Title: Was the Wealth of Nations Determined by 1000BC?
Author: Diego Comin, William Easterly and Erick Gong
Scope: 4.5 stars
Readability: 2 stars
My personal rating: 5 stars
See more on my book rating system.
Topic of Article
The authors attempt to determine whether the current wealth of nations is caused by recent events or by long-term historical trends.
This article is not very fun reading, but the conclusions are very useful. I recommend reading this summary and skipping the article unless you are a serious academic.
- Current research on the causes of nations being rich or poor is dominated by recent factors, such as government policy, education, health and political stability. Long-run factors are generally ignored.
- When one test both short-term and long-term factors, the long-term factors dominate.
- How quickly a nation adopts new technology is to a large extent determined by how advanced the technology their ancestors possessed in 1000BC. This is also true of 0AD and 1500AD.
- How wealthy a nation is today is closely tied to how wealthy their ancestors were in 1000BC, 0AD and 1500AD.
Important Quotes from Book
We assemble a new dataset on the history of technology over 2500 years of history… The first significant finding is that there were important technological differences between the predecessors to today’s modern nations as long ago as 1000BC, and that these differences persisted to 0AD and 1500AD… Further, these precolonial, preindustrial difference have striking predictive power for the pattern of both per capita incomes and technology adoption across nations that we observe today. (p2)
In 1000BC the Middle Eastern empires and China have an overall technology adoption level of 0.95 and 0.90 respectively, while in India and Western Europe the average adoption level are 0.67 and 0.65 respectively. In 0AD India and Western Europe catch up with China and the Middle Eastern empires. In 1500 AD Western Europe has completed the transition and is the most advanced of the four great empires with an average adoption level of 0.94. China remains ahead of most countries with 0.88. The Indian and Middle Eastern empires have fallen behind to 0.7. Today, the gap between Western Europe and the other three historical empires has widened considerably.
We find that there is a strong and positive contemporaneous association between technology adoption history and the contemporaneous urbanization rates.
The association between current technology and the technology in 1000BC or 0AD is insignificant. However, there is a strong and significant association between technology in 1500AD and current technology.
Latin America and the regions settled by British are the main exceptions.
Once we control for the obvious historical example of replacement of the indigenous technology by technologies brought by new settlers, technology in ancient times becomes an even more significant predictor of development today
After including the settlement dummies, an increase in the overall adoption level from 0 to 1 in 1000 BC or in 0AD is associated with an increase in income per capita in 2002 by a factor of 4. A similar increase in the overall adoption level in 1500AD is associated with an increase in per capita income in 2002 by a factor of 19. This is half of the current difference in income per capita between the top and bottom 5 percent of the countries in the world.
78 percent (of the lag in overall technology adoption) is explained by Africa’s lag in technology adoption in 1500AD.
In their mathematical model “the cost of adoption declines with the stock of technologies previously adopted in the country. This is the case both because existing technologies reduce the physical cost of adopting the new technologies and because adopters learn from previous adoption experience
The long run dynamics of technology depend upon the value of “y”. If y is smaller than 2, the number technologies adopted grows at an accelerating rate as technological level rises in the long run…. Finally, if y is greater than 2, it grows at a decreasing rate in the long run as technology rise. Less advanced countries will grow faster than more advanced countries and there will be convergence. (p19)
One interesting feature of an accelerating growth model… is that the acceleration can be extremely gradual for long periods, but then when A gets sufficiently high, growth can suddenly accelerate very rapidly… So our simplistic toy model could account for both the acceleration of growth with the industrial revolution of the last two centuries and the great divergence between countries over the same period!
To be accurate something else that slams the brakes on further increases in growth once it reaches modern growth rate levels, such as a limit on how many new technologies can be absorbed per unit of time relative to existing technologies. Our actual estimates …of y show it to be close to 2.
The model is significant after controlling for population.
The main finding of this paper is a simple one: centuries-old technology history is associated with the wealth of nations today.
This evidence provides support to the hypothesis that the technology adoption dynamics – in which the cost of adopting new technology falls with the stock of previous technology – are the mechanism that generates the propagation uncovered in the data.