Why are some areas of the world so poor and others so wealthy?

Why are some areas of the world so poor and others so wealthy? Economists generally look for answers in contemporary conditions, such as the soundness of economic policies or the presence of political instability. When they do look to history, they tend to point to the Industrial Revolution or the colonial period as parting points, when some countries hopped on the train to modernity and others stayed at the station. But economists Diego Comin of Harvard University, William Easterly of New York University, and Erick Gong of the University of California, Berkeley, contend that inklings of future development patterns can be discerned as far back as the time of King David.

Comin and colleagues assembled “snapshots” of development for the predecessors of 100 modern nations at three points in history. For 1000 bc and “AD 0,” they looked at whether a society had technologies such as writing, pottery, and bronze or iron weapons, and whether it had begun to use pack or draft animals for transportation. For 1500, the relevant advances included firearms, ships capable of crossing oceans, magnetic compasses, movable-block printing, steel, and plows. The authors found that the level of technology adoption in 1000 BC explained differences in technological prowess 2,500 years later—in 1500, just before colonization—and that the technological differences in 1500 strongly predicted wealth variations today.

To put a number on it, with the data adjusted to account for migrations (thus counting America today as primarily European, not Native American), the countries that were the most technologically advanced in 1500 have populations earning 26 times more per capita than those that live in countries that were behind 500 years ago.

The major trends reinforce the authors’ belief that “technology adoption dynamics”—the inverse relationship between the cost of adopting new technology and a country’s level of development—play a major role in determining the wealth of nations today. Well-known historical puzzles, such as China’s failure to capitalize on its ancient technological achievements and the stagnation in the countries of the Islamic empire after their early progress, are not numerous enough to overturn the worldwide correlations.

The authors say that although their results help explain historical patterns, they do not predict the future. Today, technology is developed and spreads much more rapidly than in the past. It’s not a sure thing that the dynamics that shaped the last 3,000 years of development will persist in the centuries to come.

THE SOURCE: “Was the Wealth of Nations Determined in 1000 BC?” by Diego Comin, William Easterly, and Erick Gong, in American Economic Journal: Macroeconomics, July 2010.

Photo courtesy of Flickr/Reji