Quantifying historical developments in occupational structures

Sebastian Keibek, University of Cambridge, won the New Researcher Prize at the Society’s conference in March for his work on England’s occupational structure. Establishing the occupational a structure of England before 1800 is made difficult because the nature of records is particularly complex. Here, he explains a little about his sources and methodology, and his important findings

Thirteen years ago, Leigh Shaw-Taylor and Tony Wrigley embarked on a research project called ‘The Occupational Structure of Britain, 1379-1911’. As is clear from its title, the project aims to describe over five centuries of change in British working life. My research, which focuses on men’s work during the 1600 to 1850 period, is part of the wider project, building on earlier efforts and feeding back into the ongoing programme of research. Understanding occupational change is of interest to economic historians for many reasons, but I would like to highlight two of these here. Firstly, quantitative data on the composition of the labour force provide us with excellent information on the structure of the economy, uniquely so at sub-national geographic scales. Secondly, when independent output estimates are available, understanding the contemporary occupational structure allows us to determine labour productivity growth and, thereby, gauge the effects of technological and organisational change as well as the room for improvements in living standards.  

Both reasons are especially pertinent for historians trying to understand the British Industrial Revolution. Traditionally, economists analysing this critical transition to modern economic growth have reserved an important role for structural change in their models. Arthur Lewis, for example, virtually equated industrialisation with a shift in the occupational structure from agriculture to industry, by which underutilised labour in the former was put to more productive use in the latter (1). Simon Kuznets too emphasized ‘the shift away from agriculture to non-agricultural pursuits’, followed later by one from industry to services (2). Walt Rostow’s five-stages model of economic growth was also strongly stucturalist in nature, with the share of the working population engaged in agriculture declining from seventy-five to forty per cent during the ‘take-off’ stage, and to twenty per cent during ‘drive to maturity’ stage (3).

In its quantification of the Industrial Revolution, the authors of Britain’s national accounts literature – from Dean and Cole, via Crafts and Harley to, most recently, Broadberry et al – have based their occupational estimates almost entirely on so-called ‘social tables’ (4). These were created by contemporary proto-statisticians like Gregory King and Joseph Massie. But these tables only provide information at the national scale and only for a single moment in time, are phrased in terms which allow wildly varying interpretations, were created by men pushing specific political agendas, and are, as Holmes phrased it, ‘far more the product of strained deduction, of mathematical juggling, or even plain guesswork, than of firmly grounded information’ (5). 

Fortunately, much more reliable and detailed information on men’s work is available in a number of sources. National censuses provide increasingly good occupational information, but only from 1831, so other sources are required for earlier years. The most important of these are baptism registers and testamentary documents. From 1813, registering the occupations of fathers became mandatory in Anglican baptism and during the eighteenth century too, these occupations were reliably registered in some English and Welsh parishes. Male occupations were also commonly recorded in testamentary documents such as wills and probate inventories, which are available in large numbers for most English and Welsh counties, often back into the sixteenth century. Baptism registers and testamentary documents complement one another beautifully: the former are reliable but scarce, the latter are widely available but heavily biased towards certain social groups and occupations. My methodology makes use of the complementary strength and weaknesses of each source: baptism data are used to calibrate the (biased) testamentary data, whilst testamentary data are used to interpolate and extrapolate the (scarce) baptism data. This methodology was applied to a new national database of over two million probate records, created from indexes to testamentary documents in forty-six (out of fifty-four) English and Welsh counties. Using the existing Cambridge Group’s baptism register database to calibrate these probate data, tables at the occupational sub-sector level (farming, fishing, textiles, transport, etcetera) were created for every twenty-year time interval between 1600 and 1850, for England and Wales as well as for the forty-six individual counties. Additionally, successions of maps were created for each of these counties, depicting the labour shares of the three main sectors (primary, secondary, tertiary) at the registration district level.

