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"China’s high-yield agriculture was as much a result of suitable institutions as good natural conditions." Discuss.

Shared master's students economics essays for LSE (London School of Economics and Political Science) MSc. 

EH446 Economic Development in East and Southeast Asia series 


This essay aims to analyse the relative importance and impact that good natural conditions and suitable institutions had on China’s high-yield agriculture. In order to discuss the relationship of these factors to agriculture as well as to one another, it is important to first identify the time frame in which to situate the analysis. Throughout the Qin and Han periods, institutions began to take root which would have lasting impact on the period of high-yield agriculture to follow.  A substantial shift in geographical focus to agriculture in the south of China during the Tang period  marks the start of the latter phase considered in this essay, extending into the Song Dynasty to cover the dissolving of large land estates and accompanying migration patterns.  

During this time period, China’s high-yield agriculture was both a result of good natural conditions and suitable institutions. This essay places an emphasis on the suitableness of those institutions to the natural conditions present and their responsiveness to changing circumstances and challenges presented by population growth and limited land capacity as instrumental in promoting China’s high-yield agriculture. The essay will begin with a brief description of the good natural conditions existing in China to promote an agricultural system, followed by an analysis of the institutions that mobilise this sector and the built-in response mechanisms that both contribute to high-yield agricultural sustainability as well as eventually lead to its stagnation. The conclusion offers a summary of the argument that high-yield agriculture in China resulted from a combination of a good natural environment and suitable institutions and their own mutually reinforcing relationship.

Good Natural Conditions
According to J.L. Buck’s Land Utilization in China, such natural factors as climate, topography, soil, and vegetation are important to consider in an analysis of the agricultural sector in China. These factors provided good conditions for high-yield agriculture in China, in part because of their wide variation across the vast territory. Lower elevations tended to be more suitable for large agricultural plots, the best soil could be found on valleys and plains, while rainfall levels varied by region and season. The sheer size of China and its varied geography allowed for a variety of crops and farming techniques to develop over time – from wheat, maize, and soybeans in the north to rice in the south – among many other variations from each and in between.  The challenging conditions in particular regions and seasons did pose some obstacles for farmers, but these could be overcome with developments in fertilizers and seed varieties.  These innovations were sponsored and encouraged by the institutions which developed during the Qin and Han periods.

In order to maximize the productivity of the good natural conditions described by Buck, a number of institutions developed. Among these are private property and land ownership, small family farms, the land tax structure, and state investment in technology. There existed an overarching relationship between the state and the farmers in which both parties reaped rewards from the function of these institutions. For the state, agriculture was a “fundamental” cornerstone of the Chinese economy, a symbol of enduring prosperity in which it made ideological sense to invest resources.  There were not only philosophical benefits, but military and economic benefits as well, coming from “well-fed soldiers” and additional revenue.  Peasants depended on land from the state , so they derived benefit from this relationship and the institutions that supported it as well.

Private property and land ownership is important to high-yield agriculture in China because of its early development during the Qin and Han Dynasties. Its emergence gives rise to further patterns such as small farm sizes and tax structures. Under the Han Dynasty, economies of scale did exist for some non-rice crops in northern China, which gave rise to the formation of large scale farm estates. Later, this pattern was reversed, increasing the fluidity of peasant migration in the Tang and Song periods.  
Chao Kang uses the term “atomistic” to describe the many small farms (“production units”) that made their own individual decisions in the agricultural market.  The small family farm system had many benefits to high-yield agriculture in China. The land tax structure privileged small family farms. The state taxed farmers relative to the amount of land they owned, thus encouraging the smaller farms and protecting against rent-seeking behaviour of landlords who would otherwise try to monopolize surplus production.  In general, agricultural taxes were reasonable, Kent Deng notes, supporting the “moral economy of taxation in China.”  

Among one of the most important impacts of the small farm structure was the family’s ability to allow for a surplus population to exist in the agricultural production model. Chao makes a compelling argument that the family effectively shared their income within the same production unit and allowed the marginal product of labour to fall below subsistence cost.  This creates a situation where population growth is allowed to continue, and thus production also continues to grow but at a lesser marginal product of labour rate. 

