How the World Became Rich. Mark Koyama

How the World Became Rich - Mark Koyama


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development. Such explanations touch on topics like institutional change, the growth of state capacity, and the rule of law. In our reading of the literature and of history, we find it difficult to tell a compelling story of long-run economic growth while ignoring the role that political institutions played in encouraging or (more often than not) dampening economic growth.

      The second set of explanations that we find convincing are those that highlight the role of culture. To be clear, we do not mean the type of Eurocentric explanations popular in the early 20th century that made claims regarding the supremacy of some aspect of European culture. We mean culture in the way cultural anthropologists use the term: those heuristics employed by people to interpret the complex world around them (Cavalli-Sforza and Feldman, 1981; Boyd and Richerson, 1985; Henrich, 2015). Recent scholarship demonstrates that culture is amenable to serious social scientific study. Several insights can be gleaned from this line of research. First, cultural values can be extremely persistent (Guiso, Sapienza, and Zingales, 2006; Nunn, 2012). Second, cultural values interact with institutional development (Greif, 1994, 2006; Alesina and Giuliano, 2015; Bisin and Verdier, 2017).

      Just because we find some explanations for how the world became rich more compelling than others does not mean that the other theories have little merit. In fact, we believe there are important insights in all of the theories outlined in this book. In the end, we need to remember that an issue as wide-ranging as “how the world became rich” almost certainly has many causes. Intelligent people can and will disagree on what weight to put on each of these causes. What matters most is understanding the conditions under which certain causes are important and the conditions under which they are not. It is our hope that this book will provide a better understanding of these conditions.

      For all we are attempting to accomplish with this book, we want to be clear about a few things we will not do. First, our goal is to present all of the major arguments on “how the world got rich” in a fair-minded fashion. This means that, when initially presenting the theories, we will do our best to not let our own biases creep in. We certainly have views on the various issues presented in the book, and we do think that some views are more convincing than others. The later chapters of the book lay out the reasons we believe some of the proposed causes in the literature have greater explanatory power than others. However, we aim to give each of the main explanations a fair shake and present them, to the best of our ability, the way that the authors of the theories would want them presented.

      Finally, we do not spend much time discussing the drawbacks to economic growth such as pollution, climate change, and the capacity to create deadly weapons. We are by no means denying the importance of these topics, but these issues are simply outside the scope of this book. We have written a book on the origins of modern economic growth. While we believe economic growth in general to be a good thing, the focus here is on what caused economic growth, not its consequences.

Part I Theories of How the World Became Rich

      Does geography determine the fate of nations? Is the key to unlocking riches preordained by factors like climate, natural resources, soil quality, and access to the ocean? Geographic explanations have long been a favorite of thinkers looking for reasons why their society pulled ahead. According to the Muslim Andalusian thinker Abū al-Qāsim Sā’id (1068): “The exceeding distance [of Northern Europeans] from the sun thickens the air making their dispositions cold, their natures rude, their skin color white and their hair straight. Thus … dullness and ignorance overpower them” (quoted in Chaney, 2008, p. 2). On the other hand, in Book XIV of The Spirit of the Laws, the French philosopher Montesquieu made a similar argument but drew an opposite conclusion:

      People are … more vigorous in cold climates…. The inhabitants of warm countries are, like old men, timorous; the people in cold countries are, like young men, brave. If we reflect on the late wars … we shall find that the northern people, transplanted into southern regions, did not perform such exploits as their countrymen who, fighting in their own climate, possessed their full vigor and courage. (Montesquieu, 1748/1989, p. 317)

      Modern scholars have also argued that geography and climate play a crucial role in explaining patterns of economic development. Perhaps the most well-known insights are those of Diamond (1997), who argues that factors like the relative length of continental axis, the disease environment, proximity to the equator, and access to coasts and rivers had a tremendous influence on long-run economic prosperity. We discuss Diamond’s influential hypothesis in depth in this chapter.

      What about the Industrial Revolution? Britain’s position as a large island off the coast of Europe, endowed with a moderate climate, numerous rivers, and a long coastline, helped shape the formation of its political institutions. Abundant coal resources played an important role in its early industrialization. It is worth asking: could this be why Britain industrialized first?


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