econ 4130 final exam

2. (6 points, 2 each) Explain in detail 3 weaknesses of per capita GNP (or GDP) as a measure of economic well-being. (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?

Flaws: -Welfare depends not only on size of national income but the distribution as well ex: Honduras and Sri Lanka had same income but different distributions -Does not account for differences in "cost of living" across time and space -Many goods available today were not in the past -Taxes work differently in different places -Does not capture all important economic activities -Black market/informal market (barter)- much larger in less developed countries, so makes differences look even wider. -Agricultural production for own consumption. -Housework- traditional societies have more production done in the household, US and other developed countries have more child care and housekeeping services purchased in the market -Dollar value of a good does not always equal the social value Example: no accounting for pollution costs Key debate in whether standard of living increased or not during the industrialization Why still used? -Easily comparable -Widely available -Despite flaws, in most cases it is highly predictably correlated with all other measures of well being

1. (4 pts) Explain briefly how guns and steel aided in Europeans' attempts to conquer the native population of Africa and the Americas. (3 pts)How did germs work in favor of European conquest against the Incas? (3 pts)How did germs work against the Europeans in their imperialist efforts in Africa?

Guns and steel put the Europeans at an automatic advantage. They were more technologically advanced than most other populations and these weapons were very intimidating to their enemies. It allowed the Europeans to slaughter populations more than twice their size simply due to their increased weaponry Germs: one result of having domesticated animals is the passing of disease causing microbes from animals to humans. Large, dense populations led to rapid spread of disease. Far more Native Americans died from Eurasian diseases than on the battfield from guns and swords. By the time the European conquests arrived in Peru to conquer the Incas, many of them had already been killed by the spread of small pox making it a much easier conquest Work against: Tropical Asia, Africa, Indonesia and New Guinea had many native epidemic diseases. Malaria, yellow fever, and cholera were most notorious and posed obstacle to European colonization

5. (5 pts)What is the Hecksher-Ohlin Theory of Comparative Advantage? (5 pts) Apply this model to explain trade between Great Britain and the United States in mid-nineteenth century.

Hecksher-Ohlin Theory of Comparative Advantage: Two Swedish economists, Hecksher and Ohlin, came up with a theory of comparative advantage. They assumed that all countries had access to the same technology. However, the relative scarcity of productive inputs differ from country to country and region to region. Factors of production cannot move easily across national boundaries and so cannot be used in the proportions needed to maximize productivity. Factors of production are harder to cross borders Countries begin to specialize Trade between Great Britain and the United States: Britain had a lot of labor but little land, while the US had lots of land but little labor. The HO Theory of Comparative Advantage predicts that the US would specialize in goods that used a lot of land but required little labor, for example: wheat and corn. Britain, on the other hand, would specialize in cotton cloth and other manufactured goods that require cheap labor. It doesn't necessarily predict the direction of trade or the flow of factors of production across national boundaries, but it does provide some insight into the trade flows of the 19th century and even today.

1. Explain how each of the following contributed to the Conquistador's success in the New World: The invention of the printing press(3 points), domestication of animals, their ancestors' experience in the Crusades (3 points).

Printing Press: Cortez had documented his model of attack on the Aztecs in a book that Pesaro then used to conquer the Incas. The printing press helped spread information to fellow conquistadors about native populations. The written word could now be spread more easily and vastly. Domestication of Animals: Horses were ridden by the Conquistadors which gave them a tremendous advantage in battle while the Incas only had llamas Domestic animals also carried germs that devastated native populations Herding of livestock Crusades Experience: Gun powder, steel worker/swords, technology spreads easier East to West Years of crusades led to improvements in gunpowder and steel forging

4. (4 points) Explain (preferably using a graph) why the number of manors grew as the population increased in medieval Europe. (3 points)What happened to wages and the prices of food and land? (Again, a graphical analysis is helpful) (3 points)Why did the population increase lead to the beginning of the end of the manorial system?

