In my last post, I discussed Oded Galor and Omer Moav’s paper Natural Selection and the Origin of Economic Growth. As I noted then, my PhD supervisors, Juerg Weber and Boris Baer, and I have written a discussion paper that describes a simulation of the model.

In the discussion paper we consider the entry of people into the population that have a low preference for child quality – i.e. they weight child quantity more highly. Entry could be through migration or mutation. We show that if people with a low enough preference for quality enter the population, their higher fitness in the modern growth state can drive the economy back into Malthusian conditions.

To show this, we simulated a version of the model which had present at a low level in the initial population a genotype with a very low preference for educating their children (I refer to them as the strongly quantity-preferring genotype). This strongly quantity-preferring genotype has a similar fitness to other genotypes that do not educate in the Malthusian state, and declines in prevalence while the quality-preferring genotype increases.

Once the economy takes off into the modern growth state, the strongly quantity-preferring genotype has the highest fitness as it dedicates the lowest proportion of its resources to educating its children. The strongly quantity-preferring genotype increases in prevalence until, eventually, the average level of education plummets, undermining technological progress. The world returns to a Malthusian state, with high population growth eroding the income benefits of all earlier technological progress.

The following chart shows the rate of growth of population, technological progress and income per person. The first 70 to 80 generations look like the base model simulation I described in my earlier post. However, after that point, technological progress plummets to zero. For the next 150 or so generations, population growth is positive, which can occur as per person income is above subsistence. Eventually, population growth drives income down to subsistence levels.

In the next figure, you can see that the strongly quantity-preferring genotype, genotype c, grows from being a negligible part of the population to being over 90 per cent . It is this change in population composition that drives the return to Malthusian conditions (you can also see the small peak in quality-preferring types around generation 48 that kicks off the Industrial Revolution). The strongly quantity-preferring genotypes educate their children far less than the other genotypes, depressing technological progress.

There is no escape from the returned Malthusian conditions. The quality-preferring genotype will have a fitness advantage in this new Malthusian state and will increase in prevalence. Whereas that caused a take-off in economic growth the first time, this time there is no take-off. The strongly quantity-preferring types, which now dominate the population, cannot be induced to educate their children. They simply breed faster to take advantage of any technological progress spurred by the small part of the population that is educating their children.

This result could also be achieved by introducing the strongly quantity-preferring genotype into the simulation at other points in time. If it occurs after the Industrial Revolution, the timing of the return to Malthusian conditions will occur later. However, short of restricting the range of potential quality-quantity preferences, there is no way to avoid the return to Malthusian conditions in this version of model. The strongly quantity-preferring genotypes will always have a fitness advantage when income is above subsistence and their population growth will drive income back down to subsistence levels.

There are, of course, a few possible interpretations of this result. The model or assumptions may be missing an important element (or at the extreme are wrong). Humans may only have quality-quantity preferences in the growth promoting range. Or possibly, modern levels of economic growth are only transient.

As I have focussed my PhD research on the link between evolution and long-term economic growth, for months I have meant to blog on the core paper in this area, Natural Selection and the Origin of Economic Growth by Oded Galor and Omer Moav. I have held off writing this post pending finalisation some of my own related work, which I have now done.

This paper is somewhat of an outlier as I’m not aware of any other paper that models the Industrial Revolution as a result of natural selection (apart from a soon to be published paper by Galor and Michalopoulos). There is another paper by Zak and Park that examines population genetics and economic growth (a topic for another blog post) but they do not directly tackle the Industrial Revolution. In A Farewell to Alms, Greg Clark notes that Galor and Moav’s paper reignited his interest in this topic.

Galor and Moav’s paper is based on a model that has two types of people in the population. Each of these types has a different, genetically inherited preference for quality or quantity of children. The quality-preferring genotype wants their children to have higher human capital, so they invest more in their education, while the quantity-preferring genotype is more interested in raw numbers.

During the long Malthusian era in which both genotypes struggle to earn enough to subsist (i.e. during the thousands of years leading up the Industrial Revolution), the quality-preferring genotypes have a fitness advantage. As the quality-preferring genotypes are of higher quality, they earn higher wages. These higher wages are more than enough to cover education expenses, so they are also able to have more children than the quantity-preferring genotypes.

This fitness advantage leads the quality-preferring genotypes to increase in prevalence. As this occurs, technological progress increases, as the average level of education in the population drives technological progress. This in turn increases the incentive to invest in education, creating a feedback loop between technology and education.

As this goes on, the population grows. Per capita income does not increase as any technological progress is balanced out by population growth, which is the central problem of the Malthusian world.

Eventually, the rate of technological progress gets high enough to induce the quantity-preferring genotypes to invest in education. When this happens, the average level of education jumps, boosting technological progress and causing the Industrial Revolution.

During this process, the population growth rate changes. Up to the time of the Industrial Revolution, population growth increases with technological progress. However, when the level of technology leaps with the Industrial Revolution, the level of education becomes so high that population growth drops dramatically. Everyone is investing more into education than raw numbers of children.

