The High-level Equilibrium Trap
Mark Elvin treats the problem of economic stagnation in the
traditional Chinese rural economy as resulting from obstacles to
technological innovation. In application to agriculture, Elvin's formulation
may be put in these terms: why did the Chinese economy not succeed in
introducing technological innovations into the process of cultivation, thereby
increasing the productivity of agriculture? Elvin does not maintain that
Chinese technology stood still during the medieval period.1 But he does hold
that technical advances just managed to keep pace with population increase
and resource depletion, with the result that welfare (per capita income)
remained fixed (Elvin 1975:87).2 Technical breakthrough did not occur in
spite of extensive commercial development, extensive production for the
market, and considerable levels of scientific knowledge.
Elvin proposes to explain the persistence of technical stagnation in
the late traditional economy in terms of his notion of a high-level equilibrium
trap. The following passage is formulated in terms of handicraft cotton
production, but is equally applicable to farm technology.
Why at some point did the economy not generate a demand for cloth
that was rising fast enough to smash through the institutional and
structural barriers to invention? . . . The Chinese economy as a
whole was caught in what may be called a high-level equilibrium
trap: a situation to which most of the usual criteria of
“backwardness” do not apply, yet characterized by a technological
immobility that makes any sustained qualitative economic progress
impossible. (Elvin 1972:170)
In its simplest form, Elvin describes the trap in these terms: technology had
developed to the fullest extent possible (in agriculture and water transport,
for example) without a discontinuous jump involving application of modern
scientific inputs (Elvin 1973:305-6, 312).
The hypothesis that only inputs created by a fairly advanced stage of
an industrial-scientific revolution . . . could have saved her
agriculture from sharply diminishing returns to new methods, new
1 Elvin describes several important technological advances: the windmill,
incubation box, cocoon drying techniques, hothouses, cellars for cotton
spinning, new fertilizers and food plants, new navigational techniques, and
spectacles.
2 Note that this conforms to Perkins' estimates as well.
2
investment, extra inputs and new use of resources, thus seems more
plausible. (Elvin 1973:309)3
Thus Elvin's account has at its core a view about the prerequisites of
technical innovation; he explains the failure of economic revolution in China
as the consequence of the absence of the necessary preconditions of technical
innovation.
Elvin summarizes his explanation of technical stagnation under one
broad framework--the high-level equilibrium trap. But in fact his analysis
identifies a number of separate factors, some of which are interrelated and
others independent:
· population pressure on resources, particularly land;
· an oversupply of cheap labor, favoring labor-intensive innovations;
· market efficiency and market size;
· the organization of the unit of production (farm, business, cottage
industry) and the incentives which this organization presents to various
participants;
· a lack of available innovations which are both economically and
technically feasible.
In the following I will briefly survey the main arguments concerning
each of these factors and then consider whether the high-level equilibrium
trap is one trap or many; does Elvin's formulation and application of the
concept change with context? And we will consider whether the HLET is a
valid or useful analytical concept for economic history. Does it identify a
specific economic circumstance, or is it rather a metaphorical concept which
can be loosely fitted to a wide variety of different circumstances?
Limits to the refinement of practice
Elvin holds that most elements of the HLET model in application to
agriculture may be illustrated in terms of a functional relationship between
labor and output indicating the efficiency of the production process (figure 1).
At any given time in the development of an agricultural system the process of
cultivation may be characterized in terms of the techniques available (forms
of fertilizer, techniques for processing the soil, implements for cultivating
and harvesting, techniques of crop storage, etc.); the forms of organization
3 See also Dwight Perkins' argument to much the same conclusion.
3
and labor use in use; and the forms of labor skill available. The options
available in each of these categories constitute the universe of possible forms
of cultivation in those historical circumstances; and different cultivators can
select different mixes of techniques, skills, and organizational forms through
which to cultivate their crops.
S
TET
D
E1
E2
E3
E4
P1
P2
P3
P4
I
Labor
Output
O
Figure 1. The high-level equilibrium trap
In his analysis of figure 1 Elvin makes several simplifying
assumptions: most importantly, he assumes that the total cultivated land area
is fixed and that the types of techniques available for cultivation are fixed and
unchanging. There is a hidden dynamic assumption which should be
identified as well: that population will tend to increase to the point that
existing agricultural techniques and practices will just satisfy subsistence
needs. On these assumptions, farming efficiency can only be affected by
choosing more efficient mixes of available techniques over less efficient.
Elvin refers to alternative mixes of available techniques as a “practice.”
Figure 1 represents output as a function of labor inputs for a given
set of techniques of production. Each curve Pi represents a different practice,
or mix of inputs per acre (labor, capital, fertilizer; Elvin 1972:171), and the
curve plots output for a given level of labor input. Curve OT represents the
potential output feasible for the optimal mix of all factors; it is the ideal limit
of the given technology. The shape of each curve represents the workings of
diminishing marginal returns in agriculture: given that land is fixed, adding
one worker to the production process increases the aggregate output, but less
and less the more labor is already invested in the process.
