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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.
240 pages, Paperback
First published January 1, 2022
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Displaying 1 - 30 of 82 reviews
September 24, 2024
How the World Became Rich is a terrific and balanced synthesis of the explosion of really exciting research that has helped us better understand the massive economic transition into sustained per capita GDP growth that started about 200 years ago in Great Britain and has since spread to much of the world. For better or worse, this is not a monocausal explanation but instead the first part is a discussion of the strengths and weaknesses of the main perspectives (geography, institutions, culture, demography and colonialism) and the second part integrates all of these into a research-informed narrative account of the origins and shifting location of growth.
The traditional economic approach to growth was to view it through the lens of the Solow Model, but this at best gets at the proximate causes of growth (physical and human capital) and has nothing to say about the most fundamental determinant of growth even in this simple model (the rate of technological change is exogenous). When I was in grad school in the 1990s there was growing excitement about endogenous growth theory that attempted to explain the rate of technological change—something Paul Romer got a Nobel Prize for. But that too did not really explain in any fundamental way the rate of technological change or the myriad questions like why India and Great Britain had similar incomes 500 years ago, very different incomes 100 years ago, and are converging again today (although the process will likely take a long, long time given how far apart they are).
This left a lot of economic history to people not working in the discipline of economics, like Fernand Braudel or other big historians. They had a lot of important insights and exciting detail but no method to really test all of it.
In the last twenty or so years economists have been using empiricism (not theory) but directed at a broader and more fundamental set of issues than just the proximate sources of growth. Clever natural experiments like using historical variation in what parts of central and Eastern Europe were under Hapsburg control or what colonies were susceptible to malaria have helped elucidate mechanisms that play out on the time scale of centuries.
Each one of these papers, however, generally can only get at one aspect. You also don't want to think of growth as fully pre-determined because national positions reverse and change—and much depends on chance (e.g., reforms in China in the 1980s that unleashed growth might not have happened).
That is why How the World Became Rich has so much to offer because it synthesizes the different perspectives, discusses their interrelationships (e.g., the way culture shapes institutions), and integrates them into more of a causal-research informed narrative synthesis.
I won't try to describe all of it but would briefly list some of the advantages and disadvantages of the different perspectives (many of which I cover in the growth lecture in my introductory course):
Geography: African economic development likely, in part, a function of the many land-locked countries, malaria and sleeping sickness. BUT, have seen many countries without great geography become prosperous and vice versa, plus reversals suggest geography not indelible.
Institutions: Like the modern research, places a lot of weight on these, especially inclusive and limits on sovereigns imposed by nobles and parliaments. But still, many confounding issues (e.g., some institutional models might predict more growth in India than China).
Culture: Moves more slowly, can become maladapted. Interesting discussion of the Protestant Ethic (less contributed to growth for Weber-type reasons and more because it encouraged literacy and by not providing a source of legitimacy for rule led to parliaments etc.) and Islam (was well adapted for growth in the first millennium CE but then some of what had been strengths became weaknesses, much the same way that Italian city states were good at certain types of commerce but did not transition).
Demography: Interesting discussion of the "European Marriage Pattern" of delaying marriages leading to fewer births and more investment.
Colonization: Does a terrific job of a difficult topic, places more weight on the ways colonization hurt the countries that were victimized than helped the ones that colonized—for example, Spain and Portugal may have been hurt because their overseas empires strengthened autocratic governments that were bad for growth.
In conclusion, sometimes it is useful to read a “fox”-like survey and synthesis and this is an excellent one—as is The Journey of Humanity: The Origins of Wealth and Inequality. But it is also useful to have and read "hedgehogs" with one big idea to explain everything, with some excellent examples being Why Nations Fail: The Origins of Power, Prosperity, and Poverty, The WEIRDest People in the World: How the West Became Psychologically Peculiar and Particularly Prosperous, and The Great Divergence: China, Europe, and the Making of the Modern World Economy.
P.S. Shortly after writing and posting this review I attended a seminar on a paper that provides statistical evidence to support the thesis that the codification of technical terms was critical to the spread of industrialization—specifically Japan’s enormous 19th century effort to develop dictionaries and Japanese words for technical terms from British industrial manuals. Just another sign of how exciting and fruitful this area of research has been—and how it is continuing to evolve.
The traditional economic approach to growth was to view it through the lens of the Solow Model, but this at best gets at the proximate causes of growth (physical and human capital) and has nothing to say about the most fundamental determinant of growth even in this simple model (the rate of technological change is exogenous). When I was in grad school in the 1990s there was growing excitement about endogenous growth theory that attempted to explain the rate of technological change—something Paul Romer got a Nobel Prize for. But that too did not really explain in any fundamental way the rate of technological change or the myriad questions like why India and Great Britain had similar incomes 500 years ago, very different incomes 100 years ago, and are converging again today (although the process will likely take a long, long time given how far apart they are).
This left a lot of economic history to people not working in the discipline of economics, like Fernand Braudel or other big historians. They had a lot of important insights and exciting detail but no method to really test all of it.
In the last twenty or so years economists have been using empiricism (not theory) but directed at a broader and more fundamental set of issues than just the proximate sources of growth. Clever natural experiments like using historical variation in what parts of central and Eastern Europe were under Hapsburg control or what colonies were susceptible to malaria have helped elucidate mechanisms that play out on the time scale of centuries.
Each one of these papers, however, generally can only get at one aspect. You also don't want to think of growth as fully pre-determined because national positions reverse and change—and much depends on chance (e.g., reforms in China in the 1980s that unleashed growth might not have happened).
That is why How the World Became Rich has so much to offer because it synthesizes the different perspectives, discusses their interrelationships (e.g., the way culture shapes institutions), and integrates them into more of a causal-research informed narrative synthesis.
