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How the World Became Rich: The Historical Origins of Economic Growth
Most humans are significantly richer than their ancestors. Humanity gained nearly all of its wealth in the last two centuries. How did this come to pass? How did the world become rich? Mark Koyama and Jared Rubin dive into the many theories of why modern economic growth happened when and where it did. They discuss recently advanced theories rooted in geography, politics, culture, demography, and colonialism. Pieces of each of these theories help explain key events on the path to modern riches. Why did the Industrial Revolution begin in 18th-century Britain? Why did some European countries, the US, and Japan catch up in the 19th century? Why did it take until the late 20th and 21st centuries for other countries? Why have some still not caught up? Koyama and Rubin show that the past can provide a guide for how countries can escape poverty. There are certain prerequisites that all successful economies seem to have. But there is also no panacea. A society’s past and its institutions and culture play a key role in shaping how it may – or may not – develop.
259 pages, Paperback
First published January 1, 2022
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May 18, 2022
Outstanding summary of decades of research into the origins of economic growth, why the Industrial Revolution started when and where it did, the influence of colonization and the slave trade, how institutional factors and geography affect growth prospects, etc.
It was somewhat strange to me that until this, no literature review existed of the various theories explaining how the world got rich. You could read particular people's theories and they often became best-sellers (Why Nations Fail, Guns, Germs, and Steel, Plagues and Peoples) but as a layperson, how are you to know who's right? Probably the best you can do is review the theories, and this is the first broadly accessible introduction to them I've seen.
It was somewhat strange to me that until this, no literature review existed of the various theories explaining how the world got rich. You could read particular people's theories and they often became best-sellers (Why Nations Fail, Guns, Germs, and Steel, Plagues and Peoples) but as a layperson, how are you to know who's right? Probably the best you can do is review the theories, and this is the first broadly accessible introduction to them I've seen.
February 16, 2024
کتاب از توسعه‌ی اقتصادی صحبت می‌کنه. با نگاهی به تاریخ جهان تاریخ تکنولوژی تاریخ اقتصاد مخصوصا تاریخ دویست سال گذشته تا ببینه که چه ایده‌هایی چه فکرهایی زمینه‌ساز رشد اقتصادی شدن. چرا تقریباً ۲۰۰ سال پیش، بخش‌هایی از جهان شروع کردن به تجربه رشد اقتصادی پایدار؟
December 4, 2022
How the World Became Rich : The Historical Origins of Economic Growth by Mark Koyama and Jared Rubin is an excellent overview and examination of the many theories of how prosperity took off around the world. Koyama and Rubin are both professor of economics.
The great question of why Europe and more particularly Britain was the first place in the world to see dramatically higher wealth growth from about 1800 onwards is one that many people have pondered. Many books, including Guns, Germs and Steel, The Great Divergence, The European Miracle, A Culture of Growth, Leave me Alone and I’ll Make You Rich and others have put forward hypotheses about why, when and where the great enrichment happened. How the World Became Rich summarises these books and the research behind them. The authors also introduce other literature that points out the weaknesses in various theories.
The book first provides an introduction and then is in two parts. The First : Theories of How the World Became Rich has chapters Did Some Societies Win the Geography Lottery, Is it all Just Institutions, Did Culture Make Some Rich and Others Poor, Fewer Babies and Was it Just a Matter of Colonization and Exploitation. The Second Part : Why Some Parts of the World Became Rich First, Why Other Parts Followed and Why Some are Not There Yet has chapters: Why Did Northwestern Europe Become Rich First, Britain’s Industrial Revolution, The Rise of the Modern Economy, Industrialization and the World It Created and finally The World is Rich.
The authors make a very good point that it is very much worth pondering not only where but also when people became rich. If European geography was uniquely suited to enrichment the question of why China was richer than Europe up to about 1200 comes up. If it was geography making it hard to conquer the whole of a a high population area then why didn’t India become rich first rather than Europe?
On the European Marriage Pattern (EMP) the authors point out that parts of China had similar marriage patterns. The authors also make the great point that it is worth thinking not just about where but also when the great enrichment happened. Could it have happened hundreds of years earlier in China if the Mongols had not invaded? The authors also point out that alas we can’t do experiments to determine these questions. The importance of institutions and the importance of limited government in Britain’s rise is very well described by the authors.
The authors don’t discuss technology much and energy little. But that is somewhat outside the scope of the book. It’s arguable that at some point in the most populated continent someone would develop the precision required to make steam engines and have access to coal and at that point living standards would shoot up. Presumably the counter argument to that is that you need the institutions to make it worthwhile to build a steam engine. This argument has substantial merit.
The book concludes with a discussion of how various countries have caught up and become rich since Britain. The European countries and the US and then Japan, South Korea and various other countries are discussed as is China’s amazing recent rise in prosperity.
How the World Became Rich is a fantastic book that explores the various theories about why the world become rich and why Western Europe was first to become wealthy. For anyone who has pondered the theories and read other books and wondered what other scholars had to say about various theories How the World Became Rich is very definitely worth reading.
The great question of why Europe and more particularly Britain was the first place in the world to see dramatically higher wealth growth from about 1800 onwards is one that many people have pondered. Many books, including Guns, Germs and Steel, The Great Divergence, The European Miracle, A Culture of Growth, Leave me Alone and I’ll Make You Rich and others have put forward hypotheses about why, when and where the great enrichment happened. How the World Became Rich summarises these books and the research behind them. The authors also introduce other literature that points out the weaknesses in various theories.
The book first provides an introduction and then is in two parts. The First : Theories of How the World Became Rich has chapters Did Some Societies Win the Geography Lottery, Is it all Just Institutions, Did Culture Make Some Rich and Others Poor, Fewer Babies and Was it Just a Matter of Colonization and Exploitation. The Second Part : Why Some Parts of the World Became Rich First, Why Other Parts Followed and Why Some are Not There Yet has chapters: Why Did Northwestern Europe Become Rich First, Britain’s Industrial Revolution, The Rise of the Modern Economy, Industrialization and the World It Created and finally The World is Rich.
The authors make a very good point that it is very much worth pondering not only where but also when people became rich. If European geography was uniquely suited to enrichment the question of why China was richer than Europe up to about 1200 comes up. If it was geography making it hard to conquer the whole of a a high population area then why didn’t India become rich first rather than Europe?
On the European Marriage Pattern (EMP) the authors point out that parts of China had similar marriage patterns. The authors also make the great point that it is worth thinking not just about where but also when the great enrichment happened. Could it have happened hundreds of years earlier in China if the Mongols had not invaded? The authors also point out that alas we can’t do experiments to determine these questions. The importance of institutions and the importance of limited government in Britain’s rise is very well described by the authors.
The authors don’t discuss technology much and energy little. But that is somewhat outside the scope of the book. It’s arguable that at some point in the most populated continent someone would develop the precision required to make steam engines and have access to coal and at that point living standards would shoot up. Presumably the counter argument to that is that you need the institutions to make it worthwhile to build a steam engine. This argument has substantial merit.
The book concludes with a discussion of how various countries have caught up and become rich since Britain. The European countries and the US and then Japan, South Korea and various other countries are discussed as is China’s amazing recent rise in prosperity.
How the World Became Rich is a fantastic book that explores the various theories about why the world become rich and why Western Europe was first to become wealthy. For anyone who has pondered the theories and read other books and wondered what other scholars had to say about various theories How the World Became Rich is very definitely worth reading.
Read
August 18, 2022inventio
In the Dutch daily paper De Volkskrant of tu 2022 0816 wrote Peter de Waard (a Dutch financial reporter) on page 19 and mentioned this title.
Looking here om GR for the title showed some more probably interesting titles
https://www.goodreads.com/search?q=ho... 10 (today we 0817)
table of contents [from publisher's site (and the booksite)]
Preface
1 Why, When, and How Did the World Become Rich?
2 Did Some Societies Win the Geography Lottery?
3 Is it all Just Institutions?
4 Did Culture Make Some Rich and Others Poor?
5 Fewer Babies?
6 Was it Just a Matter of Colonization and Exploitation?
7 Why Did Northwestern Europe Become Rich First?
8 Britain’s Industrial Revolution
9 The Rise of the Modern Economy
10 Industrialization and the World it Created
11 The World is Rich
Bibliography
dispositio
ISBN: 978-1-509-54022-8 hardcover 2022 March $ 69.95 -print on demand-
ISBN: 978-1-509-54023-5 paperback 2022 May $ 24.95
ISBN: 978-1-509-54024-2 ebook 2022 May $ 20.00
https://lccn.loc.gov/2021944393
https://www.wiley.com/en-us/How+the+W... publisher's bookpage
https://www.wiley.com/en-us/exportPro... productflyer (paperback)
https://www.howtheworldbecamerich.com booksite (very recommended, teaching tools)
-
.
In the Dutch daily paper De Volkskrant of tu 2022 0816 wrote Peter de Waard (a Dutch financial reporter) on page 19 and mentioned this title.
