Monday, June 18, 2012

The taxman cometh (but only for what he can see)

There have been two great transformations in human affairs. One is the Neolithic Revolution, the transition from foraging to farming. This is a transformation which is still going on, as there are still some foraging groups around the planet (though it is a vanishing way of life). The second is the Industrial Revolution, the shift from reliance on what is produced by land (farming), a factor of production managed but not created by humans, to reliance on factors of production produced by humans, the produced means of production (capital), such that farmers change from being about 80% of the workforce to less than 5%.

Compare and contrast
Both transformations are technological and involve expanded use of energy, setting off dramatic population increases (the second much faster than the first). In the foraging-to-farming transition, humans no longer merely took food from the environment around them; they deliberately grew food. This food was typically storable, so able to cope with variations in food production across the seasons.  Farming both increased the (food) energy to humans and allowed it to be stored for later use, to be actively managed across time. (Hence the very different attitudes to time between foraging and farming cultures.)

Industrialisation used wind, water and (particularly) steam energy to produce things which produced things. Increased agricultural production allowed increased production in general, with expanding sources and use of energy, ushering the creation of, not merely mass prosperity, but increasing mass prosperity. This is in stark contrast for the foraging-farming transition, where it is likely that general standards of living actually fell and, with some exceptions, remained stagnant for thousands of years.

Another contrast is that the foraging-farming transition lead to hierarchical societies with elite-dominated rulerships--whether autocratic, monarchic (i.e. containing powerful noble elites) or deliberative. The last were polities run by elite assemblies, the most democratic of these being some Mediterranean city-states where as much as a third of the adult population got to vote--i.e. male citizens; women, slaves and resident foreigners being excluded. Outside the Mediterranean, assemblies were also important in cities in Lower Mesopotamia and in the kshatriya republics of India. Conversely, with some hiccups, the Industrial Revolution has led to much more broadly-based forms of political life. Another contrast is that the share of output taken by taxation tended to be fairly constant across farming rulerships but has been steadily increasing in modern states.

Why did farming lead to hierarchical societies dominated by controlling elites? The standard answer has been increased production of food led to a surplus above subsistence which allowed a more differentiated society. The problem with this is, why there was any such surplus? Why did not population just increase to consume the surplus? What blocked population increase sufficient to allow the creation of the food surpluses that sustained these elites?

The second problem is, even if there was a food surplus, why did that not just lead to increased specialisation? What happened such that population was blocked from rising to consume the food surplus and that surplus was largely appropriated by a narrow, controlling elite? And, moreover, elites of differing sizes, with different land tenure systems.

Expropriating what you can see
Three Israeli economists have produced a paper (pdf) which provides an elegant answer. Their argument is that the key element is transparency; both in stored food and in expected production. Food had to be stored across the seasons, which made it more vulnerable to expropriation. In their words:

[Read the rest at Skepticlawyer.]

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