The picture of the Industrial Revolution which emerges from these tables and maps differs dramatically from the traditional one. There was no structural shift from agriculture to manufacturing during the Industrial Revolution; instead, this shift took place from the second half of the sixteenth to the early eighteenth century, with manufacturing overtaking agriculture as the largest male employer in c.1740. Whilst agriculture continued to decline in occupational importance after 1740, it was to the service sector rather than manufacturing to which superfluous labour flowed; whilst only one in eight men were employed in the service sector in 1740, this had risen to one in five a century later. But the occupational data also make clear that such national observations are only a small part of the story. The truly spectacular developments were regional in nature, with highly diverse trajectories for different parts of country. England and Wales witnessed rapid concentration of function, with regional economies focusing on their specific strengths, all tied together by a continuously growing number of transport workers. Where the north-west of England and the West Midlands rapidly industrialised, many southern English counties witnessed equally rapid de-industrialisation. Norfolk’s secondary sector labour share, for example, fell from a high of sixty-three per cent in 1700 to thirty-four per cent in 1820. Functional concentration took place at local levels too, as the example of Cheshire (see figure) demonstrates. Similarly, industry and services became more and more concentrated in urban areas; whereas half the secondary sector workers in 1700 were rural, this was the case for only one in three a century later.

Figure: Share of adult men working in the secondary sector (Cheshire, 1620-1820)

 

References:
1.  Lewis, ‘Economic development with unlimited supplies of labour’, The Manchester School, 22:2 (1954), pp. 105-38.

 2.  From his Nobel Prize lecture titled ‘Modern economic growth: findings and reflections’, http://www.nobelprize.org/nobel_prizes/economic-sciences/laureates/1971/kuznets-lecture.html.

3.   Rostow, The stages of economic growth: a non-communist manifesto, 3d edn (Cambridge: Cambridge University Press, 1991), p. 71.

4.   Deane and Cole, British economic growth, 1688-1959: trends and structure, 2nd edn (Cambridge: Cambridge University Press, 1967), p. 137; Crafts, British economic growth during the Industrial Revolution (Oxford: Clarendon, 1985), pp. 11-7; Broadberry et al, British economic growth, 1270-1870 (Cambridge: Cambridge University Press, 2015), pp. 345-60.

 5. Holmes, ‘Gregory King and the social structure of pre-Industrial England’, Transactions of the Royal Historical Society, 27 (1977), p. 63.

I am currently finishing my PhD dissertation which will serve as the basis of a number of papers on the methodology and conclusions described above as well as a planned book jointly authored with Leigh Shaw-Taylor and Tony Wrigley. More generally, the baptism and probate data offer a uniquely detailed basis to (re)analyse issues of economic development at regional, local, and national scales – there is much work to be done!

Sebastian Keibek, sk571@cam.ac.uk

From VOX – Comparative advantage in manufacturing: A look back at the late Victorian ‘workshop of the world’

Modern discussions about a country’s ‘decline in manufacturing’ are seldom meaningful. Such talk of industrialisation and deindustrialisation across the entire sector tends to ignore important variation across individual industries. This column draws lessons from the revealed comparative advantage of late-Victorian Britain – the ‘workshop of the world’. Advantage lay mainly in industries that were relatively…

via The late Victorian ‘workshop of the world’ — VoxEU.org: Recent Articles

From the LSE Business Review – GDP per capita: from measurement tool to ideological construct

An excellent reading suggestion from the LSE Business Review

GDP per capita: from measurement tool to ideological construct

2016 Olympics reading list: Brazilian politics, history and culture — LSE Business Review

[With the paralympics games just closing, we would like to propose again this interesting reading list from the LSE Business Review, waiting for Tokyo 2020]

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The 2016 Rio Olympics officially opened on Friday and runs from 5 August – 21 August 2016. To mark the occasion, LSE Review of Books recommends seven reads that explore the culture, politics, history and economics of Brazil. We also offer a bookshop guide to Rio and São Paulo and showcase three award-winning podcasts from the…

via 2016 Olympics reading list: Brazilian politics, history and culture — LSE Business Review

Speculative Bubbles in History

by William Quinn and John Turner (Queen’s University Belfast)

South_Sea_Bubble_Cards-Tree
Unknown, 1720ca. Tree caricature from South Sea bubble cards. Public domain, available here

Although the “speculative bubble” is one of few financial concepts to regularly show up in popular culture, in academic financial economics it is a remarkably controversial topic. There are unresolved debates surrounding what constitutes a bubble, whether bubbles actually exist, whether central banks should take action in order to ‘prick’ bubbles, and why, exactly, bubbles often lead to economic recessions. Even the use of the word “bubble” can provoke the ire of economists: Peter Garber describes it as “a fuzzy word filled with import but lacking any solid operational definition”, whereas Eugene Fama simply states that “the word ‘bubble’ drives me nuts”.

