This is carried out in most developed, capitalist economies, but was not really done in any form under feudalism. 3 Sustained economic growth occurs through absorption of the surplus by investment in capital goods (tools, plant and equipment, new businesses, and new technology) or by the government investing more money in education, infrastructure, or health care. The concept of an aggregate, actual economic surplus, as distinct from the concept of economic surplus in supply-and-demand analysis, was later further developed by Baran and Paul M. Baran goes as far as calling noblemen and clergy “parasites” thriving off the output of serfs. 2 The latter is the actual economic surplus that would be obtained if society’s labor and capital were fully and productively employed (such as in farming and making clothes) and not channeled into unproductive activities, such as those pursued by noblemen and clergy during feudalism or activities such as advertising, defense expenditures, and excessive managerial compensation under capitalism. 1 Baran labeled such extra output and income actual economic surplus, as distinct from potential economic surplus. Although not a primary participant in the debate among economists known as the Dobb-Sweezy debate, Baran saw the critical flaw in feudalism as one in which the output and income created beyond the amount necessary to meet society’s needs was basically wasted by the aristocracy and church through spending on grand castles, cathedrals, minstrels, and wars of conquest and plunder. The scholarly literature on the causes of the decline and end of feudalism in Western Europe is vast, and it is impossible here to give credit to all those who have contributed to these studies. However, somewhat surprisingly, by the nineteenth century the surplus still did not attain the levels reached in the thirteenth century. It was not until several centuries later, when capitalism became the dominant economic system, that the economic surplus began to rise on a consistent basis, probably due to the reinvestment of a portion of the surplus into productive activities, a greater ratio of capital income to rental income, and a greater ratio of investment to economic surplus. Such data show that the economic surplus declined during the thirteenth and fourteenth centuries in England, which helps explain the “crisis of feudalism” that started in the thirteenth century. Recently published and estimated historical data illustrate Baran’s analyses of feudalism. It is with capitalism that such incentives to reinvest in production become important. The lord or baron has little incentive to lend or give serfs money because he may not benefit from any increased productivity. In a feudalistic system, there is little incentive to use the proceeds of this type of surplus to buy more tools and equipment for more production of output and income. This extra portion is what he called the economic surplus, a form of savings or income left over after consumption. Baran noted how, in an economic system characterized by a hierarchy of classes where economic and political power is concentrated at the top, the output and income beyond what is consumed by most people (food, clothing, housing, public safety, education, and so on) mostly goes to the highest class. In The Political Economy of Growth and in an article he wrote several years earlier, the economist Paul A. His work has appeared in Social Science Quarterly, Economic Development Quarterly, the Journal of Economic Issues, and the Cambridge Journal of Economics, among other publications. Lambert is an applied economist with the College of Business at the University of Louisville, where he has mostly taught economics and business statistics.
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