ECON 313 Lecture Notes - Lecture 7: Yellow Fever, European Colonialism, Creative Destruction
15 Feb 2017
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Climate: no since in 1500 it was the countries in the topics that were prosperous. Disease: no since countries in the tropics have more diseases. Culture: the culture hypothesis does not provide a natural explanation for the reversal, and has nothing to say on the timing of the reversal. There was a huge variation in economic institutions. Inclusive institutions: two functions: facilitate exchange and restrain powerful actors (for all, unbiased system of law, secure property rights, permit entry of new businesses (creative destruction, allow people to choose their careers. Extractive institutions: same functions but only for the elite, goal: extract income and wealth from one subset of society to benefit a different subset. The higher initial population density, the worse are institutions. European colonialism therefore led to an institutional reversal in the sense that previously richer and more densely settled places ended up with worse institutions.
