So we're going to begin with
why some countries are rich and
why some countries are poor.
When we look at the origins of the current
income disparities across countries,
we turn to Jared Diamond.
His approach is unique, and
it is not the only approach, but
it is an interesting one.
His approach says, where you are makes
the difference, not who you are.
Where you are in the world will
determine whether you are rich or
whether you are poor.
So, if we look at his overall bottom line,
early development of food production or
early arrival of food production,
leads to vast enough production
to produce large surpluses.
The surpluses lead to large, dense,
sedentary, stratified societies
that leads to the accumulation
of global power with guns,
germs, and steel to dominate other
societies as well as accumulate wealth.
Note, this is not anything special about
the people in these various large regions
that makes them rich,
it is instead where they lived.
So how is this, how is this that early
food production determines massive wealth?
Well, we start with food production
versus hunting and gathering.
Rational economic agents are maximizing
their return on calories with
the least amount of cost, time, and
effort given some level of certainty.
Right, if you starve for a week,
the game is over, so historically,
the various groups have
judged each other negatively.
Hunter and
gatherer is seen as less than someone
who lives in a solid farming community,
that somehow they are less developed,
but, in fact,
both groups are pursuing
with rational thoughts
But, in fact, all on average
are driven by economic rationality,
both groups, the hunter and
gatherers as well as the farmers
are driven by economic rationality.
Evidence includes the fact that,
when food production or various crops were
introduced, a group would adopt the
production suited to their environment.
So again, you weren't rich because
you lived in a certain region, and
in that region,
you adopted early farming techniques.
You adopted farming early.
You left hunting and gathering and
you joined the farmers earlier.
All right, now who did that?
Was it just the smarter ones that found
themselves farming instead of hunting and
gathering?
And the answer is no.
It turns out each group had
different incentives, but
those that had the incentive
to start farming early
were the ones that ended up with
the power and the wealth later on.
Some of the reasons we have seen this
transition globally between hunting and
gathering to farm producing overall
has to do with a variety of factors.
First is the decline in
the availability of wild food, right?
At the end of the Pleistocene, there
was an extinction of all of the large
mammals in the Americas,
some in Eurasia and Africa.
Many blame humans, some blame climate,
either way we no longer had
these large mammals to hunt.
We also had an increased availability of
domesticable wild plants with climate
changes, so climate change also brought
wild plants that could be domesticated,
that led to more farming.
There was also the development of
technologies for collecting, processing,
and storing wild foods.
Blades, baskets, roasting.
As those became more advanced,
farming was more attractive, and
then we get this autocatalytic
process of increased food production
leading to increased population.
This transition from hunters and gatherers
to food production increases birth rates.
Therefore, food production becomes
more necessary and expands.
This increase in food production
increases sedentary settlement.
Increasing sedentary settlement
increases population, so
greater food production was required.
Interestingly enough,
sedentary societies were
able to have a shorter time
period between children.
If you are a hunter-gatherer and you are
moving between seasons to different areas,
you had to have a four year-old
before you could have a new baby
because you could only
carry one child at a time.
However, in a sedentary society,
you could have those kids two years apart.
So, you really had this process
of increasing population
when you had a sedentary lifestyle.
Again, that forces you to be more
sedentary to increase your food production
and more kids, and so on, so the food
producers turned out to be more numerous.
And, therefore, could displace or
kill the hunters and
gatherers when they
wanted their resources.
Note, you could adopt farming if
your group was large enough or
geographically protected.
So, you could have farmers coming at your
society, and instead of being dominated or
killed by them, you can just
adopt their farming techniques.
But typically, you would have
to be a large enough hunting and
gathering group, or you would have
to be geographically blessed,
such that those farmers were coming at
you from a distance where you were safe.
So, if you look specifically,
when you think early farming means guns,
germs, and steel, which means you are
going to end up one of the rich societies.
We look very specifically at how
plants and animals are domesticated.
It turns out the earliest fertile crescent
crops were approximately in 8000 BCE,
these are the grains and the pulses,
wheat, barley, and peas.
These were easy to grow and store and
had very little variation
from the wild varieties.
