Friday, October 7, 2011

Byzantium Stimulus

History professors often describe large-scale projects by emperors as stimuli.  Dr. Kenneth W. Carl remarks  that in the Byzantium Empire, Constantine V established numerous, large-scale public works projects in Constantinople, forcibly relocating thousands of laborers and craftsmen to rebuild the aqueducts, churches, and other infrastructure.  These projects are described by Dr. Carl as a stimulus to the Byzantium Empire.  Is it?

Certainly, when you force people to work on your aqueduct, renovate your palace, and beautify your church, those particular areas will see an increase in economic output.  However, if the workers were relocated from another place, there is a concomitant decrease in output in those other areas, and a stimulus would have to show the rise in output in Constantinople is of greater value than the output lost in other areas before it should truly be called a stimulus.

Professor Carl also remarks that forcing people to live in cities and work for the government induces people to utilize money to a greater extent, and the efficiency of money may cause overall output to rise.  This may be the case.  When a government establishes or improves new institutions (like money) that enhance productivity, real wealth increases may be realized.  This is an innovation in money, though, not a stimulus.

We should also add that as the Byzantium government put a greater number of citizens under its protection within Constantinople, this protection may have given them the economic confidence to invest and spend in ways they were reluctant too in the sparse and unprotected country. This concerns property rights and rule-of-law, though, not a stimulus.

Moreover, public goods like aqueducts may increase the productivity of all citizens, in which case this "stimulus" is really just an investment in public goods.

For these reasons, historians would be on sounder footing if they describe these government projects as public good investments, rather than a stimulus, as the modern-day stimulus describes an increase in confidence brought about by government spending, such that new economic output more than pays for the stimulus spending.

Professor Kenneth W. Carl
World of Byzantium
Lecture 15: Life in the Byzantium Dark Age
The Teaching Company

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