Understanding Economic Development
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Understanding Economic Development

A Global Transition from Poverty to Prosperity?

Colin White

This fascinating book considers one of the most important problems in economics: the inception of modern economic development. There is at present no satisfactory explanation of the inception of modern economic development; an excessive focus on either pure theory or on unique histories limits the explanatory power. This book realises the need to integrate the two approaches, moving beyond the proximate causes of economic theory to review the role in an analytic narrative of significant ultimate causes – geography, risk environments, human capital, and institutions.
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Chapter 6: Geography and Beyond: The Importance of Risk Environments

Colin White

Extract

6. Geography and beyond: the importance of risk environments . . . uncertainty is not an unusual condition: it has been the underlying condition responsible for the evolving structure of human organisation throughout history and pre-history. (North 2005: 14) Survival, whether physical or economic, is the primary motivation of individuals and society, survival amidst a flux of environmental change (Guha 1981: chapter 2), both natural, including fluctuations in the availability of resources, and human, the variable relationship with other societies or individuals. The latter includes the predatory pressures of military competition, the fluctuating opportunities arising from cooperation, notably trade and transfers of knowledge, and increasingly obvious demonstration effects, which identify opportunities. Human beings wish to control risk, but the degree of risk aversion differs from society to society and from person to person. Since human beings seek to control their environment, so that it is predictable and manageable, risk, uncertainty or ambiguity, however described, are regarded as deterrents to economic development (North 2005). A naïve view sees a monotonic relationship between the level of risk and the lack of economic development. Higher risk discourages the kind of decisions which favour economic development, particularly investment decisions. If enough people make decisions characterized by caution, an economy can become mired in a poverty trap. There are two comments to be made on such a viewpoint. The first is that both a rigidly controlled and a completely unpredictable environment are likely to be bad for innovation. In the words of Gaddis (2002: 87), innovation mostly...

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