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"Black Death: Political and Social Changes"

Posted on the 16 July 2013 by Markwadsworth @Mark_Wadsworth
Economists aren't allowed to do real life experiments, and according to some people, they are not even allowed to propose thought experiments to illustrate a point, especially one as cruel as exterminating half the population.  However, the results of this unfortunate real life event are a good illustration of the general principles that...  a) Land rents are not somehow fixed, they are primarily a reflection of population density. Land rents are a ransom payment, so the more people you can exclude, the more you can charge that one person who is prepared to pay not to be excluded. So if half the population dies, rents will fall quite significantly.  b) Wages are competed downwards if there are too many (forced) unemployed and competed upwards if labor is scarce, but as long as people can travel around the country in search of work (which the landowners of the time tried desparately to prevent), wages will tend to level out around the country.  c) The total value of output is split up between wages and rents. If half the population dies, total output falls, but the share going to rent falls disproportionately and the share going to wages increases in relative terms (the wages of those who survived went up quite markedly).  If these statements and observations were not true, in other words if... a) land rents were fixed and independent of the availability of labor or population density (i.e. if land rents were somehow "earned" by whoever owns the land),  b) wages were unaffected by (forced) unemployment, and c) Rents represented an addition to total output rather than appropriation from total output  then following the Black Death, the rents enjoyed by landowners and wages paid to each labourer would stayed constant, and so the share of total output going to landowners would have increased rather than fallen.

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