Capital In Conflict

Until a few centuries ago economic growth rates were well below feasible population growth rates.  This gave a “Malthusian” state, as in most animal species, where population was near its max sustainable level.  To learn more about our distant future, which will probably be in such a state, let us learn more about our Malthusian past.  In particular, consider two important clues:

  1. Slack – As measured either by kids per mom or hours of work a day, most recent pre-industrial societies were ~30-70% below their simple Malthusian limit.
  2. Interest – Even after correcting for depreciation and failure-to-pay, for many thousands of years interest rates have been far above population growth rates.

(Data on both clues in Greg Clark’s Farewell to Alms.)

The slack clue can be explained via local cultural norms (i.e., signaling equilibria).  For example, pre-industrial English women married at ~26; those who married earlier had more kids, but at the cost of lower husband quality and threatened kid survival.  In societies with low work hour norms, harder workers faced ridicule and theft.  They attracted worse spouses and couldn’t use all their extra product to feed more kids.

Since social norms varied greatly across societies, however, it is puzzling that competition between neighboring societies didn’t favor societies with norms that put them closer to the Malthusian limit.  When neighboring groups clashed, why didn’t those with norms favoring denser populations tend to win out?

Interest rates appear in prices for renting land, borrowing silver, etc.  Social norm variety also makes high interest rates puzzling.  Local subgroups with a norm of saving capital and reinvesting as much as possible should in principle quickly outgrown groups who instead borrowed, rented, etc.  Soon even a small fraction of the interest on their wealth could paid for many more kids.

We can explain each of these puzzles by assuming that labor and capital have a different value relative to labor in conflicts, relative to more directly making food etc.  However these two explanations are somewhat at odds.

On the slack clue, cultures that limited their fertility and work hours should have had more capital per person.  In conflicts with neighboring cultures, perhaps low capital cultures were more often intimidated or seduced by folks from individually-richer high capital cultures.  Or perhaps such capital was especially useful in warfare.

On the interest clue, subgroups in a society who accumulated more wealth, relative to other groups, would end up with more capital relative to labor than other subgroups.  Other groups would then be tempted to steal that capital.  Perhaps labor is just especially useful in stealing capital, while capital is especially easy to steal relative to labor, especially given very large capital to labor ratios.  Perhaps this Biblical rule was to limit harm from predictable periodic predation:

The Jubilee year … required the compulsory return of all property to its original owners or their heirs, except the houses of laymen within walled cities, in addition to the manumission of all Israelite indentured servants.

Problem is, these two explanations are somewhat at odds – the first assumes that capital is especially strong, relative to labor, in conflicts with neighboring societies, while the second assumes that capital is especially weak, relative to labor, in conflicts within a society.  Can both really be true?

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  • Benquo

    I thought the Jubilee year was designed to prevent concentration of capital. Land was returned to hereditary landholders (except in cities, where I guess land was not regarded as a productive asset), debts were to be forgiven, and slaves/indentured servants were to be freed. This sounds like a periodic dissolution of capital accumulation.

    I don’t think it’s much of a stretch to surmise that sovereigns were jealous of the power of private holders of capital, and aligned themselves w/ labor to keep citizens from becoming too rich and powerful. If this is true, we should expect to see restrictions on capital held by citizens (who would continue to accrue interest by lending out money, or buying/building productive assets), but no restrictions on capital directly held and controlled by the state (which I’d think would be the kind of capital useful in war-fighting, and less useful in peacetime productivity). While in the long term a capital-accumulation might maximize warfighting capacity, the short-term advantage of a powerful and rich sovereign could have outweighed the retarding effects on private capital accumulation, enough to prevent any thrifty-normed group from surviving long enough to dominate.

  • michael vassar

    Capital dedicated to winning conflicts is stronger than labor is stronger than capital dedicated to creating wealth but capital dedicated to winning conflicts retards by its presence the creation of capital dedicated to creating wealth because it can be used to seize said capital.

  • y81

    In many pre-industrial societies, the large amounts of time that the men don’t spend working are spent in activities related to warfare, i.e., either actual warfare, or activities that teach military skills (e.g., hunting, archery, horsemanship), or violent sports (e.g. jousting, wrestling, football). A society that trains its young men in skilled violence will be able to repulse wealth grabs from neighboring societies with dense populations of peasants. (Indeed, small pastoral populations frequently overrun dense peasant populations.)

