I didn't see any references to the heritability of patience in the paper (which I admittedly only skimmed), and I couldn't find anything other than Scarr (1966) in Child Development, which puts it at .48 in a sample of MZ and DZ twins from Boston. Anyone else have a more recent study?

[speculation]

Norman invasion --> William the Conquerer makes English common law (better enforcement mechanisms) --> lower risk premium --> lower interest rate.

[/speculation]


[wild speculation]

Norman invasion --> influx of Jews --> Jews build more efficient financial system, availing capital at closer to real cost --> lower interest rate.

[/wild speculation]

I haven't read the book (obviously) but I would want to test the hypothesis by looking at *unsecured* interest rates in England and elsewhere. These would probably be much higher than those for loans secured by a mortgage on property. If the legal system provides good security (as it did in England) interest rates need not be very high to give the lender an acceptable return.

I think that David B is right. Actual risk varies according to situation.

Explaining the historical differences behavior during various eras and in different societies by differences in individual psychology is bad enough, and going a step further and working on a genetic explanation of the differences in psychology just adds to the confusion.

But it's logically necessary. All of the key psychological traits have high enough heritability to change rapidly. You can't get out of this.

Whether Clark's hypothesis is right or wrong may not be nearly as important as the fact that he's framed the question so well. The escape from the Malthusian trap is perhaps the most interesting economic event in the history of life. By framing the question in this manner, Clark's book is likely to lead to a great deal of interesting research.

Herrick:

The quote you provided had somebody or other getting 10% for a 300-year period. Others can do the actual calculation if they like--but that would suggest to me, that by the time that 5th century BC rolled around, they'd already owned everything in the known world a few times over.

That rate would yield somewhere around a trillion
units, give or take a few (cut me a little slack here, won'tcha?) of drachmas--or whatever. They'd have had to employ a million or two people just to work in stuff like mortgage closings, huh? I ain't no mathematician but at least I'm numerate enough to know that a trillion is a thousand billion, so if we were talking about ounces of gold, it's about 100 times all the gold on earth (including what's at the bottom of the seas). And one more thing--that's without compounding!

I'm not disputing that rates might not have been that high (and even higher) in those days, depending on the type of loan and security. Just that there was ever any continuous, volume business at such levels without some mechanism for the restriction of competition.

Gene

The quote you provided had somebody or other getting 10% for a 300-year period. Others can do the actual calculation if they like--but that would suggest to me, that by the time that 5th century BC rolled around, they'd already owned everything in the known world a few times over.

I think you misunderstand. That was not the loan rate that one person or family was able to get away with for 300 years. That was most likely the average rate changed during that time.

Clearly, there was plenty of risk that customers would default and that families would lose their fortunes in one way or another.

Explaining the historical differences behavior during various eras and in different societies by differences in individual psychology is bad enough, and going a step further and working on a genetic explanation of the differences in psychology just adds to the confusion.

If institutional structures persist long enough, then those who are best adapted to them will outreproduce those who aren't, as long as the traits that adapt a person to their social institutions are heritable. All personality traits are, of course. Personality Traits is searchable at Amazon; search "borkenau" and look at p.150, and flip also to p.151, to see the heritabilities.

The a^2 terms are estimates of narrow heritabilities, the ones that natural selection operates on; the chart on p.151 only lists broad heritabilities (which are upper-bounds for the narrow heritabilities). In this case, we can assume the relevant trait is Conscientiousness, whose narrow heritability is estimated at 0.22-0.44 -- plenty of fuel to start a round of hill-climbing if the environment applied pressure to the pedal.

"The Temple of Delos, which received a steady inflow of funds in offerings, invested them at a
10% standard rate throughout this period."

My error, it seems, Mr. Anomalous, I guess I just didn't realize that the words meant something other than what they said. I'll try to do better in the future, though it gets a little tricky, sometimes, what with all the possible alternate explanations. (I hope my own meaning is a little clearer.)

gene:

The quote you provided had somebody or other getting 10% for a 300-year period....but that would suggest to me, that by the time that 5th century BC rolled around, they'd already owned everything in the known world a few times over.


