Lecture 1 — Foundations: from 1800 to 1978

Slides (online)Slides (PDF)

Wednesday 21 October 2026 · Block: history and institutions · 3 hours

Questions

• How did a great economy arrive at the revolution of 1949?
• What is a planned economy, how did China build one, and what did it do?
• What does the Great Leap Forward famine teach us about plans, prices and information?

Key concepts

Price and relative scarcity · quantities versus prices as ways to coordinate an economy · command economy · state-set prices · investment cycles ("leaps" and retrenchments) · the Material Product System versus GDP · hukou (introduced; it returns in lectures 4-5) · famine and institutions.

Readings

Required

• Barry Naughton, The Chinese Economy: Transitions and Growth (MIT Press, 2007): chapter 2, "The Chinese Economy Before 1949" (pp. 33-54), and chapter 3, sections 3.1-3.3, "The Socialist Era, 1949-1978" (from p. 55).
• Xin Meng, Nancy Qian and Pierre Yared, "The Institutional Causes of China's Great Famine, 1959-1961", Review of Economic Studies 82(4), 2015, pp. 1568-1611 — read the introduction.

Optional (every work cited on the slides)

• Friedrich A. Hayek, "The Use of Knowledge in Society", American Economic Review 35(4), 1945, pp. 519-530 — on what prices do.
• Mark Elvin, The Pattern of the Chinese Past (Stanford University Press, 1973) — the "high-level equilibrium trap".
• R. H. Tawney, Land and Labour in China (New York: Octagon Books, 1964) — the peasant "standing on tiptoe up to his nose in water".
• Michael Greenberg, British Trade and the Opening of China, 1800-42 (Cambridge University Press, 1951) — opium shipments, as reported in Amar Farooqui, "The Global Career of Indian Opium and Local Destinies", Almanack 14, 2016.
• James M. Polachek, The Inner Opium War (Harvard East Asian Monographs 151, Council on East Asian Studies, Harvard University, 1992) — the court split between prohibition and legalisation.
• Man-houng Lin, China Upside Down: Currency, Society, and Ideologies, 1808-1856 (Harvard East Asian Monographs 270, Harvard University Asia Center, 2006) — silver outflow and currency stress.
• Alejandra Irigoin, Atsushi Kobayashi and David Chilosi, "China inside out: Explaining silver flows in the triangular trade, c. 1820s-70s", Economic History Review 79(2), 2026, pp. 496-526 (working-paper version: LSE Economic History Working Paper 357, 2023, Figure 2 on the silver slide).
• MIT Visualizing Cultures, "The First Opium War", essay "The Opium Trade" (visualizingcultures.mit.edu/opium_wars_01/) — estimates of the number of opium smokers; the page does not name its authors.
• Estimates of the deaths of the Great Leap Forward famine: Ansley J. Coale, "Population Trends, Population Policy, and Population Studies in China", Population and Development Review 7(1), 1981, pp. 85-97; Judith Banister, China's Changing Population (Stanford University Press, 1987); Frank Dikötter, Mao's Great Famine (Bloomsbury, 2010).