I won't try to describe all of it but would briefly list some of the advantages and disadvantages of the different perspectives (many of which I cover in the growth lecture in my introductory course):
Geography: African economic development likely, in part, a function of the many land-locked countries, malaria and sleeping sickness. BUT, have seen many countries without great geography become prosperous and vice versa, plus reversals suggest geography not indelible.
Institutions: Like the modern research, places a lot of weight on these, especially inclusive and limits on sovereigns imposed by nobles and parliaments. But still, many confounding issues (e.g., some institutional models might predict more growth in India than China).
Culture: Moves more slowly, can become maladapted. Interesting discussion of the Protestant Ethic (less contributed to growth for Weber-type reasons and more because it encouraged literacy and by not providing a source of legitimacy for rule led to parliaments etc.) and Islam (was well adapted for growth in the first millennium CE but then some of what had been strengths became weaknesses, much the same way that Italian city states were good at certain types of commerce but did not transition).
Demography: Interesting discussion of the "European Marriage Pattern" of delaying marriages leading to fewer births and more investment.
Colonization: Does a terrific job of a difficult topic, places more weight on the ways colonization hurt the countries that were victimized than helped the ones that colonized—for example, Spain and Portugal may have been hurt because their overseas empires strengthened autocratic governments that were bad for growth.
In conclusion, sometimes it is useful to read a “fox”-like survey and synthesis and this is an excellent one—as is The Journey of Humanity: The Origins of Wealth and Inequality. But it is also useful to have and read "hedgehogs" with one big idea to explain everything, with some excellent examples being Why Nations Fail: The Origins of Power, Prosperity, and Poverty, The WEIRDest People in the World: How the West Became Psychologically Peculiar and Particularly Prosperous, and The Great Divergence: China, Europe, and the Making of the Modern World Economy.
P.S. Shortly after writing and posting this review I attended a seminar on a paper that provides statistical evidence to support the thesis that the codification of technical terms was critical to the spread of industrialization—specifically Japan’s enormous 19th century effort to develop dictionaries and Japanese words for technical terms from British industrial manuals. Just another sign of how exciting and fruitful this area of research has been—and how it is continuing to evolve.
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؟
January 7, 2025
An outstanding overview of the literature on the "Great Enrichment." Unlike certain other books which try to argue for the importance of a single factor (e.g. institutions, geography, culture) as the primary driver of economic growth, this book shows how all of these factors have played a role in different countries at different times: when they matter, why they matter, and when they don't. I learned a great deal from this book, and highly recommend it.
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.
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.
May 9, 2024
Mark Koyama & Jared Rubin's book How the World Became Rich: The Historical Origins of Economic Growth is one of the latest entries in the Wealth of Nations tradition. It purports to explain the causal forces that animated "the great enrichment" and why prosperity has not been equally distributed.
The book is syncretic and generous in its analysis. It combines popular but simpler models of historical/national development. The "inclusive institutions" framework of Acemoglu/Robinson make an appearance as does the geography-first model from Jared Diamond's Guns, Germs, and Steel. Koyama and Rubin also consider some more controversial models that allege the importance of culture and human capital. This predominantly includes Joe Henrich's thesis about the effects of marriage customs on individualistic and impersonal social norms and Greg Clark's ideas about the accretion of human capital in pre-IR Britain. It is heartening to see mainstream economics accept the importance of these claims, which in someways are smarter and subtler versions of models thought only to be forwarded by Western chauvinists. It is nice to see the diamond in the rough recovered rather than tossed wholesale into the dustbin of history.
The favored model(s) presented balance the different explanatory variables. This approach is persuasive because it recognizes the limitations of every one of the simple models. But the "it's complicated" refrain can create more questions than answers. There is also a possibility that some of the explanations are "overfit." Nonetheless, How the World Became Rick transcends the level of "that one thing that explains everything" (TOTTEE) type arguments, which are too common in this space. It perhaps lacks actionable insights - as in there isn't a formula for a government of a developing nation to try and run with. Essentially, Koyama and Rubin show that the inputs on economic growth are diverse and contingent and thus it is hard to engineer grow.
There are a lot of really great figures in the book that are worth checking out. I have embedded some in a Twitter post --> https://x.com/stetson_thacker/status/...
The book is syncretic and generous in its analysis. It combines popular but simpler models of historical/national development. The "inclusive institutions" framework of Acemoglu/Robinson make an appearance as does the geography-first model from Jared Diamond's Guns, Germs, and Steel. Koyama and Rubin also consider some more controversial models that allege the importance of culture and human capital. This predominantly includes Joe Henrich's thesis about the effects of marriage customs on individualistic and impersonal social norms and Greg Clark's ideas about the accretion of human capital in pre-IR Britain. It is heartening to see mainstream economics accept the importance of these claims, which in someways are smarter and subtler versions of models thought only to be forwarded by Western chauvinists. It is nice to see the diamond in the rough recovered rather than tossed wholesale into the dustbin of history.
The favored model(s) presented balance the different explanatory variables. This approach is persuasive because it recognizes the limitations of every one of the simple models. But the "it's complicated" refrain can create more questions than answers. There is also a possibility that some of the explanations are "overfit." Nonetheless, How the World Became Rick transcends the level of "that one thing that explains everything" (TOTTEE) type arguments, which are too common in this space. It perhaps lacks actionable insights - as in there isn't a formula for a government of a developing nation to try and run with. Essentially, Koyama and Rubin show that the inputs on economic growth are diverse and contingent and thus it is hard to engineer grow.
There are a lot of really great figures in the book that are worth checking out. I have embedded some in a Twitter post --> https://x.com/stetson_thacker/status/...
