Links this week:
In my last post, I noted one of the major themes of a new Journal of Economic Literature paper, How Deep Are the Roots of Economic Development (ungated pdf). Enrico Spolaore and Romain Wacziarg reviewed some literature that makes a strong case that it is population, not institutions, that underlies long-term economic growth. This post turns to the focus of the second half of the article – the genetic and cultural intergenerational transmission of development. If it is populations that underlie development, how are the traits that affect development passed through the generations?
Spolaore and Wacziarg start their analysis by slicing the analysis of intergenerational transmission into two dimensions. First, there is the genetic and cultural dimension, which comprises three types of transmission: genetic, cultural and gene-culture coevolution (often called dual inheritance theory). Under gene-culture coevolution, both genes and cultures are transmitted across generations in a unified framework.
The second dimension concerns whether the intergenerationally transmitted traits directly affect productivity and economic performance, or act as a barrier to the flow of technological and institutional innovations. It is this second pathway that is the subject of the Spolaore and Wacziarg’s paper The Diffusion of Development, which analyses the effect of genetic distance on economic development.
With these dimensions, we have six possible combinations into which we can classify this type of research. I am not a fan of this taxonomy, largely because of the biological-cultural dimension. First, there is no case where there is not gene-culture interaction. Where a paper tends to focus generally relates to whether the question being asked warrants one of these factors being held fixed for the analysis. Further, it is difficult to make a model of economic development that is exclusively genetic as they inherently contain culture – the economic part of the model. For example, Spolaore and Wacziarg classify Galor and Moav’s paper on the inheritance of the preference for high or low quality children as being biological, even though technology progresses due to the genetically predispositions of the agents, and technological progress causes changes in the relative fitness of the model agents. There is two-way feedback – a gene-culture interaction.
Funnily enough, Spolaore and Wacziarg also do not seem enamoured with their distinction between biological, cultural and gene-culture evolution, although for different reasons to me. They conclude that:
[T]he most recent scientific literature suggests that it may be conceptually very difficult, or even meaningless, to separate biological and cultural mechanisms, given the coevolution of biological traits. Consequently, a more productive approach, from an empirical perspective, is to focus on whether intergenerationally transmitted traits – whether biological or cultural – operate directly or as barriers to the diffusion of innovations.
But are they seriously saying that the dairy example they offer – coevolution of the milking of livestock and lactose tolerance – has a meaningless distinction between culture and genetics? In parts of the article they seem to have taken the idea that nature and nurture interact and inferred that this means the distinction cannot be made. But it can, just as in the dairy example. What would be incorrect is to say that the dairying example is purely a genetic or cultural process.
Another factor that may have triggered their assessment about the nature-nurture distinction is that in articles and books analysing genetic factors underlying economic development, the author is often equivocal about whether the transmission mechanism is biological or cultural. In Galor and Moav’s paper I referred to above, they note in a footnote that transmission could equally be cultural. In Greg Clark’s A Farewell to Alms, Clark often appears to be wavering between whether the transmission of traits was cultural or genetic (although he appears to have moved more to the genetic side).
While there is equivocation from those who suggest there may be genetic factors, there is usually no such uncertainty expressed by those who suggest there is transmission of cultural factors underlying economic development. For example, Spolaore and Wacziarg refer to a paper by Doepke and Zilibotti in which altruistic parents shape their children’s preferences, ruling out genetic factors on the basis that the timescale covers “at most, a few centuries”, despite it being a timescale similar to that considered by Clark. A paper by Fernandez and Fogli on second generation Americans and the explanatory power of preferences in their home country could similarly be placed in the genetic basket, as could Algan and Cahuc‘s paper on the inheritance of trust. Even where there is an explicitly cultural transmission, such as Francois and Zabojnik‘s analysis of trust, the persistent trait sought to be explained often has material heritability in modern environments, suggesting a genetic factor is relevant.
