Saturday, September 10, 2022

The optimistic view about the journey of humanity

In his book “The Journey of Humanity,” Oded Galor draws from his professional research on economic growth in the long run to answer two related questions: why humans are not like squirrels, and why some humans have distanced themselves from squirrels before others. The life of a squirrel, like that of all other non-human animals, is spent caring only about survival and reproduction, as was the life of humans until very recently, at some point in the last two or three hundred years.

The answer to the first question is the reinforcing interaction between technological progress, population growth and cultural adaptation that inevitably brings the pace of technological progress to a tipping point, beyond which education of the masses is essential for the production process.

Ever since the emergence of Homo sapiens and the development of the first stone-cutting tool, technological progress fostered the growth and the adaptation of the human population to its changing environment. In turn, growth and the adaptation of the population widened the pool of inventors and expanded the demand for innovations, further stimulating the creation and adoption of new technologies. Nevertheless, over most of human existence, one central aspect of the human condition remained largely unaffected: living standards. Innovations stimulated economic prosperity for a few generations, but ultimately, population growth brought living conditions back towards subsistence levels.

For millennia, what Galor calls the wheels of change – the reinforcing interplay between technological progress and the size and composition of the human population – turned at an ever-increasing pace until, eventually, a tipping point was reached. The rate of technological progress generated for the first time in human history a demand for skilled and educated workers who could navigate this rapidly changing technological environment, incentivizing parents to invest in the education of their children and therefore forcing them to bear fewer of them.  Fertility rates started to decline and living standards improved without being swiftly counterbalanced by population growth, and thus began a long-term rise in human prosperity that the world has experienced in the past two centuries.

The acceleration in technological progress is occurring over the entire course of human history not only in the eve of industrialization. The difference is its impact on human capital. This occurred only once the tech environment changed very rapidly.

Technological progress has been inevitably rising steadily (due to the reinforcing interaction with population) till it reached a tipping point above which human capital was demanded, fertility therefore declined since parents could not afford as many children as before, the Malthusian equilibrium vanished and the economy gravitated towards the modern growth regime (producing the “hockey stick” graph emphasized in the first chapters of the e-book “The Economy”).

The answer to the second question is even more difficult. Why some countries escaped the Malthusian trap before others? Here the author's answer is very generic. It is not so much about why the Industrial Revolution started in England instead of in France, Germany or Spain, as about why it took place in more or less Western Europe, of all places. The complex answer has to do with instituions and culture, but mostly about deeper factors such as geography and diversity. Galor’s answer is closer to Jareed Diamond’s than to Acemoglu and Robinson's: the Industrial Revolution could not have happended in the Sahara desert for geographical reasons.

The main contribution of the book, and the research on which it is based, is that diversity is a key component of social outcomes. There is an optimal level of diversity, because too little diversity creates stagnation for lack of innovative ideas, and too much diversity creates conflict and difficulties in collective action to provide public goods and solve discrepancies. The exogenous measure of population diversity taken by Galor is distance to the first African human communities, because the more distant “travellers” were less diverse than the first ones. But the optimal point of the hump shaped curve relating diversity to social outcomes changes with technology and time; it could have been in China in the XVth century and in the US today.

Although the mechanisms through which diversity affects growth remain vague, Galor is careful not to say that the optimal degree of diversity can be socially engineered. Each country or social group has a given level of diversity, and policies must be tailored to make the most of it. If there is a lot of diversity, policies must tackle its risks, and promote tolerance. If there is little diversity, policies must promote different views. There is not much more in terms of policy recommedations, but perhaps that is just fine, given that policy recommendations stemming from previous explanations of human evolution have not been very successful (namely the Washington Consensus, as argued in the book).

Since technological evolution only goes in the direction of progress, Galor has an optimistic view of the evolution of humanity. Economic depressions, world wars, genocides, colonialism, have been serious accidents in our journey, but they are anecdotes compared to the increasing welfare that is accesible to everybody, according to the author. Even those that escape later from the Malthusian trap can escape nevertheless. He is also optimistic that technological progress and demographic control will suffice to contain climate change, which perhaps will be remembered as another past accident in one hundred years time. Hopefully.

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