4
The line OS represents the level of output needed to satisfy the
subsistence needs of a given quantity of labor (population). The break-even
point for any given curve Pi is reached when the curve crosses line OS (the
subsistence level); no more labor can be absorbed into the process of
cultivation and still produce enough grain to satisfy the subsistence needs of
all cultivators. Thus the points of intersection Ei represent population
equilibrium points; no further population growth can be absorbed within the
existing agricultural practice. (Let us refer to these points as “zero-surplus
equilibrium points.”) And the distance between a given curve and line OS
represents the surplus produced using a given mix of techniques and quantity
of labor.
The significance of the movement from P1 to P2, then, is that the
latter curve represents a more efficient mix of traditional techniques
(practice); for a given input of labor the output of grain is greater than for the
same labor using practice P1. We may thus look at the progression from P1
to P2, P3, etc., as a historical progression through which cultivators “fine-
tune” the resources and techniques available to them.4 Each refinement
produces a greater aggregate output for a given level of input, and is capable
of supporting a larger population of cultivators.
There is a limit, however, to the extent to which refinements of
practice can increase efficiency and support a growing population: the curve
OT. “When the point ET is reached is this escape route barred: increased
inputs of labor, capital, and organization yield no returns. Pre-modern
technology and practice are both at a maximum” (Elvin 1972:172).
On this account ET is the high-level equilibrium trap. It is a point
of equilibrium in that it represents the circumstances in which the largest
population can be supported at the subsistence level consistent with a given
set of agricultural techniques. Elvin has postulated tendencies towards
fine-tuning agricultural practices and increasing population; ET is the point
at which this process comes to a rest. If population increases further, some
people fall below subsistence levels and the population decreases. Second,
ET is a high-level point in that it represents the most efficient possible use of
existing agricultural techniques, leading to the largest possible output capable
of satisfying subsistence needs of the population.
4 "The constant managerial decisions needed for fine technical tuning were
thus in the hands of those closest to the process of production and most
directly motivated to take them effectively" (Elvin 1982:14).
5
In what sense, though, is ET a trap? It is a trap in one obvious but
weak sense: there are no further modifications of practice which are possible
which would further increase productivity.5 But the term “trap” (and Elvin's
own usage in other contexts) implies more than this; it suggests that there is
a set of obstacles specific to the circumstances of the HLET which will
prevent technical development and which would not have blocked technical
change at an earlier point in the development. But the model has taken as a
premise the fixity of techniques; therefore by construction it is impossible for
the model to explain why technical change should be blocked. Being at ET
does not prevent technical change any more than any of the Ei do, however.
All ET represents is the point at which no further gains can be derived from
improving the “mix” of existing technologies.
This analysis suggests that the arguments supporting figure 1 must
be narrowly limited to this conclusion: If a system arrives at ET (a point of
local maximum for available technology), then it will be incapable of
escaping from ET without an exogenous shock. But there is nothing inherent
in these arguments which should lead us to the conclusion that a traditional
society will in fact arrive at ET; it is equally possible that there will be a
continuing incremental improvement in technical as well as practical
resources. It may be that this limitation is consistent with Elvin's intentions.
He may merely intend to assert that traditional China had in fact arrived at a
condition perilously close to PT, and not to assert that there was a necessary
underlying logic of development which led him to that condition. But if so,
the explanatory power of the analysis is greatly reduced.
Thus this formulation does not explain technical stagnation, but
rather presupposes it; a priori, one might suppose that technical innovation
(in the form of a new seed stock, a more efficient plough, or an inexpensive
and efficient irrigation pump) is an exogenous variable which may occur at
any time. Inventions of these sorts would have the effect of shifting curve OT
upward and generating a whole new series of intermediate curves as
cultivators experiment with the mix of the newly available techniques. And
one might hold that this sort of innovation is equally likely throughout the
series of Ei.
5 It might be more accurate to call this a "dead-end" or "cul-de-sac."
6
The “no-surplus” trap
In order to interpret ET as a trap we must make a further
observation: technical innovation generally requires capital investment (new
implements, new water management projects, etc.), and capital investment
requires a surplus product in the hands of a cultivator who has an incentive to
make these investments. The cost of technical innovation, moreover, extends
beyond the cost of the new technology itself to the social costs of the
educational, scientific, and technical establishment. If an agrarian system
reaches ET, however, there is no surplus available to fund research and
investments. Through an extended process of fine-tuning of practices
leading to an optimal mix of traditional techniques, and through the tendency
for population to increase, there has emerged a system in which cultivation
just barely manages to satisfy subsistence needs of the whole population.
Finally, for reasons described above, there is no cost-free escape from this
condition (no new arrangement of existing techniques which could allow for
the creation of a capital fund). This circumstance implies that it will be
impossible for the system to finance technical innovation.6
We may summarize this version of the HLET in these terms:
1 Rising population and progressive refinement of traditional
techniques leads to an economy in which there is no surplus
available to fund technical research and capital investment.