Having said the above, the way I would frame the taxonomy is to consider it all as gene-culture coevolution, and within that framework ask what genetic and cultural factors are and how they are evolving and driving the economic outcomes.
I find Spolaore and Wacziarg’s second dimension of direct and barrier effects more useful. But towards the close of their article, they suggest that analysis of the direct effects of intergenerationally transmitted traits may be too hard, making a focus on barrier effects more likely to yield results.
For instance, while barrier effects can explain how the Industrial Revolution spread across different societies over time and space, it is much harder to identify which intergenerationally transmitted traits, if any, are responsible for the original onset of such a major technological and institutional change. This difficulty is due to at least two reasons. Firstly, phenomena such as the Industrial Revolution are, almost by definition, unique and exceptional, and therefore one cannot build a data set of different and independent Industrial Revolutions to test alternative theories of onset. Secondly, such a complex phenomenon is likely to be the outcome of a vast set of forces and causes, including historical accidents and contingencies.
True, it’s a hard question. But it is strange to close an article on the deep roots of development that tracks those roots to thousands of years before the Industrial Revolution with a statement that we may not be able to figure it out. More importantly, classing observed effects as barrier effects without analysing alternative hypotheses such as the direct effect of intergenerational transmission runs the risk of misspecification of models and incorrect attribution of causal relationships.
Ultimately, I wonder how much Spolaore and Wacziarg’s position is driven by the academic barriers to open discussion on genetic direct effects on economics development. It’s not a comfortable area of analysis and can attract critical attention, as Ashraf and Galor’s work did earlier this year.
Still, having spent most of this post complaining about a couple of parts of it, Spolaore and Wacziarg’s article is excellent. And as I noted in my last post, I’ve added the paper to my evolutionary biology and economics reading list.
I first flagged this article a year or so ago when it was released as a working paper, but the new Journal of Economic Literature paper How Deep Are the Roots of Economic Development (ungated pdf) by Enrico Spolaore and Romain Wacziarg has so much good material in it that it is worth a revisit.
I am going to cover the article over two posts. This first post covers the major theme of the first half of the paper – that it is populations, not institutions, that underlie persistent differences in economic development. In a second post, I comment on Spolaore and Wacziarg’s analysis of the genetic and cultural intergenerational transmission of development.
To start, I will let Spolaore and Wacziarg (or the authors they reference) do most of the talking. First, from Glaeser and colleagues (2004):
[Acemoglu, Johnson, and Robinson’s] results do not establish a role for institutions. Specifically, the Europeans who settled in the New World may have brought with them not so much their institutions, but themselves, that is, their human capital. This theoretical ambiguity is consistent with the empirical evidence as well.
On Michalopoulos and Papaioannou’s (2010) analysis of institutions in Africa:
Michalopoulos and Papaioannou (2010) find that national institutions have little effect when one looks at the economic performance of homogeneous ethnic groups divided by national borders. …
Overall, their findings suggest that long-term features of populations, rather than institutions in isolation, play a central role in explaining comparative economic success.
Putterman and Weil’s results strongly suggest that the ultimate drivers of development cannot be fully disembodied from characteristics of human populations. When migrating to the New World, populations brought with them traits that carried the seeds of their economic performance. This stands in contrast to views emphasizing the direct effects of geography or the direct effects of institutions, for both of these characteristics could, in principle, operate irrespective of the population to which they apply. A population’s long familiarity with certain types of institutions, human capital, norms of behavior or more broadly culture seems important to account for comparative development.
Finally, on Easterly and Levine (2012):
Easterly and Levine (2012) confirm and expand upon Putterman and Weil’s finding, showing that a large population of European ancestry confers a strong advantage in development, using new data on European settlement during colonization and its historical determinants. They find that the share of the European population in colonial times has a large and significant impact on income per capita today, even when eliminating Neo-European countries and restricting the sample to countries where the European share is less than 15 percent—that is, in non-settler colonies, with crops and germs associated with bad institutions.
