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Questions and Answers
What major event significantly impacted European economy before the Industrial Revolution?
What major event significantly impacted European economy before the Industrial Revolution?
- The Cold War
- The Great Depression
- The Renaissance
- The Atlantic Trade (correct)
Pre-19th century GDP data is known for its accuracy and reliability.
Pre-19th century GDP data is known for its accuracy and reliability.
False (B)
What aspect does GDP fail to measure regarding living standards?
What aspect does GDP fail to measure regarding living standards?
Income distribution
Human capital is considered a measure of living standards that goes _________ economics.
Human capital is considered a measure of living standards that goes _________ economics.
Which of the following is NOT an explanation of the Industrial Revolution mentioned?
Which of the following is NOT an explanation of the Industrial Revolution mentioned?
Match the following aspects with their relevance to pre-industrial living standards:
Match the following aspects with their relevance to pre-industrial living standards:
Living standards in pre-industrial Europe were easy to measure accurately.
Living standards in pre-industrial Europe were easy to measure accurately.
What was one of the key observations about British GDP performance?
What was one of the key observations about British GDP performance?
Which economist suggested that higher wages in Northern Europe resulted from the Atlantic trade?
Which economist suggested that higher wages in Northern Europe resulted from the Atlantic trade?
The Malthusian model suggests that an increase in material living standards leads to a decrease in the birth rate.
The Malthusian model suggests that an increase in material living standards leads to a decrease in the birth rate.
What is defined as the number of births per year per person in the Malthusian model?
What is defined as the number of births per year per person in the Malthusian model?
In the Malthusian model, subsistence income is denoted as _______.
In the Malthusian model, subsistence income is denoted as _______.
Match the following terms with their descriptions:
Match the following terms with their descriptions:
Which of the following is a key idea of the Malthusian model?
Which of the following is a key idea of the Malthusian model?
Material living standards impact both birth and death rates according to the Malthusian model.
Material living standards impact both birth and death rates according to the Malthusian model.
What was Thomas Malthus' perspective on pre-industrial wages?
What was Thomas Malthus' perspective on pre-industrial wages?
What is the first step in calculating real wages?
What is the first step in calculating real wages?
Real wages are derived from nominal wages by a direct calculation of their ratio to the basket of consumption.
Real wages are derived from nominal wages by a direct calculation of their ratio to the basket of consumption.
What does a subsistence ratio of 1 imply about total earnings?
What does a subsistence ratio of 1 imply about total earnings?
The formula for the subsistence ratio includes the daily wage multiplied by _____ and the yearly cost of basket of consumption multiplied by 3.15.
The formula for the subsistence ratio includes the daily wage multiplied by _____ and the yearly cost of basket of consumption multiplied by 3.15.
Match the following components with their descriptions:
Match the following components with their descriptions:
Which factor might explain part of the increase in real wages in England and the Netherlands during the 16th century?
Which factor might explain part of the increase in real wages in England and the Netherlands during the 16th century?
A subsistence ratio less than 1 indicates that total earnings exceed consumption needs.
A subsistence ratio less than 1 indicates that total earnings exceed consumption needs.
What are the components of the basket of consumption used to deflate nominal wages?
What are the components of the basket of consumption used to deflate nominal wages?
The average number of working days in pre-industrial Europe is estimated at _____ days.
The average number of working days in pre-industrial Europe is estimated at _____ days.
What is the significance of the consumer surplus in relation to real wages?
What is the significance of the consumer surplus in relation to real wages?
What is the key characteristic of the subsistence basket?
What is the key characteristic of the subsistence basket?
Workers in southern Europe had access to the same living standards as those in England and the Netherlands.
Workers in southern Europe had access to the same living standards as those in England and the Netherlands.
What trend occurred in the subsistence ratio after the Black Death?
What trend occurred in the subsistence ratio after the Black Death?
The respectability basket includes a daily intake of _____ kcal.
The respectability basket includes a daily intake of _____ kcal.
Match the following baskets with their descriptions:
Match the following baskets with their descriptions:
What factor attracted settlers to North America?
What factor attracted settlers to North America?
Consumption of sugar and tea became prevalent during the 18th century among the upper class.
Consumption of sugar and tea became prevalent during the 18th century among the upper class.
What was one consequence of the structural change after independence in New England?
What was one consequence of the structural change after independence in New England?
In Europe, skilled wages were generally _____ compared to subsistence levels.
In Europe, skilled wages were generally _____ compared to subsistence levels.
During the 18th century, which type of consumption increased among the British middle class?
During the 18th century, which type of consumption increased among the British middle class?
