--Romantic (def): imbued with or dominated by idealism.
The current romanticization of the Paleolithic Period appears to be related to the Marxian/Durkheimian idea that specialization decreases diversity and undermines the welfare of the masses. For example, the entry at http://en.wikipedia.org/wiki/Paleolithic, which is rich with anthropological references, claims that the advent of agriculture and its attendant specialization rendered diets less diverse and lowered food security because of the increased risk of famines. But post hoc is not propter hoc. Technical change allowed population to grow to the point of Malthusian "positive checks," in a stochastic sense. And Upper Paleolithics had worse things to worry about than famines. Some of the Neanderthals seem to have been eaten by Homo Sapiens, not to mention the risks of hunting (including not killing anything).
Trade is another source of specialization and is similarly despised by romanticists. Our former Governor used to fret, "what if the boat doesn't come?" and advocated self-sufficiency as a cure. This reasoning combines the Chicken-Little and Axe-in-the-beam (from The Three Sillies) fallacies. There is little risk that shipping will be disrupted in the first place. And whatever risk there is can be greatly reduced by diversification. (Another contradiction: Why don't the proponents of diversity advocate diversification?)
We find the same thinking in non-economic development circles. Modern grain varieties are said (without evidence) to reduce the demand for labor and proletarize the peasantry. They allegedly decrease genetic diversity and therefore increase the risk of disaster. Moreover they deplete natural soil fertility and are therefore unsustainable. All of this overlooks the contribution of MVs to the virtuous circle of productivity increase, poverty reduction, and fertility decline.
The current romanticization of the Paleolithic Period appears to be related to the Marxian/Durkheimian idea that specialization decreases diversity and undermines the welfare of the masses. For example, the entry at http://en.wikipedia.org/wiki/Paleolithic, which is rich with anthropological references, claims that the advent of agriculture and its attendant specialization rendered diets less diverse and lowered food security because of the increased risk of famines. But post hoc is not propter hoc. Technical change allowed population to grow to the point of Malthusian "positive checks," in a stochastic sense. And Upper Paleolithics had worse things to worry about than famines. Some of the Neanderthals seem to have been eaten by Homo Sapiens, not to mention the risks of hunting (including not killing anything).
Trade is another source of specialization and is similarly despised by romanticists. Our former Governor used to fret, "what if the boat doesn't come?" and advocated self-sufficiency as a cure. This reasoning combines the Chicken-Little and Axe-in-the-beam (from The Three Sillies) fallacies. There is little risk that shipping will be disrupted in the first place. And whatever risk there is can be greatly reduced by diversification. (Another contradiction: Why don't the proponents of diversity advocate diversification?)
We find the same thinking in non-economic development circles. Modern grain varieties are said (without evidence) to reduce the demand for labor and proletarize the peasantry. They allegedly decrease genetic diversity and therefore increase the risk of disaster. Moreover they deplete natural soil fertility and are therefore unsustainable. All of this overlooks the contribution of MVs to the virtuous circle of productivity increase, poverty reduction, and fertility decline.
But even proponents of MVs can get excessively romantic.
Witness the advocacy of social insurance by the World Bank (World Development
Report, '08), Chetty and Looney (2006, 2007), and the New Development
Microeconomics of poverty (e.g. Banerjee and Banerjee-Duflo). Small farmers in
developing countries are thought to be trapped in poverty by risk aversion,
adverse selection (rations them out of the credit market), and behavioral
problems. All they need is a bit of subsidized fertilizer, credit, and/or crop
insurance to nudge them to a good equilibrium. But none of the explanations of
farmer behavior that support the above are properly grounded in an appreciation
of diversity. Everything is different from one farmer to another, from
agro-climatic conditions to shadow prices to risk attitudes grounded in dynamic
management. Once diversity is properly introduced, pseudo-scientific
justifications of subsidies tend to vanish.
Properly understood, specialization and diversity are not
inversely related -- they go hand in hand. Specialization is limited by the
extent of the market (defined by demand), which is limited by technology and transaction
costs.[1]
Stigler's classic on the extent of the
market describes how intermediate products can only come into existence when
the demand for a product warrants the fixed costs of specializing in intermediate
production. Consider the evolution of the personal computer industry. In the
beginning, Hewlett-Packard, Apple and others built their own central processing
units. The growth of the computer market led to the development of Intel
microprocessor chips, a case of vertical specialization. But the producers of
computers had to adapt to the same standardized chip. As the industry grew,
chips were increasingly tailored to fit diversified products. This in turn
required vertical coordination between suppliers and computer
manufacturers. As this process
continued, multiple suppliers could compete for the same vertical relationship
with each manufacturer thus incentivizing further innovations in cost
reductions and quality improvements.[2]
Thus the growth of the market, stimulated by income growth, transaction cost
reductions, and innovation, leads to both horizontal and vertical
specialization. The process has no natural end point, particularly regarding
horizontal specialization, such that the virtuous circle can continue. Globalization, induced by falling relative
costs of transportation and communication, begets specialization which begets
diversity and integration.[3]
These continuing non-convexities provide
at least part of the contents of the black box of endogenous growth theory.[4]
[1]Yang
Xiaokai, Economic Development. Strictly speaking, transaction costs limit
demand and technological change (inventions and cost reductions) impacts the
quantity demanded via market price.
[2] For a more detailed discussion see Van Assche, A.
& Gangnes, B. (2010), ‘Electronics production upgrading: Is China
exceptional?’ Applied Economics Letters 17, 477–482 and Yi, K.-M.
(2003), ‘Can vertical specialization explain the growth of world trade?’Journal
of Political Economy 111, 52-102.
[3]
Ironically, some economists refer to the increasing layers of vertical
specialization as "fragmentation," whereas market integration
actually leads to specialization, which requires vertical coordination.
[4]
Roumasset, James. 2008. "Population and Agricultural Growth" in
Durlauf and Blume, The New Palgrave Dictionary of Economics, 2nd ed. Palgrave
Macmillan. <http://www.dictionaryofeconomics.com/article?id=pde2008_A000065>
doi:10.1057/9780230226203.1308
