Friday, July 1, 2011

2000 years of economic history

The Economist recently published this as their Daily Chart along with the following explanation.
An alternative timeline for the past two millennia

SOME people recite history from above, recording the grand deeds of great men. Others tell history from below, arguing that one person's life is just as much a part of mankind's story as another's. If people do make history, as this democratic view suggests, then two people make twice as much history as one. Since there are almost 7 billion people alive today, it follows that they are making seven times as much history as the 1 billion alive in 1811. The chart below shows a population-weighted history of the past two millennia. By this reckoning, over 28% of all the history made since the birth of Christ was made in the 20th century. Measured in years lived, the present century, which is only ten years old, is already "longer" than the whole of the 17th century. This century has made an even bigger contribution to economic history. Over 23% of all the goods and services made since 1AD were produced from 2001 to 2010, according to an updated version of Angus Maddison's figures.

I've always appreciated Maddison's attempt to quantify global economic production and this chart is an interesting way to present his data. It can, however, be misinterpreted if you aren't careful. Specifically, a quick look at the graph makes it seem like things have fallen off a cliff. But that isn't the case. The graph is in percentage terms. So, the total of all the columns of either category (economic production -- dark blue columns or population -- the light blue columns) will always add up to 100. So, the 6% for the 21st century means that 6% of the total person years lived since the year 0 occurred between 2000 and 2010. As the 21st century goes on, the percent associated with this century will grow and, correspondingly, the percent associated with other centuries will decline. This will be most notable for the 20th century.

Once you understand that the 'collapse' is an artifact not worth much attention, two significant features stand out. First, after hundreds of years of not much change, things started to increase in 18th and 19th centuries and really took off in the 20th. Here we see the results of changes in social organization -- capitalism, the industrial revolution, and all that. Second, and much less appreciated, take a look at the switch in relative height of the two columns beginning in the 20th century. For most of the two thousand year period the percent of economic output was crudely one-quarter the percent of years lived. In the 19th century it rose to approximately 40%. They relative proportions reverse in the 20th century with economic output being crudely twice as large a percent as years lived -- a proportion that is even larger for the first decade of the 21st century. This switch captures the productivity gains associated with the switch from an economy based on muscle power to one based on chemical energy.

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