Then came the fruit and nut trees.
Then came the fruit and
nut trees around 4000 BCE.
It takes three years for
these trees to bear fruit, so the society
must be settled for a long period of time,
that's why these came a little bit later.
And then we needed,
in our next wave of domesticated food,
we have fruit trees
that required grafting.
These were approximately 500 BCE.
These were your pears and your apples, and
those fruits trees requiring grafting
were discovered by the Chinese.
In fact, you couldn't just take
a seed from an apple, plant it, and
get the same variety of apple.
You had to actually take a branch off of
an apple tree that was the variety that
you wanted and graft it to another tree to
get the variety that you were hoping for.
So again,
the technology was more advanced, and
it took until 500 BCE in
order to get that technology.
And then, the last big
domesticated crop were the weeds.
[LAUGH] These were the little plants and
shrubs that grew in the orchards,
in the fields.
These weeds were around the same
time period, these are 500 BCE.
Beets, oats, rye, and lettuce.
So, when you look at
these farming societies,
they were gradually domesticating more and
more crops in order to serve
their growing population.
In addition to growing crops,
they used domesticated animals
also as a food source.
The requirements for
domesticating animals, or
the requirements of any animal to
be domesticable, are very strict.
In fact, you had to have a diet
that was herb-based, right?
They had to be herbivores or omnivores,
plant-based diets, otherwise,
it was just too expensive, right?
If you were trying to raise lions for
food, you would have to raise a lot
of other animals to feed the lions in
order to get the calories from the lions.
So, instead,
they focus on herbivores as domesticable
animals because those are the ones
that require much less food.
These animals also have to grow
at a really rapid rate, right?
You don't want to wait 40 years in order
to eat this animal that you are raising,
or 20 years to eat this
animal that you are raising.
They need to grow relatively quickly.
Also, problems of captive breeding,
these guys can't have mating rituals
that require time and space..
They have to be able to reproduce
in captivity very easily.
They have to have a mild temperament.
We can't domesticate hippopotamus, right?
These are the folks that kill animal,
that kill their zookeepers at the zoos.
We have to have relatively kind animals,
ones that aren't going to attack their
owners or kill their breeders, and the
animals must not have a tendency to panic.
Animals with a tendency to panic tend
to kill themselves in captivity, right?
They panic, they run, and
they get caught up by the gates, so
these are a lot of very strict
requirements to domesticate animals.
Including, and finally, the social
structure has to be very stratified.
Animals have to be used to following
the leader if they are going to live in
a herd.
So, when we look at what countries
are rich and what countries are poor,
what regions are rich,
which regions are poor.
Those folks with animals that were kind,
that were large,
that were herbivores and omnivores,
that were comfortable
breeding in captivity.
We're narrowing ourselves
down to very few animals.
Sheep, goats, cows,
later horses, camels, donkeys.
Really, we're left with that list
that showed up in its entirety
at around 2500 BCE, and
we're stuck with it, right?
We've added, I think,
the llama, maybe one other, but
we are stuck with a very short list
of animals that you can domesticate.
So, why then?
Why are the countries that
we know today rich and
the other countries poor?
We know they had to be early
food adopters because those
early food adopters had
the larger societies.
Those larger societies tended to be
much better at dominating in warfare.
They also had the technology in
warfare to dominate other societies.
In addition to using the large animals for
food,
they also Introduced with these large
animals, germs into their societies.
So, when folks live with
animals in the barn nearby,
in the same house with you,
you're around them a lot.
You get to share diseases
with the animals, and
you get to build up various
immunities to animal diseases.
And so, when you look at those societies
that dominated, that became rich,
they were the ones with the guns,
the germs, and the steel.
They were the early food adopters.
The early food adopters,
the early domesticated animal adopters.
All right, so who were they, right?
If we look at the Fertile Crescent,
we find that it was extremely unique.
Now this is the area that's now Iraq,
Iran, the area in
the Middle East that had the largest
zone of Mediterranean climate.
They had wet winters,
long, hot, dry, summers.
The greatest climatic variation from
season to season and year to year.
