What makes a nation wealthy?

Economists typically explain the wealth of a nation by pointing to good policies and the quality of a country’s institutions.  But why do these differences exist in the first place?

Professor Greg Clark of UC Davis, in his new book-length manuscript, resurrects Malthus, counters Jared Diamond (only recently has the European standard of living surpassed that of hunter-gatherer societies), shows the Industrial Revolution came only slowly, and argues that economists overrate the importance of good policy.  We can separate out the influence of policy by looking at the differential productivity on the factory floor, across regions.  The sheer quality of labor matters more than we used to think.  Quality labor attracts capital, which in turn supports good institutions. 

Here is the conclusion to my column:

Professor Clark’s idea-rich book may just prove to be the next blockbuster in economics.  He offers us a daring story of the economic foundations of good institutions and the climb out of recurring poverty.  We may not have cracked the mystery of human progress, but “A Farewell to Alms” brings us closer than before.

Clark also argues that sub-Saharan Africa is poorer than ever before, and that foreign aid worsens a zero-sum Malthusian trap.  He makes the startling claim that gains in health are the worst thing we can bring to modern Africa.  Here is the full column (by the way, I don’t write the titles or subtitles), which includes a link to Clark’s manuscript. 

The book is not yet out, but it is the best of its kind since Guns, Germs, and Steel


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