Looking here om GR for the title showed some more probably interesting titles
https://www.goodreads.com/search?q=ho... 10 (today we 0817)
table of contents [from publisher's site (and the booksite)]
Preface
1 Why, When, and How Did the World Become Rich?
2 Did Some Societies Win the Geography Lottery?
3 Is it all Just Institutions?
4 Did Culture Make Some Rich and Others Poor?
5 Fewer Babies?
6 Was it Just a Matter of Colonization and Exploitation?
7 Why Did Northwestern Europe Become Rich First?
8 Britain’s Industrial Revolution
9 The Rise of the Modern Economy
10 Industrialization and the World it Created
11 The World is Rich
Bibliography
dispositio
ISBN: 978-1-509-54022-8 hardcover 2022 March $ 69.95 -print on demand-
ISBN: 978-1-509-54023-5 paperback 2022 May $ 24.95
ISBN: 978-1-509-54024-2 ebook 2022 May $ 20.00
https://lccn.loc.gov/2021944393
https://www.wiley.com/en-us/How+the+W... publisher's bookpage
https://www.wiley.com/en-us/exportPro... productflyer (paperback)
https://www.howtheworldbecamerich.com booksite (very recommended, teaching tools)
-
.
Read
January 25, 2023One of the many things that frustrates me about self-defined leftists is their rejection of economics. Just because your AP Econ teacher said supply and demand proves socialism wrong doesn’t mean you can’t think in terms of scarcity and choices, I say. Yes, economists are reductive, but so are philosophers or physicists; to get at the whole, we need specialists to study the specific. We bring together disparate fields of knowledge to form nuanced understandings of our world, and as such, we must make use of economical thinking. I paraphrase John Lennon and tell my friends, give Econ a chance!
This book suggests that perhaps I should be a bit less tolerant.
This was, and if I’m exaggerating it’s only slightly, the most dogshit book I had the misfortune to read in the past year or so. Even the premise, that of summarizing every major theory about economic growth across all of history and in every country, is absurd. Then, you find in these pages some of the most laughable, ignorant, ahistorical, and false theories imaginable. It’s hard to get at the merits of the arguments, which often fall well short and convey a serious lack of analytical maturity, when the methods are so self-evidently ridiculous. I may take issue with the humanities for their excessive and obtuse self-referential “theory”, but this book, dripping with contienntal generalizations, complete atemporality, and “Confucian Values” orientalism, I come across writers who have never, in their educational career, picked up a work of cultural or social history.
It’s very hard to review a book with no merit, so I’ll just describe one page of many: a map of “Africa’s ethnic boundaries prior to colonization”, which presents thousands of “ethnicities” existing outside time in neat, demarcated territories, marked off in the style of an American electoral map. The extent to which these authors grasp the concept of change over time is limited to the endless GDP/capita over time graphs that pad their book, graphs that count eighth century Umayyad living standards in 2020 U$D.
I’m really not sure how to convey how frustrating this read really was. It is very sad that history as an academic discipline is on its last legs because this book is proof that without a decent sense of the past, we are able to pass off whatever bullshit wins grants as fact. The people writing the insane and incorrect articles that make up the bulk of this book are the same people who in turn shape the economic and political destinies of continents. This is a shameful book.
This book suggests that perhaps I should be a bit less tolerant.
This was, and if I’m exaggerating it’s only slightly, the most dogshit book I had the misfortune to read in the past year or so. Even the premise, that of summarizing every major theory about economic growth across all of history and in every country, is absurd. Then, you find in these pages some of the most laughable, ignorant, ahistorical, and false theories imaginable. It’s hard to get at the merits of the arguments, which often fall well short and convey a serious lack of analytical maturity, when the methods are so self-evidently ridiculous. I may take issue with the humanities for their excessive and obtuse self-referential “theory”, but this book, dripping with contienntal generalizations, complete atemporality, and “Confucian Values” orientalism, I come across writers who have never, in their educational career, picked up a work of cultural or social history.
It’s very hard to review a book with no merit, so I’ll just describe one page of many: a map of “Africa’s ethnic boundaries prior to colonization”, which presents thousands of “ethnicities” existing outside time in neat, demarcated territories, marked off in the style of an American electoral map. The extent to which these authors grasp the concept of change over time is limited to the endless GDP/capita over time graphs that pad their book, graphs that count eighth century Umayyad living standards in 2020 U$D.
I’m really not sure how to convey how frustrating this read really was. It is very sad that history as an academic discipline is on its last legs because this book is proof that without a decent sense of the past, we are able to pass off whatever bullshit wins grants as fact. The people writing the insane and incorrect articles that make up the bulk of this book are the same people who in turn shape the economic and political destinies of continents. This is a shameful book.
September 12, 2023
Very interesting and informative but it took me ages to finish. I always have a difficult time getting through economics books since I have little previous knowledge of the field.
I hope that I am slowly building up some basic knowledge that will provide the scaffolding for me to build up future knowledge of economics more easily.
Sustained economic growth over the last few centuries lifted billions of people out of extreme poverty and brought innovations that make the lives of average people in developed countries better today than those of kings in the past. Accordingly it seems important to learn more about this world changing phenomenon.
I hope that I am slowly building up some basic knowledge that will provide the scaffolding for me to build up future knowledge of economics more easily.
Sustained economic growth over the last few centuries lifted billions of people out of extreme poverty and brought innovations that make the lives of average people in developed countries better today than those of kings in the past. Accordingly it seems important to learn more about this world changing phenomenon.
September 28, 2022
informative but quite boring
May 31, 2022
A concise and readable introduction to the recent Economic History literature on the transition to modern economic growth. On the positive side, this covers a huge amount of ground in terms of theories and debates about the origins of the modern economy, giving space to the major ideas expressed over the past 20 to 30 years in mainstream Economic History. The coverage is first thematic, with chapters on theories of particular aspects such as geography, institutions, culture, demographics, and colonialism, and then regional and chronological, covering how these themes manifested in the concrete history of Europe and eventually other areas as they began the process of development.
The downside here is that to fit such a broad scope into such a short text, the coverage of any particular issue or area is (perhaps somewhat necessarily), shallow, with a brief summary of the idea and the results of many papers without detailed interrogation of the justification for a particular conclusion or strong attempts to place it in the context of a broader framework, so that much of it reads as a big "he said she said" without providing the necessary info to resolve or evaluate the claims. This becomes especially jarring when the authors bring their own assessments about contentious areas of debate in just a few lines. Maybe they're right about many or all of these topics, but the evidence presented is much too narrow to evaluate. A highlight, which made starker what I felt was missing in the rest of the book, was the chapter on demography, which made an effort to present the facts in the context of a simple neo-Malthusian model which allowed putting different forces on a common scale and measuring their relative importance. Admittedly, this is much harder to do with something like "culture", but I would have liked a little bit more in the way of (the now deeply unfashionable) growth theory, not because it resolves any debates, but because an emphasis on the mechanical aspects of the growth process would help sort the many different theories in terms of the forces on which they act, and evaluate which are complementary or competitive. In the absence of this kind of grounding, even well-identified micro studies tell us very little about what matters for the titular question: do the results add up, or are they canceled out by other forces, or are they magnified in some way? A problem with many classes of explanation offered here is that while a contribution to the level of economic output can often easily be discerned, the role in a sustained transition from stagnation to continued growth is much less obvious. So, for example, an institution which incentivizes or suppresses economic activity might look to a microeconomist a lot like a tax or subsidy; but we know that actual tax rates were not strongly predictive of takeoff, or were predictive in the "wrong" direction (this is the puzzle that the state capacity literature has attempted to address). In that case, even if we did have a cleanly identified well-powered study of a particular institution (and in this book there is little explanation of when a study is based on such variation, and given the many extremely noisy bivariate scatter plots with no error bars, one can conclude that even when it is, one should expect a great deal of statistical uncertainty), it might tell us very little about the growth process.
None of this is to detract from the value of the book, which packs a lot into a very small and easy to digest package. As a broad overview of a literature which is not widely known to nonspecialists, it helps to place the individual works within the contours of major research areas and debates. Its best use, I think, would be as a companion to a semester long class in which students could dive into the articles and theories more briefly described, evaluating and debating methods and comparing with models. Had I had this book as a companion to the class in European Economic History that I took in grad school which covered much of the same material (not so surprisingly, as the professor came from the same program as Jared Rubin), it would have helped immensely with the synthesis, and so I think this book deserves a place on the syllabus of any such course.
The downside here is that to fit such a broad scope into such a short text, the coverage of any particular issue or area is (perhaps somewhat necessarily), shallow, with a brief summary of the idea and the results of many papers without detailed interrogation of the justification for a particular conclusion or strong attempts to place it in the context of a broader framework, so that much of it reads as a big "he said she said" without providing the necessary info to resolve or evaluate the claims. This becomes especially jarring when the authors bring their own assessments about contentious areas of debate in just a few lines. Maybe they're right about many or all of these topics, but the evidence presented is much too narrow to evaluate. A highlight, which made starker what I felt was missing in the rest of the book, was the chapter on demography, which made an effort to present the facts in the context of a simple neo-Malthusian model which allowed putting different forces on a common scale and measuring their relative importance. Admittedly, this is much harder to do with something like "culture", but I would have liked a little bit more in the way of (the now deeply unfashionable) growth theory, not because it resolves any debates, but because an emphasis on the mechanical aspects of the growth process would help sort the many different theories in terms of the forces on which they act, and evaluate which are complementary or competitive. In the absence of this kind of grounding, even well-identified micro studies tell us very little about what matters for the titular question: do the results add up, or are they canceled out by other forces, or are they magnified in some way? A problem with many classes of explanation offered here is that while a contribution to the level of economic output can often easily be discerned, the role in a sustained transition from stagnation to continued growth is much less obvious. So, for example, an institution which incentivizes or suppresses economic activity might look to a microeconomist a lot like a tax or subsidy; but we know that actual tax rates were not strongly predictive of takeoff, or were predictive in the "wrong" direction (this is the puzzle that the state capacity literature has attempted to address). In that case, even if we did have a cleanly identified well-powered study of a particular institution (and in this book there is little explanation of when a study is based on such variation, and given the many extremely noisy bivariate scatter plots with no error bars, one can conclude that even when it is, one should expect a great deal of statistical uncertainty), it might tell us very little about the growth process.
