How the World Became Rich ignores the first question about individual wealth and poverty, instead taking the country (or region) as the unit of analysis. The book aims to synthesize the major theories on comparative national economic development and then bring these theories into conversation with one another. The preferred explanation of Koyama and Rubin for how the world became rich is institutions. Institutions enable a stable foundation for the technological progress that drives the productivity gains on which economic growth depends. When the authors of How the World Became Rich talk about institutions, they speak broadly of the systems of government, law, political economy, education and market structures in which economic life is embedded.

In examining the rule of law, the authors could have also explored the alternative and opposing concepts of rule by law at a deeper level. This concept, however, has been documented by Pirie (2021) and detail. While Koyama and Rubin (2022, p. 26) note that they only provide cursory explanations for “topics like institutional change, the growth of state capacity, and the rule of law”, Koyama and Rubin (2022, p. 47) do note that “[w]hen a society follows the rule of law, laws are applied equally in all types of rights are protected”. Adam Smith’s An Inquiry into the Wealth and Poverty of Nations (1776) in many ways marked the founding of modern economics.[1] This opus examined the phenomena of growth and industrialization occurring at the time through the institutional analysis of markets, governments, and society. Mark Koyama and Jared Rubin follow in Smith’s footsteps by providing a sweeping review of the economic history literature concerning the rise and spread of modern economic growth in How the World Became Rich (Policy, 2022).[2] In their review, they discuss how geography, institutions, demography, culture, and colonial history affect economic development, and how the interplay between these factors has led some countries to experience tremendous growth while others remain stagnant. Another weakness is the book’s limited interdisciplinary approach. Economic growth is a multidimensional phenomenon that requires insights from various disciplines. Unfortunately, the book primarily focuses on economic aspects and may neglect potential contributions from sociology, political science, and environmental studies. While some areas of political science and geography are touched upon, the depth of any analysis is shallow. This, however, is to be expected. The reach of the book means that it is infeasible for the authors to encapsulate all aspects of economic science and equally delve into the geopolitical realities of a world that has changed significantly through history. Economic history scholars, it seems, are obsessed with writing about "how the world became rich". Perhaps because these books always seem to find an audience, whether NGO wonks or Wall St. types. As far as these types of books go this one is mercifully short and comprehensively researched even if it never seems to find an "answer". Of course "finding" the answer would leave the authors open to the sin of disprovability thereby pulling the curtain away from the Wizard of Economics.The reasons for their caution are made clear in the first parts of the book where the authors carefully examine the last two millennia or so of European and Asian history to sort out why, despite some spurts of prosperity and growth, real sustained growth did not come until 19th Century Britain and the U.S. Over the past several decades a wealth of new books, studies, and theories have appeared purporting to explain this historically miraculous phenomenon. In “How the World Got Rich: The Historical Origins of Economic Growth” (2022), Koyama and Rubin seek to summarize all of the main lines of research and hypotheses in the field, while presenting their own case for a synthesized argument as the best explanation for how the West – and more recently the East – have been able to maintain virtually monotonic economic growth over decades and even centuries. The end result is a book so good that, if you read it slowly and carefully, it’s like taking a graduate seminar on the subject with a world class professor in the field. While China’s rise from poverty to middle-income status has been rapid, the country is still relatively poor on a per-capita basis compared to the West. As befits a Jared Rubin book, the section on culture is also particularly weighty. The discussion veers away from preconditions for growth and tries to cover several aspects of the burgeoning literature, especially religion and trust. The Protestant Reformation—and its converse, the persistence of Islam—are accorded pride of place; though K&R discount a “Protestant ethic,” they argue (following Rubin (2017)) that the Reformation forced newly-illegitimate Protestant leaders to seek popular approbation, especially through parliaments—leading to increasingly limited government. Islam, on the other hand, inhibited the growth of large businesses, centralized power among elites, and conversely disenfranchised factions who thereby gained an interest in creating political instability. Other topics include the role of the Church in uprooting kin-based family structures and the Alesina-Giuliano-Nunn (Boserup!) research on the plough’s role in fixing female gender norms. Political stability and good governance are crucial factors in fostering economic growth (Sharma, 2007). Countries with stable political systems, strong institutions, and a reliable rule of law tend to attract investments, encourage business growth, and create an environment conducive to economic development (Spiteri & Briguglio, 2018). In addition, good governance, transparency, and a robust legal framework are essential for promoting entrepreneurship and attracting domestic and foreign investment (Alesina et al., 1996).

Countries blessed with abundant natural resources, such as oil, minerals, and fertile land, have often experienced economic prosperity. In some cases, the extraction and trade of these resources have fueled economic development and contributed to wealth accumulation. Yet, many natural resources have become a curse (Majumder et al., 2020). Ross (2012, p. 1) shows that countries with rich and abundant resources, including oil, “are 50 percent more likely to be ruled by autocrats–and twice as likely to descend into civil war–than countries without oil”. So, it becomes clear that there must be something other than wealth in the soil that makes a country prosperous.The guiding theme of the first half of the book, to my mind, is the laudable effort to present the last two decades of economic history research as part of a cumulative scientific project—normal science progressing within the “historical economics” paradigm. We are treated to a catalog of canonical results wrung from the stones of history, findings that we can use to guide our thinking about broader questions of development. This does leave the book open to the always-troubling problem of generalizability—do results about one time and place offer meaningful insights about others? Perhaps most studies don’t, but that shouldn’t be too upsetting. If we can collect and catalog enough consistent findings, we can still describe the causal forces underlying the historical process, even if we don’t have a truly unified theory of development.

Alesina, A., Özler, S., Roubini, N., & Swagel, P. (1996). Political instability and economic growth. Journal of Economic Growth, 1(2), 189–211. https://doi.org/10.1007/BF00138862 Even if you don’t believe that ideas drive the world (I do) and that the great incubator of ideas is universities, you might concede that productivity gains require innovation. An incomplete list of innovations that came from university research (almost always funded by government dollars) includes:

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The book has two parts. The first is a literature review of the five main strands of research in modern economic history—what I, following Bisin and Federico (2021), usually call the New Historical Economics. The second is also a literature review, but in the guise of a “rise of the west”-type book, and covers the medieval preconditions for European growth, Britain’s takeoff, and the spread of the Industrial Revolution to the global periphery. I will discuss each of these elements separately, focusing more on the second, which is the substance of the argument, and organize some of my thoughts from reading.