Arnold Kling  

From Poverty to Prosperity Watch

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Financial Reform... Bad Bets or Co-ordination Fail...

Charles I. Jones and Paul M. Romer write,


By something like 1300 A.D., China was the most technologically advanced country in the world, with a large integrated population. According to the Lee model, it should have persisted indefinitely as the world technology leader. The explosive dynamics of the virtuous circle between population and ideas suggests that such technological leads should never be lost. Only a remarkable and persistent failure of institutions can explain how China fell so far behind Europe. A model in which institutions can stifle innovation could explain why China lost the lead, but it takes a model in which institutions can also stop inflows of ideas from the rest of the world to explain why, for more than 500 years, ideas developed in the west were not more systematically adopted in China.

Nick Schulz and I have a forthcoming book called From Poverty to Prosperity, in which we emphasize intangible factors that affect the standard of living. Ideas and institutions play a central role, as they do in the paragraph above from the Jones-Romer paper. Our book includes an interview with Romer.



COMMENTS (6 to date)
Jacob writes:

This is close to McNeill's analysis in The Pursuit of Power (although he stresses structural factors not ideas).

Markets helped China flourish economically and technologically from 1000-1400 but were eventually suppressed by a rent-extractive state (command) that had effective veto power over market operation.

States in Europe were unable to command markets because the markets themselves were divided amongst numerous conflicting kingdoms (kings in one state had to bargain with market actors in another to get access to foreign resources).

Even if they wanted to command markets, however, it wasn't in their interest since markets provided new military technology necessary to survive intense inter-state security competition.

China's incentive, on the other hand, was domestic stability (intra-state security) because it didn't need to harness markets to compete militarily with neighbors. The state decided to control the development of technology that might threaten its control.

Randy writes:

Competition. Europe was a competitive cauldron while China had become a bureaucratic monolith. Also, China fell to western imperialism for lack of only a few key military technologies - a situation that has been largely corrected in the last short century.

ollie writes:

You could even possibly cite north Korea as a nation lacking a free flow of ideas and institutions, hence the poor standard of living.

Vichy writes:

"This is close to McNeill's analysis in The Pursuit of Power"
A very interesting book, and an interesting post. I think more work ought to be done on the economic and developmental history of China, since it is glaringly odd that at one point it had more iron production than early industrial England.

Robert writes:

An analysis on China's economic and developmental history would be very interesting, but I'd be more interested in a book examining the future of China and taking a hard look at its presumed role as a world superpower in the near future.

We seem to be collectively caught in the glamor of China, but it is a hideously corrupt state that does not use resources efficiently or in any way reflecting their true cost. It is one reason many of the regions in China are dancing on the precipice of environmental apocalypse.

I suspect China is much closer to upheaval and regression than it is to evolving into a superpower. I hope I'm wrong, but I'd sure like to see a lot more work examining the hypothesis.

Mark Bahner writes:

Hi Arnold,

"Nick Schulz and I have a forthcoming book called From Poverty to Prosperity, in which we emphasize intangible factors that affect the standard of living. Ideas and institutions play a central role,..."

Unless your thinking has changed since 2004, the factors that you think will affect economic growth in the future are computer technology, computer technology, and computer technology:

http://markbahner.typepad.com/random_thoughts/2004/10/3rd_thoughts_on.html

So I guess your book must be about economic history and the very near economic future (i.e. less than 20 years into the future)?

Best wishes,
Mark

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