None of this is to detract from the value of the book, which packs a lot into a very small and easy to digest package. As a broad overview of a literature which is not widely known to nonspecialists, it helps to place the individual works within the contours of major research areas and debates. Its best use, I think, would be as a companion to a semester long class in which students could dive into the articles and theories more briefly described, evaluating and debating methods and comparing with models. Had I had this book as a companion to the class in European Economic History that I took in grad school which covered much of the same material (not so surprisingly, as the professor came from the same program as Jared Rubin), it would have helped immensely with the synthesis, and so I think this book deserves a place on the syllabus of any such course.
October 18, 2022
Good summary of scholarly texts on theories about what caused sustained economic growth in parts of the world over the past two centuries. Also provides commentary on why some countries developed modern economies earlier than others. Bit of a letdown at the end due to the "it depends" answer for how less developed countries can use these economic history lessons to make improvements. Would have preferred more discussion on the negative impacts of sustained economic growth (e.g. environmental) but the book's scope avoids getting into this discussion and other obvious potential critiques of the GDP-centric idea of growth.
December 17, 2022
Just a rehash
I love this topic and was hoping to get some new insights from this book. I found nothing new or original. The Origin of Wealth is so much more original and powerful. If you’ve read nothing on this subject, maybe this overview will be valuable for you. It was very disappointing for me.
I love this topic and was hoping to get some new insights from this book. I found nothing new or original. The Origin of Wealth is so much more original and powerful. If you’ve read nothing on this subject, maybe this overview will be valuable for you. It was very disappointing for me.
August 14, 2022
This book gives an efficient overview of modern growth economics, with a focus on the economic history of growth. It analyzes the reasons economists have proposed for divergences in growth over time, from geography, to institutions, to culture, to demography, to colonialism, and tries to place them all in a unified framework. Not surprisingly, the result is that everything matters, but some things (institutions) matter much more than others (colonialism, which mainly had negative effects on a few places, and positive effects in a few others.)
As the authors point out, its hard to disentangle some of these explanations. For instance, the ruggedness of African terrain prevented slave raids which led to more trust in those communities that avoided them. Likewise, the division of Europe into competing fiefdoms by clear mountain ranges allowed distinct, competing institutions and states to emerge. They find culture persuasive in many cases as an explanation of growth, especially the culture of Protestantism, but, as they point out, mainly because Protestantism encouraged literacy, and not because of its work ethic (one study showed the Cistercian monks actually were good at encouraging later work ethics, long before Protestantism. They also show that the placement of both Protestant and Jesuit missionaries mattered for encouraging trust in literacy in colonial countries.) They show that demography, such as the European Marriage Pattern first postulated by John Hajnal in 1965, does have a determinative impact in early modern times. They show that population and per capita income did have a reverse relationship back then, and that the EMP, by delaying childbirth (and, especially in the North, where pastoral agriculture grew after the Black Death and led to more female empowerment) led to more investment in human capital.
For anyone looking for an overview of modern economic history, and how it ties into modern theories of economic growth, this book should be your first stop.
As the authors point out, its hard to disentangle some of these explanations. For instance, the ruggedness of African terrain prevented slave raids which led to more trust in those communities that avoided them. Likewise, the division of Europe into competing fiefdoms by clear mountain ranges allowed distinct, competing institutions and states to emerge. They find culture persuasive in many cases as an explanation of growth, especially the culture of Protestantism, but, as they point out, mainly because Protestantism encouraged literacy, and not because of its work ethic (one study showed the Cistercian monks actually were good at encouraging later work ethics, long before Protestantism. They also show that the placement of both Protestant and Jesuit missionaries mattered for encouraging trust in literacy in colonial countries.) They show that demography, such as the European Marriage Pattern first postulated by John Hajnal in 1965, does have a determinative impact in early modern times. They show that population and per capita income did have a reverse relationship back then, and that the EMP, by delaying childbirth (and, especially in the North, where pastoral agriculture grew after the Black Death and led to more female empowerment) led to more investment in human capital.
For anyone looking for an overview of modern economic history, and how it ties into modern theories of economic growth, this book should be your first stop.
August 10, 2023
Really good summary of our current understanding of the economic development of the world. This book is meant to be a meta-analysis of the scientific literature about the topic, and in that way is pretty well balanced. This is a huge topic that they were able to cover quite well. They cover different countries and regions and discuss why they diverged. It is much too complex to cover in a review, but what keeps sticking in my head is state capacity and institutions. State capacity meaning how well the government can accomplish its goals, which is tied to institutions, which encompasses formal and informal rules, regulations and norms, and includes property rights, rule of law, political stability, etc.
August 1, 2022
I am definitly not neutral in this review since the writing process seems to have entailed recording all my strange history questions and trying to answer them.
Yes, this book is very condensed and at some points cut short to the danger of being superficial. And although you get a good impression of the (good) research the authors did, I still fear to mistake causality for congruence in books like this.
But it is entertaining, insightful and will make you see the world with different eyes. I loved every bit of it
Yes, this book is very condensed and at some points cut short to the danger of being superficial. And although you get a good impression of the (good) research the authors did, I still fear to mistake causality for congruence in books like this.
But it is entertaining, insightful and will make you see the world with different eyes. I loved every bit of it
April 17, 2023
Very interesting read for my Political Economy of Development class. The first half of the book lays out different views of what makes a country rich (it is essentially a large literature review, which was very helpful). The second half looks more specifically at issues like why western purpose de veloped first and how that contributed to the world becoming rich. Overall, a solid read that I recommend to anyone interested in the subject.
March 30, 2022
Extremely clear and unbiased summary of all the theories explaining economic differences between countries, including why the West/Northern Europe/England rose.
It reads like a pop science book, with the rigour and depth of a textbook. The best of both worlds !
I have literally read it in one-go.
It reads like a pop science book, with the rigour and depth of a textbook. The best of both worlds !
I have literally read it in one-go.
June 17, 2022
Excellent overview of the literature on economic growth and its benefits.
July 20, 2023
It is hard to have perspective of how the world is now rich compared to any other time in the history of our species. We are used to the doom and gloom of constant negative news, but once in a while it is positive to see the good things in our world.
Two centuries ago, 94% if the world lived on less than $2 a day (in 2016 prices) and 84% lived with less than $1 a day. By 2015, less than 10% of the world lived on less than $1.90 a day and the number continues to decline and as the world becomes richer that number will continue to dwindle. (p 2)
There has been a negative impact on the environment from this change, however it is a mistake to think that we have to choose between the environment and economic growth. The UK saw carbon emission s fall by 38% between 1990 and 2017 while the GDP (adjusted by inflation) grew by 60% (p 5).
Stagnant or declining economies usually have the worst episodes of violence, intolerance, and political polarization. At the same time, social mobility and greater equality of opportunity are much more likely in an economy that is growing. (p 5).
Prior to the 19th century, the wealthiest region in the world never reached more than $4 a day average in 2011 USD. Through most of the history of the world, $2-3 was the norm. (p 6)
The most important cause of economic improvement has been technological change that allowed more people to be fed with less labor. (p 6).
Sustained economic growth is the result of sustained technological innovation. (p 6).
Theories of how the world became rich:
1. Geography
2. Institutions
3. Culture
4. Demographics
5. Colonization/Explotation
1.Geography
Part of the wealth creation goes back to Guns, Germs and Steel's hypothesis, but the book introduces other concepts such as the impact of mountains, coasts and climate.
My favorite part was the impact of geography and transport infrastructure. (The investment in transport infrastructure is part technology and part instutions.). After conquering most of the Mediterranean, the Roman economy experienced a period of economic growth driven by market expansion. Adam Smith observed that the greater the extent of the market, the greater the scope for specialization and division of labor. This suggests that an increase in market size can itself be a source of productivity importantes and economic growth. This type of growth is called Smithian. Overtime, Smithian growth encourages capital investments. Individuals invest in longer and more complex production processes. This investment, in turn, increases the productivity of labour and returns to trade thereby setting in motion a virtuous cycle of economic development. Favorable geography or improvements in infrastructure can be sources of Smithing growth. In the case of the Romans, investing in transport infrastructure supported economic growth as transportation costs decreased. (p 28-29).
Not surprisingly, the road network developed by the Romans outlived the Empire and was associated with trade in Europe up until the invention of the steam engine.
Similar to the impact of Roman roads, China benefited but the construction of water ways that connected the Yang to the Yellow River where the largest portion of the population of the world still lives to this date (p 28).
2. Institutions
The book points out that "the relative impartiality of courts, in turn, encourages economic activity (p 37) and that "where autocrats rule, violence follows".
