The Great Fiction, Second Expanded Edition

I. Economic Theory

For economic theory the question of how to increase wealth and get rich has a straightforward answer.

It has three components: you get richer (a) through capital accumulation, i.e., the construction of intermediate “producer” or “capital” goods that can produce more consumer goods per unit time than can be produced without them or goods that cannot be produced at all with just land and labor (and capital accumulation in turn has something to do with (low) time preference); (b) through participation and integration in the division of labor; and (c) through population control, i.e., by maintaining the optimal population size.

Robinson Crusoe, alone on his island, has originally only his own “labor” and “land” (nature) at his disposal. He is as rich (or poor) as nature happens to make him. Some of his most urgently felt needs he may be able to satisfy directly, equipped only with his bare hands. At the very least, he can always satisfy his desire of leisure in this way: immediately. However, the satisfaction of most of his wants requires more than bare nature and hands, i.e., some indirect or roundabout—and time-consuming—production method. Most, indeed almost all goods and associated sorts of satisfaction require the help of some only indirectly useful tools: of producer or capital goods. With the help of producer goods it becomes possible to produce more per unit time of the very goods that can be produced also with bare hands (such as leisure) or to produce goods that cannot be produced at all with just land and labor. In order to catch more fish than with his bare hands Crusoe builds a net; or in order to build a shelter that he cannot build with his bare hands at all, he must construct an axe.

However, to build a net or an axe requires a sacrifice (saving). To be sure, production with the help of producer goods is expected to be more productive than without it; Crusoe would not spend any time building a net if he did not expect that he could catch more fish per unit time with the net than without it. Nonetheless, the production of a producer good involves a sacrifice; for it takes time to build a producer good and the same time cannot be used for the enjoyment or consumption of leisure or other immediately available consumer goods. In deciding whether or not to build the productivity enhancing net, Crusoe must compare and rank two expected states of satisfaction: the satisfaction which he can attain now, without any further waiting, and the satisfaction that he can attain only later, after a longer waiting time. In deciding to build the net, Crusoe has determined that he ranks the sacrifice, the value forgone of greater consumption now, in the present, below the reward: the value of greater consumption later, in the future. Otherwise, if he had ranked these magnitudes differently, he would have abstained from building the net.

This weighing and the possible exchange of present against future goods and associated satisfactions are governed by time preference. Present goods are invariably more valuable than future ones, and we exchange the former against the latter only at a premium. The degree, however, to which present goods are preferred to future ones, or the willingness to forgo some possible present consumption for a greater future consumption, i.e., the willingness to save, is different from person to person and one point in time to another. Depending on the height of his personal time preferences Crusoe will save and invest more or less and his standard of living will be higher or lower. The lower his time preference, i.e., the easier it is for Crusoe to delay current gratification in exchange for some anticipated greater satisfaction in the future, the more capital goods Crusoe will accumulate and the higher will be his standard of living.

Second, people can increase their wealth through participation in the division of labor. We assume that Crusoe is joined by Friday. Because of their natural, physical, or mental differences or the differences of the “land” (nature) they face, almost automatically absolute and comparative advantages in the production of various goods emerge. Crusoe is better equipped to produce one good and Friday another. If they specialize in what each is particularly good at producing, the total output of goods will be larger than if they had not specialized and remained in a position of an isolated and self-sufficient producer. Alternatively, if either Crusoe or Friday is the superior producer of every good, the all-around superior producer is to specialize in those activities in which his advantage is especially great and the all-around inferior producer must specialize in those activities in which his disadvantage is comparatively smaller. Thereby, too, the overall output of goods produced will be greater than if each had remained in self-sufficient isolation.

Third, the wealth in society depends on the population size, i.e., on whether or not the population is kept at its optimum size. That wealth depends on the population size follows from the “law of returns” and the “Malthusian law of population,” which Ludwig von Mises has hailed as

one of the great achievements of thought. Together with the principle of the division of labor it provided the foundations of modern biology and for the theory of evolution; the importance of these two fundamental theorems for the sciences of human action is second only to the discovery of the regularity in the intertwinement and sequence of market phenomena and their inevitable determination by the market data. The objections raised against the Malthusian law as well as against the law of returns are vain and trivial. Both laws are indisputable.1

In its most general and abstract form, the law of returns states that for any combination of two or more production factors there exists an optimum combination (such that any deviation from it involves material waste, or “efficiency losses”). Applied to the two original factors of production, labor and land (nature-given goods), the law implies that if one were to continuously increase the quantity of labor (population) while the quantity of land (and the available technology) remained fixed and unchanged, eventually a point will be reached where the physical output per labor-unit input is maximized. This point marks the optimal population size. If the population were to grow beyond this size, income per head would fall; and likewise, income per head would be less if the population were to fall below this point (as the division of labor would shrink, with an accompanying efficiency loss). To maintain the optimal level of income per person, then, the population must no longer grow but remain stationary. Only one way exists for such a stationary society to further increase real income per head or to grow in size without a loss in per capita income: through technological innovation, i.e., by the employment of better, more efficient tools made possible through savings brought about by the abstention from leisure or other immediate consumption. If there is no technological innovation (technology is fixed), the only possible way for the population to grow in size without a concomitant fall in per capita income is through taking more (and possibly better) land into use. If there is no additional land available and technology is fixed at a ‘given’ level, however, then any population increase beyond the optimal size must lead to a progressive decline in per capita income.

