Elephantstrunk

Tyler Cowen reviews a book that, he argues, counters Guns, Germs & Steel.

Marginal Revolution: What makes a nation wealthy?
What makes a nation wealthy?

Economists typically explain the wealth of a nation by pointing to good policies and the quality of a country’s institutions. But why do these differences exist in the first place?

Professor Greg Clark of UC Davis, in his new book-length manuscript, resurrects Malthus, counters Jared Diamond (only recently has the European standard of living surpassed that of hunter-gatherer societies), shows the Industrial Revolution came only slowly, and argues that economists overrate the importance of good policy. We can separate out the influence of policy by looking at the differential productivity on the factory floor, across regions. The sheer quality of labor matters more than we used to think. Quality labor attracts capital, which in turn supports good institutions.

Here is the conclusion to my column:

Professor Clark’s idea-rich book may just prove to be the next blockbuster in economics. He offers us a daring story of the economic foundations of good institutions and the climb out of recurring poverty. We may not have cracked the mystery of human progress, but “A Farewell to Alms” brings us closer than before.

Clark also argues that sub-Saharan Africa is poorer than ever before, and that foreign aid worsens a zero-sum Malthusian trap. He makes the startling claim that gains in health are the worst thing we can bring to modern Africa. Here is the full column (by the way, I don’t write the titles or subtitles), which includes a link to Clark’s manuscript.

The book is not yet out, but it is the best of its kind since Guns, Germs, and Steel.

1. Economists talk about good policies because they are usually trying to influence a policy.
2. The startling claim that gains in health are the worst thing we can bring to modern Africa is pretty much the old canard that the West has given the Third World death control but not birth control.
3. There is an implicit suggestion that policies can be bad but not good but if something can be worse there must be something else that can be worse and you are bac where you started.
4. That said, I believe that policies don’t determine everything.
5. Quality of labour is nearly vacuous or tautologous.
6. If quality of labour is used to explain relative poverty it would be nice to see an economist start from the premise that low productivity behaviour is nevertheless the result of people responding to incentives.
7. William Easterley’s African shoe factory example might undermine some assumptions of comparability.
8. Barkley Rosser’s comment about economists and the prisoner’s dilemma is pretty funny. The economist is supposing that all relevant reality is captured in the rules of the game, the mathematician realises that there is a material wider context.