Wealth of nations depends on Jack Frost

Climate and scale in economic growth

by William A. Masters, Purdue University; Margaret S. McMillan, Department of Economics, Tufts University

hy do the rich get richer and the poor stay poor? When it comes to nations, the answers may include frost, according to a study that for the first time links economic and new global climate data.

    Economists and coauthors William Masters of Purdue University and Margaret McMillan of Tufts University say frost plays two important roles: it helps farmers increase agricultural productivity, and it helps people control disease, particularly malaria. Their paper, “Climate and Scale in Economic Growth,” is published this month in the Journal of Economic Growth.

    Since antiquity, observers have noted differences between people living in the tropics and those living in temperate zones. In 350 BC, the Greek philosopher Aristotle wrote, “Those who live in a cold climate are full of spirit.” And from at least the time of Adam Smith's 1776 “Wealth of Nations” to 1998's Pulitzer Prize-winning book by Jared Diamond, “Guns, Germs, and Steel,” people have speculated why some areas of the globe are wealthy while others seem destined for poverty.

    “The broad puzzle is why are poor countries are in geographic tropics, and most of the wealthy countries are not in the tropics,” Masters says.

    There are exceptions to this general rule, of course.

    “In the temperate regions you have North Korea and Mongolia, which are both poor. But these are countries that have totalitarian governments and exist in isolation,” Masters says. “On the other hand, city-state countries such as Hong Kong and Singapore are tropical nations that are wealthy, but they are trade centers that haven't depended on local resources to accumulate their wealth.”

    Masters and McMillan took advantage of recent advances in global information systems data about the earth's climate to take another look at the ancient question. “For the first time, we can put detailed biophysical data into economic models to try to understand how climate and geography have influenced economic performance without indulging in economic determinism,” Masters says. “Learning about the causes of persistent poverty helps us see what can be done about it.”

    They discovered that the factors differentiating wealthy countries from poor included annual hard frosts.

    McMillan says this finding was unexpected. “A generation of economists have focused on institutions as the key differences between societies,” she says. “Many of them - including me - are now quite surprised to find that biophysical factors like climate matter, too.”

    Cold weather has two major effects, the researchers say: the temperate areas have historically had less disease and better agriculture, at least from the point where the citizens of those countries learned how to take advantage of the seasonal frost cycle.

    “Having frost and winter forces insects into a dormant state, which makes it much easier to control insect-borne diseases. In the United States, we had malaria and we had other diseases, but we were able to more easily eradicate these than in other countries, partly because the insects were knocked back each year,” Masters says.

    The connection between frost and agricultural success isn't always as obvious.

    “People think of the frost-free tropics as a lush paradise with abundant biodiversity, and there are abundant species in the tropics,” Masters says. “But too much biodiversity can be a big problem. We get annual crops out of the tropics and plant them in the temperate regions and they do better. Corn, potatoes, wheat, and virtually all of our crop species, first evolved in the warmer areas of the world but are now grown for export by countries in temperate regions.”

    Part of the reason for this is that frost allows a buildup of organic matter that leads to rich, fertile topsoil. “In the tropics, that matter is broken down by insects and microbes very quickly, and the nitrogen and carbon in the dead plant material evaporates into the air or is leached into the ground by rainwater,” Masters says. “In a temperate zone, that nitrogen and carbon builds up and remains in the soil in the form of organic matter.”

    Another benefit of frost is that it ensures moist soil for spring planting. Snow and ice accumulates in the soil through the winter, and then is released as water in the spring. Farmers in temperate areas, unlike those in tropical regions, rarely have to worry about seasonal rains.

    Although the economies of many of the wealthiest nations are no longer based on agriculture, the researchers say past success in agriculture has an historical echo effect that allowed these nations to accumulate and build capital.

    “Looking forward,” the researchers write in the paper, “tropical countries could be helped to grow not only through trade, but also through technical change from accelerated investment in public health and agricultural research.”

    Helping tropical nations catch up will require more than scientific advances, though, Masters says. “The kinds of technologies involved, such as vaccines for tropical diseases and crop varieties adapted to tropical conditions, could be developed if we were willing to pursue them. But most tropical regions are too poor to attract enough R&D from private pharmaceutical and agri-business firms,” he says. “So public-sector investments are needed, and that depends not on science, but on the calculus of politics.”

    William Masters, (765) 494-4235, mastersagecon.purdue.edu. Margaret Mc-Millan, (617) 627-3137, mmcmilla@ emerald.tufts.edu. Related Web sites: William Masters' Web site: www.agecon.purdue.edu/staff/masters; Margaret Mc-Millan's Web site: www.tufts.edu/~mmcmilla