Book Summary: “The Causes of Economic Growth” by Rick Szostak

Title: The Causes of Economic Growth: Interdisciplinary Perspectives
Author: Rick Szostak
Scope: 4 stars
Readability: 3 stars
My personal rating: 3.5 stars
See more on my book rating system.

If you enjoy this summary, please support the author by buying the book.

Topic of Book

Szostak reviews the literature of all social sciences to identify plausible causes of economic growth.

My Comments

The title of this book is a little deceptive. A substantial section of this book is about how to conduct Interdisplinary research, a topic outside the scope of this blog.

The rest of the book consists of an exhaustive review of much of the social science literature to identify possible causes of economic growth. The list of plausible causes dug up by Szostak is overwhelming in size. In addition, I could come up with a few more that Szostak missed.

I kept hoping for a strong conclusion that gave the author’s opinion on which causes are most important, but it never happened. I finished the book feeling very disappointed.

This book does, however, serve a very valuable purpose for those who wish to understand the causes of economic growth. It should give pause to anyone who thinks that they have got it all figured out. Clearly economic growth has many causes and those causes interact with each other.

If you are looking for a somewhat comprehensive list of plausible causes of economic growth, I would recommend reading chapters 5-11. Otherwise, I would not recommend this book.

Key Take-aways

  • Economic growth is a complex process, involving the causal interaction of numerous phenomena.
  • There are dozens or perhaps even hundreds of plausible causes of economic growth. They each have a least some evidence to back up their importance.
  • There is very little agreement between experts as to which of these causes are most important.
  • Each discipline within social science and history have their own unique perspective and many disciplines have multiple competing perspectives.
  • The field of economics alone tells us relatively little on the subject. Ironically, economists do not seem particularly interested in the subject.
  • The discipline of economics has been very slow to integrate possible causes of economic growth that come from other fields. Many economists know this, but do not know how to proceed forward, so they often fall back on their traditional theories and methods.

Important Quotes from Book

This book combines the two key strands of my research career: as an economic historian studying the causes of economic growth (and decline) and as an interdisciplinarian exploring the theory and practice of interdisciplinarity itself.

What are the causes of economic growth? There is perhaps no more important question in all of human science.

There is also perhaps no more complex question in human science.

We will arguably gain our best understanding of economic growth if we integrate the understandings of economists, political scientists, sociologists, anthropologists, and others…The contribution of this book is to follow a twelve-step process for interdisciplinary analysis in exploring the causes of growth.

The starting premise of this book is simple, and hopefully obvious: Economic growth is a complex process, involving the causal interaction of numerous phenomena.

Since many of these phenomena are non-economic, insights from disciplines that study these other phenomena are likely to be invaluable.

Due to the number of complex interactions among these various phenomena, our understanding of economic growth (at least in the foreseeable future) will involve a complex amalgam of complementary theories rather than one theory of everything.

Less obviously but importantly, that different theories and different phenomena are best investigated with different methods.

Many economists working with formal growth models appreciate that these serve to identify only (some of) the ‘proximate’ causes of growth.

Economists increasingly recognize that the answers to these questions involve differences in political and economic institutions (that is, formal rules and organizations) across countries. Many economists venture even farther afield to speculate that differences in culture, social structure (family forms, gender relations, ethnic diversity, and so on), geographical environment, and political practices are also of key importance. The economics literature is thus characterized at present by a variety of models that each stresses different causal relationships (though these tend to have broadly similar theoretical roots). The goal here, then, is not to supersede economic analysis but to place this appropriately within a broader structure of complementary theories and methods applied to a much wider range of causal links.

Variables representing aspects of culture or politics or geography are often inserted into the models that economists test statistically, but few economists read widely in the literatures of disciplines that take culture or politics or geography as their focus. The logic of their own research program has brought (many) economists to the edge of the abyss: they sense that the insights of other disciplines may be important but are unsure of how best to incorporate those insights into a more comprehensive understanding of growth.4 The fact that these other disciplines use different terminology, theories, and methods makes the process of borrowing both more difficult and more suspect.

Given the importance of economic growth in human lives, its limited role in university curricula is stunning.