This latter situation has been referred to also as the “Malthusian trap.” Ludwig von Mises has characterized it thus:

The purposive adjustment of the birthrate to the supply of the material potentialities of well-being is an indispensable condition of human life and action, of civilization, and of any improvement in wealth and welfare.... Where the average standard of living is impaired by the excessive increase in population figures, irreconcilable conflicts of interest arise. Each individual is again a rival of all other individuals in the struggle for survival. The annihilation of rivals is the only means to increase one’s well-being.... As natural conditions are, man has only the choice between the pitiless war of each against each or social cooperation. But social cooperation is impossible if people give rein to the natural impulses of proliferation.2

It has been already described and explained (in the previous chapter) how all this worked out in hunter-gatherer societies. It is conceivable that mankind had never left the seemingly comfortable hunter-gatherer lifestyle. This would have been possible, if only mankind had been able to restrict all population growth beyond the optimal size of a hunter-gatherer band (of a few dozen members). In that case, we might still live today very much like all of our direct forebears had lived for tens of thousands of years, until some 11,000 or 12,000 years ago. As a matter of fact, however, mankind did not manage to do so. The population did grow, and accordingly increasingly larger territories had to be taken into possession until one ran out of additional land. Moreover, technological advances made within the framework of hunter-gatherer societies (such as the invention of the bow and arrow some 20,000 years ago, for instance) increased (rather than decreased) the speed of this expansionism. Because hunters and gatherers (like all nonhuman animals) only depleted (consumed) the supply of nature-given goods, but did not produce and thus add to this supply, better tools in their hands hastened (rather than delayed) the process of territorial expansion.

The Neolithic Revolution, which began about 11,000 years ago, brought some temporary relief. The invention of agriculture and animal husbandry allowed for a larger number of people to survive on the same, unchanged quantity of land, and the institution of the family, in privatizing (internalizing) the benefits as well as the costs of the production of offspring, provided a new, hitherto unknown check on the growth of population. But neither innovation brought a permanent solution to the problem of excess population. Men still could not keep their pants up, and the greater productivity brought about by the new, nonparasitic mode of production represented by agriculture and animal husbandry was quickly exhausted again by a growing population size. A significantly larger number of people could be sustained on the globe than before, but mankind did not yet escape from the Malthusian trap—until some 200 years ago with the beginning of the so-called Industrial Revolution.

II. Economic History: The Problem

The problem to be explained in the following has been captured by two charts depicting world population growth on the one hand and the development of per capita income (average living standards) on the other.

The first chart, taken from Colin McEvedy and Richard Jones,3 shows human population growth from 400 BC until the present (2,000 AD). The population size was about four million at the beginning of the Neolithic Revolution. But up until about 7,000 years ago (5,000 BC) the area under crops (first merely in the region of the Fertile Crescent and then also in northern China) was too small to have much of an effect on the global population size. By then the population had grown to about five million. But since then, population growth increased rapidly: 2,000 years later (3,000 BC) it had almost tripled to fourteen million, 3,000 years ago (1,000 BC) it had reached fifty million,4 and only some 500 years later, when the chart sets in, the world population size stood at about 100 million. Since then, as the chart indicates, the population size has continued to increase slowly but more or less steadily up until about 1800 (to about 720 million), when a significant break occurred and the population growth sharply increased to presently, only some 200 years later to reach seven billion.

Figure 1: Total World Population (millions)

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Figure 2: World Economic History in One Picture. Incomes Rose Sharply in Many Countries after 1800 but Declined in Others.

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The second chart, taken from Gregory Clark,5 shows the development of per capita income from the beginning of recorded human history to the present. It too shows a significant break occurring at around 1800. Until that time, i.e., for most of recorded human history, real income per capita (in terms of food, housing, clothing, heating, and lighting) did not rise. That is, average living standards in eighteenth century England were not significantly higher than those in ancient Babylon, where the oldest records of wage rates and various consumer goods prices could be found. Naturally, with sedentary life and private landownership distinct differences in wealth and income came into existence. There existed large landowners (lords) who lived in enormous luxury, even by today’s standards, almost from the beginnings of settled life. Nor were average living standards always and everywhere equally low. There existed pronounced regional differences between, for instance, English, Indian, and West African real incomes in 1800. And of course, as far as cross-time comparisons are concerned, many technologies existed in 1800 England, which were unknown in ancient Rome, Greece, China, or Babylon. Yet in any case, everywhere and at all times the overwhelming majority of the population, the mass of small landowners and most laborers, lived near or only a little bit above subsistence level. There were ups and downs in real incomes, due to various external events, but nowhere was there a continuous upward trend in real income per person discernible until about 1800.