North and Thomas (1973) suggest that individuals may have incentives to build factories and invest, to go to school, and to acquire new skills. These incentives is what they call institutions. The lack of this incentives would result in individuals taking other decisions that may not result in economic growth.
In 1981 North realized that institutions don't evolve overtime as many of these incentives may have a political interest different than the marketplace. Further authors (Grief) suggest that institutions are not only the rules of the game, but also comprise beliefs and social norms that uphold rules. Beliefs and social norms, like institutions, can be hard to change. (p 38)
One key component of institutions is the degree to which they permit economic freedom. The more economic freedom a society has, the more individuals are free to allocate their resources as they see fit. Economic freedom is closely associate with there of law. When a society follow short rule of law, laws are applied equally and all typer so rights are protected. (p 39)
Another type of institutions are those that define property rights. Property rights are defined as an owner's right to use a good or asset to transfer it, or to contract on the basis of it. Secure property rights ensure that individuals earn a return of their investment. (p 41)
Societies that have a strong rule of law tend to be richer. What is it about the rule of law that leads to positive economic outcomes? 1) the concept of legal equality -that all individuals from the ruler downwards are equally subject to the law; 2) that laws should be protective, open and celar; 3) that laws should be stable over time; 4) that the making of laws should be open and guided by impersonal rules; 5) that the judiciary should be politically independent; 6) that legal institutions such as courts should be accessible to all; and 7) that rules should be general and apply uniformly. (p 45)
Political institutions shape how we act. The state generally has something close to a monopoly on violence. It can therefore use force - or the threat of it- to incentivize people to act in certain ways. (p 47)
Unfortunately, institutions can also be a source of lasting poverty. In societies where the political system is in the hands of a narrow elite, this elite can use their power to construct economic institutions that benefit themselves but impoverish the rest of society. Those who control political institutions can use them to increase their control of economic resources, thereby increasing their political power. Economic institutions are a funciona of political institutions. (p 49)
Among the most important changes in European political institutions in the build up to the Industrial Revolution was the rise of limite government. The Middle Ages saw the rise of parliaments which is a system of political assemblies that had the ability to limit the power of the sovereign (p 56). Parliaments limited the arbitrary power of rulers, but by constraining the arbitrary power of the m monarch, parliaments also strengthen rulers by giving them credibility. (p 60)
3. Culture
I am really interested in learning more about how the impact of culture in the business or economic results. The book explains that cultural beliefs can affect how institutions funciona.
One interesting area to understand the impact of culture is on wealth accumulation in Europe. The Greeks and Romas work was a the lowest valued pursuit. Wealth was only valued because it brought freedom and permitted reassure. In the past, the middle classes had little prestige. The end goal was to own land estate and live off of its returns.
A society with these values is unlikely to have sustained economic growth. In order to get to sustained economic growth the economy needs to replay on technological innovation. Technological innovation required detailed knowledge. Any society that looks down on hard work will struggle to have a robust class of innovators. Societies that disparage finance will not be able to finance entrepreneurs by providing them with investment capital.
It was not until a change started in the Netherlands in the 17-18th centuries, and then in England that the pursuit of profit became lauded, not demised by society. Rising in the economic ladder used to help buy a noble title and live off the land. The Dutch were the first to have those on top of the economic ladder at the top of social prestige. Cultural changes encouraged the best and brightest to engage in productive pursues.
Building on the idea of the weight of culture in the performance of the economy, the authors delve in the Needham puzzle. For the last two millennia, China was the leader of technology and science but became a laggard on these fronts by the 19th century.
Part of the explanation of this phenomena is the impact of culture in China and Europe. In China, culture failed to acknowledge the economic potential of its scientific expertise involved in the larger values of society (p 70).
There are several other areas that the authors explore regarding culture. One is religion and the other one is trust. As a trained economist I believed that the protestant ethic was better adapted in supporting a society that worked well in a free market economy and democratic regime. For my surprise, the book shows with academic support that this is not the reason. The real reason is that countries with a Protestant faith lost contact with the Catholic Church that historically had given credibility and validation to the Monarchs. The Protestant Church was below the monarch thus loosing the capacity of providing an independent legitimacy to the monarch. This is why in protestant countries parliaments started gaining power and were the ones that limited the monarch and brought validity and legitimacy to the king/queen. Catholic Spain lagged behind in the same centuries when the Netherlands and England became wealthier, despinte the massive inflow of silver and gold from its colonies.
Another cultural difference between protestants and catholics is that the Bible was printed in Dutch and German by the Protestants while Catholics only published it Latin, a language for the elites. By publishing the Bible in local languages, Protestants believers were interested first in becoming literate, which eventually caused higher degrees of education among the population.
The last two aspects of culture have to do with trust and its impact on the evolution of society as well as the bias toward women in the work force due to the use of plow agriculture that started in the Neolithic.
Sadly I lost a large part of my review of this book.
I will now only focus on Chapter 8 as I believe it to be the most relevant work of the book.
The industrial revolution started in the late 17th Century in Britain. It became a revolution as things changed as the rate of the economic growth became sustained thereafter. This is strictly linked to the rat of innovation needed to continuously grow the economy.
Before the Industrial Revolution there was a Consumer Revolution. Cities grew, wages gres, agriculture improved, and manufacturing spread across Britain. There was a movement away from within household production and consumption to a market oriented one.
Retail shops emerged which focused in ready made textiles ready for use. Households became more active participants in the market ecnomy and were willing to work harder to earn the wags to buy all of the new affordable goods. The willingness to work was a precondition for the rise of the factory system.
Chapter 9 talks about two phases of the Industrial Revolution. The one from 1750 to 1830 were most of the breakthroughs in textile producing were mechanization of previously known methods. The second phase starting in the 1870s had major technological advances built have been built on the scientific knowledge base of hominy and has accelerated the rate of technological change electricity, cheaper steel, automobiles, airplanes, medicine...).
Two centuries ago, 94% if the world lived on less than $2 a day (in 2016 prices) and 84% lived with less than $1 a day. By 2015, less than 10% of the world lived on less than $1.90 a day and the number continues to decline and as the world becomes richer that number will continue to dwindle. (p 2)
There has been a negative impact on the environment from this change, however it is a mistake to think that we have to choose between the environment and economic growth. The UK saw carbon emission s fall by 38% between 1990 and 2017 while the GDP (adjusted by inflation) grew by 60% (p 5).
Stagnant or declining economies usually have the worst episodes of violence, intolerance, and political polarization. At the same time, social mobility and greater equality of opportunity are much more likely in an economy that is growing. (p 5).
Prior to the 19th century, the wealthiest region in the world never reached more than $4 a day average in 2011 USD. Through most of the history of the world, $2-3 was the norm. (p 6)
The most important cause of economic improvement has been technological change that allowed more people to be fed with less labor. (p 6).
Sustained economic growth is the result of sustained technological innovation. (p 6).
Theories of how the world became rich:
1. Geography
2. Institutions
3. Culture
4. Demographics
5. Colonization/Explotation
1.Geography
Part of the wealth creation goes back to Guns, Germs and Steel's hypothesis, but the book introduces other concepts such as the impact of mountains, coasts and climate.
My favorite part was the impact of geography and transport infrastructure. (The investment in transport infrastructure is part technology and part instutions.). After conquering most of the Mediterranean, the Roman economy experienced a period of economic growth driven by market expansion. Adam Smith observed that the greater the extent of the market, the greater the scope for specialization and division of labor. This suggests that an increase in market size can itself be a source of productivity importantes and economic growth. This type of growth is called Smithian. Overtime, Smithian growth encourages capital investments. Individuals invest in longer and more complex production processes. This investment, in turn, increases the productivity of labour and returns to trade thereby setting in motion a virtuous cycle of economic development. Favorable geography or improvements in infrastructure can be sources of Smithing growth. In the case of the Romans, investing in transport infrastructure supported economic growth as transportation costs decreased. (p 28-29).
Not surprisingly, the road network developed by the Romans outlived the Empire and was associated with trade in Europe up until the invention of the steam engine.
Similar to the impact of Roman roads, China benefited but the construction of water ways that connected the Yang to the Yellow River where the largest portion of the population of the world still lives to this date (p 28).
2. Institutions
The book points out that "the relative impartiality of courts, in turn, encourages economic activity (p 37) and that "where autocrats rule, violence follows".
North and Thomas (1973) suggest that individuals may have incentives to build factories and invest, to go to school, and to acquire new skills. These incentives is what they call institutions. The lack of this incentives would result in individuals taking other decisions that may not result in economic growth.
