more on the culture of economics, or the economics of culture
Cultural diffusion key to early industrialisation and economic growth
DP6444 Cultural Assimilation, Cultural Diffusion and the Origin of
the Wealth of Nations
URL: http://www.cepr.org/pubs/new-dps/dplist.asp?dpno=6444.asp
Author(s): Quamrul Ashraf, Oded Galor
As late as the end of the 1st millennium CE, the civilizations of
Asia were well ahead of Europe in both wealth and knowledge. By the
time of the Industrial Revolution in the 18th century, however,
Europe had already overtaken these societies. Subsequently, the gap
in per capita GDP between the richest and the poorest regions of the
world increased from a modest 3 to 1 ratio in 1820 to an astounding
18 to 1 ratio in 2000. While some theories attribute this phenomenon
to differences in cultural traits across societies, the authors of
CEPR DP6444 argue that the interplay between cultural assimilation
and cultural diffusion played a significant role in this Great
Divergence.
According to their theory, cultural assimilation (the homogenization
of cultural traits within a society) improves the efficiency with
which society-specific human capital is transmitted from one
generation to the next, increasing productivity achieved with the
available production technologies. This is beneficial to a society in
the agricultural stage of development. Cultural diffusion (the spread
to cultural traits from one society to the other) on the other hand,
enhances the accumulation of knowledge and therefore equips a society
better to adapt to new technologies. While possibly inhibiting
productivity using existing technologies, it stimulates earlier
industrialisation and the resulting take-off to a state of sustained
economic growth.
The theory is consistent with the contrasting experiences of Islamic
societies and Europe. The Golden Age of Islamic civilization was
followed by a decline which may be attributed to a resistance of new
ideas from the non-Islamic world. Europe, on the other hand,
benefited from the knowledge gained from migrant minority groups.
The authors conclude that rather than cultural traits themselves
influencing the process of development, it is the contrasting forces
of cultural assimilation and diffusion that are instrumental for
comparative economic development.