In combination, both charts capture the world-historic significance of the so-called Industrial Revolution, which occurred some 200 years ago, as well as the significance—and in particular the length—of the previous, Malthusian stage of human development. Until sometime around 1800, little difference in the economies of humans and nonhuman animals existed. For animals (and plants) it is always and invariably true that an increase in their number will encroach upon the available means of subsistence and eventually lead to overpopulation, to “supernumerary specimens,” as Mises has called them, which must be “weeded out” due to a lack of sustenance. Today, we know that as far as humans are concerned, this must not be so: no supernumerary specimens who are thus weeded out exist in modern, Western societies. But for most of human life this was indeed the case.

To be sure, the population size could grow, mostly because more land was taken into possession for agricultural use, and partly because of better technology incorporated in producer goods and an extended and intensified division of labor. But all such economic “gains” were always eaten up quickly by a growing population that again encroached upon the available means of subsistence and led to overpopulation and the emergence of the “supernumerary specimen” for whom there was no space in the division of labor and who consequently had to die out silently or become a menace (an economic “bad”) in the form of beggars, vagrants, plunderers, bandits, or warriors. Throughout most of human history, then, the iron law of wages held sway. Income and wages were held down near subsistence level owing to the existence of a substantial class of supernumerary specimens.

III. History Explained

Why did it take so long to get out of the Malthusian trap; and what happened that we finally succeeded? Why did it take so long until we gave up a hunter-gatherer existence in favor of an existence as agricultural settlers? And why, even after the invention of agriculture and animal husbandry, did it take more than another 10,000 years until mankind’s seemingly final escape from the Malthusian trap? Economic theory, or what I have said about it, does not and cannot answer these questions.

The standard answer among economists, in particular also among libertarian economists, is: there must have been institutional impediments, in particular an insufficient protection of private property rights, that prevented a quicker development and these impediments were removed only recently (about 1800). This, essentially, is also Ludwig von Mises’s explanation.6 Likewise, Murray N. Rothbard has advanced similar ideas.7 I want to argue that this explanation is mistaken or at least insufficient and present the outline of an alternative (hypothetical) explanation.

For one, hunters and gatherers, from all we know, had plenty of free time on their hands to invent agriculture and animal husbandry. Again and again and at countless places, they suffered from excess population and consequently falling incomes; and yet, although the opportunity cost of forgone leisure must have been low, no one anywhere, for tens of thousands of years, thought of agriculture and animal husbandry as an (at least temporary) escape from Malthusian conditions. Instead, until about 11,000 years ago hunter-gatherer tribes answered the recurring challenge of overpopulation always either by migration, i.e., by taking additional land into use (until they finally ran out of land) or by fighting each other to the death until the population size was sufficiently reduced to prevent real incomes from falling.

As well, property rights in settled societies were well protected at many places and times. The idea of private property and the successful protection of private property are not inventions and institutions of the recent past but have been known for a long time and practiced almost from the beginnings of settled life. From all we know, for instance, property rights in 1200 England and in much of feudal Europe were better protected than they are today in contemporary England and Europe. That is, every institutional incentive favorable to capital accumulation and division of labor was in place—and yet nowhere, until about 1800, did mankind succeed in extricating itself from the Malthusian trap of excess population and stagnating per capita incomes. Thus, the institution of property-protection can and should be regarded as only a necessary, but not also as a sufficient condition of economic growth (rising per capita incomes).

There must be something else—some other factor, not appearing in economic theory—which will have to explain all this.

Part of the answer is obvious: mankind did not get out of the Malthusian trap because, as noted before, men could not keep their pants up. If they had done so, there would have been no excess population. This can be only part of the answer, however. Because population control can prevent the fall of real incomes, but it cannot make incomes rise.8 Some other, “empirical” factor not figuring in pure (aprioristic) economic theory must explain the length of the Malthusian age and how we finally got out of it. This missing factor is the historical variable of human intelligence, and the simple answer to the above questions, then, (to be elaborated in the following) is: because for most of history mankind was simply not intelligent enough—and it takes time to breed intelligence.9

Until some 11,000 or so years ago, mankind was not intelligent enough, such that not even its brightest members were capable of conceiving the idea of indirect or roundabout consumer goods production that underlies agriculture and animal husbandry. The idea of first planting crops, then tending and protecting and finally harvesting them is not obvious or trivial. Nor is the idea of taming, husbanding, and breeding animals obvious or trivial. It requires a considerable degree of intelligence to conceive of such notions. It took tens of thousands of years of natural selection under hunter-gatherer conditions to finally breed enough intelligence to make such cognitive achievements possible.