This angle reflects Greg Clark’s analysis in A Farewell to Alms (largely contained in Chapter 8). Clark asks why economic growth took so long to emerge in England when the important institutional backbone for economic development was established well before 1800. Clark points to changes in the characteristics of the population.
These articles also reflect the question I tend to ask about institutional explanations of development. Why do good institutions exist in some places and not others? The above evidence suggests that institutions are largely endogenous to the population.
In my next post, I address the intergenerational transmission of traits. And I’ve added Spolaore and Wacziarg’s paper to my evolutionary biology and economics reading list.
Links this week:
A couple of weeks ago I flagged the Journal of Economic Behavior and Organization’s (JEBO) special issue Evolution as a General Theoretical Framework for Economics and Public Policy. I thought I would open my commentary on the special issue by examining one of the popular press articles that accompanied its launch, a piece by David Sloan Wilson called A good social Darwinism.
A couple of years ago Wilson wrote a series of posts at his blog Evolution for Everyone called Economics and Evolution as Different Paradigms. I wrote a series of posts in response to Wilson (here, here, here and here) setting out my issues with Wilson’s approach, particularly the caricatured version of economics. I also considered that Wilson sold the potential for evolutionary biology in economics a bit short, and I was somewhat pessimistic about what might come out of the Evolution Institute (This JEBO special issue has seen the Evolution Institute exceed my expectations.)
Wilson’s latest article continues in a similar vein, with a marginally more subtle perspective on economics, although still missing some of the richness. He starts by painting economics as torn between two ideas: Adam Smith’s “invisible hand” that could lead to benevolent outcomes despite no-one intending them; and Smith’s fear of naked self interest. By going too far in either direction, there can be significant costs, which Wilson suggests includes the Industrial Revolution (surely not) and the Great Depression on the one hand, and Communism on the other.
What Wilson sees as lacking is the ability of economics to navigate between these two extremes. He points to some of the attempts of economics to traverse this middle course, in which he includes Walrasian general equilibrium and the development of homo economicus. These concepts survived critiques by the likes of Thorstein Veblen to be adopted by, among others, Milton Friedman (I addressed Wilson’s views on Friedman’s The Methodology of Positive Economics in an earlier post).
Wilson then suggests that evolutionary theory can offer something here (concur), including a less Newtonian view of the world. The most interesting part of the article, however, is Wilson’s desire to rehabilitate the idea of the invisible hand through multi-level selection – that is, natural selection occurring at levels higher than the individual. While lower level units of selection (say, the gene) do not have the higher level units in mind, selection of higher level units shapes the traits of the lower level units such that they contribute to the good of the group. Wilson suggests that the invisible hand can operate in human groups as selection at the level of groups has shaped us that way.
As an example of this, Wilson points to the work of Elinor Ostrom, sadly unknown among most of the economics profession until her Nobel Memorial Prize in Economic Sciences in 2009. Ostrom did fantastic work on common-pool resources (such as fisheries, farm land or water) and showed that, under certain conditions, institutional arrangements could emerge without either private ownership or government intervention. Wilson then notes work (the subject of one of the JEBO papers) which suggests that these design principles can be expanded to a broader range of groups than just those managing common-pool resources. As a result, Wilson suggests that an evolutionary approach can offer a basis for “steering an intelligent middle course between extreme laissez-faire and ham-fisted regulation that have proven so disastrous in the past.”
But this is where Wilson misses one important interpretation of Ostrom’s work. Ostrom’s work was well-known and highly regarded before her 2009 prize by some economists who researched public choice and institutional development, many of whom were libertarians (and from the Austrian school of economics in particular). The reason they cherished Ostrom’s work was that it showed that the tragedy of the commons does not always require a solution to be imposed from above. Decentralised groups develop the rules that allow a solution to the commons problem to emerge cooperatively through voluntary association. As such, Ostrom’s work could be argued to support the laissez-faire end of the spectrum (although Ostrom was not a libertarian).
