The Unresolved Mystery of the Great Divergence is Solved

Abstract. Economic growth in Western Europe, Eastern Europe, Asia, countries of the former USSR, Africa and Latin America were analysed. It is demonstrated that the fundamental postulate of the Unified Growth Theory about the existence of the three regimes of growth (Malthusian regime, post-Malthusian regime and sustained-growth regime) is contradicted by data. These regimes did not exist. In particular, there was no escape from the Malthusian trap because there was no trap. Economic growth in all these regions was not stagnant but hyperbolic. Unified Growth Theory is fundamentally incorrect. However, this theory is also dangerously misleading because it claimsa transition from the endless epoch of stagnation to the new era of sustained economic growth, the interpretation creating the sense of security and a promise of prosperity. The data show that the opposite is true. Economic growth in the past was sustained and secure. Now, it is supportedby the increasing ecological deficit. The long-term sustained and secure economic growth has yet to be created. It did not happen automatically, as suggested incorrectly by the Unified Growth Theory. Keywords. Regional economic growth, Gross Domestic Product, Unified Growth Theory, Malthusian stagnation, post-Malthusian regime, sustained-growth regime, Industrial Revolution, hyperbolic growth. JEL. A10, C12, C20, F00, N00, O10.

Abstract. Galor discovered many mysteries of the growth process. He lists them in his Unified Growth Theory and wonders how they can be explained. Close inspection of his mysteries reveals that they are of his own creation. They do not exist. One of his claimed mysteries is the mystery of the alleged sudden spurt in the growth rate of income per capita and in the growth of population. This sudden spurt never happened. Precisely the same data , which were used in support of the Unified Growth Theory are in fact in its direct contradiction. They show that the created mysteries of growth do not exist. The difference between the diametrically opposite conclusions is that in order to support the Unified Growth Theory and to create the mysteries of growth data were appropriately manipulated and distorted but the contradicting evidence is based on their rigorous analysis. The mechanism of the historical economic growth and of the growth of human population is yet to be explained but it would be unproductive to try to look for explanations in the Unified Growth Theory. However, the problem is much deeper than just the examination of this theory. Demographic Growth Theory is based on the incorrect but deeply entrenched postulates developed by accretion over many years and now generally accepted in the economic and demographic research, postulates revolving around the concept of Malthusian stagnation and around a transition from stagnation to growth. The study presented here and earlier similar publications show that these postulates need to be replaced by interpretations based on the mathematical analysis of data and on the correct understanding of hyperbolic distributions. Keywords. Economic growth, Population growth, Growth rates, Gross Domestic Product, Income per capita, Unified Growth Theory, Hyperbolic growth JEL. A10 , A12, C02, C12, C50, F01, Y80.

.Data for the number of rock-shelter sites in Australia between 1000 and 10,000 years BP (before present or approximately between 8,000 BC and AD 1000) are analysed. These data were interpreted by Johnson and Brook (2011) as representing the growth of population. Their claim of the Mid-Holocene intensification of the growth of population around 5000 years BP is contradicted by their own data. The puzzle of the Mid-Holocene turning point has been solved: there was no turning point. Their claim of the Mid-Holocene turning point relies on a precise position of a single point in the set of the already inaccurate data. Based on the fitted distribution to the data, the size of human population has been estimated between 8,000 BC and AD 1700 and tentatively extended down to 60,000 BC. The absolute values of the size of population were determined in relation to Maddison’s data between AD 1 and 1700 (Maddison, 2010). Data of Maddison show also that the value of income per capita was constant below AD 1700. Using this information and the fit to the population data, economic growth in Australia was estimated down to 8,000 BC and tentatively extended to 60,000 BC. Keywords . Australia, Population growth, Economic growth, Gross Domestic Product, Hyperbolic growth, Unified Growth Theory, Malthusian stagnation. JEL . A10, A12, C12, C20, Y80.