Similarly, it took several thousand years more of natural selection under agricultural conditions, then, to reach a threshold in the development of human intelligence (or more precisely: of low time preference correlated with high intelligence) such that productivity growth could continuously outstrip any population growth. From the beginning of the Neolithic Revolution until about 1800 enough inventions (technological improvements) were made by bright people (and imitated by others of lesser intelligence) to account (in addition to more agriculturally used land) for a significant increase in world population: from about four million to 720 million (now, seven billion). But during the entire era, the rate of technological progress was never sufficient to allow for population growth combined with increasing per capita incomes.

Today, we take it for granted that it is solely the unwillingness to consume less and to save more that imposes limits on economic growth. We have a seemingly endless supply of natural resources and recipes how to produce more, better, and different goods, and it is only our limited savings that prevent us from employing these resources and implementing such recipes. Yet this phenomenon is actually quite new. For most of human history savings were held back by a lack of ideas of how to productively invest them, i.e., of how to convert plain savings (storing) into productive savings (producer goods production). For Crusoe, for instance, it was not sufficient to have a low time preference and to save. Rather, Crusoe also had to conceive the idea of a net and must have known how to build it from scratch. Most people are not intelligent enough to invent and implement anything new but can at best only imitate, more or less perfectly, what other, brighter people have invented before them. Yet if no one is capable to do this or to imitate what others have invented before, then even the safest of property rights will make no difference. Every incentive needs a receptor to work, and if a receptor is lacking or insufficiently sensitive, different incentive structures do not matter. Hence, the institution of property-protection must be regarded as only a necessary (but not sufficient) condition of economic growth (rising per capita incomes). Likewise, it requires intelligence to recognize the higher physical productivity of the division of labor, and it requires intelligence to recognize the laws of human reproduction and thus allow for any form of deliberate population control, let alone an efficient—low-cost—control.

The mechanism through which higher human intelligence (combined with low time preference) was bred over time is straightforward. Given that man is physically weak and ill-equipped to deal with brute nature, it was advantageous for him to develop his intelligence.10 Higher intelligence translated into economic success, and economic success in turn translated into reproductive success (producing a larger number of surviving descendants). For the existence of both relationships massive amounts of empirical evidence are available.11

There can be no doubt that a hunter-gatherer existence requires intelligence: the ability to classify various external objects as good or bad, the ability to recognize a multiplicity of causes and effects, to estimate distances, time, and speed, to survey and recognize landscapes, to locate various (good or bad) things and to remember their position in relation to each other, etc.; most importantly, the ability to communicate with others by means of language and thus facilitate coordination. Not every member of a band was equally capable of such skills. Some were more intelligent than others. These differences in intellectual talents would lead to some visible status differentiation within the tribe—of “excellent” hunters, gatherers, and communicators and “lousy” ones—and this status differentiation would in turn result in differences in the reproductive success of various tribe members, especially given the “loose” sexual mores prevailing among hunter-gatherers. That is, by and large “excellent” tribe members would produce a larger number of surviving offspring and thus transmit their genes more successfully into the next generation than “lousy” ones. Consequently, if and insofar as human intelligence has some genetic basis (which seems undeniable in light of the evolution of the entire species), hunter-gatherer conditions would over time produce (select for) a population of increasing average intelligence and at the same time an increasingly higher level of “exceptional” intelligence.

The competition within and between tribes, and the selection for and breeding of higher intelligence via differential rates of reproductive success, did not come to a halt once the hunter-gatherer life had been given up in favor of agriculture and animal husbandry. However, the intellectual requirements of economic success became somewhat different under sedentary conditions.

The invention of agriculture and animal husbandry was in and of itself an outstanding cognitive achievement. It required a lengthened planning horizon. It required longer provisions and deeper and farther-reaching insights into the chains of natural causes and effects. And it required more work, patience, and endurance than under hunter-gatherer conditions. In addition, it was instrumental for success as a farmer that one possessed some degree of numeracy so as to count, measure, and proportion. It required intelligence to recognize the advantages of interhousehold division of labor and to abandon self-sufficiency. It required some literacy to design contracts and establish contractual relations. And it required some skill of monetary calculation and of accountancy to economically succeed. Not every farmer was equally apt in these skills and had an equally low degree of time preference. To the contrary, under agricultural conditions, where each household was responsible for its own production of consumer goods and offspring and there was no longer any “free riding” as under hunter-gatherer conditions, the natural inequality of man, and the corresponding social differentiation of and between more or less successful members of a tribe became increasingly and strikingly visible (in particular through the size of one’s land holdings). Consequently, the translation of economic (productive) success and status into reproductive success, i.e., the breeding of a comparatively larger number of surviving offspring by the economically successful, became even more direct and pronounced.

