My interest in comparative economic history, and the economic history of China in particular, is motivated by the desire to fill in gaps in our knowledge of economics of the past, as well as a recognition that answers to historical questions can improve our understanding of the way economies work more generally. The study of economic history has always interested me because it allows us as economists to test theories of economic behavior in other times and places besides our own, and to ask if these general theories hold true when applied to other times and places as well, and if not, why not. Here, I give a very brief and selected introduction to some of these ideas, and the reasons why I find them important and interesting. The reader may find more details in the journal titles and working papers mentioned below.

Perhaps the biggest unanswered question in the economic history of human society is why, after millenniums of virtually zero economic growth per capita, a handful of countries located in Northwest Europe were able to escape that pattern sometime in the mid- 18th century. Why did the Industrial Revolution happen when it did, where it did? The answer to this question seems vitally important because it may hold clues to what conditions are necessary if poorer countries today are to become richer, and how even richer economies can continue to advance. Some of the most persuasive answers that have emerged from economists suggest that the Industrial Revolution is the outcome of the evolution of European institutional forms—yet this is a conclusion that has for the most part been primarily informed by the history of European economies. Interestingly, when we consider the situation in non- European economies, what many researchers have found is that some of the key causal factors attributed to the European economic story of growth may not be as unique as we once thought, or at very least would require some sort of deep revision to their former interpretation.

For example, it has been often proposed that the Chinese emperor and the officials below him were extortionist, effectively choking off any possibility of economic growth through arbitrarily high taxation and intervention in the workings of the economy. Under such circumstances, it is not difficult to understand why China did not develop. This belief, however, may have more to do with vaguely defined notions of “good institutions” of governance, than with knowledge we could gain from a direct quantitative comparison of the performance of past economies or the examination of the Chinese state and the economy. Quantitative comparisons, for example, of Chinese tax rates and total government revenue show that they were rather low relative to those in Europe. And contrary to the picture of an arbitrary and extortionist state, there is evidence, drawn from court documents and private contracts, suggesting that Chinese magistrates arbitrated in accordance with agreements in signed contracts. In my research—one article published in the Journal of Economic History (March 2004 issue) and another in the Journal of Interdisciplinary History (Summer 2005 issue)—I use a wide variety of secondary and primary sources to expand on these ideas and discuss debates centered on the commitment of the bureaucracy and the effectiveness of the state toward famine prevention; and I consider ways in which the inconsistencies in intergovernmental policy incentives inherent to the very structure of the Chinese state determined its effectiveness in carrying out stated goals.

To give another example, it is usually supposed that unfettered free markets and market- supporting institutions encourage economic growth, and that the scope of markets was relatively free in the advanced areas of Europe far earlier. In contrast, the presence and the nature of markets in the case of China have been much more disputed. China’s economy has variously been described as stagnant, with limited scope of exchange outside the informal sector, or dynamic, with a significant amount of trade even over long distances. Yet stagnation and dynamism are relative terms. Thus, which one of these two widely differing interpretations is correct must be assessed in a global comparative sense, and with comparable data. Certainly, a more efficient economic system should be more productive. It is also likely that large increases in incentives to invest occurred only after the onset of the Industrial Revolution, when the returns were much higher. To address some of these questions, I have, in a sequence of articles, studied the extent of trade in China, and in Europe, with some articles focusing on the regions separately, while other articles look at the regions comparatively.

In an article in the American Economic Review (December 2002 issue), I use data I collected from 18th-century archival records on prices to measure the extent of market integration. Acquiring the data, however, turned out to be a most exciting part of the project since this gave me the rare opportunity to visit Beijing for some months to read the handwritten letters and documents of high-ranking Qing period (1644–1911) officials. What the accumulated numerical data collected over many decades by many officials revealed was that the overall level of market integration was higher than historians and economists previously thought, and that intertemporal mechanisms, such as the storage of grain from one year to the next, are an important substitute for trade.

In a separate article in the European Review of Economic History (August 2005 issue), I considered the European context. Over the first half of the 19th century, a Prussian customs union known as the Zollverein gradually unified a scattered confederation of states under an internal free trade agreement (much as today’s North American Free Trade Association—NAFTA—does for North America). As the policymakers effectively dismantled economic borders at a well-specified point in time, this provides an interesting “natural experiment” that can be used to help shed light on the impact of borders in the 19th century. Moreover, comparisons of historical and contemporary border effects helps to provide a better understanding of the impact of political boundaries and trade costs over time on economic integration.

Finally, considering the Chinese and European economies in a single article, I have written a paper jointly with Wolfgang Keller that was published as CEPR Working Paper # 4420 (June 2004) and NBER Working Paper # 10778 (September 2004). This paper compares the actual performance of markets in Europe and China, two regions of the world that were relatively advanced in the preindustrial period, but would start to industrialize some 150 years apart. The analysis covers economies that accounted for about two-fifths of the world’s population in the mid-18th century, and it considers some three centuries of data. My findings there suggest that relative levels of market function in China and Europe were similar prior to the Industrial Revolution, and that higher efficiency in Europe was seen only in the 19th century when industrialization was already underway. Rather than being a key condition for subsequent growth, gains in efficiency appeared simultaneously with the turning point of modern growth. Market efficiency could well be a necessary, but not sufficient, condition for growth. These results are important and exciting because they give us new clues as to where (and where not) to look for the fundamental causes of economic growth. This research is now funded by a grant from the National Science Foundation for the years 2005–2008.