Rapidly expanding populations from 1100-1300. Population of Europe increased from 22 to 74 million from 600-1340 As marginal cost of protection exceeded value of marginal product of labor, new manors formed Again, rising costs of protection as populations increased, with diminishing returns to labor, net worth additional peasants, better to form a new manor to assume some of the responsibility Diminishing marginal product of labor Excess labor on demesne. Too many farmers on fixed plot of land (congestion factor) or trying to reclaim marginal lands that are not as productive Lord collected money payments from some of peasants (commutation). In effect, some peasants became tenant farmers, lords no longer responsible to protect them Shifts in the relative values of land and labor Increase in the price of food Repopulation over time of towns, villages and formation of cities; they needed food. Prices rose with demand Increases in the demand for land Initially land had almost no value, too abundant, no market for it. With population growth came land scarcity, and thus land increased in value Impact on agricultural wages The growth in population over time caused both the supply and the demand for labor to increase. Increased demand for food results in increased demand for agricultural labor. We believe rural population grew faster than urban Increase in supply > increase in demand so wages fell; employment increased Lords find fixed wage or fixed rent contracts more profitable than shared input (manorialism). It was no longer in their best interest to impose manorialism Inland cities formed with permanent markets Some lords had tried to make towns their vassals, but this governmental structure was better suited to agricultural society. Townspeople either bargained or fought for charters of freedom. Towns governed by communes--associations of citizens; early urban governments Towns required food from countryside, gave rise to markets and contributed to the breakdown of the self-sufficiency of manors Hansa--German cities organized Northern trade. Served as trade facilitators for the Baltic and North seas and up the great rivers. Like a chamber of commerce association in 200 cities The Champagne Fairs became important to North-South trade in the 12th century Started as an annual event, then quarterly, monthly and eventually became a fixed market place Lords along trade routes, fought off bandits and charged tolls along roads Instruments of commerce, i.e. letters of credit developed to facilitate trade As populations became more concentrated, the nation states, Germany, France and England were formed The effects of these changes on the Manorial System Development of markets lowers transaction costs of fixed rent contracts. Reemergence of money ends problems of negotiating goods Land becomes more valuable relative to labor as labor is plentiful and now land is scarce Tenant farmers appear on the marginal, reclaimed lands of existing manors In more settled areas, tenancy farming became more common as lords commuted labor dues into fixed money payments Some regression back to manorialism in response to inflation which diminished the value of monetary rents

4. (5 pts)Describe the resurgence of Imperialism at the end of the 19th Century. Which countries acquired new territories and where? ? (5 pts)Why were they able to expand their holdings so rapidly?

There was an outburst of imperialist expansion. This expansion consisted both of acquiring new colonies as well as establishing spheres of influence. Imperialist expansion differed from previous expansion, but differences were in degree rather than in kind Which countries acquired new territories and where? The participants were primarily the old imperial powers: Britain and France. But, other countries which had lacked the wherewithal to exert imperialism also joined the fray: e.g. Germany, U.S., Italy and Belgium. Spain and Portugal did not participate The new territories acquired include almost all of Africa and Southeast Asia The ease of expansion The IR in Europe created a large technological gap between the European nations and the rest of the world. New forms of transportation, especially the steam boat, made it easy for Europeans to penetrate the interiors of Asia and Africa, and advanced weaponry, notably breechloading repeating rifles and machine guns allowed the Europeans to overcome resistance to the encroachments quickly and at relatively low cost.

6. (2 pts) In what two aspects was the 2nd Industrial Revolution different than the 1st Industrial Revolution? (3 pts) List 3 inventions of the 2nd Industrial Revolution. (3 pts)What was the American System of Manufacturing? (2 pts) List 2 industries in which this system was utilized by the Second Industrial Revolution:

1. The Second IR was much more of an international phenomenon than the first IR. 2. The transportation inventions of the Second Industrial Revolution were personal modes of transportation: automobiles and bicycles. Relied on basic science Electrical power Affected daily life Three Inventions Aspirin Lightbulb Telephone American System of Manufacturing a. Continuous flow technology. AND interchangeable parts. Standardized parts stamped out using a machine, then assembled in an assembly line style process. In the first half of the 19th century, true "interchangeability" was not achieved. But, during the 2nd IR, this system was perfected and used in the manufacture of firearms, clocks, pumps, locks, mechanical reapers, typewriters, sewing machines, and eventually engines and bicycles. These process innovations eliminated or diminished the role of skilled labor in many industries. Two industries that used this method: Firearms Locks

7. (3 pts) What are the basic principles of Mercantilism? (3 pts) Contrast mercantilism with principles of mercantilism with that of neoclassical economics. (4 pts) List and briefly explain 4 mercantilist policies typical of pre-modern governments.