Further, this tendency of selecting for higher intelligence would be particularly pronounced under “harsh” external conditions. If the human environment is unchangingly constant and “mild”—as in the season-less tropics, where one day is like another year in and out—high or exceptional intelligence offers a lesser advantage than in an inhospitable environment with widely fluctuating seasonal variations. The more challenging the environment, the higher the premium placed on intelligence as a requirement of economic, and consequently reproductive, success. Hence, the growth of human intelligence would be most pronounced in harsher (historically, generally northern) regions of human habitation.

Humans live on—consume—animals and plants, and animals live on other animals or plants. Plants, thus, stand at the beginning of the human food chain. The growth of plants in turn depends on the presence (or absence) of four factors: carbon dioxide (which is evenly distributed across the globe and hence of no interest here), solar energy, water, and, very importantly, minerals (such as potassium, phosphates, etc.).12

At the equator, where (nearby) the first modern humans lived, two of the three conditions of biological growth were met perfectly. There existed an abundance of sunlight and of rain. Rain fell predictably almost daily. Days and nights were equally long and temperatures year-round comfortably warm, with little to no difference between day vs. night and summer vs. winter temperatures. In the tropical rainforest, temperatures rarely exceed 30 degrees Celsius (86 degrees Fahrenheit) and rarely fall below 20 degrees Celsius (68 degrees Fahrenheit). Winds were generally calm, interrupted only by sudden brief storms. The conditions for human habitation, then, would appear quite appealing; and yet, the population density in tropical regions is and has always been extremely low as compared to that in regions further north (and south), sometimes, as in the rainforests of the Amazon, nearly as low as the population density typical of deserts or arctic regions. The reason for this is the extreme shortage of soil minerals in the tropics.

The soil of the tropics is, geologically speaking, old (as compared in particular to those regions affected by the earth-historical sequence of glacial and interglacial periods) and almost completely drained of minerals (except for equatorial regions with volcanic—mineral producing—activity as on some Indonesian islands such as Java, for instance, where the human population density has in fact always been significantly higher). As a result, the enormous biomass characteristic of the tropics produces no new, surplus or excess growth. Growth is year-round, but it is slow, and it does not lead to an increase in the total biomass. Once grown up, the rainforest only recycles itself. Moreover, the overwhelming proportion of this biomass is in the form of slow growing hardwood trees, i.e., of dead matter; and the leaves of most tropical plants, due to their peculiar need for protection (cooling) against the intense equator sun, are not only hard and tough but often poisonous or at least distasteful to humans and other plant-eaters such as cattle and deer. This absence of surplus growth and the special chemistry of tropical plants explains the fact that, contrary to what is frequently imagined, the tropics support only amazingly few and smallish animals. Indeed, the only animals existing in abundance are ants and termites. A tropical biomass (mostly of wood) of more than 1,000 tons per hectare produces no more than 200 kilograms of meat (animal mass), i.e., one-five-thousandth of the plant mass. (In contrast, in the East African grassland savannah a mere fifty tons of plant mass per square kilometer (100 hectares) produces some twenty tons of animal mass: of elephants, buffaloes, zebras, gnus, antelopes, and gazelles.) Yet where there are so few and nonsizeable animals, only few humans can be sustained. (In fact, most people who lived in the tropics lived near rivers and sustained their lives essentially from fishing rather than hunting and gathering.)

At their place of origin, then, humans very quickly arrived at the point where they had to leave the paradisiacal, warm, stable, and predictable environment of the tropics and enter other regions in search of food. The regions northward (and southward) of the equator were seasonal regions, however. That is, they had less, and less constant rainfall than the tropics, and the temperatures increasingly fell and varied more widely as one moved northward (or southward). In northern regions of human habitation, temperatures could easily vary by more than 40 degrees per day and seasonal temperatures by more than 80 degrees. The total biomass produced under such conditions was significantly less than in the tropics. However, further away from the equator the soil had (often) sufficient or even ample minerals to compensate for these climatic disadvantages and offered optimal conditions for the growth of vegetation suited for animal and human consumption: of plants that grew fast and, in spurts, produced large seasonal surpluses of fresh biomass—in particular of grasses (including grains)—that could support a large number of sizable animals.