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
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 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.
August 6, 2024
How the world became rich
Chap 1:
- great increase in global wealth
- Spurts of economic growth- classical greener, Pax Islamica, Pax Mongolia, disease, new technologies
- Rich countries are distinguished by sustained economic growth without reversal-> reorganisation of society and production- economic development
- Measures - height, life expectancy, innovation
Chap 2:
- geographical influences- Fertile Crescent, access to rivers and coasts, agricultural land
- But better endowed land before 1800 was not more well off than less well endowed land
- Economies of scale and network effects = why some cities often outperform others
- Geography has some role - impacts on culture demography colonisation institutions
Chap3- the role of institutions;
- can be legal political economic social religious
- Law and property rights- important for development of economic growth, world bank governance indicators, why invest if risk of confiscation of assets, trade markets and mutually beneficial trade, trust networks,
- Law- small networks rely on only eachother- foster trust, different to a large society where this trust doesn’t exist as individuals don’t interact in such a close way
- Growth - equality on society, ability to develop political opposition
- Why do democracies work in some countries and not others
Chap 4- impact of culture
- many prev cultural theories were not very nuanced, Eurocentric
- Individualistic societies- favour personal achievement - greater productivity and innovation- develop institutions
- Vs kinbased societies - less need for institutions, less trade with rest of world and long term economic cost
- North south Italy divide
- Islam harmful to Middle Eastern economies? No - golden age of Islam, very progressive inheritance laws including inheritance for women, partnerships were kept small and trusted, impact of a few powerful corrupt elites later
- Trust rules - societies prev exploited still struggle with trust within networks- lack of interpersonal trust and trade networks
- Gender norms- shifting as economic potential of women is realised,
- Religious effects on law and politics
-
Chapter 5: fewer babies
- black deaths- higher wages for ordinary workers
- Tied to marriage ages and household formation
- EMP- European marriage pattern + inheritance vs dowry systems
- Criticism:
- Emp was most prevalent in Central Europe which had economic stagnation
- Arguments that rather than EMP the trend related to women in workforce and consent
- Areas incl Switzerland, Germany had EMP development but women still had little rights re work property rights
- Counter example of China which had strict family rules not correlating with economic dvmt
Chap 6: Exploitation and colonisation
- exploitation of natural resources- metals rubber spices sugar oil
- Contributions of colonisation- Karl Marx arguments- colonisation provided initial capital needed to construct modern economic system
- Discovery of potatoe in new world- responsible for 25% of old world popln growth and inc in urbanisation between 1700 and 1900?
- Slave trade- 4 - transatlantic, trans Saharan, Red Sea trade, Indian Ocean trade- by 1850 africas popn was only half of what it would have been if slave trades hadn’t happened
- Higher levels of slave trade- Lowe GDP, greater ethnic fracionalisation, worse political institutions
- Impacts on trust relationship, weaker village ties and no larger cohesive states-> leads to groups competing to rule over one another, less public good provision, Lowe trust
- Institutions set up by colonisers- set up to extract maximal resources, workers treated horribly-> legacy of bad governance
- Ie malaria belt in Africa- aim was for Europeans to exploit as much as possible as malaria mortality meant not favourable place to stay- so exploitation without developing legal political religious institutions
- Spanish colonisation- the mita- long lasting health outcomes in these poplns
- India case study- some areas ruled by the British, some under control of local princes- Iyer(2010) - areas prev under British rule had less access to schools health centres and road, not more productive in terms of agriculture, more tax exploitation,
- Diff wage outcomes with diff colonisers - Spanish and Portuguese were the worst
- Positives of rail network, education- reminder of these being accidental non intentional outcomes, facilities for Christian missionaries etc
Chap 7- why did northwestern Europe become rich first?
- good preconditions- high real wages and income, market development extensive, institutional framework conducive to expansion of internal trade
- Dutch republic- until growth but stagnation followed, many scientific innovations, engineering but not the same development as the Industrial Revolution in Britain
Chap 8: Industrial revolution
- britains preconditions-> limited representative government, domestic economy, access to Atlantic economies, skilled mechanical workers
- Why Britain industrialised first- high wages and cheap energy ( favours development and investment in technology rather than labour) - why did Britain have many skilled workers?
- Combination of scientific and mechanical skill
- Britain didn’t become rich until later, why?
Chapter. 9: the rise of the modern economy:
- the industrial revln was acc slow but a revolution bc it was the first period of sustained economic growth
- Wages not inc in industrev why?- rapid popln growth and Malthusian forces, war, war napoleonic , rise of inequality - so was hard to see IR as revolutionary at the time
- 2nd Industrial Revolution- scientific discoveries and technology and useful knowledge, education, upper tail human capital meant more innovation
- Solow model- innovation is driver of long run economic growth - interestingly according to the model of innovations become available in poorer countries they will grow faster than richer countries- convergence (America?)
- Circumstance? Period of peace after napoleonic wars, ban on engineers leaving country, the steamship
- Globalisation in Australia, finding gold, relying on trade
- rise of liberalism imperative to economic growth
The US:
- cotton industry in south and manufacturing in northeast
- Manufacturing- ideas shard from uk due to similar cultures + higher real wages in Us, a limited govmt ( a precondition), transport improvements, better natural resources, north and education investment unlike in uk, culture , individualism?
