The Economic Effect of Climate

A Dr William Masters was reading a book about mosquitoes when an idea struck him. 'There was this anecdote about the yellow fever epidemic that hit Philadelphia in 1793.' Masters recalls. 'This epidemic decimated the city until the first frost came.' The sub-zero temperatures froze out the insects, allowing Philadelphia to recover. If weather could be the key to a city's fortunes, Masters thought, then why not to historical fortunes of nations? And could frost lie at the heart of one of the most enduring economic mysteries of all — why are almost all the wealthy, industrialized nations to be found where the climate is cooler?

B After two years of research, he thinks that he has found a piece of the puzzle. Masters, an agricultural economist from Purdue University in Indiana, and Margaret McMillan at Tufts University, Boston, show that annual frosts are among the factors that distinguish rich nations from poor ones. Their study is published this month in the Journal of Economic Growth. The pair speculate that cold snaps have two main benefits — they freeze pests that would otherwise destroy crops, and also freeze organisms, such as those carried by mosquitoes, that carry disease. The result is agricultural abundance and a big workforce.

C The academics took two sets of information. The first was average income for countries, the second was climate data provided by the University of East Anglia. They found a curious tally between the sets. Countries having five or more frosty days in the winter months are uniformly rich; those with fewer than five are impoverished. The authors speculate that the five-day figure is important; it could be the minimum time needed to kill pests in the soil. To illustrate this, Masters notes: 'Finland is a small country that is growing quickly, but Bolivia is a small country that isn't growing at all. Perhaps climate has something to do with that.'

D Other minds have applied themselves to the split between poor and rich nations, citing anthropological, climatic and zoological reasons for why temperate nations are the most affluent. Jared Diamond, from the University of California at Los Angeles, pointed out in his book Guns, Germs and Steel that Eurasia is broadly aligned east-west, while Africa and the Americas are aligned north-south. So in Europe crops could move quickly across latitudes because climates are similar. One of the first domesticated crops, einkorn wheat, extended quickly from the Middle East into Europe; it took twice as long for it to get from Mexico to what is now the eastern United States. This easy movement along similar latitudes in Eurasia would also have meant a faster dissemination of other technologies, such as the wheel and writing, Diamond speculates.

E There are exceptions to the 'cold equals rich' argument. There are well-heeled tropical countries such as Singapore, a result of its superior trading position. Likewise, not all European countries are moneyed. Masters stresses that climate will never be the overriding factor — the wealth of nations is too complicated to be attributable to just one factor. Climate, he feels, somehow combines with other factors — such as the presence of institutions, including governments, and access to trading routes — to determine whether a country will do well.

F In the past, Masters says, economists thought that institutions had the biggest effect on the economy, because they brought order to a country in the form of, for example, laws and property rights. With order, so the thinking went, came affluence. 'But there are some problems that even countries with institutions have not been able to get around,' he says. 'My feeling is that, as countries get richer, they get better institutions. And the accumulation of wealth and improvement in governing institutions are both helped by a favourable environment, including climate.'

G This does not mean, he insists, that tropical countries are beyond economic help and destined to remain penniless. Instead of aid being geared towards improving administrative systems, it should be spent on technology to improve agriculture and to combat disease. Masters cites one example: 'There are regions in India that have been provided with irrigation — agricultural productivity has gone up and there has been an improvement in health.' Supplying vaccines against tropical diseases and developing crop varieties that can grow in the tropics would break the poverty cycle.

Decision, Decision!

A A widely recognised legend tells us that in Gordium (in what is now Turkey) in the fourth century BC an oxcart was roped to a pole with a complex knot. It was said that the first person to untie it would become the king of Asia. Unfortunately, the knot proved impossible to untie. The story continues that when confronted with this problem, rather than deliberating on how to untie the Gordian knot, Alexander, the famous ruler of the Greeks in the ancient world, simply took out his sword and cut it in two — then went on to conquer Asia. Ever since, the notion of a 'Gordian solution' has referred to the attractiveness of a simple answer to an otherwise intractable problem.

