Once you climb historic College Hill in Providence, Rhode Island, you’re rewarded with a breathtaking view of Brown University’s scenic campus. It is one of the most traditional and renowned universities in the United States and part of the world-renowned Ivy League – a historic association of eight elite universities in the Northeast of the USA. The economist Oded Galor (69) has been researching and working here since the 1980s. His publication list is impressive. He is the editor of the most prestigious journal for economic growth research, the Journal of Economic Growth. His most cited article is from 1993 and describes a pioneering model that was the first to incorporate the role of inequality in society into macroeconomic theory. Today, his countless alumni occupy influential positions in institutions and universities worldwide. The best known at the moment is probably the Argentine Minister for Economic Affairs, Martín Guzmán.
Galor is a leading figure in professional circles, he has been awarded several honorary doctorates, and in 2020 the Frankfurter Allgemeine Zeitung named him one of the most promising candidates for the Nobel Prize in Economics.
99.9 percent of the time stagnation
Dozens of economists around the world have comparable biographies. However, Galor has achieved something unique for an economist: to write a popular science book that has been published in almost 30 languages simultaneously. “The Journey of Humanity – The journey of mankind through the millennia: On the emergence of wealth and inequality” summarizes a considerable part of his life’s work in a very readable and surprisingly entertaining book. Although the underlying research articles are based almost entirely on mathematical modeling and/or statistical analysis, this work does not use a single equation.
Galor’s paper is motivated by two basic questions. First, why, after two to three hundred thousand years of stagnation, man managed to significantly increase his standard of living in a relatively short period of time. Second, which factors explain the immense inequality between countries and regions today.
With education out of the spiral of misery
After a brief excursion into evolutionary biology and the migration of Homo sapiens from East Africa around a hundred thousand years ago, the author describes an iron law that applied to 99.9 percent of human history. Namely, that every human innovation – starting with primitive stone tools – has always only temporarily improved the per capita standard of living, and ultimately only led to a higher number of descendants that had to be fed.
A milestone in this evolution – after tens of thousands of years of gradual growth in the world population – was finally the sedentarization: in several places on the globe beginning about 12,000 years ago in the Fertile Crescent, the region between the eastern Mediterranean and Mesopotamia (Euphrates/Tigris). While this so-called Neolithic Revolution did not significantly increase living standards, it did accelerate the process of constant human innovation, leading to much faster population growth.
Even if good climatic conditions, combined with political stability, often led to extraordinary civilizations, for example in Egypt, Persia, Greece, Central America, China or Rome, the fruits of progress always had to be shared with a growing number of fellow human beings. This in turn meant that living standards developed back to a subsistence level.
Human ingenuity, the accelerating pace of technological progress, and the resulting increase in population density irrevocably led to a turning point in history according to Galor’s unified growth model. Society’s level of technology was so high that parents began to prepare their descendants for this new world and to invest more in their children’s upbringing and education. As a result, they were forced to have fewer children on average. Subsequent drastic reductions in child mortality and increased life expectancy further increased the return on this investment in children’s human capital, while rising wages for women further increased the cost of raising children.
All these factors are characteristic of the so-called demographic transition, which represents the second crucial milestone for Galor. For the first time in history, innovation and rising incomes no longer led to a larger population, but to sustained increases in living standards. Like the Neolithic Revolution, the Industrial Revolution and demographic transition only began in some parts of the world, but then gradually spread across the globe.
When it comes to describing differences in the prosperity of different nations over the past decades, one often reads about the role of political and legal institutions or about cultural factors. Galor doesn’t deny their importance, but finds that they didn’t just fall out of the sky, but mostly grew as a function of regional climatic and geographical conditions. Although changes in cultural and institutional conditions can explain a considerable part of the income variation of recent decades or centuries, they play only a minor role in the long term.
Reinforced contaminated sites
He sees the reason for the growing gap between poor and rich countries in pre-existent conditions that have their roots in the distant past. These have simply been reinforced by the most recent episodes of globalization and ever-increasing global networking.
Readers of Yuval Harari’s bestseller “Sapiens” will no doubt have recognized some parallels. Born in Israel, Harari and Galor are both leaders in their fields, both published their books first in Hebrew, and both claim to explain the long-term evolution of anatomically modern humans. While Harari’s book is primarily based on anecdotal evidence and narrative, Galor’s “Journey of Humanity” is based on dozens of scientific articles published in the most prestigious peer-reviewed journals over the past three decades. Even if Harari’s book reads very well, Oded Galor’s new publication is scientifically a lot more serious – especially for the period after human settlement.
Income fourteenfold
Galor describes the human success story as a lengthy but constant process that has been evident for thousands of years. This culminated around two hundred years ago in a phase shift that subsequently led to a fourteen-fold increase in the average global income level. Ever accelerating technological progress has doubled our life expectancy and virtually eliminated infant mortality, which was so ubiquitous until recently, in short, raised our prosperity to a level that would have been simply unimaginable for our ancestors. Galor is also optimistic about the future – including threats such as climate change. However, in his “Journey of Humanity” he describes in a convincing and accessible way that it is critical to passively accept the deep roots of the prevailing global inequality. This is the only way we can design solutions to close the prosperity gap between regions in the long term and at the same time avoid mistakes in development aid – such as in the 1980s and 90s.
The Upper Austrian Alexander Lehner did his doctorate in economics at the University of Bologna and will be moving to the University of Chicago in the summer as a university assistant (postdoc) under Nobel Prize winner Michael Kremer.
Source: Nachrichten