Basic Principles: A country's power is driven (or a direct result of) from how much gold and silver they own Trade is a zero-sum game meaning no one benefits from trade with other countries Contrast mercantilism with principles of the Neoclassical Economics: Gains of trade. Mercantilism treated trade a zero-sum game; modern economic theory asserts that there are mutual gains from trade Measuring national wealth. Mercantilism measured a nation's wealth by its stocks of gold and silver; modern economic theory measures wealth as the flow of productive capacity of a nation and its people (GDP) Four Mercantilist policies typical of pre-modern governments Subsidies and tax rebates to export industries Tariffs and quotas on imports Sumptuary laws restricting the consumption of foreign goods Navigation laws restricting carriage of imports and exports to native ships. Most notably British Navigation Acts had a variety of limitations on conducting trade within its Empire. They were supposed to lower the costs of shipping for domestic exporters but of course, they created monopoly power and therefore did not lower prices. Policy was also motivated by a desire to foster the growth of a large merchant marine that could not be converted into naval forces at wartime

8. Discuss the following economic "consequences of the peace": (4pts)border changes, (3pts) neo-mercantilism, and (3pts)the return to the Gold Standard.

Border changes The Treaty of Versailles basically redrew the map of Europe The Austria-Hungarian Empire was divided into Austria, Hungary, Czechoslovakia, Poland, and Yugoslavia Romania was expanded, Bulgaria lost land Germany lost 13% of its land and 10% of its population as a result of border changes Led to further disruption of trade Members of the same ethnic group were separated by national borders; other ethnic groups were thrown together in one nation without regard to the history of conflicts between the groups Neo-mercantilism Countries returned to high tariffs and other protective measures to try to rebuild their economies. The U.S. adopted isolationist policies limiting trade as well as immigration to her shores The return to the Gold Standard The British returned to the gold standard in 1926 at the pre-war parity. They tried to set the value of the pound in dollars at the same level as before the war. Since the US had remained on the gold standard during the war and Britain had not, the pound had fallen in relative value. During the 1920s, a reconstructed gold standard emerged. Other countries had returned to the gold standard inappropriate for the current state of their economies, necessitation adjustments similar to those in Britain

7. Explain in detail how the following led to the entrepreneurial failures resulting in the British Climacteric: (3 pts) Educational failure, (4 pts) Poor Corporate Structure, (3 pts) The Loss of the Industrious Spirit.

Britain's decline is described in terms of entrepreneurial failure: o Britain was slow to develop the new high-tech industries of the Second Industrial Revolution such as chemicals, electricity, optics, aluminum. o Britain was also slow to adopt new technologies in its existing industries -- slow to adopt Thomas-Gilchrist basic process in steel production -- slow to adopt superior spinning and weaving technology invented in U.S. and Germany. Educational failure: Britain was the last in the West to institute universal elementary education (Education Act of 1870). Reluctance to enter the arena of technical education. In 1853, the British government created the Department of Arts & Sciences to oversee technical and science education, but the government tried to keep its role minimal. Science and technical teachers paid on the basis of how well their students performed on exams, encouraging them to "teach to the test" rather than fostering creativity. Poor basic skills of British students allowed them to provide only basic science education Compulsory education had not been enacted like German and French governments which pioneered laboratory training of students (technical schools) Private schools. Most of the schools in Britain in the 19th century were private schools. The "public schools" (private preparatory schools) and Oxford and Cambridge had anti-technical and classical biases. These schools, it is argued, trained boys to be gentlemen, not inventors. Poor Corporate Structure: Elbaum and Lazonick argued that British firms were small, fragmented and had rigid management structures. These firms were not suited to the changing technological environment brought about by the 2nd IR Firms in Britain tended to be family-owned. Family ownership kept firms small. It is argued that many of the new industries developed during this period had tremendous economies of scale and scope. Economies of scope means that larger firms and firms engaged in more than one aspect of production had cost advantages). British firms remained small even in industries where there were clear economies of scale. Reluctance of the owners to forfeit managerial power made these firms slow to adapt new technologies. Scientists and engineers did not move into managerial positions in British firms as they did in German and American firms. Scientists and engineers—those who were best qualified to judge the benefits of new technology or to anticipate technological changes— were left out of managerial decisions in Britain. Loss of Industrious Spirit: Martin Wiener (1981) argued that Victorian England developed anti-industrial attitudes in the latter half of the 19th century. Pastoral life was held up as the ideal. Literature helped lead to the loss of spirit because authors like Charles Dickens, Thomas Hardy, and E.M. Forester painted scathing pictures of industrial life. Industrialists portrayed as shallow, greedy, villains. Gentrification of the British industrial class. Wiener argues that second and third germination industrialists spent their money on country estates and titles rather than reinvesting in productive enterprises. The problem with this explanation is that criticisms of industrialization and gentrification had been prevalent in the First Industrial Revolution and in other parts of Europe during the 2nd IR.

