Branko Milanović – What’s with population density? Economic history speculations

One of those typically thought provoking pieces by Branko Milanović: Why is population density associated with both lower inequality and lower extraction?

Branko Milanović is an economist specialised in development and inequality. His new book “Capitalism, Alone: The Future of the System That Rules the World” should be appearing in October.

Cross-posted from Branko´s blog globalinequality

About a year ago I published a paper that looked at historical correlates of inequality. I used historical data (prior to World War I for developed countries and prior to World War II for developing countries) from some fifty social tables to calculate inequality statistics. I then ran a regression where for each of these observations, ranging from Athens in year 330 BC to India in 1938, my left-hand side variables were inequality statistics or the inequality extraction ratio (how exploitative was a given society; for the definitions see my paper), and the explanatory variables were things such as GDP per capita, whether the country was a colony or not, urbanization rate, and population density. It turns out that GDP is correlated with inequality statistics but not with the extraction ratios; colonization (not surprisingly) increases both inequality and the extraction ratio. But the most interesting result was for population density. It is associated with both lower inequality and lower extraction. 

         I speculated that there are two ways in which population density can be related to lower extraction ratios (less exploitation by the rich). One way is that higher population density implies a greater threat to an exploitative ruler: he can be more easily overthrown if there are many people in a small area, and thus he might behave in a less extortionary manner. To get the idea, notice that rulers never liked very much to live too close to the possibly restless populace: Louis XIV decamped to Versailles after La Fronde; Russian Czars felt safer in Tsarskoye Selo than in St. Petersburg. 

But an alternative explanation, where the causation runs in the opposite direction, is also possible. Say that, for whatever reason, we have a nice and lenient ruler. Then the extraction ratio goes down, population’s income increases beyond subsistence, and people multiply. Under that scenario, higher population density is the product of lower inequality (and lower extraction ratio) not its cause.

            We’ll need more research both to confirm the negative correlation between population density and inequality, and even more to tease out the direction of causality. I leave these two possibilities here. I have no means in telling which one may be more likely. Perhaps both were at work.

            Then, several months ago, in a contiguous but different field of research, Willem Jongman, Jan Jacobs and Goertje M Klein Goldewijk (JJK) published a paper on the biological standard of living in the Roman Empire based on 10,000 skeletal data. As in the earlier work by Willem Jongman, they found a number of indicators that seemed to suggest that the peak of Roman income was reached in the first century AD. This by itself is not new: quite a few people have been arguing that. But what was new and puzzling was JJK’s finding that, precisely at the period when incomes were at their peak, skeletal records unambiguously implied that life expectancy (biological standard of living) was at the trough. This is totally different from what we find in modern data: as countries get richer, people live longer. JJK thought long and hard and decided to argue that the results are not wrong or paradoxical. Roman peak income was correlated with high rates of urbanization. Most of that increased urbanization was due to slaves who were moved from the countryside to the cities such as Rome, Capua, Aquileia etc. In conditions of primitive sanitation and ignorance of the ways to combat infections, high urbanization and high population density meant high mortality rates. Thus, a seemingly paradoxical result: that Roman highest income point was associated with a low biological standard of living. 

            So here we have population density working together with urbanization, and indeed being a proxy for higher incomes, but also for higher mortality rates. If in pre-industrial societies higher population density goes together with higher mortality, then we would expect a sort of cyclical movement where very high population densities would not be sustainable. Premodern societies would not be able to reach very high densities: before it happened, mortality would make sure that density drops down to some lower “equilibrium” level.

            Let us now combine these two results (mine and JJK’s). What do we get? An increase in income leads to higher urbanization rates and greater population density; greater population density reduces inequality, increases incomes of the poor, and enables the poor to multiply; their number of children goes up. But then higher mortality kicks in, and keeps the increase of population in check. What we have is a society of high birth rates (made possible by incomes above subsistence) and high mortality rates. In other words, we get a sort of the Malthusian world where real income of the poor need never fall down to the subsistence level but where the Malthusian-like mechanism of births and deaths keeps the population in check. To break this Malthusian mechanism, we need better sanitation and health.  Exogenous (?) improvements in health become the foundation for modern sustainable growth and lower extraction ratios.

            This is all completely conjectural, but is not, I think, unreasonable. We do retrieve in both cases intriguing results for population density but their interpretation as well as a more general model of how population density affects (and is affected by) other variables is missing. A nice area for research.

            Oh, and did I forget to mention Ester Boserup’s idea that high population density increases incomes through easier transmission of technological innovations. Perhaps we should add that too.

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