history 1.2. 1.3

What is Economic History?
It is the study of how people, countries, and the world have become wealthier or poorer over long periods of time.
What are the Sources of Economic Growth? Growth happens when a society produces more goods and services. This usually comes from three things:
- Land: Using more or better soil for farming.
- Labor: Having more people working.
- Capital: Creating better tools and machines (like a plow or a tractor).
Key Indicators:
- GDP (Gross Domestic Product): The total value of everything a country produces in a year.
- GDP Per Capita: The total wealth divided by the number of people. This tells us how much the average person has.

The Visual Representation: If you look at a graph of world wealth from the year $1$ to the year $2000$ , it looks like a hockey stick lying on the ground.
- The Flat Part: For thousands of years, the line is flat. This means people were mostly poor and wealth didn't change much.
- The Upward Thrust: Around the year $1800$ , the line suddenly shoots straight up. This is when the Industrial Revolution started.
The Great Divergence:
This is a term for the moment in history when Western countries (like the UK) started getting rich very fast while other parts of the world stayed poor for much longer.

Agrarian Societies:
Almost everyone was a farmer. If the crops failed, the economy failed.
Limited Factors of Production:
1. Land: There is only a certain amount of land. Once it is all used, you cannot easily make more.
2. Labour: Many people were not free to choose their jobs.
- Serfdom: A system where farmers were legally tied to a lord's land and could not leave.
- Guilds: Groups of craftsmen that made strict rules. You couldn't just start a new business without their permission. This stopped competition and new ideas.
1. Capital: There were no banks to lend money. If a farmer wanted a better tool, he had to save for years. Most people only had very basic, simple tools.
Extractive Institutions: These are systems where a small group of powerful people (like kings or lords) take wealth away from the workers.
- Why this stops growth: If a farmer knows the lord will take half of his extra wheat, the farmer has no reason to work harder or invent a better way to farm.

Demography: The study of populations (births and deaths).
The 5 Stages of Population Change:
1. Stage 1 (High Stationary): Many babies are born, but many people die from disease and hunger. The population stays small and stable.
2. Stage 2 (Early Expanding): People still have many babies, but fewer people die because of better food or medicine. The population grows very fast.
3. Stage 3 (Late Expanding): People start choosing to have fewer babies. The population still grows, but slower.
4. Stage 4 (Low Stationary): Low birth rates and low death rates. The population is large but stable.
5. Stage 5: A possible future where more people die than are born.
Historical Trend:
Between the year $1$ and $1750$ , the world population grew by only $0.06\%$ per year. That is incredibly slow because for every baby born, someone else was likely dying of disease or famine.

Thomas Malthus (1798):
He was an economist who noticed a trap that kept humans poor.
The Math Problem:
- People grow Geometrically: $(1, 2, 4, 8…)$ Population doubles quickly because humans like to have kids.
- Food grows Arithmetically: $(1, 2, 3, 4…)$ You can only clear so much new land at a time.
- Result: Population will always grow faster than the food supply.
The Malthusian Ceiling:
There is a maximum number of people the earth can feed with basic tools. Once you hit that "ceiling," people start dying.
How the Trap Works (The Cycle):
1. A new technology is invented (like a better plow).
2. People get a little bit more food and become wealthier.
3. Because they are wealthier, more children survive and people have more kids.
4. Now there are too many mouths to feed.
5. The extra wealth is spread thin among too many people.
6. Everyone becomes poor again, back to the same level as before the invention.

The Event: In the $1300s$ , the Black Death killed about one-third of the people in Europe.
The Economic Result:
- Fewer Workers: Because so many people died, there was a shortage of labor.
- Higher Wages: To get people to work, landowners had to pay much higher wages.
- Better Living Standards: The survivors became richer. They had more land per person and better food.
The Malthusian Return:
Eventually, these richer survivors had more children. A few hundred years later, the population was back to its high level, and wages fell back down to where they were before the plague.