Introduction to economical history

• Introduction to Global Economic History or an economic history of the world
• Lecture by Frank Caestecker, 14u30-17u in aud.Lilar (campus Boekentoren/Blandijnberg)


  14.2.2024
• Topics covered in the course

  • Introduction: Modern Economic growth
  • Measuring economic success
  • How to explain economic success?
• Global Economic History, where to start? From 1500 CommonEra/AD onwards: first globalization
• Global Economic History, when to start? Christoph Columbus 1492 arrives in the West Indies "discovers" the American continent
• Global Economic History, when to start? From 1870 CE/AD onwards: second globalization (until 1914)
• Second globalization (1870-1914)


  • Innovations in transport (steamboats) and communication (telegraph, telephone)
  • Imperialist expansion, FDI (Foreign Direct Investment), multinational companies
• Global Economic History, when to start? From 1970 CE/AD onwards: third globalization (until ?)
• 2008, 2020 (Covid), March 2022: Russian attack on Ukraine and the energy crisis
• Global Economic History, how? In which language to teach at the university of Gent

  • Since 1930 Dutch is (only) language of education at this university, but since 2003 possible in English
  • At most 6% of bachelor programs and 35% of the master programs may be taught in another language than Dutch
  • Belgian students may request to do their exam in Dutch (request at start of semester)
  • Lecturers in English have to pass an exam
• Why teaching in English?

  Strategy of internationalization: Openness to international students, from within (Erasmus) and from outside of Europe
• Global Economic History, how? Which scientific methodology to use?

  • Economists are fond of developing iron laws of economics that explain the trajectory of economic development for every time and place
  • Historians focus on change over time, take context seriously, their research is mostly space-specific and time-specific
  • Non-economic context is of importance to understand the history of economic development
• Economists' toolbox


  • Quantitative data, hard date to be used in models
• Historians' toolbox


  • Quantitative and qualitative analysis
• The scientific language of more than one discipline: time series of summary statistics
• Examples of quantitative information

  • Economic growth: GDP/GNP at PPP, HDI
  • Trade relations: TOT
  • Economic inequality: Gini coefficient
  • Demography: TFR/CFR
• Not everything can be counted, not everything countable has been considered worth counting
• Modern (sustained*) Economic growth

  • Social capability to industrialize
  • Inclusive and sustainable growth
• Before modern economic history: the constraints of the preindustrial or agrarian economy


  • Population (labor) grows on a 'natural' rhythm: growth at an exponential rate
  • Land as a factor of production is scarce: production grows at a linear rate
  • Law of Diminishing Return: as long as technology remains unchanged and land is fixed employing more labor inputs will increase output, but by progressively smaller increments
• Malthusian trap of the pre-industrial economy

  • Economic growth causes population growth which on its turn kills the economic growth in the bud
  • Sustained growth is not possible, only moral restraint can prevent the trap
• Topics covered in the course

  • The History of the Modern Economy
  • How to address the history of the modern economy
  • 2.1. Measuring economic success (GNP/GDP)
  • 2.2. Comparing economic success (Inter-national inequality: GDP in PPP $)
  • 2.3. Measuring and comparing economic welfare: life expectancy and HDI
  • How to explain economic success?
  • 3.1. Knowledge and technology
  • 3.2. Market and Trade
  • 3.3. The role of the state: Do institutions matter?
• Modern economy


  • An industrialized economy
  • Acceleration of economic growth thanks to industrialization
  • Significance of the three-sector breakdown: primary, industry, services
  • Industrialization is not only technology
  • Creation of the (centralized) firm with fixed capital
  • Creation of the labor market
• Measuring economic growth


  • The invention of GNP (Gross National Product) by Colin Clark in 1937
  • Exception: Soviet dominated communist economies used Net Material Product
  • GNP conquers the world, GDP globally accepted
• The fundamental data for an analysis of economic success and its flaws
• GDP underestimates growth as price indexes are flawed


  • Only input prices count, what is consumed and produced is assumed to be of constant quality, but it is not
  • Example of lighting: from oil lamps to kerosene lamps, from incandescent to compact fluorescents (CFLs) and then light emitting diodes (LEDs)
• Comparing economic success: International inequality


  • The unit of observation is a country and within-country distribution is considered perfectly equal
  • To compare GDP internationally, market conversion into one currency is required: dollar
  • Price levels are different between countries, local purchasing power needs to be taken into account: Purchasing Power Parity
• Why $ Purchasing power parity is more stable than exchange rates
• Types of light bulbs

  • CFLs (compact fluorescent lamps)
  • LEDs (light emitting diodes)
  • Incandescent light bulbs
• Purchasing Power Parity (PPP)


  A method of measuring and comparing GDP per capita that takes into account differences in price levels between countries, allowing for a more accurate assessment of living standards
• The unit of observation in international inequality comparisons is a country, and within-country distribution is considered perfectly equal
• GDP per capita


  Average income for each country
• To compare GDP internationally, market conversion into one currency (the dollar) is required, but this does not account for differences in price levels between countries
• Purchasing Power Parity (PPP)


  A method that takes into account local purchasing power, using data on prices collected from the 1970s onwards
• Exchange rates are more volatile than PPP, for example the euro to dollar rate has fluctuated significantly over time
• Prices of goods that can be traded internationally are not very different between countries, but prices of non-tradable goods and services are lower in poorer regions due to lower labor costs
• The Maddison database provides long-term historical estimates of GDP per capita in 1990 international dollars (PPP)
• GDP per capita is a measurement of the value-added of an economy, but has issues in terms of capturing inequality and only including market transactions
• Alternative measures of economic welfare include poverty statistics, life expectancy, and the Human Development Index
• The Human Development Index (HDI) measures economic and social progress, incorporating life expectancy, education, and GDP per capita
• The HDI has an innovation of declining marginal utility of increases in GDP per capita, making it more revealing of the impact on ordinary people's lives than GDP per capita alone