Clark makes just that point himself: Since even a modest saver would soon own everything in the world, it implies that very, very few people were (net) savers.

The past truly is a different country: A country of spendthrifts....

Explaining the historical differences behavior during various eras and in different societies by differences in individual psychology is bad enough, and going a step further and working on a genetic explanation of the differences in psychology just adds to the confusion.

Clark shows that the wealthier testators outreproduced poorer ones. John, do you believe that this differential reproduction was uncorrelated with any heritable differences? Formally possible, but vanishingly unlikely.

A paper discussing English demographics 1700-1900 with no mention of emigration? Who populated Ontario? Australia?

Baseless said:
Norman invasion --> influx of Jews --> Jews build more efficient financial system, availing capital at closer to real cost --> lower interest rate.

Yeah, the article mentions this taking place after the year 1100 and that is suspiciously close to 1066??!!

Of course it wouldn't necessarily have to be that the Jews introduced a more efficient system, but that the introduction of Jewish money lenders created a more competitive system - thus driving down interest rates.

Agnostic said:
we can assume the relevant trait is Conscientiousness, whose narrow heritability is estimated at 0.22-0.44 -- plenty of fuel to start a round of hill-climbing if the environment applied pressure to the pedal.

Anecdotally, my Mom's people are of Puritan English descent and extremely conscientious - though I have to say that they all generally shun borrowing, and even today my Mom says, "Never a borrower or lender be", the idea being that if you work hard and consistently, you can save for anything you need, and thus shouldn't need to borrow at all?!

Wouldn't an increase in the amount of available capital vis-a-vis the available opportunities explain this? If there is little free capital, interest rates will be high as only the most promising ventures will be able to afford the terms. If there is a great deal, interest rates will be lower, since more funding will be chasing fewer investment opportunities, and even ventures with lower returns can be financed.
There are structural explanations too, e.g. if an improved legal framework for collecting bad debts made lending less risky I imagine interest rates could decrease. Anyway, point is that many explanations present themselves...

A paper discussing English demographics 1700-1900 with no mention of emigration? Who populated Ontario? Australia?

The paper covers 1200-1800 and Clark's demographic data come from 1500-1700, so emigration wouldn't be a concern.

Interest rates are a function of risk. As risk goes down, interest rates go down.

Clark's book goes into this a fair bit - basically, according to his evidence, England since 1200 was actually a fairly low-risk place.

My question is, aren't there lots of other long-lived agrarian societies where we'd also expect the rich to have more offspring - e.g. Pharaonic Egypt lasted thousands of years - in which case we'd have seen these behavioral changes all over the place?

David B above is correct. There is no biological or genetic story going on here.

It was right around 1100 CE that an effective legal system began to develop in England, after the Norman invasion. A good legal system, including the ability to enforce contracts, is necessary for investors to be willing give up current consumption for future rewards.

Furthermore, the unification of England and the relative reducation of the risk of outside invaders, as Norman England developed a more centralized government and repelled invaders such as the Danes, created a better environment for investment.

The question in economics would be, what is capital and what monetary unit do you use to measure it in these pre-modern economies? In an economy lacking financial instruments, it is not easy to store value. Commodity money (gold or silver) fluctuates in value too,

Traditional roles of money: unit of transaction, store of value, unit of accounting, etc.

The shape of skulls in England has changed significantly the period in question. The height of the forehead had increased by about 20%.

But "there is no biological or genetic story going on here. "

As a society develops economically, at least in the modern sense, the ratio of capital to labor increases almost by definition; therefore the marginal productivity of capital tends to fall (though this offset to a certain extent by capital-saving technological improvements, though not by the labor-saving kind) and hence the long-term real rate of interest tends to decline almost by definition. This is Econ 101. It would be surprising if this were not to occur, never mind any genetical changes.

bbartlog and luke lea:

You both make the same common error in your immediately (above) analyses: "putting the cart before the horse," the logical error in reversing cause and effect.

Interest is the cause of the amount of capital available and changes in that rate are causes of change in capital/labor ratio.

This is an identical error to that ascribing the price of corn to the price of good agricultural land. Rather, the value of the good agricultural land (and its price differential from the marginal) is due to the price of its product, the corn.












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