While it is possible to argue that it is the group that is autonomous, not the individual, another problem arises where the specific conditions that Ostrom identified are not met, such as clear group boundaries. For many economic questions, those group boundaries simply do not exist, leaving us back where we started in trying to steer the middle ground.
It is also not clear that evolutionary theory takes us to the middle. An evolutionary view of the humans in government and bureaucracies may lead to a rather pessimistic view of the ability (or motivation) of government to address “market failures”. The recent meeting of the Mont Pelerin Society (of which none other than Milton Friedman was a founder and past president) on Evolution, the Human Sciences and Liberty saw many make the argument that human nature points to a free society as the optimal state. Paul Rubin wrote the excellent Darwinian Politics: The Evolutionary Origins of Freedom as an argument that liberal society is the best fit for our evolved human natures. It is fair to say evolutionary arguments can and have been used to support all points on the political spectrum.
But let me close with some praise for Wilson. Although I find many specific points to disagree with him, from his interpretation of the invisible hand to his use of multi-level selection arguments, I am somewhat in awe of his productivity and energy. My initial pessimism about the Evolution Institute is turning into optimism. Even though Wilson has his perspectives, he seems to have a drive to bring interesting people and ideas together to address some economic questions that could truly benefit from an evolutionary approach.
My series of posts on the Journal of Economic Behavior & Organization special issue, Evolution as a General Theoretical Framework for Economics and Public Policy, are as follows:
Links this week:
Over the last couple of months I have been a silent participant in Geoffrey Hodgson and Thorbjørn Knudsen’s reading group for their book Darwin’s Conjecture: The Search for General Principles of Social and Economic Evolution. After finishing the book and following the reading group discussions, I’m not sure I am in a position yet to offer a strong review or critique. But in the meantime, here are some notes about the book.
Hodgson and Knudsen advocate that Darwinism should become the unified evolutionary framework for the social and behavioural sciences. They consider that this has benefits that include establishing the role of variety in the evolution of complex population systems, which economists often aggregate or assume away. It also provides a way of bringing the observed suboptimality prevalent in the natural world into the social context.
To achieve this, they seek to formalise the application of the Darwinian principles. This is the most important contribution of the book. Much of the research on cultural evolution feels, for want of a better word, slippery. When I read works on cultural evolution I often find myself asking what is being replicated? How is it being transmitted? How is it being selected? Is it different from contagion? This is particularly the case where group selection enters the picture. Hodgson and Knudsen tackle these questions by seeking to define what exactly is being replicated and transmitted and accordingly, what is the replicator (the cultural equivalent of the gene) and what is the interactor (the organism or object that natural selection acts upon).
For some chapters, this approach is useful. The chapter on whether social evolution is Lamarckian (modifications acquired during a lifetime are passed to offspring) is excellent. To assess this claim you need to understand the nature of transmission, which in turn requires definition of the replicator. When and how does the replicator change? Even though I didn’t agree fully agree with their conclusions, their approach allowed a clear assessment of what they were arguing.
Tying down these definitions is not a riskless enterprise, as social evolution does not have a relatively clear entity in “the gene” to select as a replicator. At an individual level, they argue that habits are the appropriate replicator. They prefer habits over memes as they consider it possible to give habits a substrate of biologically inherited instincts, whereas memes are based on habits and instincts and cannot be sustained without them. But why dismiss memes on this basis when they can be given the substrate of habits and instincts (or even a state of the brain) in the same way habits are grounded in biologically inherited instincts? Memes were also attacked on the basis of looseness of terminology, but given the book was designed around formalised Darwinism, why not tighten it? In some respects, I felt as though their discussion on memes was a battle in a long war that I do not know enough about.