  • Benquo, if capital is going to be stolen anyway in a violent theft, might as well do it peacefully instead.

    Michael, hard to follow you, but seems you are suggesting both claims are true.

    y81, that is plausible.

    • michael vassar

      In short, specialization requires high human capital and far from near-death conditions. Under near-death conditions the people specialized for violent conflict will destroy the people specialized in production and then starve.

  • Violet

    Why do you think that a denser population is necessary an advantage in warfare? With sparser population one can get:
    * better equipment
    * less overhead
    * actually trained soldiers

    Take 20 well-armed mercenaries with group cohesion against 50 peasants and the peasants don’t have a chance.

  • Tim Tyler

    Malthus discussed resource limitation. We are mostly resource-limited today – except for a lucky few who would behave the same way after winning the lottery.

    Resource limitation is ubiquitous in biological systems – basically for the reason Malthus gave – populations tend to increase exponentially, but resources rarely do. Anyway: Malthusian dynamics surely rule today.

  • Lord

    Both are consistent with a shortage of capital relative to labor and a desire for more capital. The second argument seems weak. One only lends what one is unable to make better use of themselves. An interest rate equaling the population growth rate would mean an absence of lending since everyone could do better on their own, if not through investing then through consumption. The better use may have been social or political rather than economic but the former do not preclude the latter and may even be multipliers of the latter.

  • ERIC

    Continuing on y81’s thought…I agree that investing in “human” capital seems to be beneficial.

    “Perhaps labor is just especially useful in stealing capital” … interesting when you consider who steals the most today (I’m excluding white-collar crimes here for sake of argument!).

    Robin, why would we “return to such a state”? If you believe that we are going to experience decreasing population growth, won’t this ease the “max sustainable level” of population? For all of your talk about how things have improved over time and how much more room there is for improvement in general, why do you hold this contradictory and hopelessly pessimistic Malthusian view of the future? If I’m mistaken, please correct me.

    • Tim Tyler
      • y81

        Looking at those past posts, which I hadn’t read, and this one, don’t we see a slightly different outcome than what Robin predicts? The future will hold some planets which limit population and are very rich (even if per capita wealth tops out at 1,000,000 times today’s average), and some populated to the Malthusian limit. The rich planets will definitely be able to repulse wealth grabs by the poor ones, and may even rule over the poor ones. (Isaac Asimov’s “robot detective” novels involved a scenario sort of like this, as I recall.)

  • Jay

    I suspect that the limiting factor in preindustrial societies is arable land, not available labor. Therefore, the societies may have been much closer to their limiting populations than your model suggests.

    BTW, subsistence farmers may on average work light hours, but they work like crazy during planting and harvest. When the crops are growing, there’s less to do.

  • On the slack clue, cultures that limited their fertility and work hours should have had more capital per person. In conflicts with neighboring cultures, perhaps low capital cultures were more often intimidated or seduced by folks from individually-richer high capital cultures. Or perhaps such capital was especially useful in warfare.

    This looks a lot like what I wrote a few months ago:

    Maximizing the wealth and power of a nation requires an optimal mix of human and non-human capital. Nations that fail to adopt population controls find their relative wealth and power fade over time as their mixes deviate from the optimum (i.e., they find themselves spending too much resources on raising humans, and not enough on building machines), and either move to correct this or are taken over by stronger powers.

    But at that time, your response was “On your capital argument, I think you need to learn more econ growth theory.” Have you changed your mind, or are you making a different point here that I’m misinterpreting to be the same as mine?

    • In our modern world capital is rather effective in war, so there is little danger that a capital labor mix that is optimal in times of peace is very wrong for times of war. Among our Malthusian ancestors before industry, however, the max peace production mix may have been quite different from the mix that best defends against invasion.

    • Looking more closely, I see that your explanation is a bit different, focusing on high capital being possibly useful for seduction, intimidation, and military power, instead of “wealth and power”. I guess your point is that high capital might increase power at the cost of wealth?

    • Wei, long ago max population probably also gave max total product, but it seems it was not the best mix for conflicts with neighbors. Today, max total product is more nearly the best mix for conflicts with neighbors.