1 Malazragore

Appropriability Argumentative Essays

Lambert here: Confirming the view that this whole agriculture thing was a terrible mistake….

Interestingly, the article title is as you see. The HTML page title at VoxEU, and the URL, are “The Neolithic roots of economic institutions.” Which do you prefer?

By Joram Mayshar, Professor Emeritus in Economics, Hebrew University of Jerusalem, Omer Moav, Professor of Economics, University of Warwick and Interdisciplinary Center Herzliya, Zvika Neeman, Professor of Economics at the Berglas School of Economics, Tel Aviv University, and Luigi Pascali, Assistant Professor, University of Warwick and Pompeu Fabra University. Originally published by VoxEU.

Conventional theory suggests that hierarchy and state institutions emerged due to increased productivity following the Neolithic transition to farming. This column argues that these social developments were a result of an increase in the ability of both robbers and the emergent elite to appropriate crops. Hierarchy and state institutions developed, therefore, only in regions where appropriable cereal crops had sufficient productivity advantage over non-appropriable roots and tubers.

What Explains Underdevelopment?

One of the most pressing problems of our age is the underdevelopment of countries in which government malfunction seems endemic. Many of these countries are located close to the Equator.1 Acemoglu et al. (2001) point to extractive institutions as the root cause for underdevelopment. Besley and Persson (2014) emphasise the persistent effects of low fiscal capacity in underdeveloped countries. On the other hand, Diamond (1997) argues that it is geographical factors that explain why some regions of the world remain underdeveloped. In particular, he argues that the east-west orientation of Eurasia resulted in greater variety and productivity of cultivable crops, and in larger economic surplus, which facilitated the development of state institutions in this major landmass. Less fortunate regions, including New Guinea and sub-Saharan Africa, were left underdeveloped due to low land productivity.

In a recent paper (Mayshar et al. 2015), we contend that fiscal capacity and viable state institutions are conditioned to a major extent by geography. Thus, like Diamond, we argue that geography matters a great deal. But in contrast to Diamond, and against conventional opinion, we contend that it is not high farming productivity and the availability of food surplus that accounts for the economic success of Eurasia.

  • We propose an alternative mechanism by which environmental factors imply the appropriability of crops and thereby the emergence of complex social institutions.

To understand why surplus is neither necessary nor sufficient for the emergence of hierarchy, consider a hypothetical community of farmers who cultivate cassava (a major source of calories in sub-Saharan Africa, and the main crop cultivated in Nigeria), and assume that the annual output is well above subsistence. Cassava is a perennial root that is highly perishable upon harvest. Since this crop rots shortly after harvest, it isn’t stored and it is thus difficult to steal or confiscate. As a result, the assumed available surplus would not facilitate the emergence of a non-food producing elite, and may be expected to lead to a population increase.

Consider now another hypothetical farming community that grows a cereal grain – such as wheat, rice or maize – yet with an annual produce that just meets each family’s subsistence needs, without any surplus. Since the grain has to be harvested within a short period and then stored until the next harvest, a visiting robber or tax collector could readily confiscate part of the stored produce. Such ongoing confiscation may be expected to lead to a downward adjustment in population density, but it will nevertheless facilitate the emergence of non-producing elite, even though there was no surplus.

Emergence of Fiscal Capacity and Hierarchy and the Cultivation of Cereals

This simple scenario shows that surplus isn’t a precondition for taxation. It also illustrates our alternative theory that the transition to agriculture enabled hierarchy to emerge only where the cultivated crops were vulnerable to appropriation.

  • In particular, we contend that the Neolithic emergence of fiscal capacity and hierarchy was conditioned on the cultivation of appropriable cereals as the staple crops, in contrast to less appropriable staples such as roots and tubers.

According to this theory, complex hierarchy did not emerge among hunter-gatherers because hunter-gatherers essentially live from hand-to-mouth, with little that can be expropriated from them to feed a would-be elite.2

  • Thus, rather than surplus facilitating the emergence of the elite, we argue that the elite only emerged when and where it was possible to expropriate crops.

Due to increasing returns to scale in the provision of protection from theft, early farmers had to aggregate and to cooperate to defend their stored grains. Food storage and the demand for protection thus led to population agglomeration in villages and to the creation of a non-food producing elite that oversaw the provision of protection. Once a group became larger than a few dozen immediate kin, it is unlikely that those who sought protection services were as forthcoming in financing the security they desired. This public-good nature of protection was resolved by the ability of those in charge of protecting the stored food to appropriate the necessary means.