9. (5 points) What are broker's loans and investment trusts and how did they impact the stock market in the 1920s? (5 points)Was the increase in stock prices based on fundamentals or a bubble? Explain.

Broker's loans Referred to as "buying on margin" Call loans In the late 1920s, business firms began lending directly to the stock market through broker's loans. By 1929, companies were diverting huge amounts of money: Standard Oil: $69 million per day Electric bond and share: over $100 million a day By October 1929, 78% of broker's loans came from nonblank sources Investment trusts (like mutual funds) In 1928, there were only 186 trusts in the market; in 1929 there were 265 new trusts formed In 1927, trust sold $400 million in securities; in 1929 $8 billion Fundamentals or a bubble? The stock market became a bubble that finally popped. Speculation kept pushing stock prices higher even in the presence of signs indicating that the economy was entering a down period. In the late 1920s there was a dramatic rise in stock prices. Stock prices were up 226% in 1929 compared to 1920. Up until 1929, the rise in stock prices was justified, but in 1929 the profits that stocks offered led to speculation

7. Discuss the following economic consequences of World War I: (2 pts) human capital loss, (2pts)physical destruction, (2pts)breakdown of international trade. , (4pts)Explain and quantify the German hyperinflation that followed WWI

Human capital loss About 10 million military personnel and 10 million civilians were killed Another 20 million died from famine and disease Many European countries lost a generation of men to the war--Germany and France lost 10% of all military men and Britain lost 5%. 20 million military personnel were seriously wounded and many never fully recovered Physical destruction Belgium, France, northeastern Italy, and eastern Europe sustained the greatest damage Cost of this damage are estimated to have been more than $150 billion. Breakdown of international trade The tremendous growth in international trade that occurred after 1850 was halted by the war. Countries on opposite sides of the war effort cut off their trade with each other. In addition, blockades and attacks on neutral ships led to a sharp reduction in trade between European countries and the world. Capital flows from Europe to the rest of the world were cut off. The French, who were heavily invested in Russia, suffered tremendous losses after the Russian Revolution German investments in Allied countries were repudiated during the war German hyperinflation France and Britain demanded that Germany pay reparations after the war that totaled to $33 billion. This was twice the German national income. Germany was unable to pay these reparations and the German mark began to decline in value. Germany ceased reparation payments by the end of 1922. France and Belgium responded by sending troops to occupy the Ruhr and take over coal mines and railroads. Germany responded by printing huge quantities of paper money to compensate the Ruhr workers and employers which led to hyperinflation. At one point, it took billions of marks to buy a loaf of bread. Eventually the mark's value was less than the paper it was printed on. The hyperinflation had negative effects on both the German economy and society. Many people lost their savings and overall standard of living fell. Many believe that this contributed to the rise of Hitler and the Nazi party in Germany

4. Explain these three detailed explanations as to how increases in demand for manufacture goods or the "consumer revolution" fostered the industrial revolution in Great Britain: (3 pts) Increases in the extent of the market, (3 pts) Focussing device, (4pts) "The Industrious Revolution"

Increases in the extent of the market: Adam Smith argued that the division of labor was limited by the extent of the market. When demand increases, the market expands, the division of labor can be extended, bringing higher levels of productivity and likely increased technological development due to specialization Focussing Device: Consumer preferences focused on the energies of the inventors. Inventors would not have developed power spinning or weaving machines without the demand for cotton cloth The Industrious Revolution: Jan de Vris argues that changes in household behavior fostered the start of the IR. Households produced fewer goods for their own consumption and instead purchased more and more goods on the market. This was because there were more goods in the market and/or prices of goods became more affordable. Household preferences for manufactured goods allowed for the growth of factories, with an increased labor supply. This story suggests a link between demand and the supply of labor to factories goods

2. (3 pts) Why was the development of insurance important for economic growth? (3 pts) Why did diffusion double-entry bookkeeping facilitate the birth of modern industry? (4 pts)Explain the connection between the Scientific Revolution and the Industrial Revolution in Great Britain.

