Enserfment in The Great Princedom
of Moscow: institutional
perspectives
Mikhail Vdovin, SU-HSE
April, 8th, 2010
Key issues to discuss during these 15 minutes:
1. What does affects the history most: resource endowment or political
decisions of the elites?
▫
What are the sources of the “good” and the “bad” government?
▫
Can power elites form social institutions in their favor?
▫
How important the political and economic inequality is?
2. Forced labor, serfdom and slavery. Are they “good” or “bad”
institutions?
▫
Forced labor: institutional perspectives
▫
The reasons for enserfment of peasants in Russia: overview
3. Enserfment in The Great Princedom of Moscow
▫
A model
▫
Historical parallels: a brief look at the modern Russia
The objective:
• To provide a historical example on how and under what
conditions the “bad” institutions can be developed.
• In general, we’d like to show how the rent-oriented
behavior of power elites can lead to the development of
inefficient social institutions.
Ambrogio Lorenzetti. "Ill-governed Town and Country",
1337-39. Palazzo Pubblico, Siena, Italy
Ambrogio Lorenzetti. “Effects of Good Government on Town
and Country”,1337-39 гг. Palazzo Pubblico, Siena, Italy
Why do the “bad” government and
institutions arise?
• Version 1.
«Initial endowment» [Toynbee , Myrdal, La Porta,
Acemoglu, Diamond, Sachs, etc.]:
Exogenous factors (natural resources, climate,
legal institutions brought through the
colonization) => institutions (mostly, property
rights) => economic performance.
An example: “The Reversal of Fortune”
• The colonies that used to
be rich 500 years ago, are
the poorest countries for
now.
• It’s because the Europeans
has established extractive
institutions 5 centuries ago.
• On the contrary, they were
forced to established the
institutions that promoted
investments and the
security of property rights
for the colonies with poor
initial endowment.
[Acemoglu, 2002].
Why do the “bad” government and
institutions arise?
• Version 2.
“Rent-seeking behavior of the power elites”: [Alesina &
Rodrik, Persson & Tabellini, Engerman & Sokoloff,
Glaeser, Galor, Sonin]:
• Resources are scarce. Elites do have their own interests.
That’s why they want to change the allocation and
establish the institutions they need.
• The established institutions may be advantageous to the
elites, but not to the whole society.
• A switch to other institutions can be blocked by the
elites. Especially, when there’s a strong political and/or
economical inequality.
Inequality and the economical growth
• Inequality leads to the institutions
that reflect the personal interests of
the power elite.
• When one man is much richer than
another and the courts are corrupted,
they will act in the interests of a
richer man, but not in the interests of
truth or economic effeciency.
[Glaeser, 2003].
• Political inequality => property
rights are not secured => economic
stagnation.
Shemyakin’s court. An illustration for a fairy-tale.
(copperplate, XVIII century.
An example: «Railroads in Russia”
• In the Tsarist Russia there was
just 1 railroad line developed
during 1825 -1855.
• Just when the Crimean War was
lost, Alexander II made an
attempt to reform the society and
switch to the industrial type of
development. The government
has started railroad system
development [Acemoglu, 2006].
Conclusions:
• External factors do affect the development of institutions and
economic development.
• However, the institutions are not static. They can be modified
by the pressure groups that maximize their own utility
(economical and political one).
• The maximization of the social utility occurs when the interest
of the power elites correlates with the interest society only.
• On the other hand, the elite (or a part of it) can support a
“bad” institution, if it corresponds with the elite’s pay-off.
• Political and economical inequality decreases the investments
in the human capital and damages the security of property
rights. By turn, it affects the social welfare.
A long history of the forced labor
• Free labor is just a type of
various labor relations that
became prevailing in the world’s
economic history just a few
centuries.
• “[I]n the context of universal
history, free labour, wage
labour, is the peculiar
institution” [Finley].
• Forced labor was widespread
not only in Russia and Eastern
Europe, but also in England and
France [Stanziani].
• So why did it took place in
various times and places?
Forced labor: institutional perspective
Serfdom and the forced labor contradict the notion of a “good”
institution.
• No competitive labor market. The lord (slave-owner) is a
local monopsonist, who sets the price of the labor and
appropriates the slave’s surplus.
• Peasant’s property rights are weak and are combined
with strong duties (and even a punishment).
• Loss from the agency problem. Relatively primitive labor
contract (corvee – “barshina”) with a lord’s control needed
and no incentives for the peasant.
Nevertheless, various historical examples testify that
not-free labor can be more productive, so it may be
preferred by a single social group and even the whole
society.
Example 1. Slavery in the US
• Slavery agriculture of the
Southern states was 35%
more efficient than the free
agriculture of the North.
[Fogel, Engereman].
Example 2: Serfdom in Russia
• Despite many arguments that the
serfdom was demolished because
of its non-efficiency, it was
profitable to the landowners even
in the mid of the 19th century.
That’s why they blocked
institutional reforms [Domar,
Machina].
• Serfdom decreases landowner’s
transaction costs (e.g. hire new
peasants, maintenance of a
contract).
Why does the serfdom arise?
• Version 1. [Klyuchevskiy, Niboer,
Domar]:
Low labor/land ratio => high labor costs
decreases landowners’ rent => it’s a threat
to the whole government and its securuty
=> serfdom appears.
• However, serfdom doesn’t arise at some
historical cases (the Plague in Europe,
colonization of the North America) even
there’s lot of free land and few people to
work it [Brenner, Krugman].
Why does the serfdom arise?