All of this led to variety in plants,
variety in plants so
that you could domesticate them.
Wide range of altitudes and topographies
within a short distance, which meant high
diversity in plants and animals, right?
Four of the domesticable
animals thrived in this area.
There was also less competition
from a hunter-gatherer lifestyle.
There was a short coastline,
they couldn't fish well.
Few rivers, gazelle had been over-hunted,
wild grains provided enough for
sedentary societies to begin
the process of farming early.
We also had something unique
about the continent that
the Fertile Crescent was on.
The Fertile Crescent itself provided
this wide variety of plants and
animals that were going to
lead to early food adoption.
We also had the orientation
of the continent
of Eurasia being east-west.
We had early production
of food in the Americas,
in Mesoamerica, in Africa, in the Sahel.
But it was the food production of
the Fertile Crescent that spreads farming,
farming techniques, technology,
domesticable animals across
the continent that the Fertile Crescent
was on much more rapidly.
If you look at the Americas and Africa,
you had relatively slow diffusion of these
farming techniques of these domesticated
animals, of crops, of livestock knowledge.
It was slow to spread as a result
of the north-south orientation.
If we look at Mexico to the US Southwest,
the knowledge of farming and
seeds moved at less than
a half a mile per year.
Corn and beans moved from Mexico to
the eastern US at 0.3 miles per year.
Llamas moved from Peru to
Ecuador at 0.2 miles per year.
However, crops and animals moved
from southwest Asia to Europe and
Egypt at 0.7 miles per year.
That might not seem like a big difference,
right?
You have your 0.3, your 0.5,
versus .7, however,
over decade after decade after decade,
this made a really huge difference.
If you look at the east-west
orientation of Eurasia,
they have the same day length,
the same seasonal variations,
similar diseases, similar regimes of
temperature and rainfall, and habitats.
Much more similar than those continents
with a north-south orientation,
where you have such different climates
close to the equator than you have so
far from the equator.
Not only does food production and
livestock, but
also technology traveled
more easily in Eurasia,
giving that continent more guns,
germs, and steel.
It turns out technology went hand
in hand with early food production,
earliest wheels were on carts
carrying agricultural produce,
writing was done by the elites while
supported by peasant food production.
This explanation where geography
is what makes the difference
between a rich country and
a poor country is very interesting, and
it does tell part of the story.
However, there are difficulties with
this approach, it's too simple, right?
There is more that goes on,
and there are regions of one
continent that are richer and poorer.
And there are places where we can see
early food production didn't necessarily
lead to the same level of success.
However, what Diamond gives us
is some insight into what could
be giving us this
difference between poor and
rich countries that in economic
development we're trying to explain.
And we're trying to get those poor
countries caught up with those rich
countries, so it's not ideal, right?
Diamond's approach is not ideal,
it's too simplistic.
It can tell part of the story but
not the whole story.
One other school of thought that has
been talked about quite a bit with
Diamond's approach is the approach
by Acemoglu and quite a few others.
That says that institutions are what
matters most, not just geography,
not just, are you an early food producer
and got the guns germs and steel?
But also, the institutions
that you develop as a society,
the way that humans themselves
decide to organize their
societies will determine whether or
not they prosper.
So, wide variety of papers,
each one has its own take
on this answer to the question of,
why one is rich and why one is poor.
However, institutions
can lead to innovation,
risks taking, saving for the future,
human capital growth or education.
The real problem that we
have with this approach,
however, is that,
what determines institutions?
Who determines institutions?
Are you successful so
you develop successful institutions?
Or are you developing the institutions
first, and therefore, become successful?
And this chicken and the egg question
has been very, very difficult for
economists to really pinpoint
how exactly institutions are involved
in economic growth, right?.
Do you have good growth strategy?
Which means you adopt these
great institutions, or
was it the great institutions that
gave you this great growth strategy?
So, both Diamond and
Acemoglu give us interesting pieces
to the puzzle of why some countries
are rich and some countries are poor, but
neither explanation is the total picture,
right?
It just gives us a hint
of why we find ourselves
with the goal of economic development.