Insurance: Brokers went throughout London seeking wealthy merchants who were willing to take on risk and capable of meeting their share of the claim. When merchants agreed to share the risk, he signed his name and the amount of share "under the writing" of the policy. Edward Lloyd provided a place for the transactions to take place and for information on shipping to be exchanged. Insurance for loss at sea allowed more merchants to engage in overseas trade thus increasing economic growth. Helped to decrease the risk involved in shipping which enticed more people to become involved in the shipping industry. Double Entry Booking: Every transaction that is recorded maintains the equation: Assets = Liabilities + Equity. It is a double entry booking because it considers the give and take of each transaction. It provides a way of measuring the financial position of a firm, facilitates "absentee ownership" which allows for larger firms, and lastly facilitates evaluation of creditworthiness which is essential for growth in credit mar 1. Provides a way of measuring financial position of a firm. 2. Facilitates "absentee ownership" ⇒ allows for larger firms. 3. Facilitates evaluation of creditworthiness ⇒ essential for growth in credit market Scientific Revolution and the Industrial Revolution: The SR was the rise of the application of mathematical logic and the experimental method to explain nature. The Scientific Method was developed, which allowed for new inventions during the IR, since the earliest inventions of the IR drew little from existing scientific knowledge. This was done by "trial and error". Discoveries led to innovations! Before people tinkered around with inventions but the 2nd SR caused them to want to know how and to get repeated results

2. (4 pts) Describe the general patterns of foreign investment as markets became more integrated in the late nineteenth and early twentieth centuries. (3 pts)From which countries did capital flow out of? (3 pts)And into which countries?

International Factor Flows. Not only goods flowing, but also increased flow of factors of production across boundaries Capital Flows. During this period we saw a great deal of foreign investment. The general pattern was that capital flowed from early industrializing nations to the late industrializing nations. Individuals invested where they thought they could receive the highest returns. Individuals in the early industrializing nations had the income to invest, and late industrializers offered the best opportunities for growth/high returns. Foreign investment took the form of government securities and bonds, stock and bonds of private companies, etc. Great Britain was the biggest investor in foreign capital. British investors financed French and American railroads. Cattle ranches in the US west financed by Scottish investors Between 1870 and 1910, French foreign investment increased. In the 1880s, the French were investing in Continental Europe. After that they became heavily invested in Russia, the Balkans, and Scandinavia The countries that were receiving these investments or to which capital was flowing were the countries of the New World. Canada received the greatest share of its GNP from international capital flows, but Canada did not have a very high GNP. The U.S. received the greatest share of all foreign investment during this period. The U.S. was fast growing. Already large marketing offering many opportunities for investment Latin America and Asia also received significant amounts of foreign capital during this period

5. Explain and evaluate the Leninist Theory of Imperialism.

Lenin placed a significant amount of evidence on the economic motivations for imperialism. Lenin believed that imperialism was a necessary stage in capitalism. He argued that: Competition in the capitalist world becomes more intense, resulting in large-scale firms and the elimination of small firms Capital accumulates in the large enterprises more and more, but the purchasing power of the masses becomes insufficient to buy all the products of the large-scale industries. So the rate of profit declines. As capital accumulates and the output goes unsold, capitalists resort to imperialism to find alternative markets for their output and surplus capital The Leninist theory of Imperialism is not well supported by historical record. The colonies acquired during the late 19th century expansion did not provide large markets for manufactured goods, not ample investment opportunties

6. (5 pts) What is the Malthusian Model? (3 pts) Explain how it describes population changes in Europes' First and Second Logistics. (2 pts) Give examples of positive checks and preventative checks.

