Jason Furman's Reviews > The Journey of Humanity: The Origins of Wealth and Inequality

The Journey of Humanity by economist Oded Galor is a relatively short book covering the broad sweep of human economic history (it is also very readable and does not require any economics background). It seeks to explain two huge mysteries: (1) the mystery of growth whereby for ten thousand years following the invention of agriculture innovation led to larger populations but not higher per capita incomes—until growth took off exponentially in the Industrial Revolution and (2) the mystery of inequality whereby massive differences emerged between countries (he barely addresses inequality within countries, which is a smaller factor in global inequality).

Galor tells this big story while drawing on a range of recent academic research, much of it is his own but also Daron Acemoglu, Melissa Dell, and many other economists who are using modern empirical methods to exploit quasi natural experiments to study how (possibly) random differences in the past cast a shadow centuries or even millennia later. This thorough grounding in research sets it apart from some other more speculative big think books—although some of the research ends up confirming, or at least corroborating, various speculations.

For example, Thomas Malthus had a big idea in 1798 when he argued that innovation would increase the population but not per capita incomes because population would adjust up or down to keep people at subsistence. Galor, in this case drawing on his own peer-reviewed research, looks at quasi natural experiments like the correlation between millennia old “technology” (defined as the timing of the neolithic revolution or natural variety of crops) and data for 1500 (it’s highly correlated with population density but not at all correlated with per capita incomes, which themselves barely vary across places).

The explanation of the takeoff into sustained growth is a little bit less satisfying, but that’s partly what happens when you only have one first sustained takeoff—and it happens at a time when the world is globally connected so you don’t have the (somewhat) independent data points you have for studying other issues. Galor argues was a situation where small changes can lead to a large change—which he analogizes to “bifurcation theory” in mathematics.

An important part of Galor’s story for the takeoff is human capital. Child labor became less valuable because of machines and was abolished. Women’s labor became more valuable and they were paid more. All of this created more of an incentive to invest in children which ultimately led to a Demographic Transition where birth rates plummeted. (This section too has a lot of quasi natural experiments, like using distance from the village where the steam engine was invented to measure technology and its impact on subsequent demand for education.)

The second half of the book is about the rise of inequality between countries. He eschews any discussion of the growth theory of Solow, Lucas, Romer and the like and goes—which he briefly dismisses as “proximate”—and instead instead goes to the deeper, underlying theories: (1) institutions, (2) culture, (3) geography, and (4) population diversity.

The institutional discussion largely draws on work by Daron Acemoglu and co-authors on the importance of “inclusive” institutions instead of “extractive” institutions (describing their quasi natural experiment around settler mortality, leading to different types of colonization, different institutions, and income levels today.

The cultural discussion, together with Joseph Henrich’s excellent The WEIRDest People in the World: How the West Became Psychologically Peculiar and Particularly Prosperous, has made me take culture more seriously. He presents some quasi natural experimental evidence for the Max Weber’s thesis in the Protestant Ethic (including things like distance from Wittenberg as a random treatment for Protestantism) and an argument that better agricultural land has led people to have lower discount rates (again, similar types of evidence).

Geography tells the familiar story of the tsetse fly leading to no livestock in much of Africa, malaria degrading work, and the difference in native crops in Eurasia (possibly because of its East-West orientation) and the Americas (because of its North-South orientation). He also has some interesting links between culture and geography, for example linking societal views on gender equity to the type of soil they have which determined whether they used plows (handled by strong men) or hoes (handled by men or women).

Finally, the fourth underlying story is the one that Galor’s own research has advanced and the idea that is the most intriguing but frankly also feels the most speculative to me. Specifically he points out that migratory distance from Africa is closely related to population diversity—which is very high in Ethiopia but very low in Bolivia because of the “serial founder effect”. He argues that diversity has a plus (lots of ideas from combining different perspectives) and a minus (clashing) and that this leads to an inverted U-shaped relationship between population diversity and various economic outcomes like per capita income.

In many ways the evidence the book presents, drawing on a lot of peer-reviewed research, is much better than what we had even twenty years ago in thinking about economic growth. In other ways, however, a lot of the relationships between ancient variables and present ones (e.g., when was maize first introduced in Chinese areas and what was there economic status much later) could easily have alternative explanations or miss big points.

A book of this nature relies on fortuitous reversals that might make sense ex post but how sure are we? For example, Europe’s geography led to many competition states and China’s to a single unified state, the later was better for the economy through 1500 but the former was better after. Yes, there’s a decent story. But am I sure? Of course not.

Moreover there is a lot that it does not explain, that probably depends on the more mundane issues covered by more proximate theories of growth and some of the standard economic policy issues like the importance of avoiding and resolving crises. For example, why is the United States so much richer than Argentina? Or why did China take off when it did but Brazil did not? Or even just variations in income within regions.

Galor concludes with a short and relatively superficial discussion of the public policy implications of these ideas. From my perspective the fact that the book does not explain issues like the United States vs. Argentina also is related to its overly facile dismissal of the “Washington consensus”. Of course it ignored culture, institutions, population diversity and geography—but by the way most of those are not changeable and there is enormous variation within regions that are similar in those regards. Nothing about the deep roots of incomes is a reason why a country, for example, should run large budget deficits financed with short-term foreign borrowing or have a budget devoted to subsidies while neglecting primary education or have weak property rights.

Galor’s policy argument instead is that “As the great cogs that have governed the journey of humanity continue to turn, measures that enhance future orientation, education and innovation, along with gender equality, pluralism and respect for difference, hold the key for universal prosperity.” It’s hard to argue with this—and most of these are good in their own right even if they’re not key to growth. Moreover most of them are actually emphasized by international institutions like the World Bank and International Monetary Fund (at least today).

Ultimately, however, what I liked about the book is the way that it draws on a rich set of research that is attempting to turn history into social science. And in the process coming up with some surprising and interesting answers that even if they do not help us change the world can help us understand some of the most fascinating economic developments humanity has faced.