In 1981 North realized that institutions don't evolve overtime as many of these incentives may have a political interest different than the marketplace. Further authors (Grief) suggest that institutions are not only the rules of the game, but also comprise beliefs and social norms that uphold rules. Beliefs and social norms, like institutions, can be hard to change. (p 38)
One key component of institutions is the degree to which they permit economic freedom. The more economic freedom a society has, the more individuals are free to allocate their resources as they see fit. Economic freedom is closely associate with there of law. When a society follow short rule of law, laws are applied equally and all typer so rights are protected. (p 39)
Another type of institutions are those that define property rights. Property rights are defined as an owner's right to use a good or asset to transfer it, or to contract on the basis of it. Secure property rights ensure that individuals earn a return of their investment. (p 41)
Societies that have a strong rule of law tend to be richer. What is it about the rule of law that leads to positive economic outcomes? 1) the concept of legal equality -that all individuals from the ruler downwards are equally subject to the law; 2) that laws should be protective, open and celar; 3) that laws should be stable over time; 4) that the making of laws should be open and guided by impersonal rules; 5) that the judiciary should be politically independent; 6) that legal institutions such as courts should be accessible to all; and 7) that rules should be general and apply uniformly. (p 45)
Political institutions shape how we act. The state generally has something close to a monopoly on violence. It can therefore use force - or the threat of it- to incentivize people to act in certain ways. (p 47)
Unfortunately, institutions can also be a source of lasting poverty. In societies where the political system is in the hands of a narrow elite, this elite can use their power to construct economic institutions that benefit themselves but impoverish the rest of society. Those who control political institutions can use them to increase their control of economic resources, thereby increasing their political power. Economic institutions are a funciona of political institutions. (p 49)
Among the most important changes in European political institutions in the build up to the Industrial Revolution was the rise of limite government. The Middle Ages saw the rise of parliaments which is a system of political assemblies that had the ability to limit the power of the sovereign (p 56). Parliaments limited the arbitrary power of rulers, but by constraining the arbitrary power of the m monarch, parliaments also strengthen rulers by giving them credibility. (p 60)
3. Culture
I am really interested in learning more about how the impact of culture in the business or economic results. The book explains that cultural beliefs can affect how institutions funciona.
One interesting area to understand the impact of culture is on wealth accumulation in Europe. The Greeks and Romas work was a the lowest valued pursuit. Wealth was only valued because it brought freedom and permitted reassure. In the past, the middle classes had little prestige. The end goal was to own land estate and live off of its returns.
A society with these values is unlikely to have sustained economic growth. In order to get to sustained economic growth the economy needs to replay on technological innovation. Technological innovation required detailed knowledge. Any society that looks down on hard work will struggle to have a robust class of innovators. Societies that disparage finance will not be able to finance entrepreneurs by providing them with investment capital.
It was not until a change started in the Netherlands in the 17-18th centuries, and then in England that the pursuit of profit became lauded, not demised by society. Rising in the economic ladder used to help buy a noble title and live off the land. The Dutch were the first to have those on top of the economic ladder at the top of social prestige. Cultural changes encouraged the best and brightest to engage in productive pursues.
Building on the idea of the weight of culture in the performance of the economy, the authors delve in the Needham puzzle. For the last two millennia, China was the leader of technology and science but became a laggard on these fronts by the 19th century.
Part of the explanation of this phenomena is the impact of culture in China and Europe. In China, culture failed to acknowledge the economic potential of its scientific expertise involved in the larger values of society (p 70).
There are several other areas that the authors explore regarding culture. One is religion and the other one is trust. As a trained economist I believed that the protestant ethic was better adapted in supporting a society that worked well in a free market economy and democratic regime. For my surprise, the book shows with academic support that this is not the reason. The real reason is that countries with a Protestant faith lost contact with the Catholic Church that historically had given credibility and validation to the Monarchs. The Protestant Church was below the monarch thus loosing the capacity of providing an independent legitimacy to the monarch. This is why in protestant countries parliaments started gaining power and were the ones that limited the monarch and brought validity and legitimacy to the king/queen. Catholic Spain lagged behind in the same centuries when the Netherlands and England became wealthier, despinte the massive inflow of silver and gold from its colonies.
Another cultural difference between protestants and catholics is that the Bible was printed in Dutch and German by the Protestants while Catholics only published it Latin, a language for the elites. By publishing the Bible in local languages, Protestants believers were interested first in becoming literate, which eventually caused higher degrees of education among the population.
The last two aspects of culture have to do with trust and its impact on the evolution of society as well as the bias toward women in the work force due to the use of plow agriculture that started in the Neolithic.
Sadly I lost a large part of my review of this book.
I will now only focus on Chapter 8 as I believe it to be the most relevant work of the book.
The industrial revolution started in the late 17th Century in Britain. It became a revolution as things changed as the rate of the economic growth became sustained thereafter. This is strictly linked to the rat of innovation needed to continuously grow the economy.
Before the Industrial Revolution there was a Consumer Revolution. Cities grew, wages gres, agriculture improved, and manufacturing spread across Britain. There was a movement away from within household production and consumption to a market oriented one.
Retail shops emerged which focused in ready made textiles ready for use. Households became more active participants in the market ecnomy and were willing to work harder to earn the wags to buy all of the new affordable goods. The willingness to work was a precondition for the rise of the factory system.
Chapter 9 talks about two phases of the Industrial Revolution. The one from 1750 to 1830 were most of the breakthroughs in textile producing were mechanization of previously known methods. The second phase starting in the 1870s had major technological advances built have been built on the scientific knowledge base of hominy and has accelerated the rate of technological change electricity, cheaper steel, automobiles, airplanes, medicine...).
June 15, 2023
This is a well-written review of why different countries have different wealth, i.e. mostly about the industrial revolution.
The authors predominantly adopt an economist's perspective, and somewhat neglect the perspective of historians, but manage to fairly present most major viewpoints.
To organize the hypotheses, the authors classify them into five categories, which I will now discuss in order of decreasing importance, based on my own assessment (which likely differs from the authors' ranking).
Culture
The book's examination of culture draws heavily from The WEIRDest People in the World. I wrote enough in my review of that book that I don't want to say much more here.
It has long been clear that some cultures are more successful than others at accumulating wealth. The authors speculate that scholars were averse to treating cultural differences as a main cause of wealth differences due to the prominence of claims that those differences implied that richer cultures were superior in a general way to poorer cultures. However, scholar over the last 25 years have embraced cultural explanations that emphasize tradeoffs and differing priorities among cultures. My oversimplified summary: the West got rich at the cost of an epidemic of loneliness.
For example, a notable difference between Islam and Christianity is apparent in their inheritance rules. Under Islam, partnerships are broken up when a partner dies. That prevents partnerships from becoming large businesses. This is a clear example of Islam choosing egalitarian policies over wealth-producing policies.
Institutions
The book presents a fair amount of evidence that wealth creation is greatly aided by good institutions such as the rule of law, property rights, and democracy. This is combined with the usual point that such institutions are often opposed by people whose narrower interests conflict with the goal of making the world rich (often referred to as corruption).
As with my review of Why Nations Fail, China seems to not quite fit this book's analysis. That suggests a moderate Western bias in evaluating the specifics of what institutional features matter.
I'm mostly inclined to classify good institutions as being a consequence of wealth-friendly cultures. However, the book partly justifies treating institutions as having an independent causal influence, by providing some discussion of how geographically diverse merchants developed high-trust agreements within a not-very-trusting society. The examples involve Maghribi traders around the 11th century, and, later, guilds generating high-trust agreements between distant merchants.
Geography
The authors present a wide variety of ideas as to how luck related to geography might have favored some regions over others: malaria, Jared Diamond's claim about large east-west trading regions beating north-south trading regions, climate, access to rivers and coasts, and proximity to cheap coal.
Proximity to a large region of steppe may have had harmful political effects on China and eastern Europe, via the effects of nomad invasions.
It seems likely that several of these were moderately important. It's hard to quantify that importance.
Demographics
The industrial revolution started where wages were high. That seems unlikely to be an accident. Early versions of the steam engine were only competitive where labor was expensive. So it seems unlikely that the industrial revolution could have started in a region that was close to the Malthusian limit.
The Black Death seems partly able to explain high wages around 1400. But the default result would have been enough population growth to produce cheap wages well before the the 18th century, which is when high wages seemed to trigger innovations such as the steam engine.
One explanation involves the Black Death triggering the end of serfdom in western Europe, but not elsewhere. Acemoglu and Wolitzky (2011) tie this to the presence of more big cities in the west, which gave workers better options for leaving a manor than was the case in the east.
An alternate explanation is that the European Marriage Pattern restrained population growth, possibly enough to keep Europe away from the Malthusian limit for centuries. Dennison and Ogilvie (2014) (ungated version) dispute this.
I'm left confused as to whether demographics were an important cause of high wages.
Colonizing
There seems to be a widespread belief among laymen that the West got rich by exploiting weaker nations.
This book suggests that a large number of experts say those effects were too small to explain much of the West's wealth.
There's a much clearer consensus that colonization and exploitation kept some countries poor.
The slave trade caused serious, lasting harm to the cultures from which slaves were taken, presumably due to destroying trust between neighboring tribes.
The effects seem quite mixed on regions where Europeans actually settled. Railroads increased wealth through increased trade. Missionaries made some regions more literate, resulting in more democracy.
Mines that employed forced labor before 1812 left surrounding areas poorer and less healthy today. Corruption and poverty today are worse in regions where colonial boundaries were drawn by Europeans who had little familiarity with local politics.
Concluding Thoughts
There are many, partially conflicting, guesses as to how the world became much richer than it was a thousand years ago, and not enough evidence to conclusively reject many of those guesses.
My rough estimates of the importance of each of the book's causal categories: 75% culture, 40% institutions, 15% geography, 5% demographics, 1% exploitation, 4% some other categories that we're neglecting. (These add to more than 100% since institutional causes are almost entirely a consequence of cultural causes.)
The authors predominantly adopt an economist's perspective, and somewhat neglect the perspective of historians, but manage to fairly present most major viewpoints.
To organize the hypotheses, the authors classify them into five categories, which I will now discuss in order of decreasing importance, based on my own assessment (which likely differs from the authors' ranking).