Malthusian Model- the primary resource is food the law of diminishing returns is inevitable as population grows it eventually strains on the food surplus eventually food becomes scarce and population growth must be checked through positive and preventative checks production or productivity increases provide only temporary relief (not long term) Europe's First Logistic: Rapidly expanding populations 1,000-1300. (Population of Europe increased from 22 to 74 million, 600-1340) The Black Death, 1347-1351 In 1340, total European population estimated at 80 Million Estimated 25 million people died during these peak plague years. Europe's Second Logistic: Restoration of Growth in Population around 1450. (insert graph) Decline in disease due to increased natural immunity. Rising real wages/better nutrition/increased life expectancy. Earlier marriage/higher birth rates. Stagnation of population in 1600s Wars: The Thirty Years War (1618-1648). Between 1600 and 1650 population in Germany fell by 4 million from 16 to 12 million. Epidemics: catastrophic mortality due to disease and food shortages Fertility declines: changes in nuptiality—primarily later marriage, attempts to space births The Malthusian Model. Rev. Thomas Malthus described this pattern in Principles of Population (1798). This is basically a story about diminishing returns. He argues that population growth was limited by the resources of a society: The primary resource is food. The law of diminishing returns is inevitable. The cultivation of new land and the intensification of labor in response to demographic growth adds progressively smaller increments to production for each additional unit of land or labor. As population grows, it eventually strains on the food supply. Production or productivity increases provide only temporaryf relief. Any gains from invention or innovation are inevitably canceled due to demographic growth. Eventually food becomes scarce and population growth must be "checked." Positive checks (excess mortality): famines, epidemics, wars Preventive checks: population changes behavior to lower fertility

10. (5 points) What are monetarist explanations for the Great Depression? (5 points) What are aggregate demand based explanations for the Great Depression?

Monetarist Explanations These emphasize on the role of monetary forces in causing and prolonging hte Depression. They argue that the fall in the money stock due to the actions or inactions of the Fed pushed the economy into a recession and then prevented it from recovering. Most famous proponents of this theory are Milton Friedman and Anna Schwartz The role of the money supply in initial downturn in 1929. Friedman and Schwartz have argued that the Fed was at least partially responsible for the downturn in 1929. The Fed had curtailed the growth of the money stock in response to the speculative rise of stock prices in 1928 and 1929. The Fed raised the discount rate and sold bonds The failure of the Fed to prevent further drops in the money stock after the crisis began The Fed responded inadequately to the financial crises that followed in the wake of the Stock Market Crash. The Fed allowed the nominal supply of money to fall When banks began to fail, the Fed did not loosen the money supply or try to increase the liquidity of the economy When Britain abandoned the gold standard in September 1931, this put pressure on the American dollar. The Fed responded by raising the discount rate to prevent the drain on its gold reserves. This further contracted the money supply The role of the gold standard The restrictive monetary policies followed by the

1. (4 points) According to Jared Diamond, the ability to grow what types of crops are most favorable to economic development? Why? (6 points, 2 each) List and briefly explain 3 characteristics of an animal that Diamond sees as necessary for domestication of that species.

Most favorable crops: Cereal Crops (wheat and barley) -Easily stored -Sustain harsh growing conditions -Nutritious, high caloric content -Tastey Domestication: -Large (in order to do hard/heavy labor), plant eating (cheaper and more abundant), terrestrial mammals -Can give birth in their first or second year -Need to be social animals. Internal social hierarchy -Must get along with humans (do not want to domesticate a naturally mean animal)

3. Explain the importance of the following innovations to British industrialization: the (4 pts) Newcomen steam pump / Watt Steam Engine, (3 pts) Henry Court's puddling and rolling process. (3 pts) Explain how innovations in industrial organization led to increased productivity in the ceramics industry.

Newcomen Steam Pump/Watt Steam Engine: Thomas Newcomen developed the steam pump in 1712 to pump water out of coal mines. The pump was large, expensive, and required a great deal of fuel, but it was effective. Watt improved the design in the 1760s by creating a low pressure steam engine. This improved the efficiency of the engine. The steam engine facilitated the growth in factories, and broke the dependence of factories on water power. Henry Court's Puddling and Rolling Process: This ended the reliance on charcoal fuel. Bars of pig iron were melted in a reverberatory furnace so iron did not come in contact with fuel. The molten iron was puddled with long rods to help burn off excess carbon. Bars of wrought iron were produced. Ironmasters achieved economies of scale and Britain became a net exporter of iron and ironware by 1800. Ceramics Industry: Gains in the ceramics industry came from division of labor. Unskilled workers did the grinding and mixing, high skilled workers concentrated on shaping, designing and glazing. This led to an increase in productivity.