From an evolutionary perspective, the Industrial Revolution also changes the selection pressure in the model. After the Industrial Revolution, the quality-preferring genotypes invest so much into education that they have lower fertility than the quantity-preferring genotypes. They then reduce in prevalence, their fitness advantage erased.

Galor and Moav paper work through the dynamics of the model using phase diagrams. It is not particularly easy or intuitive to see the processes working together in their paper, so my two PhD supervisors and I have just put out a discussion paper that describes simulations of the model – and shows the dynamics in a form that is easier to visually comprehend. In the chart below, you can see the dramatic jump in technological progress around generation 45 of the simulation, with per capita income growth also jumping at that time. Meanwhile, population growth drops to zero.

This second chart shows the change population composition. The quality-preferring genotype (genotype a) steadily increases in prevalence through to the Industrial Revolution, peaking at just under 5 per cent of the population. Afterwards, it is selected against.

This change in selection pressure has an interesting implication. While natural selection is the trigger of the Industrial Revolution, the population composition before and after the transition is the same. There is no difference in population composition between developed and undeveloped countries. The only time there is a difference in population composition is during the transition, when the quality-preferring genotypes peak.

In some ways, the natural selection occurring in Galor and Moav’s model is a sideshow to the main event, the quality-quantity trade-off. In a similar model by Galor and Weil, a scale effect triggered the Industrial Revolution – that is, the concept that more people leads to more ideas, so technological progress increases with population growth. I am sure that other triggers could be substituted.

That highlights the point where I am not convinced that the model is true (to the extent that a model can be). As far as human evolution relates to economic growth, I expect that inherent quality is more important (and by quality, I mean economically useful qualities) than the quality-quantity trade-off. The Industrial Revolution was possible because higher quality people were selected for in the lead-up. Higher quality people had more children as they were genetically of higher quality and they passed their high quality genes to these children. The investment in quality is choosing a high quality mate.

If quality is inherent, a high-quality person should have as many children as possible and this would have little effect on quality. For a man of low resources, his larger problem is convincing a woman to mate with him and not deciding on the right quantity-quantity mix.

The other thing that I should note is that, like most economic models, Galor and Moav’s model includes consumption with no clear evolutionary rationale (an issue I have discussed in an earlier post). Why do people in the model consume more than subsistence? If some people chose to focus all excess consumption into raising children they would come to dominate the population. This might be justified as being something to which the population has not yet adapted, but that explanation does not satisfy me.

Having made these quibbles, the model is still an impressive feat. It would not have been an easy task to create a model with technological progress, population and per capita income all following a path that resembles the last few thousand years of economic growth. There are some further issues and extensions to the model that we explore in the discussion paper I referred to above, but I’ll talk about them in my next post.

Galor, O., & Moav, O. (2002). Natural Selection and the Origin of Economic Growth The Quarterly Journal of Economics, 117 (4), 1133-1191 : 10.1162/003355302320935007

It was only a matter of time before some economists grabbed this population genetic data and in particular, this work by L Luca Cavalli-Sforza, Paolo Menozzi and Alberto Piazza, to see whether it could shed any light on economic development. In a paper published (in one of the top economics journals) in 2009, Enrico Spolaore and Romain Wacziarg have taken data on genetic distance from the The History and Geography of Human Genes and asked whether it is correlated with differences in income between countries.

Before examining the data, Spolaore and Wacziarg proposed a model. Take an initial population that branches into two sub-populations each time period, with genetic distance between the two populations being the time since they had a common ancestor. Each sub-population has a transmitted characteristic which is represented by a number. This characteristic mutates either up or down with a 50 per cent probability each generation, so it follows a random walk. As a result, the difference in characteristics (or vertical distance) between two populations is a function of their genetic distance, with the vertical characteristics more likely to have “walked” apart as the time since the shared ancestor increases.

Next, the authors introduce technology. They assume that when a sub-population develops a new technology, other sub-populations’ ability to adopt that technology is a function of their vertical distance from the population at the technological frontier. If technology determines income, then the difference in income between two populations is the size of the relative vertical distance from the population that is at the frontier, which in turn is related to the genetic distance. The core insight from this model is that relative genetic distance and not absolute genetic distance should have a higher correlation with differences in technology.

While I am not sure this model adds much to the initial intuition, it does serve a useful purpose in that it looks to link genetic distance with income differences through differences in vertical characteristics. If genetic distance and income differences had been directly linked (positing that genetic distance is the barrier, as has been proposed within populations by Ashraf and Galor), we would not be left with the interesting question of what these characteristics are.

