Some Countries Are Rich and Some Are Poor. Why?

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Why are some countries rich and others poor? And to this question, only history can give us some guidance to the answer because past societies constitute thousands of natural experiments with known outcomes. According to many reading, the answer to the question involves external and human factors. One important factor contributing to the material wealth of a society is its productivity. Imagine two nations that were exactly identical in every respect—resources, population, culture, etc—except that one society had higher productivity. We would expect the more productive society to produce a greater output of goods. Productivity is not an aggregate number (like output), but a rate (like output per capita). Higher productivity means more can be produced for a given amount of people, raising the wealth of a typical person. For most of human history, productivity has changed very little. While history has seen important advances like the compass and the printing press, it wasn't until the industrial revolution, beginning in the late 1700s, that productivity really began to grow. The source of productivity is technology. Advances in technology, like automation or telecommunications, make it possible to produce more with less. However, some elements in society resist adopting new technologies. Examples span from management at large companies that want to prevent competition, to labor unions that fear losing members to automation, to nations that prevent the spread of modern farming practices because they fear a threat to traditional culture. In these cases, groups can use their power to impede change. Doing so may be good for those groups in the short-run, but it can harm the long-run well-being of the society. We expect societies that are less resistant to change to end up being more productive, and therefore wealthier. Technology is as much about the way tools are
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