It’s a broad-ranging paper, covering everything from two millennia of wildly conflicting population estimates (a Deng pet peeve, which he then concludes isn’t particularly relevant here) to the reliability of Ming cultivated acreage returns (which the authors similarly determine can’t be relied upon to resolve the matter).
But the cornerstone of their critique concerns Maddison’s assumed present-day international poverty-line GDP level for the Han era, which informs much of the intervening presently accepted guesswork. Coupled with the World Bank’s controversial (and since partially reversed) 2005 downward revision of China’s (and much of the developing world’s) estimated PPP-adjusted income per capita, their unpicking of the long-run assumptions underlying Maddison’s time series suggests persistent overstatement of China’s GDP. And that raises questions about everyone else's past GDP too.
Indeed, the authors go further:
Sensitivity tests reveal that there is something amiss not simply with the evidence and conjectures for the rates of growth utilized for forward projections from the Han era to 1850 but more seriously with the conceptual foundations of any index expressed in constant 1990 International Dollars utilized as a base line level for the projection of long term trends in GDP per capita.It’s possible indeed that Deng & O’Brien’s implied downscaling (“implied”, because at this point they sensibly conclude that the numbers game really isn’t worth the candle given the paucity of available data) doesn’t go far enough. The shortcoming here lies in their conversion of Maddison’s Han-dynasty baseline from anachronistic 1990-era dollars to rice-equivalent units, seemingly the first step in their analysis.
I must confess some bafflement at the authors’ argument here. Leaving aside for a moment the crucial conversion error whose correction would strengthen their case hugely, their equating of Maddison’s year 1 CE income to 60% more than the rice-equivalent associated with food security suggests an uncharacteristically conservative conjecture on the late professor’s part. Even very poor people don’t spend all of their scant money on food: there’s clothing and hopefully housing, fuel, tools and utensils to be acquired one way or another, whether by purchase or by making them, either of which means GDP on top of food production. An outlay of 62% of income on the most basic adequate diet seems if anything quite high, still more so when applied to a whole "national” population of poor and rich.
But it isn’t a daily per capita GDP equivalent to a precarious-looking 3,374 kcal of edible rice that’s the problem here, it’s a purported annual income two millennia ago equivalent to something around three tonnes of grain, a level no country (apart from perhaps the odd city-state) attained at current domestic prices before the modern era: even booming eighteenth-century England reached the threshold only once, in 1761, a year of unusually low cereal prices. Here Deng & O’Brien have underplayed their hand spectacularly in converting Maddison’s Geary-Khamis dollar figures to rice-equivalents on the basis of a 1:1.1538 G-K dollar:yuan exchange rate now entirely superseded by intervening ICP revisions and in any case the wrong tool for the purpose.
As noted here previously, a feature of Geary-Khamis modern-dollar GDP results (and a source of my growing annoyance with their incomprehensibly escalating ubiquity in HNA) is that they don’t readily relate to any sectoral or particular product value, thanks to the blanket impact of inflation of output of services and other internationally non-traded items. The consequence is that rebasing the G-K numbers according to any real output quantity just doesn’t work. In my opinion this very non-additivity renders them all but worthless and irrelevant for any meaningful purpose, but on that score I’m in a minority, albeit one that on this latest evidence seems to be growing.
So regardless of any underlying conceptual nonsensicalities, a G-K 1990-price Chinese GDP of $450 two millennia ago shouldn’t necessarily relate to any Chinese rice price of 1990. But while strictly incompatible with the PPP method, the exercise gives a striking illustration of the scale of the problem. The authors' domestic edible rice price (648 yuan per tonne) appears in fact to be the average state procurement price for paddy, and therefore needs raising to take account of farmers' market sales: the result is $135-150 per tonne of paddy, depending on whether we use official or market exchange rates – not far short of the reported global average producer price of $160. As Maddison's prices are international, I use the latter, which also disagrees least with his data.
Estimates for China in the first half of the twentieth century (in which I’ve rather more faith than have Deng & O’Brien) suggest a current-price GDP per capita rather below the value of a tonne of grain. And there’s no reason to believe things had ever been much better given a millennium of improved yields and new crops. On that basis, Han per capita income would be nearer $150 than $450 at 1990 prices - indeed somewhat less, since rice even as paddy tends to command a higher price than most grains.
To put it another way, agriculture (here including forestry and fishing) contributed some $80-90 per head of 1990-price GDP (roughly 550kg in grain-equivalent) in the relatively well-fed mid-1950s, and is most unlikely to have produced appreciably more over any prolonged period in the past. Estimates for the 1930s put its share at 60-65% of current-price GDP, and this time it's unlikely to have previously been much less: recent studies by Broadberry and Shi Zhihong et al indeed put it higher in earlier centuries. But Maddison's Han GDP estimate is at least five times any plausible agricultural value added reckoned at actual 1990 international prices. This might well be a proper consequence of the backcast PPP approach, but would a procedure implying such drastic upsizing and distortion of sector shares really have anything useful to tell us?
Limiting the exercise to Maddison's own calculations up to his death in 2010 indeed understates the scale of the problem. For subsequent work by Bolt & van Zanden finds still higher pre-modern G-K incomes for most regions, though not (yet) for China, which is thus left lagging behind (in itself a wholly plausible finding) even on the basis of a Qing figure that now appears improbably high. Shi & his colleagues go one better by proposing an early Qing per capita GDP of $807 - more than the 2005 ICP revision's implied level for 1990 itself. Broadberry & co go still further with a mindboggling $1,518 (this time exceeding also the perhaps more realistic 2011-derived result) in 1020, only decades into the prosperous Song era and before the impact of early-ripening rice in the south: even supposing China's people each to have munched or worn their way annually through a heroic tonne of grain-equivalent in agricultural output, the latter would barely exceed a tenth of GDP. At a time when we might hope for downward revisions across the board, the message from Groningen, Utrecht and elsewhere is on the contrary one of still further inflation of past incomes.
Deng & O'Brien have done us all a favour with a courageous paper that errs only in pulling its punches when they had the wherewithal to strike a mortal blow at the phantom of an unrealistically bloated economic past which seems to pervade ever more otherwise promising quantitative research. The initial Maddison project gave us an early tentative glimpse into the scale and timing of long-run economic growth, but its increasing tendency to ossification of and extrapolation from questionable and now seemingly superseded data threatens to reduce it to a purely academic exercise ludicrously divorced from historical reality.
Maddison's own shift of base-year from 1980 may itself have exacerbated the problem by widening the divergence between ancient and recent commodity and services prices, though his failings seem small potatoes compared to the reworkings of his heirs. The whole undertaking is in need of more drastic surgery than just more of the same doubtful backcasting of projections from projections. The cure must begin with the price base. Prices of the very recent past can’t be counted on to say much about ancient, medieval or early-modern economies, beyond how big they might have been if the prevailing prices had been those of centuries or millennia later. But they weren’t.