It should be evident that this aspect of the argument has a highly
malthusian character. This argument depends crucially upon the assumption
6 N. C. R. Crafts offers an account of English economic development that
appears to presuppose much the same mechanism: "A number of features of
the economy aided fixed capital formation. It has been argued that
population growth was restrained by a number of 'preventive checks' on
fertility (e.g. delayed marriage), which prevented population size from
reaching the maximum consistent with subsistence and thus allowed a
surplus to exist which might be used for investment in industry. The surplus,
moreover, was distributed very unequally, as it is in most economies. . . .
Beginning much earlier but becoming evident in the eighteenth century were
new financial institutions, such as the country banks or mercantile credit
from foreign trade or the new government debt, which expedited the
channelling of the surplus into capital formation" (Crafts 1981:4).
7
of population increase to the level of marginal subsistence.7 As the system
approaches this point, the social surplus diminishes to zero and the system is
incapable of rescuing itself from its condition of low per capita income. If we
modify this assumption about population growth, however, then the
conclusion does not follow that the system described has entered an
equilibrium effectively blocking the emergence of new and more efficient
techniques of production.
There are several points at which the “no-surplus” trap is
vulnerable. First, it might be argued that population increase will stop before
it reaches the point of marginal subsistence. In this case there is a potential
surplus available for investment. And in fact, as Kang Chao points out, it is
virtually impossible for a population to reach ET, since it would require
perfectly equal distribution of the available product in order to support the
whole population at the bare subsistence level (Chao 1986:6-7). This latter
assumption, however, “can be achieved only with the help of a redistributive
mechanism so powerful as to be an impossibility in any society” (Chao
1986:7). Chao argues that the relevant point is rather point F (figure 2), the
point at which the marginal contribution of labor is equal to the subsistence
wage. If this argument is correct, however, then we should predict, against
Elvin, that population increase will stabilize at a point at which a surplus still
exists over and above the minimal subsistence needs of the population.
7 "There were several reasons why such an equilibrium became established in
China between the fourteenth and the eighteenth centuries. The most
important of these was the growing pressure of population on arable land.
This meant that the surplus product available for generating demand above
the level of subsistence was progressively reduced" (1972:170).
8
Figure 2. The Chao model
Source: Chao: 1986:7
This point brings in its train a second: we might accept the point
that per capita incomes are driven to a low level but reject the conclusion that
the social surplus disappears, by reintroducing class and surplus extraction:
landlords push peasants to even lower incomes and acquire a surplus product
through rent. This would block Elvin's conclusion of a stationary trap, since
it would provide a source of possible capital investment funds.
The no-surplus trap presupposes a very low level of stratification in
the rural economy: the vast majority population is involved in small-scale
cultivation or handicrafts, and income on each unit of production is driven to
the level of bare subsistence. This is an unreasonable assumption, however;
there persisted significant stratification of land and wealth throughout
Chinese rural history. These inequalities rested upon a system of surplus
extraction through rent, usury, and taxation; the surplus-extraction system
permitted landlords, moneylenders, and the state to confiscate most of the
rural surplus for their own use. Victor Lippit shows (1978, 1987) that it is
plausible to conclude that roughly 30% of the rural product was available as
potential surplus within the traditional economy; and surplus-extraction
institutions successfully made this surplus available to the state and a small
class of relatively affluent landowners, merchants, and officials. If this
9
account is approximately correct, then the obstacle to technical innovation is
not the absolute absence of investment funds; so we need to ask what
prevented persons who controlled the available surplus from investing it in
rural development. And this question, in turn, suggests that we consider a
surplus-extraction model for understanding local class relations and
incentives.
Finally, we might question the assumption that technical
innovations are always costly, demanding high levels of surplus to be
discovered and incorporated. Without this assumption, ET is not an
inescapable equilibrium point either.8
The “self-exploitation” trap
There is a way of treating the previous two points which brings them
together: the processes described as “fine-tuning” of traditional practice lead
naturally to a large population and a low wage rate; this encourages the
emergence of labor-intensive techniques; and given the low wage, capital-
intensive techniques cannot compete. Given, though, that technical
innovation is typically labor-replacing and capital-intensive, the demographic
process means that technical innovations will not be able to compete with
traditional techniques. Call this the “cheap labor” trap.9 This point is
particularly relevant in virtue of the organization of traditional Chinese
agriculture around small family units. For a distinctive feature of peasant
agriculture in contrast to capitalist agriculture is its relation to labor power.10
The supply of labor power in a peasant household was largely a
given factor at any one time. This is of course the basic difference
between the textbook peasant and the textbook capitalist
entrepreneur, who varies inputs of both capital and labor as
profitability dictates. For a peasant, the fundamental economic
decisions revolved around the question of how to make the best use
of the labor available to his family. (Elvin 1982:29)
8 Huang gives a series of such examples.
9 As we will see below, Huang criticizes this argument on the ground that
there were possible technical innovations which were not labor-replacing but
merely enhanced the contribution of each worker.
10 This point was extensively developed under the framework of "self-ex-
ploitation" by Chayanov.
10
Along the lines of this
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