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For most of history, humans experienced static living standards, with the average per capita income remaining constant. The world languished in a Malthusian state where any improvement in technology was rapidly subsumed by population growth. Around 1800, a small part of the global population started to exit the Malthusian trap with the advent of the Industrial Revolution. Since then, rising living standards have spread to a majority of the world’s population. Why, after living standards had languished for thousands of generations, did their level suddenly take off?
My research aims to establish a theoretical framework to test whether “time preference” could have been a trait under natural or sexual selection, favouring those genotypes with more patience and a higher propensity to save and invest. As a result, selection on specific genes in some human populations could have been a contributing factor to the transition from the low-growth Malthusian economy of pre-1800 to the modern high-growth economies of today.
Time preference refers to the rate at which people value goods received in the future compared to goods received today. The rate of time preference underlies the saving and investment decision. Individuals with lower rates of time preference are more inclined to save and invest due to the higher weight they give to future consumption. As a result, time preference affects the level of investment in physical capital and innovation, which both are major drivers of economic growth.
The rate of time preference exhibited by people may have a genetic basis. We would expect natural selection to act on variation in individual time preference, with certain rates maximising the returns of investment. The optimal rate would depend on factors that include rates of population growth, risk of death and changes in aggregate risk (a risk that when realised effects all members of a population). Aggregate risk would vary with shifts from hunter gatherer to agricultural societies with more complex division of labour.
Examination of evolution of time preference in economics has direct parallels to the study of reproductive effort in evolutionary ecology. Organisms face decisions on the ideal time to forage, whether a plant should seed this year or next and other trade-offs between different times.
The interaction between time preference, technology, risk and economic growth has the potential to induce selection, which in return could result in rapid, significant changes in economic growth. The aim of my research is to explore the theoretical foundations of these evolutionary and economic mechanisms by developing models that reflect the patterns in technology, growth and population that occurred during the Malthusian era and the transition to modern high growth regimes.
You can download my first working paper, an examination of the model developed in Galor and Moav, Natural Selection and the Origin of Economic Growth (2002) here.