Galor’s Unified Growth Theory


Jason Collins


September 4, 2013

In 1798, Thomas Malthus described a world where technological progress did not increase per person income. Any additional income was consumed by population growth. It appeared a solid explanation of the world to that point, but Malthus had the misfortune of describing the “Malthusian world” just when some parts of that world were breaking their Malthusian shackles. This left Malthus with a somewhat tarnished reputation (I consider undeservedly), with the Malthusian model failing to offer an explanation for why it no longer seemed to apply.

Conversely, modern economic theories such as the neoclassical growth model and endogenous growth theory, while being useful in understanding some elements of economic growth, do a poor job of explaining the nature of the Malthusian state that existed for most of human history.

Unified growth theory seeks to overcome the limitations of these approaches by presenting a coherent, single framework that captures the Malthusian era, the transition to higher growth and the modern growth state. The process of moving from one state to the next originates within unified growth models, with the seeds of the transition growing during the Malthusian era. As such, the Malthusian state is not an equilibrium, but a dynamic process leading to its own end. The benchmark for unified growth models is that they capture the patterns in income, technology and population through these various states and generate the transition between them.

Unified growth theory was first proposed and has largely been developed in the work of Oded Galor, who with his co-authors has put together the building blocks of the theory. In his book Unified Growth Theory, Galor catalogues his work in the area and demonstrates the strength of the foundation he has built.

The book is an academic book that Galor has largely constructed from his published papers. Some chapters are heavy on the mathematics, although Galor is a clear writer and it is possible to get a sense of unified growth theory without working through the models. The first chapter, in which Galor works through some of the core features of economic history, would provide a useful grounding for any intelligent lay reader, as would his discussion of the causes of the demographic transition.

I have posted about some of the papers that form book chapters before, so I won’t give a blow-by-blow account of the book. And if you are familiar with his papers, you won’t find many surprises. But what becomes clear from reading this work in a single collection is how coherently Galor’s work fits together (and that is from the perspective of someone who is skeptical of unified growth models as potentially trying to explain too much). While a couple of the chapters present full unified growth models, other chapters examine in detail particular elements of the theory. Galor examines the relationship between population, income and technology in the Malthusian state. He steps through the triggers of the demographic transition and examines which causes are plausible. He examines the accumulation of human capital across populations and how this coincides with changes in growth (the accumulation of human capital in response to technological progress is the core driver of the transition in Galor’s models). Put together, the case the Galor is building becomes clear.

In past posts I have focused on Galor’s work examining the interaction between evolutionary factors and economic growth. These evolutionary considerations are among the more peripheral parts of unified growth theory. Unified growth theory could survive without them. But what Galor emphasises is the range of theories that can be accommodated within a unified growth framework. For example, the effect of genetic diversity on innovation and cooperation could be taken to affect the population’s ability to accrue human capital. This then generates the divergence in economic outcomes within the unified growth framework, as one population accumulates enough human capital for a take-off in growth before the other. In this context, unified growth theory does not explain every facet of economic growth, but provides a framework under which much analysis can occur.

That said, it will be interesting to see which elements of Galor’s unified growth models stand the test of time, even if unified growth theory itself becomes a more broadly used approach. What is the nature of the trade-off between quantity and quality of children? What were the evolutionary changes during the Malthusian state? How do the models stand up when we examine specific questions under their lens, such as asking why England and not, say, China first experienced the take-off in economic growth? There is a lot of potential to put more flesh on the framework of unified growth theory and the models that Galor has developed within it.

So for those economists interested in the deep causes of economic growth, I would recommend Galor’s book, even if you are generally familiar with his work. Having that body of work systematically laid out in one piece gives it a strength not apparent when each part is taken alone.

And for those who are interested on some of my earlier posts on Galor’s work (with the corresponding book chapter in brackets):

  1. Dynamics and Stagnation in the Malthusian Epoch (chapter 3)

  2. The Neolithic Revolution and Comparative Development (chapters 6.4.1)

  3. The “Out of Africa” Hypothesis, Human Genetic Diversity, and Comparative Economic Development (chapter 6.4.2)

  4. Natural selection and the origin of economic growth (chapter 7)

  5. Evolution of Life Expectancy and Economic Growth (chapter 7.7.2)