Culture
The book's examination of culture draws heavily from The WEIRDest People in the World. I wrote enough in my review of that book that I don't want to say much more here.
It has long been clear that some cultures are more successful than others at accumulating wealth. The authors speculate that scholars were averse to treating cultural differences as a main cause of wealth differences due to the prominence of claims that those differences implied that richer cultures were superior in a general way to poorer cultures. However, scholar over the last 25 years have embraced cultural explanations that emphasize tradeoffs and differing priorities among cultures. My oversimplified summary: the West got rich at the cost of an epidemic of loneliness.
For example, a notable difference between Islam and Christianity is apparent in their inheritance rules. Under Islam, partnerships are broken up when a partner dies. That prevents partnerships from becoming large businesses. This is a clear example of Islam choosing egalitarian policies over wealth-producing policies.
Institutions
The book presents a fair amount of evidence that wealth creation is greatly aided by good institutions such as the rule of law, property rights, and democracy. This is combined with the usual point that such institutions are often opposed by people whose narrower interests conflict with the goal of making the world rich (often referred to as corruption).
As with my review of Why Nations Fail, China seems to not quite fit this book's analysis. That suggests a moderate Western bias in evaluating the specifics of what institutional features matter.
I'm mostly inclined to classify good institutions as being a consequence of wealth-friendly cultures. However, the book partly justifies treating institutions as having an independent causal influence, by providing some discussion of how geographically diverse merchants developed high-trust agreements within a not-very-trusting society. The examples involve Maghribi traders around the 11th century, and, later, guilds generating high-trust agreements between distant merchants.
Geography
The authors present a wide variety of ideas as to how luck related to geography might have favored some regions over others: malaria, Jared Diamond's claim about large east-west trading regions beating north-south trading regions, climate, access to rivers and coasts, and proximity to cheap coal.
Proximity to a large region of steppe may have had harmful political effects on China and eastern Europe, via the effects of nomad invasions.
It seems likely that several of these were moderately important. It's hard to quantify that importance.
Demographics
The industrial revolution started where wages were high. That seems unlikely to be an accident. Early versions of the steam engine were only competitive where labor was expensive. So it seems unlikely that the industrial revolution could have started in a region that was close to the Malthusian limit.
The Black Death seems partly able to explain high wages around 1400. But the default result would have been enough population growth to produce cheap wages well before the the 18th century, which is when high wages seemed to trigger innovations such as the steam engine.
One explanation involves the Black Death triggering the end of serfdom in western Europe, but not elsewhere. Acemoglu and Wolitzky (2011) tie this to the presence of more big cities in the west, which gave workers better options for leaving a manor than was the case in the east.
An alternate explanation is that the European Marriage Pattern restrained population growth, possibly enough to keep Europe away from the Malthusian limit for centuries. Dennison and Ogilvie (2014) (ungated version) dispute this.
I'm left confused as to whether demographics were an important cause of high wages.
Colonizing
There seems to be a widespread belief among laymen that the West got rich by exploiting weaker nations.
This book suggests that a large number of experts say those effects were too small to explain much of the West's wealth.
There's a much clearer consensus that colonization and exploitation kept some countries poor.
The slave trade caused serious, lasting harm to the cultures from which slaves were taken, presumably due to destroying trust between neighboring tribes.
The effects seem quite mixed on regions where Europeans actually settled. Railroads increased wealth through increased trade. Missionaries made some regions more literate, resulting in more democracy.
Mines that employed forced labor before 1812 left surrounding areas poorer and less healthy today. Corruption and poverty today are worse in regions where colonial boundaries were drawn by Europeans who had little familiarity with local politics.
Concluding Thoughts
There are many, partially conflicting, guesses as to how the world became much richer than it was a thousand years ago, and not enough evidence to conclusively reject many of those guesses.
My rough estimates of the importance of each of the book's causal categories: 75% culture, 40% institutions, 15% geography, 5% demographics, 1% exploitation, 4% some other categories that we're neglecting. (These add to more than 100% since institutional causes are almost entirely a consequence of cultural causes.)
May 2, 2023
I wish this had been titled How Economists Think the World Became Rich. According to the authors,
This is probably true, and my high regard for the book is predicated on viewing it more as a literature review than a volume that offers satisfying causal explanations of “the origins of modern, sustained growth.” There’s quite a lot of labored, labyrinth reasoning that leaves questions of consequence versus cause and proximate versus ultimate causality unresolved, and readers are likely to find themselves periodically channeling their inner Harry Truman in longing for one-armed economists (paraphrasing: “education levels increased rates of technology diffusion but technological progress also increased returns to investment in education”). Furthermore, much real estate is devoted to examining phenomena that, strictly speaking, are largely irrelevant to questions of sustained growth: unsustained, premodern growth is, by definition, categorically different from sustained, modern growth, and yet much discussion is devoted to it, and “catch-up” growth (i.e., convergence) is categorically different from growth at the technological frontier, and yet much discussion is devoted to it.
But the book doesn’t claim to offer conclusive theoretical explanations and does bill itself as a survey, so I guess it gets a pass on these fronts.
My biggest gripe with the work, though, is that it dances around and ultimately doesn’t articulate my preferred hypothesis for the cause of modern growth: liberalism—the idea that individuals should be free. I found this odd because Koyama and Rubin cite one of this explanation’s leading proponents, Deirdre McCloskey, quite a bit. From her Leave Me Alone and I’ll Make You Rich :
Koyama and Rubin are explicit that “sustained innovation is the key to unlocking the modern economy,” but their actual discussion of how specific advances in science, engineering, and technology (i.e., technical innovation) have been translated into the expansion of production is meager to a degree that it almost seems like lip service. Lost in most economists’ discussion of GDP growth, I feel, is an appreciation that GDP isn’t a homogeneous blob that mechanistically expands or contracts in response to extraneous factors, it’s the market value of heterogeneous goods and services. If you want it to go up indefinitely, you need new goods and services—innovation, literally.
An appreciation of the centrality of technical innovation is needed to appreciate the claim of liberalism causing growth because if one appreciates technical innovation, one is led to ask what sort of social milieus foster it. The answer is liberal ones. Why? Because liberal comes from the Latin liber, meaning free, and an area of social life (not just politics) can be considered liberal if individuals are free to pursue their interests and express themselves without interference from religious authorities, governments, or other people. If one understands that technical innovation demands that individuals come up with new theories, techniques, and products, one sees how sustained (emphasis) innovation is only possible in the absence of said interference.
Thus, the mechanism for liberalism causing growth is pretty simple:
Koyama and Rubin concern themselves with questions of the where and when of sustained growth, and as far as I can tell invoking liberalism as its principal catalyst is not only consistent with geography and history, but it also subsumes many cultural and institutional arguments: The scientific revolution transpired in the West in the 16th and 17th centuries, the Enlightenment in the long 18th. Liberal-democratic sociopolitical values began to take root there by the 19th century, and sustained growth commenced shortly thereafter. I look at figures like the one reproduced from the book below and simply don’t see what the big mystery is: the world has become richer because the world has become freer.
If it were not for our book, a reader who wants to get an idea of the current state of the literature would have to read countless books and articles, each putting forth their own hypotheses.
This is probably true, and my high regard for the book is predicated on viewing it more as a literature review than a volume that offers satisfying causal explanations of “the origins of modern, sustained growth.” There’s quite a lot of labored, labyrinth reasoning that leaves questions of consequence versus cause and proximate versus ultimate causality unresolved, and readers are likely to find themselves periodically channeling their inner Harry Truman in longing for one-armed economists (paraphrasing: “education levels increased rates of technology diffusion but technological progress also increased returns to investment in education”). Furthermore, much real estate is devoted to examining phenomena that, strictly speaking, are largely irrelevant to questions of sustained growth: unsustained, premodern growth is, by definition, categorically different from sustained, modern growth, and yet much discussion is devoted to it, and “catch-up” growth (i.e., convergence) is categorically different from growth at the technological frontier, and yet much discussion is devoted to it.
But the book doesn’t claim to offer conclusive theoretical explanations and does bill itself as a survey, so I guess it gets a pass on these fronts.
My biggest gripe with the work, though, is that it dances around and ultimately doesn’t articulate my preferred hypothesis for the cause of modern growth: liberalism—the idea that individuals should be free. I found this odd because Koyama and Rubin cite one of this explanation’s leading proponents, Deirdre McCloskey, quite a bit. From her Leave Me Alone and I’ll Make You Rich :
The theme of our book is…that human liberty—and not the machinery of coercion or investment, or even science by itself— is what made for a Great Enrichment, from 1800 to the present. The Enrichment was really, really “great”: three thousand percent per person. Liberated people devising new technologies and institutions did an amazing job from 1800 to the present and will keep doing it. Liberty will make the Enrichment worldwide…The Enrichment wasn’t achieved by governmental coercion, which is usually counterproductive— except maybe in plagues and invasions. Nor was it achieved by science unassisted, or the exploitation of slaves, or the routine accumulation of capital, or a profound dialectic of history, or a deep specialness of Europeans. It was achieved by liberty alone, a necessary and pretty much sufficient cause, which came tentatively to northwestern Europe in the eighteenth century.