  • That is, we argue that it was this transformation of the appropriation technology, due to the transition to cereals, which created both the demand for protection and the means for its provision.

This is how we explain the emergence of complex and hereditary social hierarchy, and eventually the state.

Applied to Diamond’s prototypic contrast between Eurasia and New Guinea, our theory suggests that the crucial distinction between these two regions is that farming in Eurasia relied on the cultivation of cereals, while in New Guinea it relied mostly on the cultivation of tubers (yam and taro, and, more recently, sweet potato) and bananas, where long-term storage is neither feasible (due to perishability) nor necessary (because harvesting is essentially non-seasonal). This provided farmers in New Guinea with sufficient immunity against bandits and potential tax collectors. More generally, we contend that the underdevelopment of tropical areas is not due to low land fertility but rather the reverse. Farmers in the tropics can choose to cultivate highly productive, non-appropriable tuber crops. This inhibits both the demand for socially provided protection and the emergence of a protection-providing elite. It is a curse of plenty.

In the empirical section of our paper we demonstrate that, contrary to the standard productivity-and-surplus theory, land productivity per se has no direct effect on hierarchy. We also show that, consistent with our theory, the cultivation of roots or tubers is indeed detrimental to hierarchy.

Empirical Findings

These results are established by employing two datasets with information on social hierarchy: a cross section and a panel of countries. For our cross-sectional analysis we use Murdock’s (1967) Ethnographic Atlas, which contains information on cultural, institutional, and economic features of 1,267 societies from around the world at an idealised time period of first contact with Europeans. Our main outcome variable is ‘jurisdictional hierarchy beyond the local community’. The Ethnographic Atlas also provides information on the major crop type grown by societies that practice agriculture.

Since the cultivated crop is a decision variable, we instrument for the crop type by using data on land suitability for different crops from the Food and Agriculture Organisation. We first show that the decision whether to cultivate cereals as a main crop depends positively on the productivity advantage of cereals over roots and tubers (in terms of potential caloric yields per hectare). We then find that societies tend to have a more complex hierarchal organisation where the productivity advantage of cereals over roots and tubers is higher, as predicted by our theory. Furthermore, we find that societies that practice agriculture are more hierarchical only where they cultivate cereals. This means that societies that cultivate roots and tubers have similar levels of hierarchy to those of pastoral or foraging societies.

We also show that land productivity, measured by the potential yield of calories per acre of the most productive crop in each area, does not affect hierarchy once we control for the productivity advantage of cereals. Thus, our empirical findings challenge the conventional argument that it is increased land productivity that leads to more hierarchical societies.

Although this cross-sectional analysis accounts for a wide range of confounding factors, we cannot rule out completely that omitted variables may bias the estimates. To overcome this concern, we employ another dataset compiled by Borcan et al. (2014). This is a panel, based on present-day boundaries of 159 countries, with institutional information every five decades over the last millennium. This panel enables us to exploit the ‘Columbian exchange’ of crops across continents as a natural experiment. The new crops that became available after 1492 in the New and the Old World changed both the productivity of land and the productivity advantage of cereals over roots and tubers in the majority of the countries in the sample. Consistent with our theory, the panel regressions confirm that an increase in the productivity advantage of cereals over roots and tubers has a positive impact on hierarchical complexity, while an increase in land productivity does not.

Concluding Remarks

These findings support our theory that it is not agricultural productivity and surplus per se that explains more complex hierarchical societies, but rather the productivity advantage of cereals over roots and tubers, the type of crop that is cultivated as a result, and the appropriability of the crop type. Given that the productivity of roots and tubers is typically high in the tropics, these results also support the claim that deep-rooted geographical factors may explain the current weakness of state institutions in these regions.


Acemoglu, D, S Johnson and J A Robinson (2001), “The Colonial Origins of Comparative Development: An Empirical Investigation,” American Economic Review, 91, 1369-1401.

Besley, T and T Persson (2014), “Why Do Developing Countries Tax So Little?” Journal of Economic Perspectives, 28, 99-120.

Borcan, O, O Olsson and L Putterman, (2014), “State History and Economic Development: Evidence from Six Millennia.” Brown University – Department of Economics -Working Paper Series.

Diamond, J (1997) Guns, Germs, and Steel: The Fates of Human Societies, Norton, New York.