Abstract. A simple but useful method of reciprocal values is introduced, explained and illustrated. This method simplifies the analysis of hyperbolic distributions, which are causing serious problems in the demographic and economic research. It allows for a unique identification of hyperbolic distributions and for unravelling components of more complicated trajectories. This method is illustrated by a few examples: growth of the world population during the AD era; growth of population in Africa; economic growth in Western Europe; and the world economic growth. They show that fundamental postulates of the demographic and economic research are contradicted by data, even by precisely the same data, which are used in this research. The generally accepted postulates are based on the incorrect understanding of hyperbolic distributions, which characterise the historical growth of population and the historical economic growth. In particular, data used, but never analysed, during the formulation of the Unified Growth Theory show that this theory is based on fundamentally incorrect premises and thus is fundamentally defective. In this theory, distorted representations of data are used to support preconceived and incorrect ideas. Precisely the same data, when properly analysed, show that the theory is incorrect. Application of this simple method of analysis points to new directions in the demographic and economic research. It suggests simpler interpretations of the mechanism of growth. The concept or the evidence of the past primitive and difficult living conditions, which might be perhaps described as some kind of stagnation, is not questioned or disputed. It is only demonstrated that trajectories of the past economic growth and of the growth of population were not reflecting any form of stagnation and thus that they were not shaped by these primitive and difficult living conditions. The concept or evidence of an explosion in technology, medicine, education and in the improved living conditions is not questioned or disputed. It is only demonstrated that this possible explosion is not reflected in trajectories of the economic growth and of the growth of population. Growth trajectories were increasing monotonically during the generally claimed epoch of stagnation and during the claimed explosion. Keywords. Hyperbolic distributions, Reciprocal values, Economic growth, Growth of human population, Industrial revolution, Unified Growth Theory, Growth regimes, Gross Domestic Product. JEL. A10, A12, A20, B41, C02, C12, C20, C50, Y80.

Abstract. Data describing historical growth of income per capita [Gross Domestic Product per capita (GDP/cap)] for the world economic growth and for the growth in Western Europe, Eastern Europe, Asia, former USSR, Africa and Latin America are analysed. They follow closely the linearly-modulated hyperbolic distributions represented by the ratios of hyperbolic distributions obtained by fitting the GDP and population data. Results of this analysis demonstrate that income per capita was increasing monotonically . There was no stagnation and there were no transitions from stagnation to growth. The usually postulated dramatic escapes from the Malthusian trap never happened because there was no trap in the economic growth. Unified Growth Theory is fundamentally incorrect because its central postulates are contradicted repeatedly by data, which were used but never analysed during the formulation of this theory. The large body of readily-available data opens new avenues for the economic and demographic research. They show that certain fundamental postulates revolving around the concept of Malthusian stagnation need to be replaced by the evidence-based interpretations. Within the range of analysable data, which for the growth of population extends down to 10,000 BC, growth of human population and economic growth were hyperbolic. There was no Malthusian stagnation and there were no transitions to distinctly faster trajectories. Industrial Revolution had no impact on changing growth trajectories. Keywords. Economic growth, Income per capita, Unified Growth Theory, Hyperbolic growth, Industrial Revolution, Takeoffs, Malthusian stagnation JEL. A10 , C12, C20, C50, F00.

This chapter examines the process of development from an epoch of Malthusian stagnation to a state of sustained economic growth. The analysis focuses on recently advanced unified growth theories that capture the intricate evolution of income per capita, technology, and population over the course of human history. Deciphering the underlying forces that triggered the transition from stagnation to growth and the associated phenomenon of the great divergence in income per capita across countries has been widely viewed as one of the most significant challenges facing researchers in the field of growth and development. The inconsistency of non-unified growth models with the main characteristics of the process of development across most of human history induced growth theorists to advance an alternative theory that captures in a single unified framework the epoch of Malthusian stagnation, the modern era of sustained economic growth, and the recent transition between these distinct regimes. Unified growth theory reveals the underlying micro foundations that are consistent with the growth process over the entire history of the human species, enhancing the confidence in the viability of the theory, its predictions and policy implications for the growth process of less developed economies.

The evolution of economies during the major portion of human history was marked by Malthusian stagnation. The transition from an epoch of stagnation to a state of sustained economic growth has shaped the contemporary world economy and has led to the great divergence in income per capita across the globe in the past two centuries. This article examines the process of development over the course of human history in light of recent advances in unified growth theory.

Abstract. Data describing historical economic growth are analysed. They demonstrate convincingly that the take offs from stagnation to growth, claimed in the Unified Growth Theory, never happened. This theory is again contradicted by the same data which were used, but never properly analysed, during its formulation. The absence of the claimed takeoffs demonstrates that the postulate of the differential takeoffs is also contradicted by data. Furthermore, this analysis demonstrates that the mathematically-analysable data contradict the concept of the prolonged Malthusian stagnation, its effects on the economic growth as well as the concept of a dramatic escape from the Malthusian trap. Keywords. Historical economic growth, regimes of growth, Malthusian stagnation, takeoffs, Malthusian trap, hyperbolic growth. JEL. A10, B10, B22, F01, N10.