Koyama and Rubin are explicit that “sustained innovation is the key to unlocking the modern economy,” but their actual discussion of how specific advances in science, engineering, and technology (i.e., technical innovation) have been translated into the expansion of production is meager to a degree that it almost seems like lip service. Lost in most economists’ discussion of GDP growth, I feel, is an appreciation that GDP isn’t a homogeneous blob that mechanistically expands or contracts in response to extraneous factors, it’s the market value of heterogeneous goods and services. If you want it to go up indefinitely, you need new goods and services—innovation, literally.
An appreciation of the centrality of technical innovation is needed to appreciate the claim of liberalism causing growth because if one appreciates technical innovation, one is led to ask what sort of social milieus foster it. The answer is liberal ones. Why? Because liberal comes from the Latin liber, meaning free, and an area of social life (not just politics) can be considered liberal if individuals are free to pursue their interests and express themselves without interference from religious authorities, governments, or other people. If one understands that technical innovation demands that individuals come up with new theories, techniques, and products, one sees how sustained (emphasis) innovation is only possible in the absence of said interference.
Thus, the mechanism for liberalism causing growth is pretty simple:
Liberalism causes sustained growth because it fosters sustained technical innovation and sustained technical innovation is a necessary condition for sustained growth.
Koyama and Rubin concern themselves with questions of the where and when of sustained growth, and as far as I can tell invoking liberalism as its principal catalyst is not only consistent with geography and history, but it also subsumes many cultural and institutional arguments: The scientific revolution transpired in the West in the 16th and 17th centuries, the Enlightenment in the long 18th. Liberal-democratic sociopolitical values began to take root there by the 19th century, and sustained growth commenced shortly thereafter. I look at figures like the one reproduced from the book below and simply don’t see what the big mystery is: the world has become richer because the world has become freer.
January 19, 2024
I've always been curious about what makes countries wealthy and how economies grow. That's why I was excited to read 'How the World Became Rich' by Mark Koyama and Jared Rubin. This book isn't just a bunch of dates and events; it really dives deep into why our world's economy is the way it is today.
The authors, Koyama and Rubin, have a great way of explaining things. They make it easy to understand and really interesting, too. They don't just list what happened; they connect everything together, like how different cultures and places have played a part in economic changes.
What struck me most about 'How the World Became Rich' is the authors' ability to weave a captivating narrative from what could easily have been a dry topic. Koyama and Rubin delve into the myriad factors that contribute to a country's economic prosperity, exploring not just the obvious elements like technology and trade but also the less tangible ones like cultural norms and political institutions.
One of the book's key strengths is its global perspective. While many economic histories focus predominantly on Western developments, Koyama and Rubin ensure that their narrative is truly worldwide. They take us on a journey from the ancient civilizations of Mesopotamia and China to the modern economies of Japan and the United States, showing how each culture's unique contributions have shaped the global economic landscape.
Moreover, the book doesn't shy away from complex topics like the Industrial Revolution or the rise of capitalism. Instead, it tackles them head-on, breaking down intricate economic theories and historical events into digestible pieces. This approach makes 'How the World Became Rich' not just informative, but also highly accessible to readers who might not have a background in economics or history.
Another commendable aspect is how Koyama and Rubin incorporate recent research and debates into their narrative. They don't present the history of economic growth as a settled matter but as a field that is constantly evolving with new insights and perspectives. This makes the book not just a historical account but a living discussion about how our understanding of economic growth continues to develop.
In a world where economic theories and practices are rapidly evolving and often debated at high-profile platforms like the World Economic Forum, as recently seen with Javier Milei's passionate advocacy for free enterprise capitalism at Davos, 'How the World Became Rich' offers a timely and crucial perspective. It helps contextualize these current debates within a broader historical framework, providing invaluable insights into the diverse factors shaping our global economy.
In conclusion, 'How the World Became Rich' is a must-read for anyone interested in understanding the complex tapestry of global economics. It’s a book that challenges and enlightens, offering a fresh perspective on the forces that have shaped our world. Koyama and Rubin have crafted an engaging, insightful, and highly educational work that stands out in the genre of economic history."
The authors, Koyama and Rubin, have a great way of explaining things. They make it easy to understand and really interesting, too. They don't just list what happened; they connect everything together, like how different cultures and places have played a part in economic changes.
What struck me most about 'How the World Became Rich' is the authors' ability to weave a captivating narrative from what could easily have been a dry topic. Koyama and Rubin delve into the myriad factors that contribute to a country's economic prosperity, exploring not just the obvious elements like technology and trade but also the less tangible ones like cultural norms and political institutions.
One of the book's key strengths is its global perspective. While many economic histories focus predominantly on Western developments, Koyama and Rubin ensure that their narrative is truly worldwide. They take us on a journey from the ancient civilizations of Mesopotamia and China to the modern economies of Japan and the United States, showing how each culture's unique contributions have shaped the global economic landscape.
Moreover, the book doesn't shy away from complex topics like the Industrial Revolution or the rise of capitalism. Instead, it tackles them head-on, breaking down intricate economic theories and historical events into digestible pieces. This approach makes 'How the World Became Rich' not just informative, but also highly accessible to readers who might not have a background in economics or history.
Another commendable aspect is how Koyama and Rubin incorporate recent research and debates into their narrative. They don't present the history of economic growth as a settled matter but as a field that is constantly evolving with new insights and perspectives. This makes the book not just a historical account but a living discussion about how our understanding of economic growth continues to develop.
In a world where economic theories and practices are rapidly evolving and often debated at high-profile platforms like the World Economic Forum, as recently seen with Javier Milei's passionate advocacy for free enterprise capitalism at Davos, 'How the World Became Rich' offers a timely and crucial perspective. It helps contextualize these current debates within a broader historical framework, providing invaluable insights into the diverse factors shaping our global economy.
In conclusion, 'How the World Became Rich' is a must-read for anyone interested in understanding the complex tapestry of global economics. It’s a book that challenges and enlightens, offering a fresh perspective on the forces that have shaped our world. Koyama and Rubin have crafted an engaging, insightful, and highly educational work that stands out in the genre of economic history."
November 6, 2022
How the World Became Rich provides an excellent and much needed overview of where the current literature is at as regards to the origins of economic growth. It packs a lot of accessibly written information and gives ample incentive to further study whatever one interests the most.
However, despite being upfront about their biases the authors seem very unwilling to actually examine them. They see markets as a natural phenomenon, which means they do not analyze capitalism as a system. But this is acceptable and does not mar their argumentation too much. Other important questions and problems are either barely addressed or not addressed at all which do pose a problem.
The authors never give a solid defense for using GDP as a measure, despite its many obvious flaws on whether it really captures the well-being of a population.
The authors claim that modern sustained economic growth lifted many out of extreme poverty. However, they provide slim evidence for this claim, mainly relying on the oft criticized $1.90 measure of the World Bank. In how far people benefited from goods provided outside of the market (e.g. subsistence agriculture or benefits from the commons) stays an open question.
As an afterthought the authors mention the negative effects of sustained economic growth. But if economic growth brings with it the current climate catastrophe (to which their answer in the conclusion is just a wishful thinking that innovation will solve it somehow), the biodiversity catastrophe and massive amounts of pollution leading to possible civilizational collapse, in how far can one call the growth that started with the Industrial Revolution "sustained" (or even permanent as they call it on one page)? The authors also mention the often debunked decoupling phenomenon.
To expand on these points, even a brief examination of alternative views on growth such as steady-state economics or the degrowth movement would have led to a better informed book.
The biggest limitation however is the conspicuous absence of the role of fossil fuels (save for one tangentially related page on coal) in helping economic growth stay sustained. Would the world still have grown "rich" without the high energy return on energy invested (EROI) of fossil fuels? The authors remain silent on this question unfortunately. This is either a massive oversight on their part or a sign that the current economic literature is majorly deficient.
However, despite being upfront about their biases the authors seem very unwilling to actually examine them. They see markets as a natural phenomenon, which means they do not analyze capitalism as a system. But this is acceptable and does not mar their argumentation too much. Other important questions and problems are either barely addressed or not addressed at all which do pose a problem.
The authors never give a solid defense for using GDP as a measure, despite its many obvious flaws on whether it really captures the well-being of a population.
The authors claim that modern sustained economic growth lifted many out of extreme poverty. However, they provide slim evidence for this claim, mainly relying on the oft criticized $1.90 measure of the World Bank. In how far people benefited from goods provided outside of the market (e.g. subsistence agriculture or benefits from the commons) stays an open question.
As an afterthought the authors mention the negative effects of sustained economic growth. But if economic growth brings with it the current climate catastrophe (to which their answer in the conclusion is just a wishful thinking that innovation will solve it somehow), the biodiversity catastrophe and massive amounts of pollution leading to possible civilizational collapse, in how far can one call the growth that started with the Industrial Revolution "sustained" (or even permanent as they call it on one page)? The authors also mention the often debunked decoupling phenomenon.
To expand on these points, even a brief examination of alternative views on growth such as steady-state economics or the degrowth movement would have led to a better informed book.
The biggest limitation however is the conspicuous absence of the role of fossil fuels (save for one tangentially related page on coal) in helping economic growth stay sustained. Would the world still have grown "rich" without the high energy return on energy invested (EROI) of fossil fuels? The authors remain silent on this question unfortunately. This is either a massive oversight on their part or a sign that the current economic literature is majorly deficient.
