How far can cultural differences be traced back?

Cultural differences between countries are quite large, and likely affect differences in economic development. But how did these differences arise in the first place? Consider recent history: it’s not a stretch to believe that Europeans who immigrated to the US were generally individualistic, adventurous, entrepreneurial people who potentially did not fit in well with their existing society; they were possibly non-conformist, less obedient that those who stayed.

Values such as individualism, innovativeness and entrepreneurialism gave these immigrants an edge in the longer term, and this made the US very successful, even relative to Europe. Can such a story apply over the much longer term? Can it explain how cultures diverged thousands of years ago?

Continue reading

Advertisements

Is industrialization conducive to economic prosperity?

Conventional wisdom suggests that industry is important for economic development. And while indeed the rise of industry coincided with the time when economic growth took off in the Western world, historically industrial regions (such as the Rust Belt in the US, the Midlands in the UK, or the Ruhr Valley in Germany) are currently struggling economically relative to other regions within their respective countries.

This post not only looks at why this is the case, but also at whether conventional wisdom is wrong: was it really industrialization per se that allowed economic growth to skyrocket in the 19th century? Or did these two events just happen to coincide?

Continue reading

Islam, trade and development

The popularity of a religion is probably determined by various forces, one of which is – as with any activity involving humans – economic incentives. This post examines how certain practices of Islam helped historical Arabia become more prosperous, and how those same practices later limited economic growth in the region.

When Islam arose it provided an important solution to some problems, namely the constant raids of traders from richer oasis cities by poorer nomadic tribes in the desert. It did so by aligning economic incentives in such a way that it was better for the poor not to raid, and for the rich to redistribute some of their income to the poor to prevent raids.

Continue reading

How economic incentives shape wealth transmission

Parental wealth transmission to children can take many forms. Primogeniture refers to a preferred (usually first-born) child getting all the wealth, whereas a completely egalitarian transmission would mean each child getting the same share. Then there is everything in-between.

Which one of these societies tended towards historically varied quite a bit by time and place. Surely, there are cultural and historical reasons for this. But there are also economic ones.

Continue reading

The origins of patience

The rate of time preference or in other words long-term orientation has been found to be an important determinant of human behavior. Generally, it is associated with better educational outcomes, and even better physical and emotional health. On an aggregate level it can affect differences in GDP across countries.

This post presents a new paper that asks how differences in time preference arose. Clearly, we see substantial variation in time preference across countries, so the question is what caused this.

Continue reading

Why has monogamy prevailed?

Have you ever wondered why the world is largely monogamous today? This is an especially interesting question if you consider that historically monogamy did not always enjoy such superiority, not even in Western societies. What happened?

While at first it may sound strange, as with everything else incentives play a great role in who marries whom. Thus marriage has been extensively studied by economists as well as sociologists. In this article, I briefly present the three main theories on why humanity has made this transition from polygamy to monogamy. This will include answering: why was polygamy more common in the past, and what made it disappear.

Continue reading

Genetics and development

Genetic diversity is an interesting phenomenon. Too little of it and the population can be too homogeneous, too much of it and there will be a lot of mistrust and conflict. This exactly sounds like something that could potentially influence economic development, doesn’t it?

Research on genetic diversity’s effect on development is quite new. It started with Ashraf and Galor’s (2013) paper, which established the pattern described above: that there is a hump-shaped relationship between genetic diversity and development. Some remain skeptical, however. So let us look at a new take at this question.

Continue reading