Thursday, July 31, 2008

Geography and Economics

Megan McArdle makes what she thinks is a very profound point:
Ten thousand years or so after the first humans built sailing ships for trade, the coast still matters immensely. In fact, there are only two prosperous landlocked countries of any size: Austria and Switzerland.

Geography does not drive economics. Look at Japan, Iceland, Singapore, Hong Kong, Finland. None are geographically rich, but the people are. Winston Churchill and his friends raved about the wealth of Africa, as Uganda and Kenya have fertile lands, lots of minerals ... and they are economic wastelands now.

But back to Megan's point. Non-communist Europe has 15 countries, and the two landlocked countries (Aus and Switz). The other 13 countries are prosperous, and have coasts, but it is not their coastliness that matters. Adopting free market policies, avoiding blatantly corrupt governments, is key (unlike the subtly corrupt Western governments). The problem with Zimbabwe or Uzbekistan is not their lack of regattas.

In North America, Canada and the US are on coasts, but then so is all of central America, which is dirt poor. South America has 13 countries, and the 2 landlocked ones are poor, but so are most of their countries on the coast, and with only 2, the standard error on this pattern is large. Most landlocked countries are either in Africa, or ex-communist states, and that's the real pattern, not water. But then that's not very interesting, because the problems of Africa, and the ex-Soviet satellites are pretty different.

In warfare, it is useful to remember that the tough terrain, geographically, is easier to go through than a heavily defended terrain. That's why you go through the Ardennes forest and not the Maginot line. It's people and the things they create that matter, not geography.

10 comments:

CFA Northwestern grad in MN said...

Erik, Megan does mention "poor institutions" as a factor, but in a bit of a throwaway manner.

I think your reasoning is sound for economic history starting with the Industrial Revolution. However, I would point to the conclusions in Jared Diamond's "Guns, Germs and Steel" regarding why the Middle East and Eurasia developed faster than the Western Hemisphere -- a large amount of arable land at the proper latitudes for agriculture and animal husbandry. Compare to skinny Central America.

Megan also misses the fact that rivers have been and remain very good means of transportation: the Danube in E. Europe, the river systems of the American South that prolonged the Civil War, and the St Lawrence are but three examples. Excellent Industrial Revolution examples are the Erie, Panama and Suez Canals -- prosperous humans building their own rivers and sailing routes.

cfa NWU grad in MN said...

Forgot to add to previous comment: If you like interesting maps like I do, check out

http://www.worldmapper.org/

Eric Falkenstein said...

IMHO, GG&S is simply PC rationalization for the fact that the reason the poor are poor. I would argue poverty is mostly, but not totally, self-inflicted.

Mexico's corn was slow to migrate north and south along the Americas' main axis because crops' growing seasons are sensitive to latitude? Do you think wheat just grew out of the ground as is 10k ago? No, it was finely evolved by humans over thousands of years of selective breeding. The Americans could have done the same. Africa has lots of ungulates that could have been domesticated, and so too the Americas, but they weren't.

It's very nice to think people are poor because they are born in poor neighborhoods. To assert they are poor because they make stupid choices, repeatedly, is blaming the victim.

I have a theory: housing causes poverty. Rich people, strangely, are born in nicer houses on average than poor people. If we could only get more people into nicer houses, everyone would be rich!

Anonymous said...

Do you at least agree that it is easier for a small country to develop economically if it is next to a wealthy country it can trade with?

For most countries, geography need not hold them back. But if you are a small, poor country SURROUNDED by poor countries, it's much more difficult to trade your way up, even with good institutions.

Eric Falkenstein said...

well, Singapore, South Africa, Hong Kong, are prosperous in spite of their neighbors. I guess I don't see the theory.

Anonymous said...

the problem with africa is africans, not the land or resources. The british have proved time and time again they can run a sound country on the continent, just as the africans have proven time, time, and time again that they know how to destroy whatever has been given to them. that 70 average iq, or whatever it is, is just not conducive to managing a modern, western style state.