• Version 2. [Kahan, Conning,
Lagelof, Rosa]:
Power elites choose the institutions
in their favor and establish
monopsony on the labor market to
increase their profits. The cartel is
formed.
Recent papers:
• Conning J. “On ‘The Causes of Slavery or
Serfdom and the Roads to Agrarian Capitalism:
Domar’s Hypothesis Revisited”, 2004
• Lagerlof N.-P. “Slavery and Other Property
Rights, 2009
• Rosa J.-J., “Freedom and Serfdom: Domar’s
puzzle revisited, 2009
The emergence of the serfdom in Russia in
the 16th century: brief overview
• Economy: The Moscowian princes support the class of
landed gentry and government “pomest’e” land
ownership. At the same time they try to undermine the
power of major landowners (the Church, boyars, local
princes) and decrease the amount of private hereditary
lands.
• Politics: Ivan the Terrible stops advising with the
nobility for political matters and becomes the only ruler
at the State. He’s able to develop the institutions that
maximize his rent and the pay-offs of the landed gentry.
• The result: The kind of “political collusion” is formed.
The Tsar and the landed gentry can exercise their power
on the labor market by introducing the serfdom.
Let’s compare the background of these
persons
Dmitry
Donskoy,
XIV century
«с вами великое княжество велми
укрепих, и мир и тишину княжению
своему сотворих,и державу отчины
своея соблюдох… и какому же вас зла
сотворих, ни силою отъях, ни досадих,
ни укорих, ни разграбив, ни обезестив…
вы же не нарекотеся у меня бояре, но
князи земли моей».
f
Ivan
The Terrible
XVI century
«наших великих государей вольное
царское самодержство… а нашим
великим государем не указывает
никто… а наши все государи
самодержцы, и никто же им не может
указа чинити, и вольны добрых
жаловати, а лихих казнити».
XVI century: the crossroads
Option 1
Option 2
Governance
Limited monarchy (Boyars’
Duma)
Autocracy
Governing class
Boyars
Landed gentry
Property rights
Secured by the government
and the law
Secured by one’s service and
loyalty to the Tsar
Land owernship
Votchina
Pomest’e
Land market
Competitive
Monopoly (Tsar)
Peasants’ labor
Peasants have a right to leave
the land they work after
paying all the taxes
Serfdom
Labor market
Competitive, or limited
competition
Monopsony
Our logic:
• The Tsar and the landed gentry developed a social contract.
• The government enforces serfdom and let the gentry extract an
additional surplus by establishing a monopsony on the labor
market.
• In exchange the gentry is obliged to provide the government
with a military service and agrees to weaken their land
property rights and politic rights.
• To support the historical evidence and previous economic
researches let’s show that the serfdom is more likely to be
introduced, if there’s:
▫ Abundance of land (resources)
▫ Increase of the price of products
• Political inequality enforces the serfdom as social contract and
leads to the path-dependence.
Serfdom as a monopsony
• The social contract
results in the decrease of
labor used in the
economy: from L’ to L.
• The wage decreases from
w’ to w.
• There’s a deadweight loss
in the economy.
• However, the land gentry
is now able to extract
peasants’ surplus.
• Let’s see, when the
contract can be
established.
Step 1. Monopsony’s profit maximization
• Production function: Q = S*L - L2
• Labor supply: W=L
• Profit maximization of a monopsonist:
• Then, we can find:
• and
Step 2. Nash Equilibrium in the serf-based economy
• Let A denote the net revenue of a monopsonist (which is equal to
π) when the social contract is enforced and the landlors are able to
extract peasants’ surplus.
• There are n landlords who can share A in between them.
• Let F denote the costs of a social contract for landed gentry
which are now obliged to be on the military service.
• Landlords compare their pay-off’s with and without the social
contracted enforced.
• The serfdom will be the Nash Equilibrium for landlords, if
• The lower the landlord’s discount factor σ* is, the more likely the
introduction of serfdom is.
• Let’s see what does affect σ* and how that lead to different institutional
results.
Step 3. Factors that affect the equilibrium
• The landlord’s discount factor is
• The lower the σ* is, the more probable the introduction
of serfdom is.
• If S (land) ↑, then A (monopsonist’s profit)↑, σ*↓ and the
serfdom is more likely to be introduced (the emergence
of serfdom in Russia in the 16th century).
• If P↑ , then A↑ , σ*↓ and the serfdom is more likely to
be introduced (“second serfdom in Eastern Europe”).
Results and next steps
• Serfdom can be viewed as a social contract between the
landed gentry and the Tsar.
• That’s why the introduction of serfdom as labor monopsony of
landed gentry is connected with the development of the Tsar’s
property rights in land.
• Serfdom is more likely to be the Nash equilibrium, when
▫ P (price of the product) and S (land) are relatively high as
predicted by the previous observations.
• Political inequality makes the “rules of the game”
unchangeable. The Tsar and the only ruling party (landed
gentry) can’t be forced to switch to another institution by any
other internal political force. That lead to path-dependence.
▫ Introduction of a new parameter called “political inequality” to
this model can be a next step to explore the problem.
Historical parallels
XVI century
Modern Russia
Resources (land)
Resources (gas & oil)
Abolition of
“Verhovnaya rada”
“Sovereign” democracy
The power of landed
nobility (boyars)
undermined.
Oligarchs’ power
undermined.
Pomest’e
Government corporations
(goskorporacii)
Property rights are
secured by the Tsar
The number of free
farmers vs serfs
The share of small
business vs big business