- Immigration into the US massively helped economic development- growth of domestic markets and workforce for manufacturing - Counties with higher levels of historical immigration have higher incomes higher levels of urbanisation, educational attainment, less unemployment and poverty
- The soviet detour- remaining agrarian, war communism, reduced agricultural yields and starvation, better technical education and healthcare, dictatorship and poor decision making, relying on exports of oil but when its price collapsed so did the economy wnd communism
-
Chap 10- industrialisation and the world it created:
- more extractive colonisation caused inc delay in catch up, post colonisation conflict, o policy choices,
- India’s economic decline - worse climate, invasions, endemic warfare, the British neglected infrastructure that didn’t suit them, Malthusian demographic,
- Reasons for diff inpace of economic growth- colonies, factor endowments unsuitable for capital intensive technologies, institutions repressing entrepreneurship,
- Japan- first non western country to achieve rapid economic growth- changing institutions, moving to manufacturing,
- Japan was previously a very divided society- hereditary class system, low wages, no functioning markets, no formal property rights
- But - human capital - investment in education, infrastructure and local areas, local engineering
- Meiji restoration- education, raised taxes
- Export economy- the educational adv helped massively, cheap labour , Japanese redesigned western tech to make it more cost effective in a low wage economy, many skilled workers
- Other East Asian counties - East Asian tigers these countries and Japan achieved rapid economic growth by importing ideas and tech
- Not just importing tech, economic geography, ability to learn off Japan, reliance and acceptance of international trade which prevented stagnation from only allowing national trade- kalkatta motors vs Japan
- South Korea- disciplined by international markets as its economy was too small to produce enough consumers, with chaebols resolved problems between state and private sector, prevented corrupt executive power
- China- massive growth in economy in past 40 yrs,- a unified state, relatively peaceful, beurocratic, BUT political failure by Qing elites, disincentivisafion of Indivs to work too hard due to imperial beurocracy, clan based structure at the expense of systems
- The communist party created a modern centralise state, again importing ideas for development and foreign investment
- Early reforms- household agriculture and increased agricultural products too
- Late reforms- widespread privatisation, market economy, some reforms within communist rule to make moves towards rule of law
- Culture- economic growth may be restricted by autocracy, high emphasis on education conducive with economic growth
Chapter 11- the world is rich
- many people have been lifted out of poverty, understanding how can accelerate future development
- Culture geography institutions demography colonisation sustained growth innovation markets historical contexts
Chap 1:
- great increase in global wealth
- Spurts of economic growth- classical greener, Pax Islamica, Pax Mongolia, disease, new technologies
- Rich countries are distinguished by sustained economic growth without reversal-> reorganisation of society and production- economic development
- Measures - height, life expectancy, innovation
Chap 2:
- geographical influences- Fertile Crescent, access to rivers and coasts, agricultural land
- But better endowed land before 1800 was not more well off than less well endowed land
- Economies of scale and network effects = why some cities often outperform others
- Geography has some role - impacts on culture demography colonisation institutions
Chap3- the role of institutions;
- can be legal political economic social religious
- Law and property rights- important for development of economic growth, world bank governance indicators, why invest if risk of confiscation of assets, trade markets and mutually beneficial trade, trust networks,
- Law- small networks rely on only eachother- foster trust, different to a large society where this trust doesn’t exist as individuals don’t interact in such a close way
- Growth - equality on society, ability to develop political opposition
- Why do democracies work in some countries and not others
Chap 4- impact of culture
- many prev cultural theories were not very nuanced, Eurocentric
- Individualistic societies- favour personal achievement - greater productivity and innovation- develop institutions
- Vs kinbased societies - less need for institutions, less trade with rest of world and long term economic cost
- North south Italy divide
- Islam harmful to Middle Eastern economies? No - golden age of Islam, very progressive inheritance laws including inheritance for women, partnerships were kept small and trusted, impact of a few powerful corrupt elites later
- Trust rules - societies prev exploited still struggle with trust within networks- lack of interpersonal trust and trade networks
- Gender norms- shifting as economic potential of women is realised,
- Religious effects on law and politics
-
Chapter 5: fewer babies
- black deaths- higher wages for ordinary workers
- Tied to marriage ages and household formation
- EMP- European marriage pattern + inheritance vs dowry systems
- Criticism:
- Emp was most prevalent in Central Europe which had economic stagnation
- Arguments that rather than EMP the trend related to women in workforce and consent
- Areas incl Switzerland, Germany had EMP development but women still had little rights re work property rights
- Counter example of China which had strict family rules not correlating with economic dvmt
Chap 6: Exploitation and colonisation
- exploitation of natural resources- metals rubber spices sugar oil
- Contributions of colonisation- Karl Marx arguments- colonisation provided initial capital needed to construct modern economic system
- Discovery of potatoe in new world- responsible for 25% of old world popln growth and inc in urbanisation between 1700 and 1900?
- Slave trade- 4 - transatlantic, trans Saharan, Red Sea trade, Indian Ocean trade- by 1850 africas popn was only half of what it would have been if slave trades hadn’t happened
- Higher levels of slave trade- Lowe GDP, greater ethnic fracionalisation, worse political institutions
- Impacts on trust relationship, weaker village ties and no larger cohesive states-> leads to groups competing to rule over one another, less public good provision, Lowe trust
- Institutions set up by colonisers- set up to extract maximal resources, workers treated horribly-> legacy of bad governance
- Ie malaria belt in Africa- aim was for Europeans to exploit as much as possible as malaria mortality meant not favourable place to stay- so exploitation without developing legal political religious institutions
- Spanish colonisation- the mita- long lasting health outcomes in these poplns
- India case study- some areas ruled by the British, some under control of local princes- Iyer(2010) - areas prev under British rule had less access to schools health centres and road, not more productive in terms of agriculture, more tax exploitation,
- Diff wage outcomes with diff colonisers - Spanish and Portuguese were the worst
- Positives of rail network, education- reminder of these being accidental non intentional outcomes, facilities for Christian missionaries etc
Chap 7- why did northwestern Europe become rich first?