Anonymous said...

GGS makes a few compelling arguments, but you chose to focus on crop migration only and that's not too weak either. you might focus on 10k years experiments if you see potential there, but those guys were barely surviving hunting so they never bothered. hindsight bias.

Barry W. Ickes said...

Coastline does matter. After the Soviet Union broke up, Kirgizia engaged in market reform and so did Estonia. Estonia is on a coast near prosperous countries, Kirgizia is landlocked. Reforms were much more effective when shipping costs were low. This is especially true for the types of goods that poorer countries trade. If you are landlocked then your neighbors can rip you off easier. Turkmenistan has to ship its gas through Russia, and the Russians get much of the rent.

NWU grad said...

Legg Mason's Michael Mauboussin has noted that complex systems (like financial markets -- I would also add human societies) are often highly dependent on the initial conditions in determining future outcomes.

So while I sympathize with Erik's free will/libertarian view that being poor is a choice, I think that geography, institutions, family situations, etc. all matter.

So a society with a lack of domesticate-able grasses (W. Hemisphere) may not develop as quickly as the Middle East.

Still, there are lots of seemingly "happy accidents" that are difficult to conclusively attribute to particular factors. Why did the plow and wheel develop in Eurasia but not in the Western Hemisphere? James Burke's "Connections" (book and PBS series) is great on these points.

Turning from history to modern day, I agree with Erik that poverty is most frequently due to human institutions and choices, not physical conditions. Cf. Greg Easterbrook's book "White Man's Burden."

the unreliable narrator said...

More along the lines of what nwu grad has said, because my blog is still down after days of hassling with my host/registrar (who are clearly ungulates):

I would argue poverty is mostly, but not totally, self-inflicted.

Small changes in initial conditions invariably create larger knock-on effects--which, with the insertion of that modifying clause, you are in fact acknowledging.

For what does it mean for any behavior to be "self-inflicted"? That's also actually Diamond's argument: At a certain point along the way, you no longer need colonials to oppress you, but in the immortal words of Radiohead, you do it to yourself.

Do you think wheat just grew out of the ground as is 10k ago? No, it was finely evolved by humans over thousands of years of selective breeding.

That doesn't mean that it wasn't somehow subtly easier to grow than corn. For humans, things don't have to be impossible before we decide not to waste finite resources pursuing them--only difficult.

Africa has lots of ungulates that could have been domesticated, and so too the Americas, but they weren't.

Actually, most undomesticated four-leggeds remain that way because they absolutely can't be domesticated. There's a biological reason why you can't ride a zebra--it won't let you, ever.

It's very nice to think people are poor because they are born in poor neighborhoods. To assert they are poor because they make stupid choices, repeatedly, is blaming the victim.

A more interesting and fruitful line of inquiry might be, what predisposes a person or a culture to make stupid choices?

I have a theory: housing causes poverty. Rich people, strangely, are born in nicer houses on average than poor people. If we could only get more people into nicer houses, everyone would be rich!

This is simply the logical fallacy of causal oversimplification.

En bref, I think you have a point (people are poor because of the poor choices they make) yet without seeking to attribute the historical causes of that reality and the emergent properties which helped create it. One studies these initial conditions NOT in order to get entire civilizations off the hook and/or onto Oprah being handed tissues while they whine, but in order to problem-solve. Because if you can reverse/eliminate/hack around even an apparently insignificant obstacle, the knock-on effect can be transformative.

For in the end, in terms of mere Realpolitik, how does "You're poor because you're dumb" help anyone move in a different direction? What if you simply blamed your child for his/her failures, instead of offering support, suggestions, solutions, and possible systems for change?

(Well, you don't need to answer that last one, because we've seen what happens--years of therapy, bébé; years of therapy.)

Nice blog! You're funny about the anthrax lab HR background check.