During the last ice age, which ended some 10,000 years ago, the regions which offered this less than paradisiacal climatic conditions but a superior food supply included (concentrating here on the northern hemisphere, where most of the considered development took place) all of supra-equatorial Africa—including the Sahara—and most of the Eurasian land mass (except for still-arctic northern Europe and Siberia). Since then, and essentially continuing until today, a northern belt of deserts, which widens toward the east, has come to separate the entire zone of seasonal regions into a southern one of subequatorial regions and a northern one that includes now also most of northern Europe and Siberia. From the hunter-gatherer stage of human development essentially until today, then, the highest population density could be found in these “moderate” seasonal regions (a picture further modified only by altitudes).

It is important to realize in this context, however, that what we have come to regard as “moderate” regions of human habitation were actually quite harsh living conditions, and in far northern latitudes even extremely harsh conditions as compared to those in the constantly warm tropics, to which humans first had been adapted. In contrast to the stable and unchanging environment of the tropics, moderate regions presented increased change and fluctuation and thus posed (increasingly) difficult intellectual challenges to hunters and gatherers. Not only did they have to learn how to deal with large animals, which did not exist in the tropics (except for the volcanic parts of Indonesia), and their movements. More importantly, outside equatorial regions seasonal changes and fluctuations in the human environment played an increasingly greater role, and it became increasingly important to predict such changes and fluctuations and to anticipate their effects on the future food supply (of plants and animals). Those who could do so successfully and make appropriate preparations and adjustments, had a better chance of survival and proliferation than those who could not.

Outside the equatorial rainforest, to the north (and south), pronounced raining seasons existed and had to be taken into account. It rained during the summer and was dry in the winter. As well, the growth and distribution of plants and animals was affected by northeasterly (or, in the southern hemisphere, southeasterly) trade winds. In regions still further to the north (or south), increasingly separated since the end of the last ice age from the subequatorial regions by a belt of (northern and southern) deserts, the rain seasons shifted, with rain in the winter and drought in the summer. The winds affecting the distribution of rain were prevailingly westerlies. Summers were hot and dry, while winter temperatures, even in low altitudes, could easily reach “deadly” freezing levels, even if only for short periods. Growing seasons were accordingly limited. Lastly, in the northernmost regions of human habitation, i.e., north of Mediterranean latitudes, rain fell irregularly throughout the year and, with prevailing westerly winds, more in the west (northern Europe) than in the east (northern Asia). Otherwise, however, seasonal changes and fluctuations in this zone of human habitation were extreme. The lengths of days (light) and nights (dark) varied remarkably throughout the year. In extreme northern regions, a light summer day and a dark winter night both could last for more than a month. More importantly, the entire region (and especially pronounced as one moved in a northeasterly direction) experienced extended periods of often extreme freezing conditions during the winter. During these periods, lasting from many months to most of the year, all plant growth came essentially to a standstill. Plants died or went dormant. Nature stopped supplying food, and humans (and animals) were threatened with starvation and the danger of freezing to death. The growing seasons, during which a surplus of food and shelter could possibly be built up for this contingency, were accordingly short. Moreover, the extreme differences between long, harsh, and freezing winters and the short, mild to warm growing seasons, affected the migration of animals. Unless they had fully adapted to arctic conditions and could go into some form of hibernation during “dead” seasons, animals had to migrate from season to season, often over long distances to and from far apart locations. And since animals constituted a major part of the human food supply, hunter-gatherers, too, had to migrate regularly over large distances.

Before the background of this rough picture of human ecology and geography, further modified and complicated of course by the existence of mountain ranges, rivers, and bodies of water, it becomes apparent why the natural selection in favor of higher intelligence among hunter-gatherers would be more pronounced as one moved in a northern (or southern) direction toward the coldest regions of human habitation. No doubt, significant intelligence was required of humans to live successfully in the tropics. However, the equilibrium-like constancy of the tropics acted as a natural constraint on the further development of human intelligence. Because one day was much like any other day in the tropics, little or no need existed for anyone to take anything into account in his actions except his immediate surroundings or to plan beyond anything but the immediately impending future. In distinct contrast, the increasing seasonality of regions outside the tropics made for an intellectually increasingly challenging environment.

The existence of seasonal changes and fluctuations—of rain and drought, summer and winter, scorching heat and freezing cold, winds and calms—required that more, and more remote factors including the sun, the moon, and the stars, and longer stretches of time had to be taken into account if one wanted to act successfully and survive and procreate. More and longer chains of causes and effects had to be recognized and more and longer chains of argument thought through. The planning horizon had to be extended in time. One had to act now, in order to be successful much later. Both the period of production—the time lapse between the onset of a productive effort and its completion—and the period of provision—the time span into the future for which present provisions (savings) had to be made—needed to be lengthened. In the northernmost regions, with long and deadly winters, provisions of food, clothing, shelter, and heating had to be made that would last through most of a year or beyond. Planning had to be in terms of years, instead of days or months. As well, in pursuit of seasonally and widely migrating animals, extensive territories had to be traversed, requiring exceptional skills of orientation and navigation. Only groups intelligent enough on average to generate exceptional leaders who possessed such superior intellectual skills and abilities were rewarded with success—survival and procreation. Those groups and leaders, on the other hand, who were not capable of these achievements, were punished with failure, i.e., extinction.