On the flip-side, Spolaore and Wacziarg have produced a model in which differences in vertical characteristics are a function of random drift, rather than selection. This is a touch unsatisfying, but it is hard to see how the authors could otherwise have produced the model without a theory about what those characteristics are. The model is also agnostic about how one country may develop technology as the authors assume transmitted characteristics do not have any effect on productivity. Introducing a theory of technological development could have been interesting as if certain traits make technological development more likely, there would be two effects creating the income difference – the higher probability of technological progress coupled with the barriers to diffusion.

With model in hand, Spolaore and Wacziarg turned to the population genetic data. Taking data on from 42 world populations, they matched it to countries (for which they have economic data) using information on the ethnic composition of those countries. This formed the basis of determining the genetic distance between countries. They also took a set of European population data (of 26 populations) which would allow them to do a European analysis. The regressions had to depart from the model and test the link between genetic distance and income differences directly as the data does not tell us anything about the vertical characteristics of the population.

The authors completed a mountain of regressions in analysing the data, so here are some of the headline findings. Taking the United States as the world technological frontier in 1995 (a fair assumption), the authors regressed genetic distance against the log of income and, as expected, found that income was negatively correlated with average genetic distance from the United States population. Genetic distance also had reasonably high explanatory power, accounting for 39 per cent of the variation in the sample. The chart below gives the picture. Throwing a range of other explanatory variables into the analysis such as geography and linguistic and religious differences did not materially change this result.

Spolaore and Wacziarg then ploughed deeper into the statistical analysis by creating 9,316 pairs of countries (from 137 countries) for the world sample and 325 pairs (based on 26 countries) for the European sample and assessed the link between genetic distance and income difference. When they use this broader set of pairs, as opposed to the simple comparison with the United States technological frontier, the degree of variation accounted for by genetic distance decreases, although the genetic distance still has a material effect. For example, one standard deviation change in genetic distance accounts for 16.79% of a standard deviation change in income difference when genetic distance alone is entered into the regression.

The authors also examined a range of other factors, such as Jared Diamond’s thesis about differences in geography and domesticable plants and animals. While including these factors in the analysis reduced the explanatory power of the genetic difference measure, the significance remained. The data also allowed some analysis of earlier time periods, which was in fact easier as most countries’ populations were more ethnically uniform in, say, 1500. At for the later dates, the relationship still held.

Given the agnosticism of Spolaore and Wacziarg on what the vertical characteristics driving income differences are, I hope this paper triggers some deeper examination of what is going on. What are the microeconomic mechanisms driving this result? What are the vertical characteristics that are relevant? And going the next step from Spolaore and Wacziarg’s model, how has selection affected these characteristics? Without the characteristics being subject to selection, the change in characteristics would be fairly slow. These slow changes are then hypothesised to create a substantial barrier to technological diffusion even though the populations have been separated a relatively short period. I would suggest that selection is required.

The authors suggest that more research on peaceful and non-peaceful interaction between societies may be useful to tease out the mechanisms that they have proposed. I agree that research may be interesting, but it leaves open the question which the model ignores – how did some countries get that technological lead in the first place. Do these vertical characteristics play a role in that? Asking why others did not follow does not seem as interesting as asking why some countries got the lead in the first place.

**By way of quick introduction, I am a PhD student in Western Australia and blog at Evolving Economics. I’ll be cross-posting the odd piece that might be of interest to gnxp.com readers (of which this is the first).

- Albion’s Seed. I read this in 2004, and it was a page turner.

- The Cousins’ Wars. I had thought of Kevin Phillips as a political writer, but this was a very engaging and deep cultural history. My prejudice resulted in my not reading this until 2009.

- What Hath God Wrought. This book focuses on the resistance of the Whigs and Greater New England to the cultural ascendancy of the Democrats and their “big-tent” coalition which included most of the South, the Mid-Atlantic, and much of the “Lower North” (e.g., the “butternut” regions of the Midwest settled from the Border South).

- The Rise of American Democracy. This is a good compliment to the previous book, in that it takes the “other side,” that of the Democrats. In many ways this is the heir to Arthur Schlesinger’s Age of Jackson.

- Throes of Democracy. A somewhat “chattier” book than the previous ones, it is still an informative read. It covers a period of history with the Civil War as its hinge, and so gives one the tail end of the Age of Sectionalism.

- Freedom Just Around the Corner. By the same author, but covering a period of history overlapping more with Albion’s Seed.

- The Age of Lincoln. This is not a “Civil War book.” It is of broader scope, though since the the war is right in the middle of the period which the book covers it gets some treatment. I’d judge this the “easiest” read so far of the list.

- Replenishing the Earth. This is about the Anglo world more generally, but it is nice to plug in America into a more general framework. North America is not sui generis.

- The English Civil War. This is obviously not focused on America, but it is a nice complement to Albion’s Seed, as it shows the very deep roots of the division between two of America’s folkways. The Cousins’ Wars serves as a bridge between the two, shifting as it does between both shores of the Atlantic.

I’m game for recommendations! I had a relatively traditional education in American history, and did very well in my advanced courses, but I knew very little before I read books like this.