We offer a theory that explains the wide variance in levels of economic development around the planet, accounts for its geographic clustering, and makes plain why these patterns only emerged over the past two centuries. Its mechanics focus on the fundamental challenge of survival that faced all human societies prior to the 19th century: insuring against starvation. Local factor endowments conditioned how societies could respond to that challenge, thereby shaping pre-1800 forms of social organization. Those forms of social organization, in turn, conditioned how quickly societies could respond to the next great challenge they all faced: absorbing rapidly a broad suite of mutually dependent, post-1800 technologies that were crucial to economic development and geopolitical competition in the modern world. We develop novel datasets to put the predictions of the theory to the test. We find that a vector of exogenous factors that were binding constraints on food production, transport, and post-harvest storage (conditional on 18th century technologies) within the densely populated nuclei from which nation states later emerged account for 60 percent of the cross-country variance in per capita GDP today. Importantly, we also find that this vector of exogenous factors accounts for progressively less of the variance in levels of economic development (as measured by urbanization ratios) going back in time, such that circa 1500-1700 they account for almost none of the variance. We also discover that a particular complex combination of ecological factors that permitted some societies to insure against starvation through local trade is associated with faster economic growth from 1800 to 2000, faster development of market towns from 1500 to 1800, higher levels of investment in trade-related human capital circa 1800, faster absorption of 19th century technologies, and lower probability of being colonized.
Co-authors: Roy Elis and Jordan Horrillo