B Among researchers in the psychology of decision making, however, such solutions have traditionally held little appeal. In particular, the 'conflict model' of decision making proposed by psychologists Irving Janis and Leon Mann in their 1977 book, Decision Making, argued that a complex decision-making process is essential for guarding individuals and groups from the peril of 'group-think'. Decisions made without thorough canvassing, surveying, weighing, examining and reexamining relevant information and options would be suboptimal and often disastrous. One foreign affair decision made by a well-known US political leader in the 1960s is typically held up as an example of the perils of inadequate thought, whereas his successful handling of a water crisis is cited as an example of the advantages of careful deliberation. However, examination of these historical events by Peter Suedfeld and Roderick Kramer found little difference in the two decision-making processes; both crises required and received complex consideration by the political administration, but later only the second one was deemed to be effective.

C In general, however, organizational and political science offers little evidence that complex decisions fare better than simpler ones. In fact, a growing body of work suggests that in many situations simply 'snap' decisions with being routinely superior to more complex ones — an idea that gained widespread public appeal with Malcolm Gladwell's best-selling book Blink (2005).

D An article by Ap Dijksterhuis of the University of Amsterdam and his colleagues, 'Making the Right Choice: the Deliberation-without-attention Effect', runs very much in the spirit of Gladwell's influential text. Its core argument is that to be effective, conscious (deliberative) decision making requires cognitive resources. Because increasingly complex decisions place increasing strain on those resources, the quality of our decisions declines as their complexity increases. In short, complex decisions overrun our cognitive powers. On the other hand, unconscious decision making (what the author refers to as 'deliberation without attention') requires no cognitive resources, so task complexity does not affect effectiveness. The seemingly counterintuitive conclusion is that although conscious thought enhances simple decisions, the opposite holds true for more complex decisions.

E Dijksterhuis reports four simple but elegant studies supporting this argument. In one, participants assessed the quality of four hypothetical cars by considering either four attributes (a simple task) or 12 attributes (a complex task). Among participants who considered four attributes, those who were allowed to engage in undistracted deliberative thought did better at discriminating between the best and worst cars. Those who were distracted and thus unable to deliberate had to rely on their unconscious thinking and did less well. The opposite pattern emerged when people considered 12 criteria. In this case, conscious deliberation led to inferior discrimination and poor decisions.

F In other studies, Dijksterhuis surveyed people shopping for clothes ('simple' products) and furniture ('complex' products). Compared with those who said they had deliberated long and hard, shoppers who bought with little conscious deliberation felt less happy with their simple clothing purchase but happier with the complex furniture purchases. Deliberation without attention actually produced better results as the decisions became more complex.

G From there, however, the researchers take a big leap. They write: There is no reason to assume that the deliberation-without-attention effect does not generalize to other types of choices — political, managerial or otherwise. In such cases, it should benefit the individual to think consciously about simple matters and to delegate thinking about more complicated matters to the unconscious.

H This radical inference contradicts standard political and managerial theory but doubtless comforts those in politics and management who always find the simple solution to the complex problem an attractive proposition. Indeed, one suspects many of our political leaders already embrace this wisdom.

I Still, it is there, in the realms of society and its governance, that the more problematic implications of deliberation without attention begin to surface. Variables that can be neatly circumscribed in decisions about shopping lose clarity in a world of group dynamics, social interaction, history and politics. Two pertinent questions arise. First, what counts as a complex decision? And second, what counts as a good outcome?

J As social psychologist Kurt Lewin (1890–1947) noted, a 'good' decision that nobody respects is actually bad. His classic studies of decision making showed that participating in deliberative processes makes people more likely to abide by the results. The issue here is that when political decision-makers make mistakes, it is their politics, or the relationship between their politics and our own, rather than psychology which is at fault.

K Gladwell's book and Dijksterhuis's paper are invaluable in pointing out the limitations of the conventional wisdom that decision quality rises with decision-making complexity. But this work still tempts us to believe that decision making is simply a matter of psychology, rather than also a question of politics, ideology and group membership. Avoiding social considerations in a search for general appeal rather than toward it.