Where the authors really started to lose me was when they moved into higher levels of evolution. As is typical when assessing multilevel selection, they noted the Price equation and how it can be used to partition selection at various levels of organisation. But when they laid out their proposed six levels of replicators (genetic, individual, organisational, symbolic, legal, and scientific and technological) across four levels of interactors (individual, organisational, national, scientific and technological organisations), a lot of the crispness of terminology seemed to disappear, along with tools such as the Price equation. The sharpness they brought to the initial chapters of the book faded.
There were a few nice lines in the book. In dismissing arguments that human intentionality renders analysis of social evolution irrelevant, the authors note that intentionality itself has evolved from similar but less developed attributes among pre-human ancestors. Similarly with artificial selection, it is evolved humans doing the selection
On the flipside, there was also the occasional argument that grated me the wrong way, such as their suggestion that the impulse to produce and acquire in all human societies is a cultural propensity. This is pushing the cultural explanations too far.
Ultimately, the test of their work will be in the application. Although I enjoyed the attempt to tighten the use of some concepts that are often loosely used, it is only when we gain new insights from these tools that the effort will be proved worthwhile. As to whether that is likely to occur, I am not yet convinced (I still have some Steven Pinker like tendencies in this area). I am also reluctant to get sucked into some of the issues in the book as, to my untrained eye, they often appear semantic (as does much of the conversation in the reading group). That is another area where some real-world application will help, with some practical examples to render the material more real.
And as a last word, if you are interested in finding a book as a starting point on cultural evolution, this probably isn’t it. If you have already read a few books in the area, it is worth the effort.
It has been a few months since I wrote most of my series of posts on Quamrul Ashraf and Oded Galor’s paper The ‘Out of Africa’ Hypothesis, Human Genetic Diversity, and Comparative Economic Development. This last post in the series is on the implication of their argument for policy.
As a recap, Ashraf and Galor showed a hump-shaped relationship between genetic diversity and economic development across countries and populations. They proposed that two opposing effects of genetic diversity cause this hump-shaped pattern: diversity promoting innovation and productivity through the greater range of traits available in the population, and negative effects through conflict between more dissimilar individuals. This pattern is reflected in African populations with high diversity and North American populations with low diversity experiencing lower levels of economic development than European populations with moderate levels of diversity.
Ashraf and Galor do not express any policy recommendations as flowing from their findings. The closest they come is a thought experiment where they note the effect of increasing diversity in Bolivia or decreasing diversity in Ethiopia. In an article in Chance (based on an earlier blog post), Andrew Gelman considered what this means:
What would it mean to increase Bolivia’s diversity by 1 percentage point? I assume that would mean adding some white people to the country. What kind of white person would go to Bolivia? Probably someone rich enough to increase the country’s income per capita. Hey, it works! What if some poor people from Ethiopia were taken to Bolivia? They’d increase the country’s ethnic diversity too, but I don’t see them increasing its per-capita income by 41%. But that’s okay; nobody’s suggesting filling Bolivia with poor Africans.
What about Ethiopia? How do you make it less diverse? I guess you’d have to break it up into a bunch of little countries, each of which is ethnically pure. Is that possible? I don’t actually know. If you can’t do that, you’d need to throw in lots of people with less genetic diversity. Maybe, hmmm, I dunno, a bunch of whites or Asians? What sort of whites or Asians might go to Ethiopia? Not the poorest ones, certainly. Why would they want to go to a poor country in the first place? Maybe some middle-income or rich ones (if the country could be safe enough, or if there’s a sense there’s money to be made). And, there you go; per-capita income goes up again.
