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| 29962 | Historical reconstructions of national accounts – the case of the UK | untitled-reusable-block-195 | wp_block | publish | <!-- wp:paragraph --> <p>How do economic historians go about estimating incomes in the distant past?</p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>In broad terms, the strategy is to extend back to earlier periods the system of national income accounting that countries use today to estimate the total output of the economy. The main objective is to apply a methodology that reconstructs this metric consistently over time and across countries. In the absence of data collected at the time, researchers have to bring together what evidence they can from historical sources, but the basic principles are the same.</p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>Because Great Britain's economy was the first to achieve persistent economic growth it is the economy that historians have studied in most depth.</p> <!-- /wp:paragraph --> <!-- wp:heading {"level":4} --> <h4>The reconstruction of Britain's economic history</h4> <!-- /wp:heading --> <!-- wp:paragraph --> <p>The visualization shows the output of the English economy per person since the Middle Ages. As explained below, it is not only capturing the production of workers paid in the labor market, but also the production of subsistence farmers and other producers which were not paid a monetary salary. As such it gives us a perspective on the history of material living conditions of the English population over the last 746 years.</p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>The data in the chart is taken from the seminal book on the history of material living conditions in Britain – <em>British Economic Growth 1270-1870</em> by Broadberry, Campbell, Klein, Overton, and van Leeuwen. It presents a fantastic overview of this work and is very much recommended for anyone who wants to study the origins of economic growth in detail.{ref}See Broadberry, Stephen, Bruce Campbell, Alexander Klein, Mark Overton and Bas van Leeuwen (2015) – British Economic Growth 1270-1870. Cambridge: Cambridge University Press. https://doi.org/10.1017/CBO9781107707603 And of course their work in turn relies on hundreds of other people's work.{/ref}</p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>When interpreting these reconstructions it is important to bear in mind the fundamental identity in this historical accounting: "Within the methodological framework provided by national income accounting, the estimation of GDP can be approached in three different ways, via income, expenditure and output, all of which ought to yield broadly similar results."{ref}Stephen Broadberry, Bruce M. S. Campbell, Alexander Klein, Mark Overton, and Bas van Leeuwen – ‘British Economic Growth 1270–1870’; <a href="https://www.cambridge.org/core/books/british-economic-growth-12701870/A270234C137117C8E0F1D1E7E6F0DA56">book</a> page.{/ref} For the important case of the subsistence farmer for example, the value of the food they produce represents both the economic output of the activity and the income received by the farmer. Consumption of that produce then represents a form of expenditure, as it is using up part of the farmer’s income.</p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>Because of this identity the measurement of GDP can be approached from any one of these three angles: output, income, or expenditure. For historical estimates, the output approach is often considered the more reliable in practice given the available evidence, though information on incomes and expenditure still provide benchmarks to cross-check the plausibility of estimates.</p> <!-- /wp:paragraph --> <!-- wp:html --> <figure><iframe style="width: 100%; height: 600px; border: 0px none;" src="https://ourworldindata.org/grapher/gdp-per-capita-in-the-uk-since-1270"></iframe></figure> <!-- /wp:html --> <!-- wp:heading {"level":4} --> <h4>It would be wrong to believe that historians do not take non-monetary incomes into account</h4> <!-- /wp:heading --> <!-- wp:paragraph --> <p>Firstly, it’s important to get clear from the outset that historical reconstructions of poverty and prosperity do not just concern the amount of <i>money </i>people had in the past. This is a common misunderstanding that is often at the heart of misinformed critiques of historical research. For instance, <a href="https://www.reddit.com/r/dataisbeautiful/comments/5cim2a/the_world_population_living_in_extreme_poverty/">in a discussion</a> of our global extreme poverty chart on reddit, one user suggested that it was <em>"indicative of the fact that quite a lot of the world […] did not use fiat currency."</em></p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>This interpretation is incorrect. Yes, over the last two hundred years, there has been a major shift from people farming for their own consumption towards people working for a wage and purchasing goods in the market. But historians know about history and where non-market sources of income make up a substantial part of total income, it is very obvious that money would represent a rather silly indicator of welfare.