nep-evo New Economics Papers
on Evolutionary Economics
Issue of 2019‒09‒23
three papers chosen by
Matthew Baker
City University of New York

  1. The Globe as a Network: Geography and the Origins of the World Income Distribution By Matthew Delventhal
  2. The Evolutionary Stability of Optimism, Pessimism, and Complete Ignorance By Burkhard C. Schipper
  3. The global distribution of economic activity: nature, history, and the role of trade By Henderson, Vernon; Squires, Tim; Storeygard, Adam; Weil, David

  1. By: Matthew Delventhal (Claremont McKenna College)
    Abstract: In this paper I develop a quantitative dynamic spatial model of global economic development over the long run. There is an agricultural (ancient) sector and a non-agricultural (modern) sector. Innovation, technology diffusion, and population growth are endogenous. A set of plausible parameter restrictions makes this model susceptible to analysis using classic network theory concepts. Aggregate connectivity is summarized by the largest eigenvalue of the matrix of inverse iceberg transport costs, and the long-run path of the world economy displays threshold behavior. If transport costs are high enough, the world remains in a stagnant, Malthusian steady state; if they are low enough enough, this sets off an endogenous process of sustained growth in population and income. Taking the model to the data, I divide the world into 16,000 1 degree by 1 degree quadrangles. I infer bilateral transport costs by calculating the cheapest route between each pair of locations given the placement of rivers, oceans and mountains. I infer a series of global transport networks using historical estimates of the costs of transport over land and water and their evolution over time. I then simulate the evolution of population and income from the year 1000 until the year 2000 CE. I use the model to calculate two sets of location-specific efficiency parameters, one for the ancient sector and one for the modern sector, that rationalize both the year 1000 population distribution and the year 2000 distribution of income per capita. I then calculate the relative contributions of each set of efficiency wedges, and key historical shifts in transport costs, to the year 2000 variance of per-capita real income.
    Date: 2019
  2. By: Burkhard C. Schipper (Department of Economics, University of California Davis)
    Abstract: We provide an evolutionary foundation to evidence that in some situations humans maintain either optimistic or pessimistic attitudes towards uncertainty and are ignorant to relevant aspects of the environment. Players in strategic games face Knightian uncertainty about opponents' actions and maximize individually their Choquet expected utility with respect to neo-additive capacities (Chateauneuf, Eichberger, and Grant, 2007) allowing for both an optimistic or pessimistic attitude towards uncertainty as well as ignorance to strategic dependencies. An optimist (resp. pessimist) overweights good (resp. bad) outcomes. A complete ignorant never reacts to opponents' changes of actions. With qualifications we show that in finite populations optimistic (resp. pessimistic) complete ignorance is evolutionary stable and yields a strategic advantage in submodular (resp. supermodular) games with aggregate externalities. Moreover, this evolutionary stable preference leads to Walrasian behavior in these classes of games.
    Keywords: ambiguity, Knightian uncertainty, Choquet expected utility, neo-additive capacity, Hurwicz criterion, Maximin, Minimax, supermodularity, aggregative games, monotone comparative statics, playing the field, evolution of preferences
    JEL: C72 C73 D01 D43 D81 L13
    Date: 2019–09–17
  3. By: Henderson, Vernon; Squires, Tim; Storeygard, Adam; Weil, David
    Abstract: We explore the role of natural characteristics in determining the worldwide spatial distribution of economic activity, as proxied by lights at night, observed across 240,000 grid cells. A parsimonious set of 24 physical geography attributes explains 47% of worldwide variation and 35% of within-country variation in lights. We divide geographic characteristics into two groups, those primarily important for agriculture and those primarily important for trade, and confront a puzzle. In examining within-country variation in lights, among countries that developed early, agricultural variables incrementally explain over 6 times as much variation in lights as do trade variables, while among late developing countries the ratio is only about 1.5, even though the latter group is far more dependent on agriculture. Correspondingly, the marginal effects of agricultural variables as a group on lights are larger in absolute value, and those for trade smaller, for early developers than for late developers. We show that this apparent puzzle is explained by persistence and the differential timing of technological shocks in the two sets of countries. For early developers, structural transformation due to rising agricultural productivity began when transport costs were still high, so cities were localized in agricultural regions. When transport costs fell, these agglomerations persisted. In late-developing countries, transport costs fell before structural transformation. To exploit urban scale economies, manufacturing agglomerated in relatively few, often coastal, locations. Consistent with this explanation, countries that developed earlier are more spatially equal in their distribution of education and economic activity than late developers.
    Keywords: agriculture; physical geography; development
    JEL: O13 O18 R12
    Date: 2018–02–01

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