Reviewed by: India, Modernity and the Great Divergence: Mysore and Gujarat (17th to 19th C.) by Kaveh Yazdani, and: The Industrial Revolution: The State, Knowledge and Global Trade by William J. Ashworth, and: Globalization and the Colonial Origins of the Great Divergence: Intercontinental Trade and Living Standards in the Dutch East India Company's Commercial Empire, c. 1600–1800 by Pim De Zwart Tirthankar Roy India, Modernity and the Great Divergence: Mysore and Gujarat (17th to 19th C.). By kaveh yazdani. Leiden: Brill, 2017. 669 pp. $246.00 (paper). The Industrial Revolution: The State, Knowledge and Global Trade. By william j. ashworth. New York: Bloomsbury, 2017. 352 pp. $29.95 (paper). Globalization and the Colonial Origins of the Great Divergence: Intercontinental Trade and Living Standards in the Dutch East India Company's Commercial Empire, c. 1600–1800. By pim de zwart. Leiden: Brill, 2016. 290 pp. $141.00 (hardcover). The Rise of the West and Other Stories Why some countries grow rich before others do, is a question that has been discussed almost from the time modern economic growth began in the mid-nineteenth century, "modern" economic growth being a process driven by productivity gains rather than by the accumulation of resources. Standard answers to this question differed according to the emphasis laid upon market-integration, cultural attributes of societies, or political factors, citing Adam Smith, Max Weber, or Karl Marx in the process. The crucial evidence to test these theories came from Europe and was usually speculative about regions outside Europe. There was a broad agreement that Europe possessed efficient markets, entrepreneurial cultures, and market-friendly states before industrialization ushered in modern economic growth, whereas societies in Asia and Africa did not. In the mid-twentieth century, neo-Marxist writers challenged this Eurocentric view by saying that Europe grew rich by exploiting the rest of the world. But to many, this position was as Eurocentric as the one it criticized. Two things happened around 2000 that changed the discourse. First, Kenneth Pomeranz published his famous book The Great Divergence, which showed that just before industrialization began, advanced regions in Europe and East Asia showed "surprising similarities" in economic conditions.1 The book did two things at once, it shifted attention to non-European regions, and questioned the idea that economic growth had [End Page 280] roots in exceptional European traditions. Second, economists looking for causes of economic growth moved into history. Many of them were inspired by the intellectual movement known as new institutional economic history.2 They were aided in this endeavor by Angus Maddison's huge cross-country dataset on average income by country over several centuries.3 The most influential contributions in this field retained, even reinforced, the idea that economic growth did have roots in European tradition, especially in institutions like laws of property and contract, adding that the transmission of these institutions worldwide faced barriers of a political nature. These two propositions, that there were "surprising similarities," and that Europe made exceptional strides in institutions, did not fit, giving rise to a debate. Better known as the great divergence debate, this exchange has formed the stem of world economic history in recent years. Whether Europe was different or not, the debate shifted attention to the "early modern," roughly the seventeenth-eighteenth centuries, when differences, if any, would have begun to take shape. During these centuries, several processes that would play a large role in world inequality later, such as colonization, expansion of trade, expansion of states, warfare, and the framing of laws, started. That raised the question, if indeed world regions were already different then, were they different because of how these processes began? Between 2000 and 2010, a series of innovative research projects tried to resolve the conflict between surprising similarities and exceptionality. While an earlier crop joined the debate directly, more recent works in the field reflect the debate in a different way. For example, almost all recent contributions on the origins of economic growth try to incorporate the early-modern into an explanation of what made the world more unequal in the nineteenth century; regional comparisons cannot afford to be Eurocentric anymore; and mining data for non-European regions is now...

Chapter 4 From Stagnation to Growth: Unified Growth Theory

An important challenge in economics is explaining the factors that drive transformation processes in economic systems, often resulting in complex and contradictory structural changes. One notable historical example is the late Russian Empire’s transition from a Malthusian regime to a “modern” regime of economic growth in the late 19th and early 20th centuries. This article explores theoretical and methodological approaches from recent economic history literature concerning Russia’s role in modernization and catch-up development. By employing tools from economics and related social sciences, such as sociology and demography, the study analyzes empirical evidence grounded in quantitative data. The study contributes to economic theory by reevaluating the modernization paradigm and the “modern regime of economic growth.” It reinterprets A. Gerschenkron’s concept of economic development in “backward” countries, highlighting the role of human capital accumulation, challenging linear and pessimistic views of material well-being, and emphasizing the significance of non-material aspects in well-being dynamics. Drawing on Russian evidence, the study also partially confirms models in unified growth theory, such as the relationship between human capital accumulation and the demographic transition, where the former is shown to have preceded the latter. Additionally, the analysis identifies a bell-shaped pattern in economic inequality dynamics: S. Kuznets’ cyclical model of individual income inequality and J. Williamson’s observation that the downward phase of spatial inequality in Russia began earlier than in reference countries due to the growing role of central government investment in education. The article concludes by identifying promising directions for future research, particularly concerning the “Great Divergence” and the long-term dynamics of productivity and well-being gaps between Western Europe and East Asia.