</p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>Just as we need to adjust for price inflation, accounting for non-market sources of income is an essential part of making meaningful welfare comparisons over time. Estimates of poverty and prosperity account for both market and non-market sources of income, including the value of food grown for own consumption or other goods and services that enriched the lives of households without being sold in a market.</p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>This issue is not just of importance for historical estimates, but it is also of central relevance for poverty measurement today, given the importance that food produced at home, or otherwise received in-kind, continues to play in the incomes of the rural poor, especially in low-income countries. Accordingly, these flows are accounted for in household surveys of both consumption and income, and in the historical estimates.</p> <!-- /wp:paragraph --> <!-- wp:heading {"level":4} --> <h4>Adjusting for price changes and new products</h4> <!-- /wp:heading --> <!-- wp:paragraph --> <p>It is straightforward to compare material prosperity over time relative to all those goods which remained relatively unchanged over the course of history – economic historians can track the affordability of products like bread, shirt, beer, nails, meat, books or candles over time. </p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>This however is not easily possible when entirely new products were introduced or when the quality of products and services changed very much.</p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>The fact that some of the most important goods and services very much changed in quality or did not exist at all in the past represents the biggest problem of any long-term comparisons of poverty and prosperity because it makes price adjustments difficult.</p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>Many of the most valuable goods today were not available at all: no king or queen had access to antibiotics, they had no <a href="https://ourworldindata.org/vaccination">vaccines</a>, no comfortable transport in trains or planes, and no electronic devices – no computer and no <a href="https://ourworldindata.org/light">light at night</a>. </p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>Historians of course attempt to take this into account as much as possible{ref}Again see Broadberry et al or read about the various methods that attempt to take innovation of new products and changing quality of products into account. One important method is 'hedonic pricing'.{/ref} but this caveat should be kept in mind: no matter how high someone’s income might have been, some of the goods you might value the most – or would value, when you get sick – were not available at all.{ref}To some extent the opposite problem also exists and some goods that were available in the past – like slaves – are not available today. But this is a much rarer problem.{/ref}</p> <!-- /wp:paragraph --> <!-- wp:heading {"level":4} --> <h4>The detail of the historical reconstructions</h4> <!-- /wp:heading --> <!-- wp:paragraph --> <p>The simple structure of how this economic history is presented – as a single line that is flat for most of the time and very steep for the recent period – should not fool us into believing that it is only a loose and approximate historical analysis. The amount of work that went into the reconstruction of this history is extraordinary: it is the culmination of decades of tedious and extremely careful academic work by large teams of dedicated researchers.</p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>The level of <i>detail</i> that goes into such estimates is extreme, although this is hard to present in a short overview like this one. Whilst, there are indeed many sources of uncertainty in such a process, it would be very wrong to think that historical GDP estimates are based on flimsy evidence. It is recommended to read this work in full length, but a passage on agricultural output gives some insight already:</p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p><em>“[The output method] has entailed, first, estimating the amounts of land under different agricultural land uses... and, then, deriving valid national trends from spatially weighted farm-specific output information on cropped areas and crop yields and livestock numbers and livestock yields... The latter task is further complicated by the need to correct for data biases towards particular regions, periods and classes of producer.”</em></p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>And below is one of the many tables from this book, showing the authors’ estimates of output of just one part of the agricultural sector of England. This is one of hundreds of datasets that are required to construct the time series in the chart above. And this table – and all others – in turn build upon a substantial body of historical research, as is suggested by the list of sources it cites.