New Theory Explains Economic Growth In Terms Of Evolutionary Biology

"Until now, economic growth theory did not have implications for evolutionary biology, and evolutionary biology did not have implications for economic growth," said lead theorist Oded Galor, professor of economics at Brown University.

This new theory, the first of its kind ever proposed in the economics literature, appears as the lead article in the current Quarterly Journal of Economics. It is co-authored by Omer Moav of the Hebrew University of Jerusalem.

"The struggle for survival that had characterized most of human existence stimulated a process of natural selection and generated an evolutionary advantage to human traits that were complementary to the growth process, triggering the takeoff from an epoch of stagnation to sustained economic growth," the authors wrote in their study.

The evolution of the human brain in the transition to Homo sapiens "increased the evolutionarily optimal investment in offspring's quality," said Galor. "This was due to the complementary relationship between brain capacity and the return to investment in human capital."

The process gave an evolutionary advantage to people who had higher valuation toward offspring's quality, Galor said. "The subsequently increased prevalence of this genetic trait in the population ultimately permitted the Industrial Revolution to trigger a transition to a state of sustained economic growth."

The critical natural selection that occurred prior to the Industrial Revolution involved the fundamental tradeoff between child-caring and child-rearing. The "epoch of stagnation" gave an evolutionary advantage to a higher-quality smaller family rather than to lower-quality larger families, Galor said.

"Valuation of quality, through better nourishment and education for children, fed back into technological progress. And as technology advanced, it fed back into more education. Human capital took off. This leap in evolution came to dominate the population as a whole, and centuries of economic stagnation ended."

The authors attribute acceleration in this evolutionary process to the emergence of the nuclear family that fostered intergenerational links. Prior to the agricultural revolution, 10,000 years ago, people lived among hunter-gatherer tribes that tended to share resources more equally.

"During this hunter-gatherer period, the absence of direct intergenerational links between parental resources and investment in their offspring delayed the evolutionary advantage of a preference for high-quality children," said the authors.

In fact, according to the theory, a switch back to a quantity emphasis began to take place in the 20th century.

"During the transition from stagnation to growth, once the economic environment improved sufficiently, the evolutionary pressure weakened and the significance of quality for survival declined," said Galor. The inherent advantage in reproduction of people who highly value a large number of children gradually dominated and their fertility rates ultimately overtook the fertility rates of people who value high-quality children, he said.

"Oded Galor's tendency to ask big, important questions, to be tackled in ambitious and technically sophisticated models have earned him a well-deserved reputation as one of the most ingenious and interesting growth-theorists of our age," said Joel Mokyr, professor of economics and history, Northwestern University. Mokyr is a leading expert on the history of technological progress and the Industrial Revolution.

"Galor and Moav have opened a new and potentially very fruitful vein of thinking about the history of economies in the very long run," said Mokyr. "This pioneering paper is a breakthrough in its use of population dynamics in long-term historical change and in applying Darwinian logic to the history of mankind."

The predictions of the proposed theory are consistent with the time path of population, technology and income since the emergence of Homo sapiens, said Galor.

"Once biologists identify the genes that control fertility behavior, the predictions of the theory in the context of the evolution of the human species could be tested as well, comparing genetic valuation for quality in hunter-gatherer tribes to those in societies that have experienced the Neolithic revolution," Galor said.

According to the authors, earlier episodes of technological progress did not generate a "takeoff" because the necessary human evolutionary change had not yet completed its course.

"The population did respond to higher return to education and investment in human capital, but not aggressively enough to generate an acceleration in the rate of technological progress and sustained economic growth," said Galor.

The theory generates an alternative intriguing prediction, he said.

"It suggests that during the epoch of stagnation, men who were from a physiological viewpoint moderately fertile (men with a moderate sperm count), and who were therefore induced by nature to invest more in the quality of their offspring had an evolutionary advantage over highly fertile individuals," Galor said. This would suggest that sperm count has declined in the last thousands of years, he said.

The National Science Foundation supported Galor's research.