Topic 4: The Economics of the Manorial SystemI. Reasons for the Rise of the Manorial SystemCastles, moats, etc. Entail high fixed costs, average cost per peasant drops initially, but as population increases, so does cost to keep everyone protected over a large area.V. The effects of changes in population.VI. The breakdown of the feudal system (changes in military technology)Topic 4: The Economics of the Manorial SystemI. Reasons for the Rise of the Manorial SystemA. Great need for protection.1. In 711 Muslim invaders captured Spain and continued into central France by 732, before being repelled by the Franks. The Muslims ultimately gained control of the Mediterranean.2. In the latter 8th and 9th centuries, Vikinginvaders conquered the British Isles, Normandy, even Paris.3. Magyar tribesman raided Central and Southern Europe.B. System of agriculture in Northwestern Europe.1. More capital intensive than in Mediterranean.- Heavy (yet very fertile soil) required heavy wheeled plow.- Required draft animals to pull the plow.2. 3-course rotation- Feasible in heavier soil- Increased crop yield over the old 2-course rotation (crops/rest)- Could support more people and animals—fertilizer 3. Many agricultural inventions in the Dark Ages.- Hoes, pitchforks, axes- Sickles and the scythe- Improvements in the harrows and plows.- Better fertilization.III. Feudalism and Manorialism as Contractual Relationships.A. Distinction between feudalism and manorialism1. Manorialism was the social and economic system. 2. Feudalism: a system of military and political relationships. After the fall of Rome, many small kingdoms rose and fell, but none were able to gain a firm hold of the former Roman Empire. Starting in the 8th century, Europe was frequently subject to invasions from outside—Muslims from North Africa, Vikings from Scandinavia, Magyars from the East. Kings needed a military force to defend against these threats, but no way to efficiently tax a rural population.a. Warriors paid in land, no taxes and commerce.b. Self-sufficient, protected manors.This system also solved the problem of local government: lords were responsible for maintain orderand administering justice.B. The physical attributes1. The lord’s demesne could account for 25 to 30 percent of the total arable land of the manor and contained the manor house and associated structures.2. Peasant holdings lay in large open fields which were divided into strips. Each peasant held several strips that were distributed throughout the fields of the manor.3. The common land usually consisted of waste, meadows, pasture, and woodland. Peasants used these areas to graze livestock, gather firewood, etc.but lord supervised use.C. Social structure and organization of production1. Peasants were bound to the soil (serfdom). a.Required to contribute labor services to production on the lord’s demesne. Work on the lord’s demesne took precedence over work on their own plots. b.Peasants also were required to make other contributions and dues to thelord. (Some estimates indicate thatover 50% of the peasants’ output was extracted by the lords.)2. In exchange, the lord provided protection for the peasants and served as the judge and administrator of the estate.III. The Economics of ManorialismA. “Open fields” Why were peasants’ landholdings scattered across estate?1. Enforce cooperation—the most efficientagriculture practices of the time required use of heavy—wheeled plows, and teams of oxen (later draft horses).The capital costs of these best practices were too great for any onepeasant household. Resources would have to be shared or pooled across households. Open fields were a way to ensure, or at least facilitate cooperation.2. Risk Diversification. Difficult to diversifyacross a manor, but possibly there can be soil quality difference.C. Why manorialism?1. Domar’s theory: Incompatibility of free (abundant) land, free (unbound) labor and non-working, landholding class. Domar equates serfdom to slavery. And, since in the middle ages, land hadno value (plentiful) and labor was scarce. The warrior classes could not get high enough rents or would have had to pay too high a wage, so it was intheir best interest to make the peasants serfs.2. North and Thomas distinction.a. Feudalism closer to sharecropping than slavery.b. High costs to enforcing property rights, competition for labor.3. Why a share contract? Why not fixed wages or fixed rent?a. The model. Consider a simple model with one landlord and one farmer (who doesnot own land)1) Output is determined by a production function f(0) for which the inputs are the farmer’s labor, L(days of labor), the effort, E, that the farmer exerts while working, the land cultivated K (in acres). Output is increasing in all 3 inputs.2) The farmer’s work effort is difficult for the lord to observe.3) There is also a random element,@, @ represents the effects of weather, infestation, other “acts ofGod”- things over which neither the lord nor the farmer has any control.c. Fixed rent contract: farmer pays lord a fixed rent, r, and gets to keep the output of the land (usuallyreferred to as tenancy).Lord: r-c (over L)Farmer: f(K, L, E, @)-r-c(over F)1) Farmer has high incentive to work hard. He gets all theadditional output as a result of that effort.2) But, the farmer bears all the risk of a bad crop.3) Transactions costs (C over L, C over F) are costs of negotiating the contract which N&T argue could be considerable, with no money it would have to be paidin goods. d. Fixed wage contract: landlord pays farmer a fixed wage rate, and landlord gets to keep the output of the land.Lord: f(K,L,E,@)-w*L-C over LFarmer: w*L-c over F1) Farmer has little incentive to work hard; will put out only enough effort to not get caught“shirking”.2) Landlord bears risk of a bad crop.3) C over L Lord’s transaction costs include negotiation PLUS monitoring. d. Output sharing (sharecropping): farmer pays landlord share (∞) of output and keeps the rest.Lord: ∞* f(K,L,E,@)-C over L Farmer: (1-∞)* f(K,L,E,@)-C over F1) Intermediate incentive. Will be higher than fixed wage less than fixed rent. Incentive decreases with ∞, increase in share farmer keeps.2) Risks shared3) Transaction costs for landlord include negotiation PLUS monitoring of effort as well as output.e. Input Sharing (Manorialism)Lord: f (K-KF, LL, EL, @)-CL Farmer f (KF, LF, EF, @)-CF1) Farmer has mixed incentives. Will work