Subsistence economies and surplus economies

I am not sure this paper (pdf) is sound, and it is hardly in publishable form.  Still, it probably qualifies as the most interesting paper I have read this year to date.  It is by Lemin Wu, graduate student in economics at UC Berkeley, who appears to have links to Brad DeLong and Peter Lindert.  The title is “Millennia of Poverty: If Not Malthusian, Then Why?” and here is the abstract:

Living standards were constant for thousands of years before the industrial revolution. Malthus explained it this way: population grows faster when living standards rise; therefore, changes in technology alter the density of population but not the average welfare. This paper challenges Malthus’s explanation of the constancy and replaces it with the theory of group selection.

Malthusian theory is inadequate because it misses the fact that a dollar’s worth of diamonds contributes less to survival and reproduction than a dollar’s worth of grain. Grain is a subsistence commodity and a diamond is a surplus commodity. The Malthusian force anchors the average level of subsistence, but not that of surplus. If the surplus sector had grown faster than the subsistence sector, then living standards could have grown steadily before the industrial revolution, but they did not. The constancy of living standards thus implies that growth was balanced between subsistence and surplus, something Malthus did not explain.

To explain the balanced growth, I propose the theory of group selection. Selection of group characteristics, including culture and technology, goes on by migration and conquests. Since living standards rise with the ratio of surplus to subsistence, migrants and invaders usually move from places relatively rich in subsistence to those relatively rich in surplus. They spread the culture and technology of their subsistence-rich origin to the surplus-rich destination – the bias of migration favors the spread of subsistence over that of surplus. Even if surplus cultures and technologies would develop faster than subsistence ones in a local environment, the o setting biased migration balances the two sectors on a global scale. This explains the constancy of living standards.

My new theory reinterprets why living standards declined after the Agricultural Revolution and stagnated afterwards, how the Industrial Revolution happened and where the prosperity of Roman Empire and Song Dynasty came from.

I expect to hear more from Lemin Wu.

The paper is here (pdf), the slides to the paper are here, more pdf and 100 pp. at that.  I first saw this cited by @mattyglesias.


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