Mayshar, J, O Moav, Z Neeman, Z and L Pascali (2015), “Cereals, Appropriability and Hierarchy,” CEPR Discussion Paper 10742.

Murdock, G P (1967) Ethnographic Atlas, University of Pittsburgh Press, Pittsburgh.

Spolaore, E and R Wacziarg (2013), “How Deep Are the Roots of Economic Development?” Journalof Economic Literature, 51, 1-45.


1 See Spolaore and Wacziarg (2013) for a survey.

2 In the paper, we provide evidence that hunter-gatherers who used storage developed hierarchies similar to those of early farmers.

This entry was posted in Economic fundamentals, Environment, Income disparity on by Lambert Strether.

About Lambert Strether

Readers, I have had a correspondent characterize my views as realistic cynical. Let me briefly explain them. I believe in universal programs that provide concrete material benefits, especially to the working class. Medicare for All is the prime example, but tuition-free college and a Post Office Bank also fall under this heading. So do a Jobs Guarantee and a Debt Jubilee. Clearly, neither liberal Democrats nor conservative Republicans can deliver on such programs, because the two are different flavors of neoliberalism (“Because markets”). I don’t much care about the “ism” that delivers the benefits, although whichever one does have to put common humanity first, as opposed to markets. Could be a second FDR saving capitalism, democratic socialism leashing and collaring it, or communism razing it. I don’t much care, as long as the benefits are delivered. To me, the key issue — and this is why Medicare for All is always first with me — is the tens of thousands of excess “deaths from despair,” as described by the Case-Deaton study, and other recent studies. That enormous body count makes Medicare for All, at the very least, a moral and strategic imperative. And that level of suffering and organic damage makes the concerns of identity politics — even the worthy fight to help the refugees Bush, Obama, and Clinton’s wars created — bright shiny objects by comparison. Hence my frustration with the news flow — currently in my view the swirling intersection of two, separate Shock Doctrine campaigns, one by the Administration, and the other by out-of-power liberals and their allies in the State and in the press — a news flow that constantly forces me to focus on matters that I regard as of secondary importance to the excess deaths. What kind of political economy is it that halts or even reverses the increases in life expectancy that civilized societies have achieved? I am also very hopeful that the continuing destruction of both party establishments will open the space for voices supporting programs similar to those I have listed; let’s call such voices “the left.” Volatility creates opportunity, especially if the Democrat establishment, which puts markets first and opposes all such programs, isn’t allowed to get back into the saddle. Eyes on the prize! I love the tactical level, and secretly love even the horse race, since I’ve been blogging about it daily for fourteen years, but everything I write has this perspective at the back of it.

Table of Contents

1. Introduction

2. The Origin of the List’s Theory
2.1. Pattern of Protection of List’s Theory
2.2. Justification of List’s Theory

3. Contemporary Perspectives of List’s Theory
3.1. Future comparative advantage
3.2. Domestic Market Failure and “Pseudoinfant” industries
3.2.1. Imperfect Capital Markets
3.2.2. Appropriability Argument / External economies
3.3. Political Economy Problem
3.4. Example for a general disagreement with the infant industry argument
3.5. Example for a general agreement with the infant industry argument

4. Conclusion


1. Introduction

The infant industry argument is one of the most famous arguments for protection against free international trade. The argument claims that protection is justified for new industries especially in less developed countries in order to establish them sufficiently. These infant industries are unable to compete with the old and well established industries located mostly in developed countries. The main reasons are differences in efficiency in production, information, knowledge and capital endowment (Suranovic, 2004).

Since Friedrich List (1789-1846) had developed this argument at the beginning of the Nineteenth Century, since then infant industry protection has been immensely criticized among economists. Most economists agree to some reasonable circumstances that would justify the temporary and limited protection of an infant industry (Melitz, 1999). Nevertheless, there is a big community of opponents who claim that protection is likely to be only the second-best policy rather than the first-best policy (Suranovic, 2004). Despite this opposition, almost all countries of the world have developed their industrial base by applying to infant industry protection (Krugman and Obstfeld, 2003 and Shafaeddin, 1998).

This essay aims to examine Friedrich List’s theory of the infant industry argument in detail. First, it explores the origin of List’s theory by giving a general explanation and some background information, by identifying the pattern of protection and by examining the justification for his theory. Secondly, it critically examines List’s theory under a contemporary perspective by discussing the current issues of the infant industries argument. Finally, it asks the question, if List’s theory is still valid.