</p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>There are two key takeaways: First, that historical reconstructions of GDP are the outcome of very <i>serious </i>academic work. And second, these represent estimates of <i>total </i>output, not just that part of production sold on markets.</p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>It would be wrong to believe that these GDP series do not account for the value of non-market production, including domestic production for households’ own use.</p> <!-- /wp:paragraph --> <!-- wp:heading {"level":6} --> <h6>A table from Broadberry et al. (2015) showing estimates of historical arable output in England</h6> <!-- /wp:heading --> <!-- wp:image {"align":"center","id":22671,"linkDestination":"custom"} --> <div class="wp-block-image"><figure class="aligncenter"><a href="https://owid.cloud/app/uploads/2019/02/Broadberry.png"><img src="https://owid.cloud/app/uploads/2019/02/Broadberry.png" alt="" class="wp-image-22671"/></a></figure></div> <!-- /wp:image --> | {
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2020-02-07 10:41:29 | 2024-02-16 14:23:00 | [
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2020-02-07 10:41:34 | 2023-10-11 12:46:50 | {} |
How do economic historians go about estimating incomes in the distant past? In broad terms, the strategy is to extend back to earlier periods the system of national income accounting that countries use today to estimate the total output of the economy. The main objective is to apply a methodology that reconstructs this metric consistently over time and across countries. In the absence of data collected at the time, researchers have to bring together what evidence they can from historical sources, but the basic principles are the same. Because Great Britain's economy was the first to achieve persistent economic growth it is the economy that historians have studied in most depth. ## The reconstruction of Britain's economic history The visualization shows the output of the English economy per person since the Middle Ages. As explained below, it is not only capturing the production of workers paid in the labor market, but also the production of subsistence farmers and other producers which were not paid a monetary salary. As such it gives us a perspective on the history of material living conditions of the English population over the last 746 years. The data in the chart is taken from the seminal book on the history of material living conditions in Britain – _British Economic Growth 1270-1870_ by Broadberry, Campbell, Klein, Overton, and van Leeuwen. It presents a fantastic overview of this work and is very much recommended for anyone who wants to study the origins of economic growth in detail.{ref}See Broadberry, Stephen, Bruce Campbell, Alexander Klein, Mark Overton and Bas van Leeuwen (2015) – British Economic Growth 1270-1870. Cambridge: Cambridge University Press. https://doi.org/10.1017/CBO9781107707603 And of course their work in turn relies on hundreds of other people's work.{/ref} When interpreting these reconstructions it is important to bear in mind the fundamental identity in this historical accounting: "Within the methodological framework provided by national income accounting, the estimation of GDP can be approached in three different ways, via income, expenditure and output, all of which ought to yield broadly similar results."{ref}Stephen Broadberry, Bruce M. S. Campbell, Alexander Klein, Mark Overton, and Bas van Leeuwen – ‘British Economic Growth 1270–1870’; [book](https://www.cambridge.org/core/books/british-economic-growth-12701870/A270234C137117C8E0F1D1E7E6F0DA56) page.{/ref} For the important case of the subsistence farmer for example, the value of the food they produce represents both the economic output of the activity and the income received by the farmer. Consumption of that produce then represents a form of expenditure, as it is using up part of the farmer’s income. Because of this identity the measurement of GDP can be approached from any one of these three angles: output, income, or expenditure. For historical estimates, the output approach is often considered the more reliable in practice given the available evidence, though information on incomes and expenditure still provide benchmarks to cross-check the plausibility of estimates. <Chart url="https://ourworldindata.org/grapher/gdp-per-capita-in-the-uk-since-1270"/> ## It would be wrong to believe that historians do not take non-monetary incomes into account Firstly, it’s important to get clear from the outset that historical reconstructions of poverty and prosperity do not just concern the amount of _money _people had in the past. This is a common misunderstanding that is often at the heart of misinformed critiques of historical research. For instance, [in a discussion](https://www.reddit.com/r/dataisbeautiful/comments/5cim2a/the_world_population_living_in_extreme_poverty/) of our global extreme poverty chart on reddit, one user suggested that it was _"indicative of the fact that quite a lot of the world […] did not use fiat currency."