[ExI] How learning to pass the marshmallow test explains global economic evolution

[Keith Henson]

Those of you who have been here a *long* time, know that I have been
much influenced by Evolutionary Psychology, which I first ran into in
Moral Animal, by Robert Wright.

Years before that, I thought highly of Richard Dawkins.  Selfish Gene
is must reading for those who would understand the world.

Since 2007 or so I have been impressed by the work of Gregory Clark.
Unlike the EP people who say most of our psychological traits were
selected back in the stone age, Clark makes a case that some of them
were strongly selected in far more recent times.  Kind of like the
tame foxes.

I happen to be reading Clark's most recent book, _The Son Also Rises_
when this showed up in my email.

Keith

BY Gregory Clark  July 9, 2014 at 12:10 PM EDT

What separated the English from the rest of the world in the lead-up
to the Industrial Revolution was their culture and genetics, says
economic historian Gregory Clark. The most materially-driven and most
patient survived. Photo by Flickr user mrjorgen.

Editor’s Note: If you had to choose between living in a
hunter-gatherer society and pre-industrial England, or even a very
orderly and hygenic Japan, which would you prefer? In nearly every
dimension, hunter-gatherer life was better: you’d live just as long
(about 35 years), with more dietary variety and in a more egalitarian
society.

One of the reasons living conditions were so high for hunter-gatherer
societies, economic historian Greg Clark told Paul Solman, is that
there was a high degree of violence. “It’s better to die at the end of
a spear than to die from miserable material living conditions,” he
said in part one of his never-before published interview with Paul,
published Monday on Making Sen$e.

But it’s not just the ease of your own death that makes that a better
life. More violence meant that more people were eliminated, and those
who were left could share in the bounty, increasing their own living
standards. To Clark, this explains why Thomas Malthus’ population
theory – that population is limited by the limited resources for
keeping humans alive – explains so much about economic history up
until around 1800.

Greg Clark: A lot about the Malthusian world is the exact opposite of
what we expect now. What’s vice now is virtue then. You know, bad
hygiene actually makes for good living conditions.

Paul Solman: Because so many people die.

Greg Clark: Yes. Areas that have bad climate in terms of disease, like
sub-Saharan Africa, we believe, were actually wealthy areas in the
pre-industrial period because disease helped kill so many people.

So then how, Paul wanted to know, did Clark think the world, led by
the miserable English – of all people — manage to break out of the
Malthusian trap? Previous explanations have been:

The advent of modern institutions like the rule of law, the sanctity
of contracts and the ubiquity of markets;
The advent of modern technology, initially spurred by England’s vast
coal deposits, which required vast energy to tap and thus led to the
invention of the steam engine, mainly to dredge the water you struck
when you dug deep enough. (One might call this
“the-luck-of-the-English” hypothesis);
The advent of modern exploitation due to military technology — of
colonies in general, and of African slaves in particular;

The circumstance of England’s unique geography, both in terms of
latitude (temperate weather) and access to, and protection by, water.
As Shakespeare put it around 1600: “this precious gem set in the
silver sea that serves it in the office of a wall or else a moat
defensive to a house.”

But Greg Clark’s answer is: none of the above. He argues that culture
and genetics were what really separated the English from the rest of
the world. The key, he said in his controversial 2007 book, “A
Farewell to Alms,” and in the interview Paul did with him when it came
out, was that the English developed the “habits” of wealth creation
before anyone else. We return to that interview for elaboration.

– Paul Solman and Simone Pathe, Making Sen$e

________________________________

Greg Clark: The reason the English were more innovative, more
commercially active, more alive to [economic] possibilities was a
survival of those who were driven by material success, those who
couldn’t be happy unless they were making more money. In some sense,
the envious have inherited the earth, and that’s why we’ve got modern
growth.

Paul Solman: So survival of the richest means survival of the most
competitive, or most envious, or most bourgeois?

Greg Clark: Yes.

Paul Solman: Really?

Gregory Clark: In the context of pre-industrial England, those are the
people who made it through.

***

Paul Solman: So we get to 1800 and now suddenly things become
dramatically different. If you’ve got a line for growth per person
that’s basically horizontal along a timeline of all human history,
suddenly after 1800 it looks like it’s going straight up?

Greg Clark: Yes. Sometime around 1800 this dominant feature of the
world up until then, which was very slow technological advancement,
changed, and we moved to a world where technological advancement was
systematic, expected, occurring all the time. But I should emphasize
that that change is actually much more gradual than that 1800 date
would suggest.

There was a break at some point between, say, 1600 and 1900 from this
Malthusian world to the modern world, and that, for the advanced
economies, just dramatically changed their nature.