- good preconditions- high real wages and income, market development extensive, institutional framework conducive to expansion of internal trade
- Dutch republic- until growth but stagnation followed, many scientific innovations, engineering but not the same development as the Industrial Revolution in Britain
Chap 8: Industrial revolution
- britains preconditions-> limited representative government, domestic economy, access to Atlantic economies, skilled mechanical workers
- Why Britain industrialised first- high wages and cheap energy ( favours development and investment in technology rather than labour) - why did Britain have many skilled workers?
- Combination of scientific and mechanical skill
- Britain didn’t become rich until later, why?
Chapter. 9: the rise of the modern economy:
- the industrial revln was acc slow but a revolution bc it was the first period of sustained economic growth
- Wages not inc in industrev why?- rapid popln growth and Malthusian forces, war, war napoleonic , rise of inequality - so was hard to see IR as revolutionary at the time
- 2nd Industrial Revolution- scientific discoveries and technology and useful knowledge, education, upper tail human capital meant more innovation
- Solow model- innovation is driver of long run economic growth - interestingly according to the model of innovations become available in poorer countries they will grow faster than richer countries- convergence (America?)
- Circumstance? Period of peace after napoleonic wars, ban on engineers leaving country, the steamship
- Globalisation in Australia, finding gold, relying on trade
- rise of liberalism imperative to economic growth
The US:
- cotton industry in south and manufacturing in northeast
- Manufacturing- ideas shard from uk due to similar cultures + higher real wages in Us, a limited govmt ( a precondition), transport improvements, better natural resources, north and education investment unlike in uk, culture , individualism?
- Immigration into the US massively helped economic development- growth of domestic markets and workforce for manufacturing - Counties with higher levels of historical immigration have higher incomes higher levels of urbanisation, educational attainment, less unemployment and poverty
- The soviet detour- remaining agrarian, war communism, reduced agricultural yields and starvation, better technical education and healthcare, dictatorship and poor decision making, relying on exports of oil but when its price collapsed so did the economy wnd communism
-
Chap 10- industrialisation and the world it created:
- more extractive colonisation caused inc delay in catch up, post colonisation conflict, o policy choices,
- India’s economic decline - worse climate, invasions, endemic warfare, the British neglected infrastructure that didn’t suit them, Malthusian demographic,
- Reasons for diff inpace of economic growth- colonies, factor endowments unsuitable for capital intensive technologies, institutions repressing entrepreneurship,
- Japan- first non western country to achieve rapid economic growth- changing institutions, moving to manufacturing,
- Japan was previously a very divided society- hereditary class system, low wages, no functioning markets, no formal property rights
- But - human capital - investment in education, infrastructure and local areas, local engineering
- Meiji restoration- education, raised taxes
- Export economy- the educational adv helped massively, cheap labour , Japanese redesigned western tech to make it more cost effective in a low wage economy, many skilled workers
- Other East Asian counties - East Asian tigers these countries and Japan achieved rapid economic growth by importing ideas and tech
- Not just importing tech, economic geography, ability to learn off Japan, reliance and acceptance of international trade which prevented stagnation from only allowing national trade- kalkatta motors vs Japan
- South Korea- disciplined by international markets as its economy was too small to produce enough consumers, with chaebols resolved problems between state and private sector, prevented corrupt executive power
- China- massive growth in economy in past 40 yrs,- a unified state, relatively peaceful, beurocratic, BUT political failure by Qing elites, disincentivisafion of Indivs to work too hard due to imperial beurocracy, clan based structure at the expense of systems
- The communist party created a modern centralise state, again importing ideas for development and foreign investment
- Early reforms- household agriculture and increased agricultural products too
- Late reforms- widespread privatisation, market economy, some reforms within communist rule to make moves towards rule of law
- Culture- economic growth may be restricted by autocracy, high emphasis on education conducive with economic growth
Chapter 11- the world is rich
- many people have been lifted out of poverty, understanding how can accelerate future development
- Culture geography institutions demography colonisation sustained growth innovation markets historical contexts
This entire review has been hidden because of spoilers.
February 16, 2025
TL;DR: Rubin and Koyama’s "How The World Became Rich" attempts to cram the leading theories of economic development into fewer than 260 pages, examining their merits through history’s lens. They emphasize technological innovation and global market competition as key drivers of sustained growth, with Britain’s Industrial Revolution as the poster child. Rejecting simplistic explanations, they advocate for a more holistic approach to understanding economic development. How novel.
The authors make a compelling case that while many regions experienced economic growth spurts, none achieved sustained growth until the magic combination of five factors aligned:
1. Institutions: Inclusive governance, property rights, rule of law. Acemoglu fans, rejoice!
2. Culture: Innovation-friendly attitudes, education, and open-mindedness.
3. Geography: Resources, trade routes, and favorable climates (with an institutional assist).
4. Demography: Declining birth and death rates, plus the ever-popular European Marriage Pattern.
5. Colonialism: A wealth booster, but apparently not the golden ticket without those pesky supportive institutions.
Part One surveys these leading theories and their heroes, while Part Two attempts to weave them into a coherent development tapestry, with Britain as the lead thread.
The book is exasperating at times, as the authors' quest for impartiality and comprehensiveness results in a citation tennis match: “These guys said this, but this other guy disagrees (A Few Guys, 1998; Another Guy, 1999).” If Koyama and Rubin had the courage to drop their academic shields for a moment and share their actual thoughts, this could have been a far more engaging read. It feels as if every other sentence is a hedge against the preceding one.
Look, I get it. Pinning down the reasons for sustained economic development is like herding cats in a thunderstorm. But at some point, take a stand! This cafeteria approach to development theory, where everyone gets a participation trophy, feels like a cop-out. It all makes sense, but when everyone is a little right and no one is completely wrong, nothing is very compelling. I am extremely surprised they did not include behavioral economics as one of their factors, you know, just in case.