_ This interpretation is incorrect. Yes, over the last two hundred years, there has been a major shift from people farming for their own consumption towards people working for a wage and purchasing goods in the market. But historians know about history and where non-market sources of income make up a substantial part of total income, it is very obvious that money would represent a rather silly indicator of welfare. Just as we need to adjust for price inflation, accounting for non-market sources of income is an essential part of making meaningful welfare comparisons over time. Estimates of poverty and prosperity account for both market and non-market sources of income, including the value of food grown for own consumption or other goods and services that enriched the lives of households without being sold in a market. This issue is not just of importance for historical estimates, but it is also of central relevance for poverty measurement today, given the importance that food produced at home, or otherwise received in-kind, continues to play in the incomes of the rural poor, especially in low-income countries. Accordingly, these flows are accounted for in household surveys of both consumption and income, and in the historical estimates. ## Adjusting for price changes and new products It is straightforward to compare material prosperity over time relative to all those goods which remained relatively unchanged over the course of history – economic historians can track the affordability of products like bread, shirt, beer, nails, meat, books or candles over time. This however is not easily possible when entirely new products were introduced or when the quality of products and services changed very much. The fact that some of the most important goods and services very much changed in quality or did not exist at all in the past represents the biggest problem of any long-term comparisons of poverty and prosperity because it makes price adjustments difficult. Many of the most valuable goods today were not available at all: no king or queen had access to antibiotics, they had no [vaccines](https://ourworldindata.org/vaccination), no comfortable transport in trains or planes, and no electronic devices – no computer and no [light at night](https://ourworldindata.org/light). Historians of course attempt to take this into account as much as possible{ref}Again see Broadberry et al or read about the various methods that attempt to take innovation of new products and changing quality of products into account. One important method is 'hedonic pricing'.{/ref} but this caveat should be kept in mind: no matter how high someone’s income might have been, some of the goods you might value the most – or would value, when you get sick – were not available at all.{ref}To some extent the opposite problem also exists and some goods that were available in the past – like slaves – are not available today. But this is a much rarer problem.{/ref} ## The detail of the historical reconstructions The simple structure of how this economic history is presented – as a single line that is flat for most of the time and very steep for the recent period – should not fool us into believing that it is only a loose and approximate historical analysis. The amount of work that went into the reconstruction of this history is extraordinary: it is the culmination of decades of tedious and extremely careful academic work by large teams of dedicated researchers. The level of _detail_ that goes into such estimates is extreme, although this is hard to present in a short overview like this one. Whilst, there are indeed many sources of uncertainty in such a process, it would be very wrong to think that historical GDP estimates are based on flimsy evidence. It is recommended to read this work in full length, but a passage on agricultural output gives some insight already: _“[The output method] has entailed, first, estimating the amounts of land under different agricultural land uses... and, then, deriving valid national trends from spatially weighted farm-specific output information on cropped areas and crop yields and livestock numbers and livestock yields... The latter task is further complicated by the need to correct for data biases towards particular regions, periods and classes of producer.”_ And below is one of the many tables from this book, showing the authors’ estimates of output of just one part of the agricultural sector of England. This is one of hundreds of datasets that are required to construct the time series in the chart above. And this table – and all others – in turn build upon a substantial body of historical research, as is suggested by the list of sources it cites. There are two key takeaways: First, that historical reconstructions of GDP are the outcome of very _serious _academic work. And second, these represent estimates of _total _output, not just that part of production sold on markets. It would be wrong to believe that these GDP series do not account for the value of non-market production, including domestic production for households’ own use. #### A table from Broadberry et al. (2015) showing estimates of historical arable output in England <Image filename="Broadberry.png" alt=""/> | {
