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Lecture 6

W6 The Importance of History.docx

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ECON 255
Ashok Kotwal

Conclusion is highlighted in blue Jared Diamond focuses on geography as advantages to economic development W6: The Impact of History Key Figures − Robinson-Acemoglu and Johnson: European colonies in Africa vs. new world − Engermen and Sokoloff: Latin America − Nathan Nunn: Slavery in Africa Geography, Institutions and Reversal of Fortune Non-Spurious Relationship − Proving that a relationship is not caused by a third fact The Reversal of Fortune − Occurs mostly after the Industrial Revolution − Wasn’t caused by colonial plundering – there’s time gap and reversal of factor occurs during Industrial Revolution Does affect the present income directly? − Geographical factor alone doesn’t affect income but the role of institution does Conclusion − Geography versus institutions: Institutional development plays a big role in the reversal of factor [Impact of Slave Trade on Africa] − slave trade in Africa is an example of an extractive institution − slave trade occurs in a longer period of time (500 years) and colonization shorter (75 years) − Largest impact of slavery: Trans-Atlantic Slavery − The reason for slave trade to have big impact: Destroys trust and social networks : people around them can capture and make them slave  As a result: the process to build an inclusive institution becomes problematic  Today’s evidence: those countries that used to be − Empirical evidence: measuring the number of slaves in each country in Africa in each century − Conclusion: slave trade is a factor that prevents the formation of inclusive institutions  when there’s no inclusive institution, the economic structure will be problematic and subsequently halt the economic progress − Possible causalities: Slave trade causes: Conclusion is highlighted in blue Jared Diamond focuses on geography as advantages to economic development  Tie between villages to weaken  halt the process of forming the society  Ethnic fractionalization  is it about preferential treatment or different people have different access to resources. Therefore, different people have different advantages in economic development  Society to not trust among one another  so, it is hard to solicit support from society in achieving a collective action [Initial Inequality and Institutional Development by Engerman and Sokoloff] − focus on the difference between North and South America (Mexico)  ultimately: the resource distribution in Mexico/South America was due to extractive political institution  the few benefits from the many  As a result: slower economic progress in developing literate labor
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