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OPTIMISTIC BUT FLAWED? A REPLY

Published online by Cambridge University Press:  18 March 2015

Leticia Arroyo Abad  and
Jan Luiten Van Zanden
Leticia Arroyo Abad
Affiliation:
Middlebury College, USA
Jan Luiten Van Zanden
Affiliation:
Utrecht University
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Abstract

Replying to Rafael Dobado-González’s article on living standards in Spanish America during the colonial period, we discuss the methodology and evidence published in Arroyo Abad, Davis, and van Zanden (2012).

Resumen

En respuesta al artículo de Rafael Dobado-González sobre niveles de vida en Hispanoamérica durante el periodo colonial, discutimos la metodología y la evidencia publicadas en Arroyo Abad, Davis, and van Zanden (2012).

Keywords

economic historymacroeconomics and monetary economics/growth and fluctuationsLatin America/CaribbeanN16N36I32historia económicasalarios realesestándares de vidaLatinoamérica
Type
Panorama and Debate
Information
Revista de Historia Economica - Journal of Iberian and Latin American Economic History , Volume 33 , Issue 1 , March 2015 , pp. 77 - 82
Copyright
© Instituto Figuerola, Universidad Carlos III de Madrid, 2015 

1. INTRODUCTION

In the last few years, a renewed interest in living standards in Latin America is evident from the number of articles publishedFootnote 1 . Inspired by the controversial and influential works of Engerman and Sokoloff (Reference Engerman and Sokoloff1997) and Acemoglu et al. (Reference Acemoglu, Johnson and Robinson2001), economists, historians and economic historians are devoting more attention to comprehensive studies on Latin America to understand its evolution and performance before the 20th centuryFootnote 2 .

Our work was the first systematic attempt to estimate living standards in selected urban centres in Latin America during colonial times to allow comparison with other cities in the world (Arroyo Abad et al. Reference Arroyo Abad, Davies and Van Zanden2012). Our motivation was to take advantage of the works on Europe and Asia and put Latin America on the map. The results may have been surprising for many readers; however, historians of Latin America had long shown the particular dynamism of the Latin American economies throughout colonial ruleFootnote 3 .

These results point to high living standards in Latin America when compared to Western Europe and Asia together with cycles of expansion and contraction throughout colonial rule. Dobado-González (Reference Dobado-Gonzalez2015) claims that our findings fit within an «optimistic» economic evolution of Latin AmericaFootnote 4 . We believe that this new evidence is an important contribution to tracing Latin America’s history in a comparable fashion and from a quantitative perspective. In fact, our results have inspired us to continue this work and to estimate GDP per capita for Mexico and Bolivia-Peru (Arroyo Abad and van Zanden 2014). Moreover, we welcome new works that improve our results with new data and novel methodologies.

Dobado’s latest assessment on the literature on living standards in Latin America challenges our methodology and evidence used. For starters, Dobado-González (Reference Dobado-Gonzalez2015, p. 32) argues that Dobado and Garcia’s (Reference Dobado and García2014) methodology is better as it apparently introduces no assumptions on consumption patternsFootnote 5 . He proposes the use of heights with real wages measured in kilograms of grains, meats and sugar. However, this simple approach suffers from at least two related shortcomings: lack of comparability across the world and missing information on caloric intake.

Given that our motivation was to incorporate Latin America in the discussion of global living standards, the adaptation of the methodologies of Allen (2001) and Allen et al. (Reference Allen, Bassino, Ma, Moll-Murata and Van Zanden2011) was crucialFootnote 6 . By contrast, Dobado and García’s (Reference Dobado and García2014) preferred interpretation of the real wages ratios has no clear implications for living standards. For example, a higher ratio of kilograms of meat as real wage has very different implications for living standards in Buenos Aires than in Potosí. An increasing grain-wage ratio may suggest improving living standards, but does not solve the problems of changing family size, preferences or working days that Dobado finds problematic in our approach. Consequently, his simplified approach appears to have no clear advantage in determining living standards, and furthermore seems less likely to provide a unified assessment of living standards.

Also puzzling is Dobado’s (Reference Dobado-Gonzalez2015, p. 47) demand for a more sophisticated measure of cost of living «to capture distinct features of the complex and heterogeneous nutritional patterns over the Early Modern Era in the cradle of the «Columbus exchange» and probably of the «consumer revolution» as well». Yet, he still promotes his approach as more accurate. The construction of more complete baskets is, by all means, desirable but unfortunately very difficult to implement in practice for long periods of time given the availability of prices and wage data so farFootnote 7 . Furthermore, this approach does not solve the problem of increasing shares in the different Latin American consumption baskets of the so-called exotic goods (Dobado-González Reference Dobado-Gonzalez2015, p. 19). Looking at the summary table 1 in Dobado and García (Reference Dobado and García2014), it also does not provide a clear picture of cost of living or living standardsFootnote 8 . If we want to accurately measure cost of living, then we would need a more innovative methodology that incorporates income and substitution effects within the consumption baskets but at the cost of compromising international comparabilityFootnote 9 .