What does the biological standard of living primarily indicate?
What does the biological standard of living primarily indicate?
British recruits were shorter than recruits from Italy, France, and Austria.
British recruits were shorter than recruits from Italy, France, and Austria.
What technological advancement significantly increased literacy rates across Europe?
What technological advancement significantly increased literacy rates across Europe?
In the Middle Ages, literacy was mainly limited to __________ and those involved in trade activities.
In the Middle Ages, literacy was mainly limited to __________ and those involved in trade activities.
What skills were emphasized for young workers in apprenticeship during the high-wage economy?
What skills were emphasized for young workers in apprenticeship during the high-wage economy?
Match the following countries with their typical living standard characteristics:
Match the following countries with their typical living standard characteristics:
The high wage economy contributed to high incentives for skilled labor and facilitated apprenticeships.
The high wage economy contributed to high incentives for skilled labor and facilitated apprenticeships.
What was the subsistence ratio a measure of?
What was the subsistence ratio a measure of?
Study Notes
The High-Wage Economy
- Assessing living standards in pre-industrial Europe:
- Anecdotal evidence: stories and accounts of daily life
- Quantitative assessment: using numbers to measure things like wages, prices, and consumption
- Living standards across Europe: varied greatly, with Northern Europe generally experiencing higher living standards than Southern Europe and Asia
Measuring Living Standards
- Human capital: A measure of individual skills and knowledge, often indicating a higher standard of living.
- Literacy: Ability to read and write
- Numeracy: Ability to understand and work with numbers
- Craft skills: Ability to perform specialized tasks, often learned through apprenticeship
The Malthusian Model
- Developed by Thomas Malthus: A theory explaining how population growth and living standards are connected.
- Birth rate: Number of births per year per person
- Death rate: Number of deaths per year per person
- Subsistence income: The minimum income needed to survive
- Key ideas:
- Birth rate increases with higher living standards: People can afford to have more children.
- Death rate decreases with higher living standards: Improved living conditions lead to fewer deaths.
- Population decreases with higher living standards: This is because higher living standards can lead to lower birth rates and higher death rates, eventually leading to population decline.
Nominal Wages and Prices
- Nominal wages: Wages measured in money, before taking into account inflation.
- Relatively similar across Europe until the 16th century.
- England and the Netherlands began to see higher nominal wages in the second half of the 16th century.
- Real wages: Wages adjusted for inflation, showing the actual purchasing power of money.
- Computed as a ratio between nominal wages and a basket of consumption goods.
- Subsistence ratio: A measure of how much a worker's income exceeds the cost of basic needs.
- Computed as (daily wage x 250) / (yearly cost of consumption basket x 3.15).
- Interpretation:
- 1: Income just covers basic needs
- >1: Income exceeds basic needs
- <1: Income is not enough to cover basic needs
Consumption Baskets
- Subsistence Basket: A minimum set of goods and services to sustain an adult male.
- Contains basic food, clothing, and fuel.
- Respectability Basket: Includes a wider range of goods and services, including more meat, bread, cheese, clothing, and fuel.
- Reflects a higher standard of living, allowing for more "luxury" items.
Living Standards in Europe
- Subsistence Ratio:
- Increased after the Black Death: More land per worker, higher wages.
- Decreased in the 16th century for most of Europe: Increased population pressure and economic challenges.
- England and the Netherlands: Workers were earning much more than subsistence in the 17th and 18th centuries.
- Southern and Central Europe: Workers were close to bare subsistence.
- Respectability Ratio:
- Similar trends to the subsistence ratio.
- English and Dutch workers could afford a standard of living above both subsistence and respectability.
- Workers in Southern and Central Europe could not afford the same standard of living as those in Northern and Western Europe.
Human Capital
- Literacy: Increased after the printing press, the spread of Protestantism, and a new focus on knowledge.
- Numeracy: Increased due to the demands of maritime trade and the spread of arithmetic and geometry skills.
- Craft Skills: Learned through apprenticeships, providing higher earnings and contributing to economic growth.
- High wages: incentive for apprenticeships and the ability to pay for training.
Conclusion: The High-Wage Economy
- Pre-industrial living standards varied greatly across Europe.
- British and Dutch workers enjoyed higher wages and a standard of living above subsistence and respectability.
- This higher standard of living allowed for greater food consumption, better quality food, more luxury goods, and investment in education (human capital).
- These factors contributed to the economic growth of these regions.
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Description
Explore the various aspects of living standards in pre-industrial Europe, including anecdotal evidence and quantitative assessments. Understand how human capital, literacy, and the Malthusian model influence economic conditions across different regions.