December 30, 2023
It has been quite a long while since I read a work on economic theory, and so to correct this I checked out Mark Koyama’s ‘How the World Became Rich: The Historical Origins of Economic Growth’. In a nutshell this book was extremely well done. Instead of the authors picking up their favorite hypotheses and running amok with them, they explored a variety of ideas, explored contexts in which their predictive and explanatory power worked and where they did not. In doing so, even though we are left in the end with the less than satisfactory ‘it is complex’ answer to the historical origins of economic growth, at the very least we are spared of bombastic nonsense which insult the intellect of readers.
The authors also do their best to do justice to a question as sweeping as the one the set out to explore, by comparing and contrasting European experiences with those in the rest of the world (i.e. in Asia, India, parts of the Islamic world, etc.). In doing so, they manage to lessen if not mitigate the obsessively European focus of economic origin stories. The key drivers of growth, namely the role of institutions, the presence of technology as a multiplier of growth, the enablement of geographical and demographic advantages, and the complementing effects of culture all are explored at length. It dismantles the simple "natural progression" narrative, emphasizing the historical contingency and unique challenges faced by different regions, thus at the very least, paying a hat tip to the role of luck and chance in enabling economic growth and success of societies. (I understand that luck and chance are unsatisfactory explanators, especially in the long run, but bad luck can be an explanator for growth that is halted despite all other favorable outcomes.).
The writing may feel a bit dry for the average reader, however I thought the work was reasonably well written and engaging, and the ideas presented clearly so as to assist the reader in exploring a hypothesis, evidence which supported the hypothesis as well as the arguments against the same.
Rating 5 of 5
The authors also do their best to do justice to a question as sweeping as the one the set out to explore, by comparing and contrasting European experiences with those in the rest of the world (i.e. in Asia, India, parts of the Islamic world, etc.). In doing so, they manage to lessen if not mitigate the obsessively European focus of economic origin stories. The key drivers of growth, namely the role of institutions, the presence of technology as a multiplier of growth, the enablement of geographical and demographic advantages, and the complementing effects of culture all are explored at length. It dismantles the simple "natural progression" narrative, emphasizing the historical contingency and unique challenges faced by different regions, thus at the very least, paying a hat tip to the role of luck and chance in enabling economic growth and success of societies. (I understand that luck and chance are unsatisfactory explanators, especially in the long run, but bad luck can be an explanator for growth that is halted despite all other favorable outcomes.).
The writing may feel a bit dry for the average reader, however I thought the work was reasonably well written and engaging, and the ideas presented clearly so as to assist the reader in exploring a hypothesis, evidence which supported the hypothesis as well as the arguments against the same.
Rating 5 of 5
August 20, 2023
Excellent overview & synthesis of explanations for economic growth from 0-2000.
Koyama & Rubin cover five types of explanations: geographical determinism (Diamond's "Guns, Germs, Steel"), cultural evolution (Henrich's "WEIRDest People in the World" and Mokyr's "Industrial Enlightenment"), institutions (Acemoglu's "Why Nations Fail"), demographics (Malthus & European Marriage Pattern), and colonization. These summaries were well done. Good graphs.
The authors then zoom into why sustained economic growth happened in northwestern Europe, not all of Europe, and then specifically in Britain overtaking the Dutch. This was an excellent reframe from the "Europe vs. the rest" (which is wrong) to "NW Europe and actually just the UK" (which is right).
They then give their take after reviewing the evidence. Their conclusion mostly aligns with Mokyr — that it is a combination of institutions + culture, and specifically taking the knowledge gained in the Republic of Letters, then applying it in the UK through skilled craftsmen.
Finally, they look at how economic growth spread from the first Industrial Revolution to the Second Industrial Revolution (1870-1914, applied science in all of Europe), to the US, and then to Asia (Japan and China) more recently.
Highly recommended!
Koyama & Rubin cover five types of explanations: geographical determinism (Diamond's "Guns, Germs, Steel"), cultural evolution (Henrich's "WEIRDest People in the World" and Mokyr's "Industrial Enlightenment"), institutions (Acemoglu's "Why Nations Fail"), demographics (Malthus & European Marriage Pattern), and colonization. These summaries were well done. Good graphs.
The authors then zoom into why sustained economic growth happened in northwestern Europe, not all of Europe, and then specifically in Britain overtaking the Dutch. This was an excellent reframe from the "Europe vs. the rest" (which is wrong) to "NW Europe and actually just the UK" (which is right).
They then give their take after reviewing the evidence. Their conclusion mostly aligns with Mokyr — that it is a combination of institutions + culture, and specifically taking the knowledge gained in the Republic of Letters, then applying it in the UK through skilled craftsmen.
Finally, they look at how economic growth spread from the first Industrial Revolution to the Second Industrial Revolution (1870-1914, applied science in all of Europe), to the US, and then to Asia (Japan and China) more recently.
Highly recommended!
July 27, 2022
Excellent introduction for a course of economic history. It’s true that I missed more detailed analysis and economic theory applied to the study of history, but it is not, I think, the purpose of the book. In this fashion it could be read for anyone in social sciences.
For more advanced students it should be accompanied by other sources quoted in the references. It shows the major factors behind the sustained economic growth and anyone interested in analysing the economic modernisation (or lack of it) of his/her country may very well use the first 6 chapters to assess it.
Luckily enough, it will find some readers that will go to the sources in search of thorough explanations and to ask new questions and other factors.
For more advanced students it should be accompanied by other sources quoted in the references. It shows the major factors behind the sustained economic growth and anyone interested in analysing the economic modernisation (or lack of it) of his/her country may very well use the first 6 chapters to assess it.
Luckily enough, it will find some readers that will go to the sources in search of thorough explanations and to ask new questions and other factors.
December 30, 2023
After reading a number of books (like Guns, Germs, and Steel; Why Nationals Fail; and The WEIRDest People in the World) on long-run economic growth and the great divergence, I despaired as a non-economist/non-historian of ever coming to a clear understanding of how factors like geography, institutions, and culture matter and have mattered to the global distribution of wealth (and consequently, human welfare). This excellent book provides a clear overview of the recent academic literature and then advances a plausible, nuanced thesis, while remaining succinct and engaging. I highly recommend this book to everyone interested in growth, the great divergence/industrial revolution, and both macro- and economic history. It is one of the best nonfiction books I've read in a while.
December 2, 2023
Fíxoseme bola este libro. Pretende resumir e comparar un montón de teorías económicas, sociais e históricas que explican as diferencias en prosperidade entre distintas comunidades humanas. Por exemplo, a teoría da importancia xeográfica de Diamond, ou a da importancia das institucións de goberno que propoñen Acemoglu e Robinson.
E faino, repasa estas teorías, e outras que falan de colonialismo, de diferencias culturais, demográficas, etc.
Pero faino a base de ser densísimo e costar muito acabalo. E realmente, é un grandísimo compendio de teorías pero non propón nada novo.
En fin, se vos apetece lelo por min non vos cortedes.
E faino, repasa estas teorías, e outras que falan de colonialismo, de diferencias culturais, demográficas, etc.
Pero faino a base de ser densísimo e costar muito acabalo. E realmente, é un grandísimo compendio de teorías pero non propón nada novo.
En fin, se vos apetece lelo por min non vos cortedes.
July 5, 2022
Excellent book, that executes on its stated goals, explaining basic theories on economic development. I'm very much a fan of how the authors present & synthesize this wide field. This was actually the book I wanted to read, after reading Oded Galor's new book, that did not deliver on its stated message. This book is more honest.
The last star is reserved to an original argument or a book delivering on a highly atheistic note, which this raw and concise book does not - but nor should've it had try to do so. I will recommend this book to my students in comparative politics this fall.
The last star is reserved to an original argument or a book delivering on a highly atheistic note, which this raw and concise book does not - but nor should've it had try to do so. I will recommend this book to my students in comparative politics this fall.
September 14, 2023
A part of me is nervous about reviewing this book because I'm not at all familiar with the topic, so I can't really judge if the authors are sneaking in a bias, but it seemed like a fairly broad and balanced literature review of the work that has been done in the past decades, and I think I learned a bit from it. I listened to it as an audiobook, but a part of me wants to acquire a paper copy so I can look up a lot of the references...the main thing stopping me is an awareness that I really don't have the time.
Read
January 10, 2024An interesting book. Some of my takeaways:
Education and literacy are important.
Low labor supply leads to higher wages. This incentivizes the development of labor-saving technologies. The European Marriage Pattern (getting married late and having fewer children) may have played a large role in the industrialization of Britain and Western Europe.
Trust is very important in an economy. Colonialism and slavery destroyed a lot of trust.
Limits on executive power and rent-seeking are important. As are institutions.
Education and literacy are important.
Low labor supply leads to higher wages. This incentivizes the development of labor-saving technologies. The European Marriage Pattern (getting married late and having fewer children) may have played a large role in the industrialization of Britain and Western Europe.
Trust is very important in an economy. Colonialism and slavery destroyed a lot of trust.
Limits on executive power and rent-seeking are important. As are institutions.
July 24, 2023
This was a pretty quick read; my friend and I listened to it as an audiobook on the way to and from our writing retreat last week. It's a good general reference book on the causes and factors for economic growth, and provides an in-depth survey of the literature on each topic, including demography, geography, institutions, and more before diving into specific country-studies. I'm going to get this as an e-book so I can word search for literature on specific topics in the future.
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