In summary, if you’re looking for a crash course in economic development theories and their historical context, this book fits the bill. Just don’t expect a page-turner.
The authors make a compelling case that while many regions experienced economic growth spurts, none achieved sustained growth until the magic combination of five factors aligned:
1. Institutions: Inclusive governance, property rights, rule of law. Acemoglu fans, rejoice!
2. Culture: Innovation-friendly attitudes, education, and open-mindedness.
3. Geography: Resources, trade routes, and favorable climates (with an institutional assist).
4. Demography: Declining birth and death rates, plus the ever-popular European Marriage Pattern.
5. Colonialism: A wealth booster, but apparently not the golden ticket without those pesky supportive institutions.
Part One surveys these leading theories and their heroes, while Part Two attempts to weave them into a coherent development tapestry, with Britain as the lead thread.
The book is exasperating at times, as the authors' quest for impartiality and comprehensiveness results in a citation tennis match: “These guys said this, but this other guy disagrees (A Few Guys, 1998; Another Guy, 1999).” If Koyama and Rubin had the courage to drop their academic shields for a moment and share their actual thoughts, this could have been a far more engaging read. It feels as if every other sentence is a hedge against the preceding one.
Look, I get it. Pinning down the reasons for sustained economic development is like herding cats in a thunderstorm. But at some point, take a stand! This cafeteria approach to development theory, where everyone gets a participation trophy, feels like a cop-out. It all makes sense, but when everyone is a little right and no one is completely wrong, nothing is very compelling. I am extremely surprised they did not include behavioral economics as one of their factors, you know, just in case.
In summary, if you’re looking for a crash course in economic development theories and their historical context, this book fits the bill. Just don’t expect a page-turner.
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.
October 14, 2024
This book is great! Best Econ book I've read in a while.
The single most important question about the economy is how we became rich and prosperous starting 300 years ago. It only happened once (the British Industrial revolution), so systematically testing hypotheses it is difficult.
Nevertheless, the past 20 years have seen an explosion empirical research on the causes of economic growth. The modern computer and internet are to social science and history what Galileo's telescope was to astronomy. We can codify centuries and millennia worth of data and systematically test hypotheses we could only rely on anecdotes and stories to argue before. It's really a very exciting time.
Koyama and Rubin write a balanced and engaging book. I kept stopping every other page to look up the research they were summarizing. It was just cool.
There are six primary causes economists have theorized.
1. Geography (access to ports and conducive weather or even a horizontal continent (a la Jared Diamond)
2. The role of institutions. (freedom, democracy, openness, etc.)
3. Culture
4. Demographics (the Malthusian explanation for a slower population growth allowing real wages to grow)
5. The role of colonization and exploitation
The best part of the book? It's a short 240 pages with lots of graphs. Go do yourself a favor and read it.
The single most important question about the economy is how we became rich and prosperous starting 300 years ago. It only happened once (the British Industrial revolution), so systematically testing hypotheses it is difficult.
Nevertheless, the past 20 years have seen an explosion empirical research on the causes of economic growth. The modern computer and internet are to social science and history what Galileo's telescope was to astronomy. We can codify centuries and millennia worth of data and systematically test hypotheses we could only rely on anecdotes and stories to argue before. It's really a very exciting time.
Koyama and Rubin write a balanced and engaging book. I kept stopping every other page to look up the research they were summarizing. It was just cool.
There are six primary causes economists have theorized.
1. Geography (access to ports and conducive weather or even a horizontal continent (a la Jared Diamond)
2. The role of institutions. (freedom, democracy, openness, etc.)
3. Culture
4. Demographics (the Malthusian explanation for a slower population growth allowing real wages to grow)
5. The role of colonization and exploitation
The best part of the book? It's a short 240 pages with lots of graphs. Go do yourself a favor and read it.
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.
October 21, 2024
Un gran compendio de las principales teorías académicas sobre el crecimiento económico y sus causas además de un muy buen análisis de las mismas.
Lo que más le ha gustado del libro es que te ofrece una explicación del asunto con numerosos factores interactuando entre sí que entran en juego en un contexto histórico concreto. No hay ninguna fórmula mágica para convertirse en un país rico, pero sabiendo cómo pudo pasar y *por qué* en ciertos momentos históricos podremos dar pasos más sólidos en el camino de escapar la pobreza en todo el mundo.
Lo que más le ha gustado del libro es que te ofrece una explicación del asunto con numerosos factores interactuando entre sí que entran en juego en un contexto histórico concreto. No hay ninguna fórmula mágica para convertirse en un país rico, pero sabiendo cómo pudo pasar y *por qué* en ciertos momentos históricos podremos dar pasos más sólidos en el camino de escapar la pobreza en todo el mundo.
December 28, 2024
this was literally just a summary of the economics section of each chapter of my european and american history textbooks (and if i took world history, i imagine every chapter of that as well). every time england and the first and second industrial revolutions were mentioned i thought of the “why britain?” worksheet i had to do in senior year of high school and the frq that went along with it.
December 2, 2025
dat ene fragment over de sovjetunie is zo slecht dat ik niet kan geloven dat het gepubliceerd werd
February 8, 2025
How the World Became Rich is a synthesis of economic research that attempts to determine the following: 1) Why was per capita growth averaged roughly 0% for all of human history until ~1700, 2) Why has economic growth been sustained since 1700, and 3) Why did sustained economic growth begin in Britain? I think the ambition of the book is exciting and it does a great job of aggregating research and telling a fun, historical story about the origins of our wealth. Yet I found it surprisingly weak in some areas (which I’ll get into) and I enjoyed Oded Galor’s The Journey of Humanity more.
