Breaking the Cycle of Human Stagnation

with Oded Galor

There’s a commonsense view of human progress that plots overall prosperity and growth as a steady upward trajectory. In the deep past, say 300,000 years ago, life was “nasty, brutish, and short,” as Thomas Hobbes put it. But as humans developed technology, social and political institutions, and systems of thought that organized the world, things gradually improved for the average human, resulting in the astonishingly high quality of life we now have in our most economically prosperous and politically stable nations. The average person, this thinking goes, was better off in the year 1700 than they were the year 950, and the average person in 950 was better off than they were in 400 BCE, and so on.

My Brown University colleague Oded Galor turns this notion on its head. His book The Journey of Humanity, which is the result of decades of research and thinking, claims that income per capita was essentially stagnant for almost all of human history, and that every time some social or technological advance made overall economic growth possible, population increased proportionately to yank whatever gains were made back to their base level. His story of humanity is one of economic stagnation, not growth. That is, until the Industrial Revolution, when, as Oded claims, humanity broke this ancient stagnation cycle and began experiencing true, sustained economic growth for the first time in history. Because this “phase transition” that was the Industrial Revolution emerges at different times in different countries, Oded's theory also helps to account for the vast inequality of wealth that we see among the world's nations today.

Oded’s theory of human growth is at odds with our ordinary way of thinking about the world, but I find it immensely compelling. If nothing else, I think it will give you a sense that, as grim as things can feel, we are living in an unprecedented moment in human history.

---

This post is free and available to the public. To receive early access to TGS episodes, an ad-free podcast feed, Q&As, and other exclusive content and benefits, click below.

---

ODED GALOR: The Journey of Humanity, my book, is in fact an attempt to understand the journey of humanity since the emergence of Homo sapiens in Africa 300,000 years ago. And primarily it's an attempt to resolve two fundamental mysteries that surrounds this turn. The first one I define as the mystery of growth. Namely, what is the origin of this incredible transformation that occurred in living standards in the past 200 years after literally hundreds of thousands of years of near-stagnation. And the second mystery is the mystery of inequality. Namely, what is the origin of this vast inequality in the wealth of nations? Why some countries are rich and others are poor, and why much of the inequality that we see across nations today is originated in the past 200 years.

And to a large extent, I argue that a significant portion of the inequality as we see it at the moment originated in forces that operated in the distant past, forces that were formed hundreds of years ago, thousands of years ago, and even tens of thousands of years ago. And therefore, if we would like to mitigate inequality across the globe today, we would like to close the gap across nations today, we will have to design policies that will be historically based, country based. We'll have to be specific to the history of each nation, specific to the geography of each nation. This will base us in a position to mitigate much of the inequality that we see across the globe today.

GLENN LOURY: I have a question. It's the the mystery of growth which is a phenomenon of the last 200 years. But it's also the mystery of inequality between nations, which you say has its roots and patterns that could be thousands of years old. So how do you reconcile those two?

Indeed. So when we think about the journey of humanity as a whole, and when we attempt to resolve the mystery of growth, namely this dramatic transformation that occurred in living standards in the past 200 years, it's quite apparent, first, factually that income per capita in the world economy as a whole has increased fourteen-fold in the past 200 years after 300,000 years of near stagnation. Life expectancy has doubled in the past 200 years after fluctuating in the narrow band of 25 to 40.

Something very dramatic occurred in the past 200 years, and this transformation did not occur at the same time period across the globe. Some societies, Western Europe and the offshoots in the Americas, their takeoff took place around 200 years ago, perhaps even earlier. In other regions of the world, this takeoff took place significantly later. And since this takeoff was associated with the fourteen-fold increase in the standard of living, this generated an incredible divergence across the globe.

Now, why do we need to look even deeper in human history to understand the inequality that emerged in the world economy in the past 200 years? Because naturally, the differential timing of the takeoff across the globe was predicated on forces that operated much earlier. Geographical forces and their effect on institutional characteristics and cultural characteristics and human diversity that affected economic development in the course of human history.

So at the beginning of the nineteenth century, when we see these parts of the world are taking off and enjoying this dramatic increase in living standards, other societies do not have the type of structure that is needed for the takeoff. And the reason is based on forces that operated early on in human history. So in this respect, much of the inequality that we see across the globe is based on forces that operated, as I said, hundreds of years ago, thousands of ago, and even tens of thousands of years.