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"content": "\n<p>How do economic historians go about estimating incomes in the distant past?</p>\n\n\n\n<p>In broad terms, the strategy is to extend back to earlier periods the system of national income accounting that countries use today to estimate the total output of the economy. The main objective is to apply a methodology that reconstructs this metric consistently over time and across countries. In the absence of data collected at the time, researchers have to bring together what evidence they can from historical sources, but the basic principles are the same.</p>\n\n\n\n<p>Because Great Britain’s economy was the first to achieve persistent economic growth it is the economy that historians have studied in most depth.</p>\n\n\n\n<h4>The reconstruction of Britain’s economic history</h4>\n\n\n\n<p>The visualization shows the output of the English economy per person since the Middle Ages. As explained below, it is not only capturing the production of workers paid in the labor market, but also the production of subsistence farmers and other producers which were not paid a monetary salary. As such it gives us a perspective on the history of material living conditions of the English population over the last 746 years.</p>\n\n\n\n<p>The data in the chart is taken from the seminal book on the history of material living conditions in Britain \u2013 <em>British Economic Growth 1270-1870</em> by Broadberry, Campbell, Klein, Overton, and van Leeuwen. It presents a fantastic overview of this work and is very much recommended for anyone who wants to study the origins of economic growth in detail.{ref}See Broadberry, Stephen, Bruce Campbell, Alexander Klein, Mark Overton and Bas van Leeuwen (2015) \u2013 British Economic Growth 1270-1870. Cambridge: Cambridge University Press. https://doi.org/10.1017/CBO9781107707603 And of course their work in turn relies on hundreds of other people’s work.{/ref}</p>\n\n\n\n<p>When interpreting these reconstructions it is important to bear in mind the fundamental identity in this historical accounting: “Within the methodological framework provided by national income accounting, the estimation of GDP can be approached in three different ways, via income, expenditure and output, all of which ought to yield broadly similar results.”{ref}Stephen Broadberry, Bruce M. S. Campbell, Alexander Klein, Mark Overton, and Bas van Leeuwen \u2013 \u2018British Economic Growth 1270\u20131870\u2019; <a href=\"https://www.cambridge.org/core/books/british-economic-growth-12701870/A270234C137117C8E0F1D1E7E6F0DA56\">book</a> page.{/ref} For the important case of the subsistence farmer for example, the value of the food they produce represents both the economic output of the activity and the income received by the farmer. Consumption of that produce then represents a form of expenditure, as it is using up part of the farmer\u2019s income.</p>\n\n\n\n<p>Because of this identity the measurement of GDP can be approached from any one of these three angles: output, income, or expenditure. For historical estimates, the output approach is often considered the more reliable in practice given the available evidence, though information on incomes and expenditure still provide benchmarks to cross-check the plausibility of estimates.</p>\n\n\n\n<figure><iframe style=\"width: 100%; height: 600px; border: 0px none;\" src=\"https://ourworldindata.org/grapher/gdp-per-capita-in-the-uk-since-1270\"></iframe></figure>\n\n\n\n<h4>It would be wrong to believe that historians do not take non-monetary incomes into account</h4>\n\n\n\n<p>Firstly, it\u2019s important to get clear from the outset that historical reconstructions of poverty and prosperity do not just concern the amount of <i>money </i>people had in the past. This is a common misunderstanding that is often at the heart of misinformed critiques of historical research. For instance, <a href=\"https://www.reddit.com/r/dataisbeautiful/comments/5cim2a/the_world_population_living_in_extreme_poverty/\">in a discussion</a> of our global extreme poverty chart on reddit, one user suggested that it was <em>“indicative of the fact that quite a lot of the world [\u2026] did not use fiat currency.”</em></p>\n\n\n\n<p>This interpretation is incorrect. Yes, over the last two hundred years, there has been a major shift from people farming for their own consumption towards people working for a wage and purchasing goods in the market. But historians know about history and where non-market sources of income make up a substantial part of total income, it is very obvious that money would represent a rather silly indicator of welfare.</p>\n\n\n\n<p>Just as we need to adjust for price inflation, accounting for non-market sources of income is an essential part of making meaningful welfare comparisons over time. Estimates of poverty and prosperity account for both market and non-market sources of income, including the value of food grown for own consumption or other goods and services that enriched the lives of households without being sold in a market.