As Dobado (Reference Dobado-Gonzalez2015) points out, the construction of a «bare bones» basket is data intensive. We noted this weakness that the different sources do not allow us to have a balanced panel: «price and wage data can be quite patchy:» (Arroyo Abad et al. Reference Arroyo Abad2013, p. 163). To overcome this problem, we resorted to different techniques, from direct interpolation to use of relative prices between locations. The latter, in particular for textiles, appears to be problematic for Dobado (Reference Dobado-Gonzalez2015, p. 43) as he argues that «Using prices from Lima (the commercially active and coastal capital of the viceroyalty) «to interpolate missing price data for Potosi» — a remote mining town, located more than 2,000 miles away from Lima and closer to northern Argentina’s markets — does not seem to be fully justified.» The 2011 version of our paper presents evidence on the evolution of the price of imported textiles for Santiago de Chile, Potosí and Lima, which shows comparable trends and levels (see Figure 1; Arroyo Abad et al. 2011)Footnote 10 .

FIGURE 1 PRICE OF TEXTILES (lINEN, FROM FRANCE) IN POTOSÍ (BOLIVIA), SANTIAGO (CHILE) AND LIMA (PERU), 1630S-1810S (10-YEAR AVERAGE), IN REALES PER VARA

Source: Arroyo Abad et al. (2011).

While our estimations are a first approximation, Dobado (Reference Dobado-Gonzalez2015) maintains that the incorporation of anthropometric evidence, in particular heights, should be part of the discussionFootnote 11 . The assessment of living standards through biological welfare is indeed a flourishing field in Latin American history, as the edited volume by Salvatore et al. (2010) epitomises. However, Dobado’s work fails to explain how stature fits within the framework of measuring living standards in colonial Latin America. As Steckel (Reference Steckel1995) points out, real wages look at market outcomes, while heights provide information on net nutrition and inequality. In particular, Steckel (Reference Steckel1995) presents several episodes of declining stature in the presence of economic growth with increasing mortality rates in pre-modern societies. Given the prevalence of epidemics during colonial times and the sources of heights being traditionally from militia, it is only fair to discuss the limitations of this approach as well. Thus, absent further argument, the role of height in living standards is unclear.

In summary, Dobado-González (Reference Dobado-Gonzalez2015) may well be interested in something other than international comparisons of living standards. In that context, his criticisms may have some validity. However, since our interest is precisely in these comparisons, our methods seem to have clear advantages over his. Having said that, this discussion brings to light the need for more research to assess the evolution of Latin America’s living standards in history. As historians and economic historians venture more to archives, we will be able to construct better indicators that will undoubtedly revise and expand our state of knowledge so far. Studies that span from colonial times to the long 19th century will only help us to understand why, how and when Latin America fell behind.

Footnotes

a

Department of Economics, Middlebury College, 502a Warner Hall, Middlebury, VT 05753, USA. larroyoabad@middlebury.edu

b

Department of History and Art History, Utrecht University, Drift 6, 3512 Utrecht, The Netherlands. j.l.vanzanden@uu.nl

1 See for example: Salvatore et al. (2010); Arroyo Abad et al. (Reference Arroyo Abad, Davies and Van Zanden2012); Allen et al. (Reference Allen, Murphy and Schneider2012); Dobado and García (Reference Dobado and García2014); Challú (Reference Challú2010); Arroyo Abad (Reference Arroyo Abad2013); Arroyo Abad (Reference Arroyo Abad2014); and Challú and Gómez-Galvarriato (Reference Challú and Gómez-Galvarriato2015).

2 See Dobado-González (Reference Dobado-Gonzalez2015) for a review.

3 See Salvucci (Reference Salvucci1994) for review essay on Bourbon Mexico and the quintessential work on prices in Latin America by Tandeter and Johnson (Reference Tandeter and Johnson1990).

4 Unless otherwise specified, we refer to Dobado’s interpretation according to his article published in RHE-JILAEH Dobado-González (Reference Dobado-Gonzalez2015).

5 Dobado and García (2009) did not include sugar as part of their analysis.

6 This methodology is indeed imperfect as noted by Allen (2001).

7 For example, Arroyo Abad (Reference Arroyo Abad2013, Reference Arroyo Abad2014); Challú and Gómez-Galvarriato (Reference Challú and Gómez-Galvarriato2015) estimate the traditional «bare bones» basket and wider baskets as well.

8 Moreover, Dobado-González (Reference Dobado-Gonzalez2015) uses the consumption baskets estimated by Brown (1992) in Arequipa to bring up a discrepancy of the trend of the cost of living in Lima in our work. (The implied decrease in the cost of living is overstated as the author quoted the basket in pesos instead of silver grams.) Hence, it suggests that the use of baskets is convenient after all.

9 Irigoin (Reference Irigoin2013) uses this methodology for colonial Latin America. Zegarra (Reference Zegarra2011) applied lineal programming to calculate poverty lines in Lima at the turn of the 20th century.

10 The 2012 published version of our paper does not, unfortunately, include this graph due to space constraints; however, Dobado-González (Reference Dobado-Gonzalez2015) does cite our working paper as a source.

11 Our results are consistent with existing anthropometric data; however, contrary to Dobado-González’s (Reference Dobado-Gonzalez2015) claims we do not have our own data set.

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Figure 0

FIGURE 1 PRICE OF TEXTILES (lINEN, FROM FRANCE) IN POTOSÍ (BOLIVIA), SANTIAGO (CHILE) AND LIMA (PERU), 1630S-1810S (10-YEAR AVERAGE), IN REALES PER VARASource: Arroyo Abad et al. (2011).