Moving people around in the way Gelman considers is different from a situation where the founder effect shaped genetic diversity (the founder effect is the reduction in diversity that occurs when a small proportion of a population migrates and takes only a subset of the genetic diversity of the population with them). If a group of rich whites moved to Bolivia, they might increase the level of genetic diversity, but they would also be of substantial genetic distance from the Bolivians. Spolaore and Wacziarg argued that genetic distance causes differences in economic development as it acts as a barrier to technological diffusion, either through the genetic distance itself or other characteristics for which genetic diversity is a proxy. If the new sub-population in Bolivia pushed out the technological frontier through their activities, the genetic distance between them and other sub-populations may prevent technological diffusion and prevent the benefits from accruing across the country.
We can also consider this mix from the perspective of relatedness, which is how Ashraf and Galor frame the problem. Each of the whites and native Bolivians would have lower relatedness with each other than with their someone from their own sub-population. This might increase the negative effects of diversity more strongly than it would introduce any positive effects, as differences in relatedness between some people would be greater than in an equally diverse population shaped purely by the founder effect.
Then there is the question of interaction between people of different races. There is considerable evidence of racial conflict, whereas the evidence for the human ability to detect small genetic differences in relatedness as Ashraf and Galor propose is weak.
Apart from Gelman’s suggestion, Ashraf and Galor’s paper does not immediately lend to other genetic-focused policy interventions. But this is not to say that their findings are useless in determining policy. For example, if Ethiopians populations could be highly productive due to their diversity, but this is negated by excessive intra-population conflict, we might ask what interventions could reduce conflict. Similarly for Bolivia, if the lack of diversity hinders expansion of the productive frontier, could Bolivia benefit from technological imports?
As I’ve posted about before, I am skeptical of Ashraf and Galor’s hypothesis, so I’m not sure these policy suggestions would work. But if the hypothesis is right, there is scope for it to shape policy. As Goldberger and Manski failed to see in their criticism of the use of genoeconomics in policy development, just because there is a genetic factor underlying an observed outcome does not mean that we need to implement eugenic policies or throw away non-genetic policy interventions.
Having said this, policy recommendations on the basis of work such as this appears to be the lightening rod that focuses criticism (as per the Heritage Foundation’s immigration report and the revelation of Jason Richwine’s PhD thesis). Ashraf and Galor’s paper was published in the American Economic Review, one of the top few economics journals, which suggests that proposing relationships between genetic factors and economic outcomes across populations is acceptable in some circles. The strong response from some Harvard Academics (here and here) suggests that it is not acceptable to all, but unlike the Richwine case, no lynching followed the paper’s publication. Ashraf and Galor’s avoidance of policy recommendations, whether deliberate or not, was likely a wise move.
My posts on Ashraf and Galor’s paper on genetic diversity and economic growth are as follows:
Other debate on this paper can also be found here, here, here and here.
Links this week:
This year’s Australian Conference of Economists had a few behavioural/experimental economists among the invited speaker list. This post is a short record of some of the main things I took away from their presentations (which is not necessarily the focus of the presentation).
From Andrew Clarke: Ignore cross-country comparisons of happiness. The word happiness (or whatever term is intended to capture it) is ambiguous enough in survey questions without the added complications of language translations and cross-cultural interpretation.
From Glenn Harrison: Don’t rest on the work done by Kahneman and other behavioural psychology pioneers. Go out and test these biases to ensure that they hold up in incentivised environments. Don’t gives biases a name until they have a theoretical basis – otherwise we are giving too much weight to poorly tested and considered observations. Do decent, robust econometric analysis (some of the examples Harrison gave of work published in high-ranking journals was embarrassing).
From Graham Loomes: Considering preferences as probabilistic and not deterministic (that is, “I will choose the first alternative X per cent of the time”) can shed light on some observations such as preference reversals.
From Robert Sugden (author of one of my favourite papers): Behavioural economists have taken on every challenge thrown down by those who believe in rational choice. Almost every “rational” explanation for these biases has tested and they almost never explain the anomaly, even if they are partially “true”. For example, using the income effect to explain differences between willingness-to-pay and willingness-to-accept explains only a fraction of the observed disparity (this was more from a panel session than Sugden’s main presentation).