Assuming that bubbles actually exist as a recurring phenomenon, how should they be defined? Charles Kindleberger defined a bubble as any substantial upward price movement followed by a crash. This, however, feels incomplete: if an industry grew due to unforeseeable good news, before shrinking due to unforeseeable bad news, it would not seem accurate to describe the event as a bubble. Peter Garber therefore proposes defining a bubble as “a price movement that is inexplicable based on fundamentals”, which seems more consistent with the popular understanding of the word.

A problem with Garber’s definition is that, although it is more precise, it renders bubbles impossible to identify with certainty. This is because testing for market efficiency always invokes a ‘double hypothesis’ problem: one can never tell whether prices were truly inconsistent with fundamentals, or they just appear to have been because the pricing model used for the test was incomplete. One solution is to avoid using the word ‘bubble’ at all. But given how frequently the concept appears outside of academia, it would be absurd if academic finance had nothing to say on the subject at all. In practice, the most sensible solution is often to revert to Kindleberger’s definition.

Why are economic historians interested in bubbles? There are purely historical reasons to be interested in these events: they have often played a central role in the development of financial markets and corporate law, most notably with the Bubble Act of 1720. However, this is also a field in which the past can directly inform the present. The potentially severe economic consequences of bubbles makes their study essential, but they are also rare events, and acquiring an overview of the subject is almost impossible without a historical perspective. Economic history has therefore recently contributed to three areas of contemporary, policy-relevant debates surrounding bubbles.

The first area is the central question of whether bubbles represent examples of market irrationality. The historical evidence on this point is somewhat mixed. Qualitative evidence has been used to suggest that bubbles result from mass irrationality, or, as Charles Mackay put it, the ‘madness of crowds’. However, closely analysing share prices during famous episodes often contradicts these stories. This is not to say that the price at the peak of a bubble is necessarily “correct”, but there is generally a sense in which it is justifiable. For example, Gareth Campbell has shown how prices during the British Railway Mania, although inaccurate in hindsight, were generally consistent with the pricing models widely used at the time. In practice, these models overestimated the sustainability of high initial dividends. But this is a long way from the ‘madness’ described by Mackay. The evidence from historical bubbles suggest that, while prices might not always have perfectly reflected underlying fundamentals, the popular characterisation of bubble investors as naïve fools absorbed by a speculative frenzy is inaccurate.

The second area is the question of whether central banks should raise interest rates in order to ‘prick’ a bubble, thereby preventing adverse economic consequences if it is allowed to grow. There are strong economic arguments for and against this point, but historical evidence generally suggests that it is a bad idea. Ben Bernanke, amongst others, has argued that the attempts of the Federal Reserve to burst the asset price bubble on the eve of the Wall Street Crash were partly responsible for the Great Depression. Hans-Joachim Voth has convincingly shown that a similar mistake was made in Germany in 1927, with even more severe political consequences. The counter-argument put forward by Nouriel Roubini is that these particular examples involve monetary policy which was ‘botched’, and more well-informed efforts to influence asset prices could be effective. This is theoretically possible, but any historical examples seem insignificant in comparison to the severe consequences of the aforementioned attempts to burst bubbles in the 1920s.

The final area is the question of why financial bubbles are often followed by a recession. Here there are two plausible mechanisms: the ‘wealth effect’ and the ‘debt effect’. The wealth effect argument is that the bursting of the bubble inflicts heavy losses on investors, who respond by decreasing spending, thus reducing aggregate demand. The debt effect argument is that, after the bubble bursts, demand is reduced because the public are less inclined to borrow, and banks are less inclined to lend. A 140-year study by Óscar Jordá, Moritz Schularick, and Alan Taylor finds that, while both of these mechanisms seemingly occur, recessions are much more severe when the bubble was accompanied by a high level of leverage. John Turner in his book Banking in Crisis, has suggested that bubbles which are driven by indebtedness, such as the housing bubble of 2006-07, are particularly dangerous for banking systems and economies.