Geography as Destiny?

Yesterday, we watched the first segment of Guns, Germs and Steel in our macroeconomics class. This DVD takes a look at why certain parts of the world (particularly the West) have developed so well, why other parts of the world have languished so far behind. Jared Diamond, the author of the book the DVD is based on, proposes that the biggest influence on why some societies develop and others don't is their geographic location. Some areas of the world have sutiable climates for farming, have indigenous animal species that are suitable for using as labor and food, are better connected to other areas that allow ease of exchange of goods and ideas.

Diamond's theory basically implies that "geography is destiny". Professor Ramirez asked the class whether or not we found Diamond's arguments compelling. The class was somewhat split on the issue. I for one think his ideas hold a lot of merit. I believe that geography has historically played a huge role in the relative costs of exchange and access to markets of both goods and ideas. The more isolated a region is, the more resources are required to connect to other people, making such interaction far less likely than in more connected regions (such as in Eurasia). The smaller a population is in a geographically isolated area, the less gains they are able to realize from specialization of labor, making them consume huge portions of their resources just to keep themselves alive. This further reduces the available resources these people are able to devote to connect to others, exacerbating the effects of their isolation.

This analysis seems consistent with history. The areas that were connected (particularly Europe) in large networks were almost always the people who made contact with other, more isolated regions, rather than the other way around. As people are able to interact in broader networks of interaction, this allows for wealth-enhancing exchange of goods. It also allows for the transfer of knowledge, information, ideas and technology as discussed in an excellent post by Will Wilkinson today:

Don Boudreaux has been doing the Lord’s work by pointing out that economies are not bounded by political borders. I’ve made the point before that the better a state’s institutions are, the less the state level is the appropriate final unit of analysis. Good institutions within a state’s borders are precisely what enables the people under the jurisdiction of a state to create complex networks of economic, political, and moral cooperation with people outside that jurisdiction. Which is a way of saying the good institutions in here increase our interdependence with people and institutions out there.

Nothing has brought this point home to me more than the lovely, truthy, graphics accompanying Richard Florida’s Thomas Friedman takedown “The World is Spiky” [pdf] in the October 2005 Atlantic.

[click for full-size]

What is manifest in the pictures is that U.S. institutions, in addition to producing more wealth and using more energy, produce scientific discoveries at a rate far outpacing the rest of the world. Just glancing at picture, it appears that MIT and Cal Tech combined produce almost as much scientific discovery as all of of Europe, which in turn produces more science than the rest of the world. The market economies of the Pacific Rim produce a trickle of science, but produce on overwhelming proportion of the world’s technological innovation as measured by patents.

Here is one of these pictures’ 1000 stories. American institutions confer a fantastically huge positive externality, in terms of knowledge, to the rest of the world. Science is a root cause of economic growth. New knowledge enables new technologies, which enable increases in the productivity of capital, which enable growth. And good institutions are the root cause of science. If the U.S. produces most of the world’s knowledge and Asia produces most of the world’s technology, then the institutions that underpin epistemic and technical advance are chiefly responsible for growth in states that have different institutions, but which are able to import knowledge.

Read his whole post! It's very good.

Not everyone in class was convinced by these theories last night. The idea of geography seems to get at an important issue, but is not complete in telling the story of the rise of nations.

Questions: Could it be that geography has historically been like a form of predetermined "DNA" for areas, limiting the potential for growth? If so, does what does the rise in technology and reduction in transportation and transactions costs mean for developing nations? What roles do institutions like property rights, rule of law, culture, religion and political structures play in this development? How might countries that are playing "catch-up" best benefit from technological and scientific spill-over effects of more developed nations? What other factors have influenced the growth of nations? Do you think this story is credible?