Abstract. New interpretation of the Anthropocene is presented, the interpretation based on the rigorous analysis of the growth of human population and of economic growth in the past 2,000,000 years, which are found to have been hyperbolic. The Anthropocene appears to transcends the geological epochs of Pleistocene and Holocene. Anthropogenic impacts evolved over a long time on the canvas of hyperbolic growth of population. There were probably various stages of the Anthropocene in the past 2,000,000 years or even over a longer time. The current stage is distinctly different because now, for the first time in human existence, we are shaping our global future and even the future of our planet. This modern stage of the Anthropocene is characterised by the rapid growth of population, rapid economic growth, rapid consumption of natural resources and rapidly increasing impacts on the environment. All these features can be easily explained by characteristic properties of hyperbolic growth. Hyperbolic distributions are slow over a long time and fast over a short time. The origin of the Anthropocene can be explained as the natural consequence of hyperbolic growth of population. The mechanism of the Anthropocene can be also explained by referring to the mechanism of the growth of population. The beginning of the current stage of the Anthropocene is difficult or maybe even impossible to determine because anthropogenic impacts are likely to have been increasing monotonically. The future of the Anthropocene, which is also our future, is uncertain because it is dictated by many critical anthropogenic trends, but notably because the size of the world population is predicted to continue to increase at least until the end of the current century to a possibly unsustainable level and because the world economic growth follows now an unsustainable trajectory. Effects of the current human activities might affect global ecosystems for a long time into the future but we might not be there to see them. Keywords. The Anthropocene, Economic growth, Population growth, Mechanism of growth, Hyperbolic growth, Exponential growth, Future of the Anthropocene. JEL. A12, F01,Y80.

Abstract. Data describing the growth of the world population in the past 12,000 yearsare analysed. It is shown that,if unchecked, population does not increase exponentially but hyperbolically. This analysis reveals three approximately-determined episodes of hyperbolic growth: 10,000-500 BC, AD 500-1200 and AD 1400-1950, representing a total of about 89% of the past 12,000 years. It also reveals three demographic transitions: 500 BC-AD 500, AD 1200-1400 and AD 1950-present, representing the remaining 11% of the past 12,000 years. The first two transitions were between sustained hyperbolic trajectories. The current transition is to an unknown trajectory. There was never any form of dramatic transition from stagnation to growth, described often as a takeoff, because there was no stagnation in the growth of the world population. Correct understanding of the historical growth of human population is essential in the correct interpretation of the historical growth of income per capita. Keywords. Growth of human population, economic growth, growth of income per capita, stagnation, takeoffs, hyperbolic growth, demographic transitions JEL. A12, B22, B25, F01, N00, Y80

The main purpose of the current study is to investigate if tourism affects economic growth of China. The data set has been acquired from the Beijing Municipal Bureau of Statistics, and the time span of the data set takes into account a 20-year time period, from 2000 to 2019. To determine the strength of the above-mentioned relationship previous models that have been used for this research are mainly VAR (vector auto-regression) and VECM (vector error correction) models. The VAR and VECM models have been conducted together with the Granger causality test. The internal revenue generated from tourism-related activities is taken as being the main indicator for the tourism industry, while economic growth is determined by GDP (gross domestic product). We support the above-mentioned notion, as we found that a strong relationship exists between the development of the tourism industry and economic growth. Moreover, our analysis also indicates that this industry has a major impact on long-term economic growth in the region as well. This study thus provides further support to the existing literature on the topic of tourism and the impact that tourism-related activities have upon economic development and growth. The existence and the impact of tourism-related activities upon long-term economic growth were confirmed by the results of the VAR models. At the same time, the unidirectional results of VECM models have confirmed the existence of economic growth in the short term. In our case, the cardinal relationship between the development of the tourism industry and the economic growth in the Beijing region of China have managed to provide strong empirical support to the earlier stated notions and to the literature alike.

The study examined the relationship between external financial flows, domestic savings and economic growth in the SADC region for the period from 1980 to 2009 specifically looking at the role played by institutions. The majority of countries in the SADC region are experiencing low levels of savings, which has led to them relying more on external financial flows to bridge the gap between domestic demand for finance and domestic supply. However the relationship between external finance and economic growth is still a contentious issue. Given this, the study has thus examined the link between growth and external finance in the region, specifically focusing on the impact of the different forms of external financial flows on economic growth in the region incorporating the role played by institutions. The empirical results revealed that three types of external financial flows have a significant impact on economic growth in the SADC region except ODA; however when all the different types of external financial flows were interacted with the measure of institutions, they all become significant and more enhanced in explaining economic growth in the region. This supports the hypothesis that good institutions are necessary in promoting economic growth in developing countries. The empirical results also suggest that foreign capital is another channel through which a crisis in developing countries can be transmitted to the SADC region.