5. (3 points) What is meant by technological stagnation in the Greek and Roman Empires? (2 points) How could "an Overdose of Slavery" be the cause? (2 points) List 2 flaws of the slavery explanation. (3 points) Provide an alternative explanation.

Stagnation Short list of new products in the 1,500 years of Greek and Roman rule Not too impressive refinements to existing technology Surprisingly little application of water-mill power using aqueducts. Mostly in France and in the latter days of the empire Overdose of Slavery Under slavery, labor was relatively cheap, no incentive for the elites to replace human power with machine power Slaves had no incentive to make labor-saving devices, since their labor would be elsewhere directed The case against the slavery explanation Slavery not all that prevalent until Roman conquests Slavery used for massive projects (temples, fleet building, etc) not widely in agriculture in which most of the labor force was engaged Alternative explanations for technological stagnation The value system of the great philosopher-scientist-mathematicians which favored theory over practice A great disconnect between the thinkers and the producers in a stratified society The practical applications of the new scientific discoveries were mostly in weaponry in response to duress

3. (5 points) Describe the North and Thomas model explaining the Neolithic Revolution. Specifically, use a graph to illustrate how population growth affected this change. (5 points) How is this model consistent with what we know about the transformation from Hunter-Gatherers to Settled Agriculturists?

The Neolithic Revolution was the 1st Economic Revolution, switch from hunter/gatherer to settled agriculture Initial CRS to hunting. Game is ample, high returns, no lost efficiency. Double the hunters, double the yield Then DRS eventually. Twice as many hunters no longer yields twice as much output CRS to agriculture. Land is not scarce. If you have twice as much land you'll have twice as much food Consistent with what we know: Extinction of mammoths - implications for returns to hunting. Settled agriculture occurred at the same time. Either due to overhunting and/or climate change (ice age) that large game was not available, new food source necessary How culture (differences in returns for men vs. women) while hunting was initially more productive than gathering. It makes sense that women would be the first farmers. Hoe culture refers to early agricultural efforts by women using primitive hoes. First sharpened sticks, then stick with a stone blade attached, eventually metal hoes. Eventually began domesticating animals and cultivating grains and vegetable while men hunted Trial and error in agriculture (returns to scale) as best practices learned and passed down, returns to agriculture increased Establishments in the fertile crescents. Independently in Mesopotamia, North China, and Meso-America. Areas best suited to early agriculture

6. (8 points, 4 each) Provide 2 examples of imperialist efforts by European powers motivated by their desire to expand or control trade in the nineteenth century and give historical details. (2 points)Discuss motivations other than economics in the European powers imperialist efforts in Africa.

The Suez Canal Built by a French company in the 1860s and opened in 1869. The canal radically shortened the travel distances from Europe to the East. The canal became of utmost importance to British trade with India, losing access to the canal or even an increase in the tolls charged would have imposed great costs to the British The British did not initially own shares in the Suez Canal. It wasn't until the Egyptian khedive ran into financial troubles that Britain was able to acquire shares. The Khedive incurred large debts to the French and British in the construction of the canal. His inability to repay his debt forced him to sell his shares in the canal to Britain in 1875, however this did not solve Khedives financial problems and he suspended payments on his debts in 1876. The French and British governments appointed financial advisors in the late 1870s after the khedive, who eventually became the effective government of Egypt. Egypt resented European control and rioted and destroyed European property. In response to the rioting, the British bombarded Alexandria in 1882 and sent in troops. Britain occupied Egypt until 1914, when the British made Egypt a protectorate China A triangular trade developed in the 18th and 19th centuries: Opium was grown in India; shipped to China by the British East India Company; the opium was traded for silver which Britain used to cover her negative trade balance with China. China opposed this trade, and when one Chinese official burned a shipment of opium in 1839, the British traders demanded the British government retaliate. This was the beginning of the Opium War (1839-1842) The war ended by the Treaty of Nanking, which gave Britain the island of Hong Kong, opening five more ports to trade and established a uniform 5% import tariff Rebellions in China, e.g. the Taiping Rebellion, gave Western powers another excuse for intervention. In 1857-1858, a Anglo-French force occupied several principal cities and forced more concessions from the Chinese China never became a colony, but the Western powers did have spheres of influence, treaty ports, and long term leases of Chinese territory. These powers agreed to an "open door" policy in 1899--they agreed not to discriminate against the commerce of other nations in their own spheres of influence