Technological development responds in a similar manner, adapting to population growth and perpetuating the increase through investment in labour-intensive innovations. As the marginal productivity of labour declines, the system responds by increasing the marginal productivity of land.   Chao traces the technological innovation in China from labour-saving devices such as the shareplow until the 12th century, when this type of innovation comes to a halt in favour of labour-intense techniques such as raising more than one crop within a year and farming on previously uncultivated land.  As the population grew, migration to the southern region allowed a larger labour force to be successful in harvesting labour-intensive crops such as rice and to benefit from such techniques as double cropping and fast growing seeds.  Again, it was a case of the institutions, in this case, investment in agricultural technology, adapting to the constraints of a growing population and diminishing amount of available land.

The key for good natural resources and suitable institutions to perpetuate high-yield agriculture in China was their compatibility with one another. Since natural conditions are natural, institutions need to be flexible to adjust to these as well as other variables (such as population). For Chao, the critical capability is redistribution. This property is evidenced in the family production unit structure, where the family production utility can be shared amongst the members internally, even though their individual members’ marginal product of labour is below subsistence level.  Thus, the family unit structure responds to the rise in population by allowing it to continue to grow. Similarly, technology and state policies and incentive structures allowed for agriculture itself to adapt and absorb a larger labour force.

The excellent responsiveness of institutions prolonged high yield agriculture in China. However, this institutional adaptability to a growing population on a fixed area of land led to a pattern of path dependency. The small farm structure and growth in labour-intensive agriculture impacted rational choices made by both peasants and the state. Within the family farm, despite the diminishing marginal product of labour, people continued to work and produce a greater total output rather than let the surplus labour sit idle.  Chao’s argument that the institutional ability to fix problems in the short-run contributed to long-run economic stagnation  provides a good explanation for high-yield agricultural success in China, while also acknowledging its shortcomings. Francesca Bray also touches on this stagnation point, dating it to around 1800 when China reached its geographical limits and the population finally surpassed the capacity of agricultural production. 


This essay has argued that China’s high-yield agriculture was a result of both good natural conditions and suitable institutions. The key to these factors’ ability to propel high-yield agriculture was their complementary nature. Having one without the other would not have provided the same rich platform for growth that was created by these conditions together. Institutions have been the focus of this essay because they are the factor over which the population has control. Institutions can be used to maximize the productivity of natural conditions, as they did through technological innovations to increase the marginal productivity of land, and state policies to encourage small family farms and labour-intensive crops. The assessments made by Chao and Bray attach importance to the roles of population and land capacity as constraints on agriculture for which institutions must correct. 
This essay has stressed the importance of institutional responses to these variables of population and land capacity. Institutions are critical to the development of China’s agricultural sector. During the Qin and Han periods, institutions such as private property and favourable tax structures maximize the use of existing good natural conditions (land, soil, and climate). Over time, particularly during the Tang and Song periods, family production units and labour-intensive technological development react to the limitations of natural resources as the population grows and agricultural space becomes constrained. How this responsiveness ultimately created an unsustainable path dependency that limited agricultural growth in the long-run is not the topic of this essay. However, it helps to illustrate the primary importance of institutions in managing good natural conditions in China for high-yield agriculture.

JC Economics Essays - This short series on JC Economics Essays is a set of shared economics essays on economic development, shared by my former classmates KVL and TZ with me when we were reading our MSc. at LSE, London, United Kingdom. We shared essays so that we could gain additional perspectives on how to craft good essays to get a high grade for the Master's degree at LSE, and that was a good way of sharing information and material. All the essays were graded highly by Dr Kent Deng, a very excellent and inspirational tutor and lecturer at the LSE when I was studying there. I hope you find the essays on economic development interesting or useful. Special thanks to KVL and TZ (both from the United States of America) for their kind sharing.

EH446 Economic Development of East and Southeast Asia

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