About Nick: i am an economist based in malaysia. I write about development economics, while sneaking in a pop culture reference or two.

More Entrepreneurs, More Artists, Fewer Politicians

Published in The Edge Malaysia, April 2016.

In learning of human history and the ‘greats’ or ‘giants’ of our collective past on whose shoulders we stand on, many of us have our favourite names that immediately come to mind. The reader will likely have her own list. My (partial) list is as follows:

Abraham Lincoln. Martin Luther King Jr. Michael Jordan. Amelia Earhart. Thomas Jefferson. J.R.R. Tolkein. Arthur Conan Doyle. Zeti Akhtar Aziz. Jane Austen. Charles Darwin. Larry Bird. Bill Russell. Jose Mujica. Ismail Abdul Rahman. Kareem Abdul Jabbar. Rosa Parks. Onn Ja’afar.

Of course, this list is partial as I have left off economists, an entire group unto itself, given my background. In any case, when we think of ‘giants,’ we think not only of the person themselves. We think also of their accomplishments and their greatest triumphs and, sometimes, their greatest failures. The names I have listed above are synonymous with some of the greatest micro and macro events in human history. For instance, at the micro level, Abraham Lincoln is forever famous for the Emancipation Proclamation and the Gettysburg Address while at the macro level, he will always be forever associated with the American Civil War. Similarly, the Civil Rights movements of the 1950s and 1960s are the macro lens at which to place Martin Luther King Jr., but no one can ever forget his iconic, “I Have a Dream” speech.

The legacies of ‘giants’ are typically assured – the deeds they have done, the people they were, though, often, the myth becomes more than the man. Thomas Jefferson was an intellectual giant, former President, and wrote the American Declaration of Independence – setting all men as equal – but was a slave owner, even if he was a product of his own time. Michael Jordan was a cultural icon, often labelled the greatest basketball player of all-time and even, according to Fortune magazine, credited with having a $10 billion impact on the economy from his basketball career, but he is a notorious gambler, is pathologically competitive and was well-known for his extremely harsh behavior towards his teammates.

With that said, I have always found the $10 billion calculation very interesting. For one, it quantifies a legacy, which is an incredibly difficult and, some would argue, abhorrent thing to do. For instance, what is the quantifiable impact of Rosa Parks refusing to give up her bus seat to a white man? Even if the figure may not be high, there is still incredible value in the act itself. However, while figuring out the impact of a particular individual may be tricky, we may also ask, what type of individuals are more likely to have a stronger impact on their society? For instance, should our society try to produce more political leaders, or more artists, or more entrepreneurs, or more athletes or, heaven forbid, more economists?

This is the question that a recent paper by French economists Olivier Gergaud, Morgane Laouenan and Etienne Wasmer tries to explore. They ask what the real influence of notable people is on city growth over the very long run. The authors collected data on 1.2 million people through an in-depth analysis of their Wikipedia biographies, aiming to identify the causal impact of the presence of these famous people on the growth of approximately 2,000 cities located in 30 countries around the world since 800AD.

The principal finding of the authors is that there is a positive correlation between the contemporaneous number of entrepreneurs and the urban growth of the city in which they are located the following decades. Further, this is also true for artists. On the other hand, they find a zero or negative correlation between militaries, politicians and religious people and urban growth in following decades. This is compounded by their finding that the fraction of notable people in governance occupations has decreased, while the fraction in occupations such as the arts, literature/media and sports has increased over the centuries. In addition, there has been an exponential growth over time of ‘notable people,’ with more than 60% of notable people still living in 2015.

Together, these three findings may explain why over the past century or so, the world has seen much faster growth than ever before. Indeed, the growth rate of the United Kingdom during the Industrial Revolution was only about 1-2% according to most historical estimates. Certainly, it was a time of great change in terms of technology and manufacturing, but economic growth was measly. However, in the 20th and 21st centuries, global growth has averaged between 2 to 3% per annum. This is consistent with the findings of the paper. If most of the ‘notable people’ are still alive, and more people are becoming artists and fewer are undertaking governance occupations, and artists are positive for urban growth while governance occupations are not, then this change in types of ‘notable people’ may explain some of global growth in the past 100 years or so.

The study is rife with potential critiques. For one, it is not clear that historical data on city growth is accurate, given a lack of standardised record-keeping in the past. Secondly, it is also not clear that all the ‘notable people’ are captured; for historical figures, we only know those who are documented. Many more may not be. Thirdly, occupations can overlap – Benjamin Franklin was an inventor as well as a politician, Leonardo Da Vinci was a scientist as well as an artist. Fourthly, there are issues of confounding variables. Perhaps it is not a city of entrepreneurs that drives growth, but rather something inherent in the institutions that enabled entrepreneurs to thrive that may have driven growth.

Nonetheless, the basic findings of the paper are still instructive. If we take the findings of the paper as a guide, it is therefore reassuring that the Malaysian government is focusing heavily on entrepreneurship. However, the ecosystem is still murky, with loads of stakeholders playing loads of roles, many of which tend to overlap. Further, we do not yet have a prioritised list of barriers to entrepreneurship in Malaysia that is data-driven. What is the ranking of binding constraints to entrepreneurship in Malaysia? There are many opinions, but few facts. This is something we need to solve. Entrepreneurship is a solution to many of our country’s problems, including job creation and crime reduction. It may also be a spark for economic growth.

 

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