One crying need in the study of growth is for a more nuanced understanding of the interactions among the causes of growth.

Small differences in annual rates of economic growth can have huge cumulative impacts over time. And thus a governmental policy that increases growth even slightly will have a greater impact on wellbeing in the very long run than policies that tackle more pressing but transitory social problems.

At the level of individuals two categories of phenomena can be identified:

• The first is ‘genetic predisposition.’ As a species, humans share a gene pool that gives all a set of basic abilities, motivations, and emotions.

• While this common gene pool guarantees a certain set of characteristics that defines the species, differences in the precise genes that individuals possess, in concert with differences in environment, serve to guarantee that individuals differ from each other both physically and psychologically. This yields a second category of ‘individual differences.’

All humans are necessarily part of a larger community, especially for the first few years of life. That is, one of the shared characteristics noted above is that humans are born needing the help of others. Several distinct categories of collective behaviours can be identified:

• Humans interact with the non-human environment in order to create (and distribute) food, shelter, and other items of practical utility: ‘the economy.’

• Humans interact with the non-human environment to create items desired primarily for their aesthetic appeal rather than their utility: ‘art.’ Note that works of art, through their aesthetic appeal, may serve further purposes, such as encouraging religious belief. Such effects would be captured in causal links.

Art is often viewed as a subset of ‘culture’; it is treated separately here because works of art, while they contain cultural elements, are defined in terms of an aesthetic effect that transcends cultural boundaries.

• The various sub-groups of society must interact in some way: ‘social structure.’ There are always at least two types of sub-group, for the family is ubiquitous, albeit in different forms, and genders have never yet been treated in precisely the same way.

• Power is distributed and exercised: ‘politics.’

• It is obvious that hierarchical economic, social, and political structures evolve beliefs in the correctness of those structures, or at least attempts are made by those at the top to do so. Such beliefs thus logically belong to those categories.

Yet societies have a host of religious beliefs, customs, habits, and so on whose connection to these other realms is (at least potentially) tenuous: these can be termed ‘culture.’ Attitudes toward all categories except economy, politics, and social structure are thus part of culture. Following common usage, languages are treated here as a subset of culture. The precise definition of culture becomesclearer as the category is unpacked.

• Humans also develop knowledge of how they can best manipulate the nonhuman environment to suit various ends: ‘science and technology.’

• The list may seem complete, but humanity must also perpetuate itself as a species, and thus ‘population’ must be considered. Ability to reproduce depends in turn on ability to survive. The related matter of ‘health’ must also, then, be considered. This deserves more attention than it receives from human scientists.

• The ‘non-human environment’ has been mentioned more than once above. Since it both shapes and is shaped by humanity, it deserves its own role in the classification as another category. This category (and that of genetic predisposition) would provide a link between this classification and a classification of natural science phenomena.

While the approach here emphasizes the exploration of a variety of causal links (often with feedback effects), it is nevertheless important not to lose sight of the possibility of emergent properties of the system of causal links as a whole. Emergent properties can be defined as characteristics of a system that cannot be understood by reference to its constituent elements (phenomena and causal links) but only at the level of the system as a whole: consciousness, for example, may be an emergent property of human beings that cannot be understood by reference to the details of our biology.

One general result from the analysis above seems destined to remain robust: No one type of theory on its own can provide a complete understanding of the process of economic growth

Below is a partial list of plausible causes for economic growth that were identified by Szostak. Many of these entries are as categories of multiple causes:

  • Investment
  • Capital Goods sector
  • Foreign Investment
  • Foreign Aid
  • Microfinance
  • Openness to Trade
  • Technology
  • Technological innovation
  • Clustering
  • Research
  • Technology Transmission
  • Geography
  • Climate
  • Natural Resources
  • Country Size
  • Regional Clusters
  • Institutions
  • Property Rights
  • Exchange
  • Financial Institutions
  • Labor markets
  • Culture
  • Entrepreneurship
  • Social Capital
  • Population
  • Health
  • Social Structure
  • Ethnicity
  • Gender
  • Family Structure
  • Sectoral Interactions
  • Networks

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