Okay, so the inequality is due to difference in the timing of the incidents of the takeoff. Those timing differences are themselves due to deep forces that go back a long way.

Precisely.

So talk to me about the stagnation and about the takeoff. It really is quite dramatic as you describe it in the book.

Indeed. So part of the description in the book is based on a theory that I founded over the years that is known as unified growth theory. This is an attempt to understand the process of development in its entirety. So the development of unified growth theory was predicated under the assumption that, in order to understand inequality today, we will have to understand how this inequality emerged gradually in the course of human history and how the transition from stagnation to growth took place. Namely, if we will restrict ourself only to the modern growth regime, we'll not be in a position to understand much of the inequality that we see at the moment, and we will not be in a position to understand the forces that contributed to this inequality in the course of human.

---

---

I was just going to remark, it's worth contrasting this with the growth theory that I learned when I was a graduate student at MIT in the 1970s, which presupposed a modern framework of production and technology and focused on the accumulation of factors of production—especially capital—where technical change was exogenous, population growth was exogenous, and the structure was pretty much fixed. And it seems to me that you were saying that doesn't go nearly deeply enough if one wants to understand the differences in economic development between nations.

Precisely. Because in fact, if you take the model that you were exposed to, the so-called Solow growth model, this growth model is predicated on the assumption that economies are already in the modern growth regime, economies already experience a takeoff, and from this point onward, the forces of convergence are operating and economies are expected to converge to one another over time, because those that are coming from behind are experiencing the benefit of being subjected less to diminishing returns, and consequently they can converge faster.

What unified growth theory suggests to us, that in fact much of the inequality that we see across the globe originated due to the differential timing of the transition, and therefore the Solow growth model cannot really take us into a position in which we can understand this inequality. This inequality is due to the differential timing of the transition, not due to the operation of societies in the modern growth regime. And as a result of it, most of the modeling is an attempt to understand how in fact societies manage to move from stagnation to growth. What are the forces that ultimately brought about this transition from stagnation to growth and why these forces operated in a different pace across the world in different place, leading into the inequality that we see across nations today.

Well, naively, you say stagnation. Naively, I would've thought a human being alive in 1800, 200 years ago, was much better off than a human being alive in the year 0, who in turn was much better off than a human being alive in the year 10,000 BCE. I would've thought that the calories per day that a person was consuming or the agricultural productivity or whatever would've been different. And you say there's stagnation until just 200 years ago. What's wrong with my naive assessment?

So when we look at the process of development, one can identify three fundamental phases of development. The first one can be defined as the Malthusian outlook, and this is an outlook that is characterized by an interesting dualism. On the one hand, stagnation in living standards. But on the other hand, some dynamism in the context of population, technology, and human adaption. This epoch of stagnation lasts over 99.9% of human existence. It starts with the emergence of Homo sapiens in Africa 300,000 years ago, and it lasts till the eve of the Industrial Revolution.

Now, during this time period, individuals are innovating. Not at the pace that we see at the moment. Naturally, at the beginning of the process, we see the emergence of stone tools that are replaced by another type of stone tools and progress is very rudimentary and very slow. But nevertheless, progress permits individuals to have more resources. But unlike today's world, in which technological progress is converted into the prosperity of the existing population, this is a time period in which technological progress and the increase in the material wellbeing of the population was converted into lower mortality, higher fertility, and consequently higher population growth.

So after a short period of time, after the arrival of a new technology, population increased proportionately, and income per capita reverted back to the previous equilibrium. And consequently, what we see in the course of human history are Malthusian fluctuations. When technology arrives, there is a temporary increase in income per capita, but ultimately population increases proportionately, bringing about a decline in income per capita back to the previous equilibrium position. And therefore, in the long run, the wellbeing of the population, say, in the Fertile Crescent 5,000 years ago was not very different than the wellbeing of the average person in England in the fourteenth century or the average person in Greece in the fourth century BC.

So this is what we see in the course of human history: a long period of Malthusian stagnation. It is not a true stagnation in the sense that technology is advancing. The size of the human population is advancing and humans are adapting to their technological environment. But it is a period of stagnation in terms of the standard of living.

---