The book starts with an exploration of the many theories about why the world became rich. These include:
1. Geography: Geography can enable lower transportation costs (waterways) and lower disease levels along with allowing for higher population density.
2. Institutions: Institutions form the incentive structure for a society and good, inclusive institutions can guarantee property rights and impose constraints on rulers, allowing for economic growth.
3. Culture: Culture is remarkably persistent and can influence attitudes on work ethic, education, politics, and trust—all which are valuable for economic growth.
4. Demography: A prioritization of quality over quantity of children led to a demographic transition of lower birth rates and higher per capita income growth, allowing us to escape from the Malthusian Trap.
5. Colonization and Exploitation: Colonization had mixed effects (America’s growth was fueled by it, whereas Africa’s was harmed). The book argues the divergence is due to whether climate allowed many Europeans to move to their colonized lands and thus create inclusive institutions vs. creating exractive institutions which have persisted in some parts of the world.
Other than the broad read on history (which I always tend to enjoy) there were a few interesting ideas in the book including:
1. The book emphasizes the role limited government took in economic growth, guaranteeing property rights and individual liberty. While the book didn’t mention it, the creation of limited government felt like imposing a stronger form of Median Voter Theorem on rulers.
2. The book explores how the incentive for innovation in Britain and the US was strong due to high wages and low capital and energy costs. This idea was also touched on in The Great Demographic Reversal which argued the future labor shortage would lead to greater investments in capital. How the World Became Rich likely agrees:
a. “When labor is relatively expensive, producers choose a technology which is labor-saving and capital-intensive. On the contrary, when labor is cheap, producers will choose labor-intensive production. In the second stage, there is relatively rapid technological progress in the capital-intensive technology. This makes the capital-intensive technology profitable even in locations where labor costs are low and capital and energy are relatively more expensive,” 168.
Perhaps I am being too nitpicky and I am critiquing the book on dimensions of which it is not meant to be critiqued—the book is seemingly an aggregation of research and does a great job of this—but I found many of the arguments relatively weak or ambigous. These include:
1. The authors argue the issue with using geography as a predictor for the start of economic growth is that it is largely unchanging and thus can’t account for change:
a. “As it is mostly fixed, it cannot easily explain why the Middle East was much more developed in 1000 than Western Europe yet by 1800 Western Europe was far ahead of the Middle East,” (22).
b. It is true that geography can’t work in isolation, but I felt they didn’t focus enough on geography. The Middle East is flush with oil, but for most of human history, this didn’t matter! Oil didn’t become a significantly important fuel source until the 1800s. The authors argue a few times that geography is “fixed,” yet this is only true if you are ignoring the changing needs of humanity.
c. A better critique of geography can be found in Marko Papic’s Geopolitical Alpha: “Mountainous terrain combined with ethno-linguistic heterogeneity has consigned Afghanistan and Bosnia to centuries of conflict, but Switzerland, cursed with similar topography and heterogeneity, is doing just fine,” 145.
2. The authors argue that the abundance of coal wasn’t a necessary condition for Britain’s industrialization:
a. “Had Britain had no coal, this would not have prevented industrialization. Coal would simply have been imported from Ireland, France, or elsewhere in Northern Europe. This would have been costly, but the additional costs were unlikely to have been decisive for Britain’s industrialization.” 35.
b. This is pretty difficult to prove and I wasn’t thoroughly convinced. The book argues Britain, not Germany or France had the exact preconditions for industrialization implying other nations likely wouldn’t have industrialized first. Had Britain not had coal (an artifact of exhausting their timber supply a few centuries earlier, thus leading to a search for it), would they have really realized its importance? Would they have been able to import enough of it to achieve sustained economic growth? I am skeptical here.
3. Throughout the book, there are various conflicting examples as to more elites in power being beneficial for economic growth vs. more elites in power leading to harmful policies. I agree there are complex dynamics at play, but the book never attempts to address what appears to be a fundamental aspect of institutional quality. Here are some examples:
a. On how elites led to favorable trade policies: “Meanwhile, the British state was committed to free internal trade. This was no doubt due, in part, to the pre-eminence of economic elites in Parliament,” 161.
b. On the fall of Iraq, medieval northern Italy, and the early modern Dutch Republic: “Those who owned the factors of production gained more political power. They used it to dominate the markets for land, labor, and capital, as well as financial markets, making these markets less free in the process,” 43.
c. On the role of parliament in constraining the crown: “Because Parliament now had power over the English purse-strings, creditors were more willing to believe they would be paid back,” 145.
d. On how elites ran parliaments and extracted from society: “Parliaments were characterized by unabashed rent-seeking. Parliament passed many acts that benefited specific interests–most notably the Calico Act of 1721, which banned the importation of most cotton textiles–at the expense of the larger public,” 146.
5. A relatively small point, but when discussing the growth patterns the East Asian economies took over the last ~70 years, they argue that these countries were committed to free trade and didn’t rely on tariffs or subsidies. Chip War by Chris Miller would disagree! Chip War showed numerous examples of South Korea subsidizing Samsung, Taiwan subsidizing TSMC, Japan subsidizing their chip industry, and so on.
a. “The East Asian economies were all relatively small. They were therefore forced to rely on international markets. They did not fall into the trap that many larger developing countries did of relying on protective tariffs and subsidies to support domestic manufacturing firms,” (209).
6. The book argues the culture of Europe changed prior to the Industrial Revolution and began emphasizing hard work whereas before it scoffed at it. However, the book didn’t give much data on this nor provide an explanation for why this occured. At the same time, it stated this new industrious attitude (which preceded the Consumer Revolution) was key to unlocking economic growth.
