Friday, February 23, 2007

Explaining (some) Global Inequality: Genes, Culture, or Luck?   posted by Herrick @ 2/23/2007 11:48:00 AM

Economists Wacziarg (Stanford) and Spolaore (Tufts) are using Cavalli-Sforza's genetic distance data. They find that countries that are genetically different from the rest of humanity tend to be poorer, even after controlling for lots of popular variables (like geography and colonial experience, two recent favorites). Their explanation: It's easier to get ideas from people who are similar--a contrast with much of the trade literature, where it's easier to get gains from trade from people who are dissimilar.

As Google Scholar shows, W&S have drawn some attention. Along related lines, Bill Easterly and his coauthors remind us that the countries that were more innovative in 1000 BC tend to be richer today--so not much is new under the sun.

Of course, W&S remind us that it's essentially impossible to disentangle genetic versus cultural stories when looking at nation-level data--and they note that their genetic measures are based on neutral markers, so it's "different," not "worse."

By contrast, one way to interpret Easterly's result is mere path persistence: A multiple-equilibrium story where you get it right once through sheer luck, and afterwards you're likely to stay lucky forever. Difficult to disprove--maybe it's a fair coin, and the West and East Asia just flipped Heads...

Genes, culture, luck: All three stories deserve some attention over the next few years. Two big problems: Measuring culture and luck. Genetic differences, those we'll be able to measure, with greater precision every year. But that's almost as much a curse as a blessing, since it'd be extremely valuable to be able to disentangle these hypotheses.