</p>\n\n\n\n<p>This issue is not just of importance for historical estimates, but it is also of central relevance for poverty measurement today, given the importance that food produced at home, or otherwise received in-kind, continues to play in the incomes of the rural poor, especially in low-income countries. Accordingly, these flows are accounted for in household surveys of both consumption and income, and in the historical estimates.</p>\n\n\n\n<h4>Adjusting for price changes and new products</h4>\n\n\n\n<p>It is straightforward to compare material prosperity over time relative to all those goods which remained relatively unchanged over the course of history \u2013 economic historians can track the affordability of products like bread, shirt, beer, nails, meat, books or candles over time. </p>\n\n\n\n<p>This however is not easily possible when entirely new products were introduced or when the quality of products and services changed very much.</p>\n\n\n\n<p>The fact that some of the most important goods and services very much changed in quality or did not exist at all in the past represents the biggest problem of any long-term comparisons of poverty and prosperity because it makes price adjustments difficult.</p>\n\n\n\n<p>Many of the most valuable goods today were not available at all: no king or queen had access to antibiotics, they had no <a href=\"https://ourworldindata.org/vaccination\">vaccines</a>, no comfortable transport in trains or planes, and no electronic devices \u2013 no computer and no <a href=\"https://ourworldindata.org/light\">light at night</a>. </p>\n\n\n\n<p>Historians of course attempt to take this into account as much as possible{ref}Again see Broadberry et al or read about the various methods that attempt to take innovation of new products and changing quality of products into account. One important method is ‘hedonic pricing’.{/ref} but this caveat should be kept in mind: no matter how high someone\u2019s income might have been, some of the goods you might value the most \u2013 or would value, when you get sick \u2013 were not available at all.{ref}To some extent the opposite problem also exists and some goods that were available in the past \u2013 like slaves \u2013 are not available today. But this is a much rarer problem.{/ref}</p>\n\n\n\n<h4>The detail of the historical reconstructions</h4>\n\n\n\n<p>The simple structure of how this economic history is presented \u2013 as a single line that is flat for most of the time and very steep for the recent period \u2013 should not fool us into believing that it is only a loose and approximate historical analysis. The amount of work that went into the reconstruction of this history is extraordinary: it is the culmination of decades of tedious and extremely careful academic work by large teams of dedicated researchers.</p>\n\n\n\n<p>The level of <i>detail</i> that goes into such estimates is extreme, although this is hard to present in a short overview like this one. Whilst, there are indeed many sources of uncertainty in such a process, it would be very wrong to think that historical GDP estimates are based on flimsy evidence. It is recommended to read this work in full length, but a passage on agricultural output gives some insight already:</p>\n\n\n\n<p><em>\u201c[The output method] has entailed, first, estimating the amounts of land under different agricultural land uses… and, then, deriving valid national trends from spatially weighted farm-specific output information on cropped areas and crop yields and livestock numbers and livestock yields… The latter task is further complicated by the need to correct for data biases towards particular regions, periods and classes of producer.\u201d</em></p>\n\n\n\n<p>And below is one of the many tables from this book, showing the authors\u2019 estimates of output of just one part of the agricultural sector of England. This is one of hundreds of datasets that are required to construct the time series in the chart above. And this table \u2013 and all others \u2013 in turn build upon a substantial body of historical research, as is suggested by the list of sources it cites.</p>\n\n\n\n<p>There are two key takeaways: First, that historical reconstructions of GDP are the outcome of very <i>serious </i>academic work. And second, these represent estimates of <i>total </i>output, not just that part of production sold on markets.</p>\n\n\n\n<p>It would be wrong to believe that these GDP series do not account for the value of non-market production, including domestic production for households\u2019 own use.</p>\n\n\n\n<h6>A table from Broadberry et al. (2015) showing estimates of historical arable output in England</h6>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter\"><a href=\"https://owid.cloud/app/uploads/2019/02/Broadberry.png\"><img loading=\"lazy\" width=\"654\" height=\"629\" src=\"https://owid.cloud/app/uploads/2019/02/Broadberry.png\" alt=\"\" class=\"wp-image-22671\" srcset=\"https://owid.cloud/app/uploads/2019/02/Broadberry.png 654w, https://owid.cloud/app/uploads/2019/02/Broadberry-150x144.png 150w, https://owid.cloud/app/uploads/2019/02/Broadberry-400x385.png 400w, https://owid.cloud/app/uploads/2019/02/Broadberry-572x550.png 572w\" sizes=\"(max-width: 654px) 100vw, 654px\" /></a></figure></div>\n"
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