The book starts with an exploration of the many theories about why the world became rich. These include:
1. Geography: Geography can enable lower transportation costs (waterways) and lower disease levels along with allowing for higher population density.
2. Institutions: Institutions form the incentive structure for a society and good, inclusive institutions can guarantee property rights and impose constraints on rulers, allowing for economic growth.
3. Culture: Culture is remarkably persistent and can influence attitudes on work ethic, education, politics, and trust—all which are valuable for economic growth.
4. Demography: A prioritization of quality over quantity of children led to a demographic transition of lower birth rates and higher per capita income growth, allowing us to escape from the Malthusian Trap.
5. Colonization and Exploitation: Colonization had mixed effects (America’s growth was fueled by it, whereas Africa’s was harmed). The book argues the divergence is due to whether climate allowed many Europeans to move to their colonized lands and thus create inclusive institutions vs. creating exractive institutions which have persisted in some parts of the world.
Other than the broad read on history (which I always tend to enjoy) there were a few interesting ideas in the book including:
1. The book emphasizes the role limited government took in economic growth, guaranteeing property rights and individual liberty. While the book didn’t mention it, the creation of limited government felt like imposing a stronger form of Median Voter Theorem on rulers.
2. The book explores how the incentive for innovation in Britain and the US was strong due to high wages and low capital and energy costs. This idea was also touched on in The Great Demographic Reversal which argued the future labor shortage would lead to greater investments in capital. How the World Became Rich likely agrees:
a. “When labor is relatively expensive, producers choose a technology which is labor-saving and capital-intensive. On the contrary, when labor is cheap, producers will choose labor-intensive production. In the second stage, there is relatively rapid technological progress in the capital-intensive technology. This makes the capital-intensive technology profitable even in locations where labor costs are low and capital and energy are relatively more expensive,” 168.
Perhaps I am being too nitpicky and I am critiquing the book on dimensions of which it is not meant to be critiqued—the book is seemingly an aggregation of research and does a great job of this—but I found many of the arguments relatively weak or ambigous. These include:
1. The authors argue the issue with using geography as a predictor for the start of economic growth is that it is largely unchanging and thus can’t account for change:
a. “As it is mostly fixed, it cannot easily explain why the Middle East was much more developed in 1000 than Western Europe yet by 1800 Western Europe was far ahead of the Middle East,” (22).
b. It is true that geography can’t work in isolation, but I felt they didn’t focus enough on geography. The Middle East is flush with oil, but for most of human history, this didn’t matter! Oil didn’t become a significantly important fuel source until the 1800s. The authors argue a few times that geography is “fixed,” yet this is only true if you are ignoring the changing needs of humanity.
c. A better critique of geography can be found in Marko Papic’s Geopolitical Alpha: “Mountainous terrain combined with ethno-linguistic heterogeneity has consigned Afghanistan and Bosnia to centuries of conflict, but Switzerland, cursed with similar topography and heterogeneity, is doing just fine,” 145.
2. The authors argue that the abundance of coal wasn’t a necessary condition for Britain’s industrialization:
a. “Had Britain had no coal, this would not have prevented industrialization. Coal would simply have been imported from Ireland, France, or elsewhere in Northern Europe. This would have been costly, but the additional costs were unlikely to have been decisive for Britain’s industrialization.” 35.
b. This is pretty difficult to prove and I wasn’t thoroughly convinced. The book argues Britain, not Germany or France had the exact preconditions for industrialization implying other nations likely wouldn’t have industrialized first. Had Britain not had coal (an artifact of exhausting their timber supply a few centuries earlier, thus leading to a search for it), would they have really realized its importance? Would they have been able to import enough of it to achieve sustained economic growth? I am skeptical here.
3. Throughout the book, there are various conflicting examples as to more elites in power being beneficial for economic growth vs. more elites in power leading to harmful policies. I agree there are complex dynamics at play, but the book never attempts to address what appears to be a fundamental aspect of institutional quality. Here are some examples:
a. On how elites led to favorable trade policies: “Meanwhile, the British state was committed to free internal trade. This was no doubt due, in part, to the pre-eminence of economic elites in Parliament,” 161.
b. On the fall of Iraq, medieval northern Italy, and the early modern Dutch Republic: “Those who owned the factors of production gained more political power. They used it to dominate the markets for land, labor, and capital, as well as financial markets, making these markets less free in the process,” 43.
c. On the role of parliament in constraining the crown: “Because Parliament now had power over the English purse-strings, creditors were more willing to believe they would be paid back,” 145.
d. On how elites ran parliaments and extracted from society: “Parliaments were characterized by unabashed rent-seeking. Parliament passed many acts that benefited specific interests–most notably the Calico Act of 1721, which banned the importation of most cotton textiles–at the expense of the larger public,” 146.
5. A relatively small point, but when discussing the growth patterns the East Asian economies took over the last ~70 years, they argue that these countries were committed to free trade and didn’t rely on tariffs or subsidies. Chip War by Chris Miller would disagree! Chip War showed numerous examples of South Korea subsidizing Samsung, Taiwan subsidizing TSMC, Japan subsidizing their chip industry, and so on.
a. “The East Asian economies were all relatively small. They were therefore forced to rely on international markets. They did not fall into the trap that many larger developing countries did of relying on protective tariffs and subsidies to support domestic manufacturing firms,” (209).
6. The book argues the culture of Europe changed prior to the Industrial Revolution and began emphasizing hard work whereas before it scoffed at it. However, the book didn’t give much data on this nor provide an explanation for why this occured. At the same time, it stated this new industrious attitude (which preceded the Consumer Revolution) was key to unlocking economic growth.
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...).
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
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.)
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