The greatest progress on the way toward the invention of agriculture and animal husbandry some 11,000 years ago, then, should have occurred in the northernmost regions of human habitation. Here, the competition within and between hunter-gatherer groups should have produced over time the most intelligent—provisionary and farsighted—population. And indeed, during the tens of thousands of years until about 11,000 years ago, every significant technological advance originated in northern regions: mostly in Europe or, in the case of ceramics, in Japan. In contrast, during the same period the toolkit used in the tropics remained almost unchanged.

But the explanatory power of the above sketch of social evolution goes much further. The admittedly hypothetical theory presented here can explain why it took so long to get out of the Malthusian trap, and how such a feat was possible at all and we did not remain under Malthusian conditions forever: Mankind was simply not intelligent enough to achieve productivity increases that could continuously outstrip population growth. A certain threshold of average and exceptional intelligence had to be reached first for this to become possible, and it took time (until about 1800) to “breed” such a level of intelligence. The theory can explain the well-established and corroborated (and yet for “political correctness” reasons persistently ignored) fact of intelligence research: that the average IQ of nations gradually declines as one moves from north to south (from about 100 or more points in northern countries to about seventy in sub-Saharan Africa).13 More specifically, the theory can thus explain why the Industrial Revolution originated and then took hold immediately in some—generally northern—regions but not in others, why there had always existed persistent regional income differences, and why these differences could have increased (rather than decreased) since the time of the Industrial Revolution.

As well, the theory can explain what may at first appear as an anomaly: that it was not in the northernmost regions of human habitation where the Neolithic Revolution began some 11,000 years ago and whence it gradually and successively conquered the rest of the world, but in regions significantly further south—yet still far north of the tropics: in the Middle East, in central China (the Yangtze Valley), and in Mesoamerica. The reason for this seeming anomaly is easy to detect, however. In order to invent agriculture and animal husbandry two factors were necessary: sufficient intelligence and favorable natural circumstances to apply such intelligence. It was the second factor that was lacking in extreme northern regions and thus prevented its inhabitants from making the revolutionary invention. The extreme freezing conditions and the extreme brevity of the growing season there made agriculture and animal husbandry practically impossible, even if the idea might have been conceived. What was necessary to actually implement the idea were natural circumstances favorable to sedentary life: of a long and warm growing season (besides suitable crops, and domesticable animals). (The greater scarcity of such crops and animals on the American continent is the likely reason for the somewhat belated third independent invention of agriculture and animal husbandry in Mesoamerica.) Such climatic conditions existed in the mentioned “temperate” regions. Here, the competitive development of human intelligence among hunter-gatherers had made sufficient progress (even if it lagged behind that in the north) so that, combined with favorable natural circumstances, the idea of agriculture and animal husbandry could be implemented. Since the end of the last ice age about 10,000 years ago, then, the zone of temperate climates expanded northward into higher latitudes, rendering agriculture and animal husbandry increasingly feasible there as well. Meeting there an even more intelligent people, the new revolutionary production techniques were not merely quickly imitated and adopted, but most subsequent improvements in these techniques had their origins here. South of the centers of the original invention, too, the new technique would be gradually adopted (with the exception of the tropics)—after all, it is easier to imitate something than to invent it. Meeting a less intelligent people there, however, little or no contribution to the further development of more efficient practices of agriculture or animal husbandry would come from there. All further efficiency gains in these regions would stem from the imitation of techniques invented elsewhere, in regions further north.

IV. Implications and Outlook

Several implications and suggestions follow from this. First, the theory of social evolution sketched here entails a fundamental criticism of the egalitarianism rampant within the social sciences generally but also among many libertarians. True, economists allow for human “differences” in the form of different labor productivities. But these differences are generally interpreted as the result of different external conditions, i.e., of different endowments or training. Only rarely are internal, biologically anchored characteristics admitted as possible sources of human differences. Yet even when economists admit the obvious: that human differences have internal, biological sources as well, as Mises and Rothbard certainly do, they still typically ignore that these differences are themselves in turn the outcome of a lengthy process of natural selection in favor of human characteristics and dispositions (physical and mental) determinant of economic success and, more or less highly positively correlated with economic success, of reproductive success. That is, it is still largely overlooked that we, modern man, are a very different breed from our predecessors hundreds or even thousands of years ago.

