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John Coats History 392 Reading Response #2 North & Thomas

January 24, 2012

Douglass C. North and Robert Paul Thomas believe that before the other factors generally viewed as required for serious economic growth can make their presence felt, the one true requirement, or as they put it the key to growth, is efficient economic organization (page 1). They begin by defining what they mean by economic growth (i.e., a per capita long-run rise in income page 1), the difference between private costs and benefits v. social costs and benefits, and then explain why technological change, as claimed by other economic historians to be the major source of Western economic growth, is not a cause but a result of economic growth (page 2). They dont really offer any thoughts on the causes of capitalism other than to say on the first page most people prefer more goods to fewer goods and act accordingly. Perhaps they feel that by the 1970s capitalism is pretty well established and doesnt need an explanation or a cause. They justify their claim of the primacy of economic organization by presenting an economic history of Western Europe. This allows the authors to compare how the various nations respond to the wars, plagues, droughts and famines that were regularly occurring parts of life in the Middle Ages. Through most of the Middle Ages the results of these misfortunes were fairly similar in that populations would increase during periods of abundance, labor would become less expensive, land would become more expensive, disaster would strike, land would become less expensive, labor would become more expensive and the cycle would start anew. As the Middle Ages were waning, different nations embraced different approaches to trade. The authors focus primarily on Britain and Holland in contrast to France and Spain. Using statistical data on real wages from the early modern period, they hold up Britain and Holland as the two

countries that made the transition to a more modern form of property rights, allowing them to switch to more of a trade based economy before the rest of Europe, thereby allowing them to escape the teeth of the Malthusian trap. As they discarded technology as a result of growth itself rather than a cause, they dont really look at advances in technology except as leading to other effects in the economy. They accept that advances in weaponry changed the way wars were fought, i.e., professional soldiers well versed in specific fighting techniques (page 94, 95). But this development, which was a factor in the creation of nation states, is viewed as important, not so much because of the technology itself, but because it resulted in much more expensive wars which in turn led to lords having to find new ways to raise money, which in turn led to an increase in capital markets to fund them. One other weak point in their argument is that during those times when Europes population decreased, the progress toward modern economics lost its drive. There was no need to find another way of doing things. Increasing population brought about the friction that necessitated change. If there was no increase in population then there was no impetus for change.

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