November 4, 2006
Technology Adoption & Very Long Term Prosperity
A paper out of NYU explores the question, Was the Wealth of Nations Determined in 1000 B.C.? [pdf]:
What does seem inescapable from this finding (if it is taken at face value despite the caveats) is that development is a very long run process. The tendency of policymakers and international institutions to overemphasize the instruments under their control may have contributed to an excessive weight being placed on the behavior of modern-day governments and development strategies as a determinant of development outcomes.
Their methodology was to measure, from available data, the use (but not the intensity) of cutting-edge technological innovations from 1000 B.C., 0 A.D., and 1500 A.D., and then to run some regressions to see what the correlation is to wealth in today’s nation-states.
Some excerpts from the paper:
For example, in the dataset for 1000 B.C., we consider two transportation technologies: pack animals and vehicles. A country’s level of technology adoption in transportation is then determined by whether vehicles and/or draft animals were used in the country at the time.
In 1000 B.C. the Arab empire and China have an overall technology adoption level of 0.95 and 0.9 respectively, while in India and Western Europe the average adoption level are 0.67 and 0.65 respectively. In 0 A.D. India and Western Europe catch up with China and the Arab empire. In 1500 A.D. Western Europe has completed the transition and is the most advanced of the four great empires with an average overall adoption level of 0.94. China remains ahead most countries with 0.88. But the Indian and the Arab empires have fallen behind. The average overall adoption levels in these empires are 0.7.
Among the interesting implications is the degree to which, they believe, we may be misreading the causes of poverty:
20 percent of the income difference between Europe and Africa is explained by Africa’s lag in overall technology adoption in 1000 B.C., 7 percent is explained by the technology distance in 0 A.D., and 75 percent is explained by Africa’s lag in overall technology adoption in 1500 A.D. This gives a very different perspective on Africa’s poverty compared to the usual emphasis on modern governments. It also shifts backward in time the historical explanations for Africa’s poverty, compared to the usual emphasis of historians on the slave trade and colonialism.
You may also remember the the “latitutde hypothesis” popularized a few years ago, which attempted to correlate a nation’s latitude with is prosperity. The authors here compared their findings:
As emphasized by the previous literature, being far from the Equator tends to be associated with higher levels of current income per capita. Controlling for the latitude of countries, however, does not eliminate the strong positive effect of overall technology adoption in 1500 A.D. on current development. This effect remains statistically significant, though the effect of technology adoption history on 1000 B.C. and in 0 A.D. on current development become insignificant after controlling for the distance to the Equator or after including the tropical dummy.
So, why does the willingness or ability of ancient cultures to adopt new technologies affect us so much today? They offer a couple of pretty mundane hypotheses:
First, it seems to us the simplest hypothesis with which to begin is that adopting one technology today makes it much easier to adopt subsequent technologies in the future […] Second, we suggest (not so controversially) that technology is a principal determinant of a country’s level of development. Hence, countries that currently are the technology leaders are the richest countries and countries that fail to use advanced technologies are the poorest. In short, as Mokyr (1990) memorably argued, technology is the “lever of riches.”
A couple of potential flaws/unanswered questions, which I don’t recall reading in the paper:
- the sparseness of data from 1000 B.C. suggests a couple of key archeological finds could nullify the correlation, if the now-poorer nations could be shown to have adopted technologies earlier, but were later conquered or suffered through natural disasters and evidence destroyed;
- pre-existing wealth, war or strokes of luck may have driven both technological adoption and longer-term propserity
(Link via Marginal Revolution.)