal industry not at all a good position for a state to be in. Long term inflation can cause much the same effects in the long run as well, it will primarily hurt your poor, with the burden falling most heavily on farmers or the urban poor, in the first instance because food prices tend to be sticky and only rise in famines and other extraordinary events, any rise because of persistent inflation is going to get a government backlash in the form of price controls or other mechanisms, which will probably exacerbate inflation and hurt the farmers even more (the wealthy landowners if they work the land through slaves or sharecroppers might similarly be hurt, although this is not as likely), and well the urban poor get screwed by an drop in purchasing power especially on food which accounts for the bulk of the budget.
It depends, it could be as little as one turn, or it could be as much as three (perhaps even longer) the quicker it happens the more overall danger there is to the state, a sharp uptick in inflation will hurt your poor and rich alike, it will put people out of jobs and stunt your internal industry not at all a good position for a state to be in. Long term inflation can cause much the same effects in the long run as well, it will primarily hurt your poor, with the burden falling most heavily on farmers or the urban poor, in the first instance because food prices tend to be sticky and only rise in famines and other extraordinary events, any rise because of persistent inflation is going to get a government backlash in the form of price controls or other mechanisms, which will probably exacerbate inflation and hurt the farmers even more (the wealthy landowners if they work the land through slaves or sharecroppers might similarly be hurt, although this is not as likely), and well the urban poor get screwed by an drop in purchasing power especially on food which accounts for the bulk of the budget.
It isn't my fault you can't ask specific questions, so I can’t answer them specifically, it's like giving me a half formed essays question and expecting a certain result using the other half you haven't mentioned. Or to make it even simpler, it’s like asking a Greco/Roman History buff to distil into a couple of hundred words 2000 years of history, its going to be ugly, general, wrong for vast swathes and just generally nasty. Economics is like law, there is no single right answer, there are a bunch of precedents (papers, experience and data series), a bunch of circumstances (any single change in a circumstance can throw the a wrench in the most well though out solution) and heck I’m sorry I cant really dumb what I’m writing down, a post that takes me 200 words to write would normally take should be taking me 50 words judiciously smattered with formulas and symbols.
In short if you have issues with my questions, ask bloody questions. Snide criticism is childish.
EDIT: I'm not trying to burn you, I'm just trying to explain the difficulties of asking me about a time period which stretches for a few hundred years (with developments) and asking me to sum up neatly a general cure-all or some such... it's difficult.