Second, once it is realized that the Industrial Revolution was first and foremost the outcome of the evolutionary growth of human intelligence (rather than the mere removal of institutional barriers to growth), the role of the State can be recognized as fundamentally different under Malthusian vs. post-Malthusian conditions. Under Malthusian conditions the State doesn’t matter much, at least as far as macro-effects are concerned. A more exploitative State will simply lead to a lower population number (much like a pest would), but it does not affect per capita income. In fact, in lowering the population density, income per capita may even rise, as it did after the great pestilence in the mid-fourteenth century. And in reverse: a “good,” less-exploitative State will allow for a growing number of people, but per capita incomes will not rise or may even fall, because land per capita is reduced. All this changes with the Industrial Revolution. For if productivity gains continuously outstrip population increases and allow for a steady increase in per capita incomes, then an exploitative institution such as the State can continuously grow without lowering per capita income and reducing the population number. The State then becomes a permanent drag on the economy and per capita incomes.

Third, whereas under Malthusian conditions positive eugenic effects reign: the economically successful produce more surviving offspring and the population stock is thus gradually bettered (cognitively improved). Under post-Malthusian conditions the existence and the growth of the State produces a two-fold dysgenic effect, especially under democratic welfare-state conditions.14 For one, the “economically challenged,” as the principal “clients” of the welfare State, produce more surviving offspring, and the economically successful less. Second, the steady growth of a parasitic State, made possible by a growing underlying economy, systematically affects the requirements of economic success. Economic success becomes increasingly dependent on politics and political talent, i.e., the talent of using the State to enrich oneself at others’ expense. In any case, the population stock becomes increasingly worse (as far as the cognitive requirements of prosperity and economic growth are concerned), rather than better.

Finally, it is important to note in conclusion, then, that just as the Industrial Revolution and the attendant escape from the Malthusian trap was by no means a necessary development in human history so its success and achievements are also not irreversible.

* Previously unpublished. Reprinted in Hoppe, A Short History of Man: Progress and Decline (Auburn, Ala.: Mises Institute, 2015).

• 1Ludwig von Mises, Human Action: A Treatise on Economics (Chicago: Regnery, 1966), p. 667.
• 2Ibid., p. 672.
• 3Colin McEvedy and Richard Jones, Atlas of World Population History (Harmondsworth, U.K.: Penguin Books, 1978), p. 342.
• 4Ibid., p. 344.
• 5Gregory Clark, Farewell to Alms: A Brief Economic History of the World (Princeton, N.J.: Princeton University Press, 2007), p. 2.
• 6Mises, Human Action, pp. 617–23.
• 7 Rothbard, “Left and Right,” in idem, Egalitarianism as a Revolt against Nature and Other Essays (Auburn, Ala.: Mises Institute, 2000).
• 8When Tahiti was rediscovered by Europeans in 1767, some 1,000 or possibly 2,000 years after it had been first settled by Austronesian farmers, its population was estimated at 50,000 (today, 180,000). According to all accounts, the Tahitians lived paradisiacal lives. Real income per capita was high, not least because of highly favorable climatic conditions in the Polynesian islands. Tahitian men could not keep their pants up either, but in order to maintain their high standard of living, the Tahitians practiced a most rigorous and ruthless form of population control, involving infanticide and deadly warfare. The place was paradise, but a paradise only for the living. Yet all the while Tahitians were still living in the Stone Age. Their tool kit had remained essentially unchanged since their first arrival on the island(s). There had been no further capital accumulation, and real income per capita, even if high due to favorable external circumstances, had remained stagnant.
• 9See Michael H. Hart, Understanding Human History: An Analysis Including the Effects of Geography and Differential Evolution (Augusta, Ga.: Washington Summit Publishers, 2007).
• 10See also Arnold Gehlen, Man (New York: Columbia University Press, 1988).
• 11See also Hart, Understanding Human History; Clark, Farewell to Alms, chap. 6; and Richard Lynn, Dysgenics: Genetic Deterioration in Modern Populations (Ulster: Ulster Institute for Social Research, 2011), chap. 2.
• 12 See on the following Josef H. Reichholf, Stabile Ungleichgewichte: Die Ökologie der Zukunft (Frankfurt: Suhrkamp, 2008); also Carroll Quigley, The Evolution of Civilizations: An Introduction to Historical Analysis (Indianapolis, Ind.: Liberty Classics, 1979), chap. 6.
• 13See Richard Lynn and Tatu Vanhanen, IQ and Global Inequality (Augusta, Ga.: Washington Summit Publishers, 2006); Richard Lynn, The Global Bell Curve: Race, IQ and Inequality Worldwide (Augusta, Ga.: Washington Summit Publishers, 2008); idem, Race Differences in Intelligence: An Evolutionary Analysis (Augusta Ga.: Washington Summit Publishers, 2008).
• 14Lynn, Dysgenics.