2. The Origin of the List’s Theory

Friedrich List (1789-1846) was a critic of economic theory. He was an American citizen, a German patriot and universalist who believed in the ultimate harmony of national interests. His famous work, The National System of Political Economy (1841) was written to oppose the free-trade doctrines of Classical economics (Fonseca and Ussher, 2004 and Lind, 1998).

illustration not visible in this excerpt

Picture of Friedrich List (1789-1846), Source: Fonseca and Ussher, 2004

After the first industrial revolution List developed the infant industry argument to react to the divergence of the industrial development between Great Britain, the main European countries and the United States. At this time Great Britain was more developed than these other countries, largely due the fact that industrial revolution took place mainly in that country (Shafaeddin, 2000). ‘Adam Smith and the school of economic liberalism represents List’s principal theoretical opponent’ (Bolsinger, 2004). List (1841) argued that Adam Smith’s universal theory of international trade have been mainly influenced by the perspective of Great Britain. He wrote that Smith ‘… omits a vital intermediate stage between the individual and the whole world. This is the nation, to which its members are united by the tie of patriotism’ (List, 1841).

A world of free trade can not be achieved instantly due to the divergence of the industrial development of the nations. A precipitate acceptance of global free trade would enduringly favour the industrialised countries (like Great Britain in the 19th century and the United States nowadays). To enable the infant industries of the developing countries to catch up, they had to be protected. After this stage of development, the recently developed nations should slowly reduce protection to be more engaged in free trade with the rest of the world (Lind, 1998).

List (1841) examined the different stages of economic development though which countries naturally pass. These stages are described as (1) the Savage stage, (2) the Pastoral stage, (3) the Agricultural stage, (4) the Agricultural united with Manufacturing stage and the (5) the Agricultural, Manufacturing and Commercial stage (see also Hoselitz, 1960).

According to List (1841), every country should start with free trade to develop a strong agricultural industry. They should export raw materials and import manufactures. But to develop further, countries must industrialize, i.e. go from the Agricultural stage (3) to the Agricultural united with Manufacturing stage (4) and later to the Agricultural, Manufacturing and Commercial stage (5).

List (1841) assumed that such developments cannot emerge automatically through the ‘natural course of things’, i.e. through market forces. Therefore, infant industry protection becomes a necessity for countries which are at the agricultural united with manufacturing stage (4) to be enabled for the competition with more developed countries.

To enable countries to go through these different stages of development List explained the pattern of protection, which will be examined in the next chapter.

2.1. Pattern of Protection of List’s Theory

List (1841) examined the following pattern to protect the domestic infant industry:

1. Import duties and subsidies are opportunities to support domestic industrialization. To show that these are not the only methods, List referred to a lot of other policies such as industrial, financial and educational policies as an obligation for promoting the domestic industry. Furthermore, List highlighted the development of agricultural sector as a requirement for successful industrial development (Senghaas, 1989).
2. List recommended ‘… protection of manufacturing products on a selective and discriminatory rather than a universal basis’ (Shafaeddin, 2000). List (1841) clearly stated: ‘But it is not necessary that all branches of industry be equally protected’. A manufacturer ‘… has a hundred times more opportunity for developing his mind than the agriculturist. In order to qualify himself for conducting his business, he must become acquainted with foreign men and foreign countries; in order to establish that business, he must make unusual efforts...‘. Form List’s point of view, the manufacturing industry is the ‘engine of growth’ (Hong and Moon, 2004).
3. To support further industrialisation on a higher stage, protection should only be temporary, because further growth would be hardly possible without international trade. In addition, the level of protection should not be too high to stop imports at all, because even infant industries need a slight competition to be more efficient and therefore successful, especially in the long-run.
4. The intensity of protection cannot be concluded by using any theory, even List’s theory. There is no general rule, which countries can apply, because the situation of every country is different, especially in the context of its trading partner. List (1841) stated that not all countries have the opportunity for industrialisation. He supported this notion by giving some recommendations on the minimum conditions for the success of infant industry protection and the level of duties. In addition, he suggested that sudden protections are not favourable for the domestic industry, because the producers and investors need to know the scale of protection duties in advance to have enough time to react.
5. There should be no duties on importing raw materials or intermediate goods. List (1841) gave an example of cotton yarn to show the disadvantages of an import duty on such products.


Leave a Comment


Your email address will not be published. Required fields are marked *