What I want to emphasize here is the bizarre and puzzling nature of
the Industrial Revolution, and its important to understand that this
is one of the intellectual puzzles of history that’s on a par with the
biggest puzzles in physics, or in astronomy, even though people
generally don’t appreciate this. And perhaps the reason is that modern
economists have constructed a false history of the world in their
minds. They tend to assume that since high-income modern economies
have certain economic features –

Paul Solman: Free markets, rule of law…

Greg Clark: …stability, peace, open government, and that low-income
modern economies tend to have violence, market interference,
restrictions — what must be the case is that the pre-industrial world
suffered from all of these problems, and that then somehow people
stumbled on the right institutions, and then growth occurred.

Paul Solman: And by “institutions” you mean markets, the sanctity of contracts?

Greg Clark: That’s right. Property rights, markets, representative
government, limitations on the power of government. And it does turn
out that England, which was in the vanguard of this movement, was a
politically stable society with limited democracy, and very little
government interference.

However, when you study the long history of the pre-industrial period,
it becomes apparent that, for example, if you go back to 1300, England
already had all the institutions you needed for modern economic
growth.

England had a government tax rate that averaged 1 percent. It had, for
hundreds of years, zero inflation. It had no government debt. It had
absolute security for most people of their property rights. Most
markets were free. For hundreds and hundreds of years, England had
everything it needed for modern growth. If you go back to ancient
Greece or ancient Rome, or probably even ancient Babylon, they had
institutions enough for getting growth.

Paul Solman: We have the tablets from ancient Babylon because they
were incised in clay, and there were all kinds of contracts.

Greg Clark: They had home mortgages, they had rental contracts, they
had labor contracts, they had urban societies.

But, says Clark, the Babylonians obviously didn’t have modern economic
growth. Nor did the Greeks, the Romans, the Chinese or anyone else,
even though they had many of the institutions that economists credit
with the advent of prosperity.

Greg Clark: It’s the dominant paradigm in modern economics. The idea
in this is that economics has an amazing power. Institutions – I mean,
it’s just the rules of the game in any society. If we don’t like the
rules we have, why don’t we just change them? And then apparently, we
could have endless growth.

That I think, is what gives economics its power and its appeal. But
that’s what I’m trying to argue against.

I think the key was that there is very strong evidence that people
were changing through this long Malthusian interval. Human nature
seems to have been changing. It may well be culturally. It’s
impossible to rule out that it’s actually genetically. What we find,
if we look back at the earliest societies, is that people tended to be
violent, impulsive, impatient. They didn’t like to work.

When we get to societies like England on the eve of the Industrial
Revolution, you can see that people are accumulating capital in ways
that they never did before. There’s much less violence – ordinary
day-to-day violence — in the society.

People’s levels of education have expanded enormously. They are much
more aware of numbers.

The upper classes in ancient Rome mostly didn’t know what age they
were. On their tombstones they would record ages that were just
fantastical – 120 in a society where life expectancy at birth was 25
to 30. No one seems to have thought: “This is crazy.”

You also get in these early societies people giving numbers for
battles that just make no sense in terms of what we now know about
history.

Paul Solman: What’s an example of that?

Greg Clark: They typically quote 80,000 for some reason as a standard
number, and it just seemed to mean “big.”

There’s a case in medieval England where someone testified in
Parliament to having fought in a battle in his youth, which occurred
more than 100 years earlier. No one interrupted to say, “What are you
talking about?”

And so we really see big changes in terms of work effort, patience,
interest rates in very early societies at astonishing levels. If you
go back to ancient Babylon, your house mortgage would cost you in real
terms 20 to 25 percent interest rate per year.

These were societies that offered fantastic profit opportunities –
profit opportunities that even venture capitalists now would die for.
They were available to everyone, and no one took them.

In ancient Greece, your standard return from completely safe
investments was 10 percent. But on the eve of the Industrial
Revolution in England, the rate is down to 4 percent. There’s just a
fundamental change in people’s psychology. What that implies is that
people were historically very impatient.

Paul Solman: So you mean the time value of money — the value of
waiting — has simply gone down as time has gone on?

Greg Clark: Yes. There’s very clear signs that with risk-free
investments, the amount you have to pay people to wait declines very
dramatically. We know, in the modern world, that people vary in their
degree of impatience and how much they have to be paid.

I have three children, and they vary very significantly across that factor.

We also know in the modern world that psychologists were able to test
four-year-olds and say, “You can have one marshmallow now or two
marshmallows if you wait for a few minutes.”

There’s a bunch of kids that have to have the marshmallow, and others
that just have this different psychology where they can wait. It turns
out that’s a very good predictor of how they’ll do later in life. It
seems to be a fundamental feature of peoples’ personalities: how
willing they are to wait for gratification.

There seems to be this possibility that on a world scale, this was
actually changing as we moved from hunter-gatherer society, to 1800.