“Becky’s World, Desta’s World, and The Economist’s Agenda”:
Summary
The prologue presents a striking comparison between two ten-year-old girls — Becky from suburban
America and Desta from rural Ethiopia — to illustrate the vast disparities in living standards and
opportunities that exist in today’s world. Through their contrasting life stories, the author introduces
the central concerns of economics: understanding the causes of such inequalities and finding ways to
improve human well-being within the limits of scarce resources.
Becky’s World:
Becky lives with her parents and older brother Sam in a comfortable suburban town in the American
Midwest. Her father is a successful property lawyer earning around $145,000 a year, and her mother,
a former publishing professional, now volunteers in local education. The family owns a spacious two-
storey house equipped with modern amenities, two cars, and a backyard for recreation. Although
they manage their finances carefully due to taxes and mortgage obligations, they enjoy a stable and
secure lifestyle. They save for their children’s college education, contribute to pension and insurance
schemes, and participate in leisure activities such as summer camps and vacations. Becky, an
environmentally conscious child who bikes to school, aspires to become a doctor. Her life reflects the
advantages of living in a developed economy—access to education, healthcare, financial institutions,
and long-term economic security.
Desta’s World:
In stark contrast, Desta lives in a small, two-room mud hut with her parents and five siblings in a
remote Ethiopian village. Her father cultivates maize and teff on half a hectare of government-
allocated land, while her mother grows vegetables, brews local drinks to earn extra income, and
works tirelessly from early morning to night managing household chores and childcare. Desta and
her sister assist their mother with cooking, fetching water, and collecting firewood, while only their
younger brother attends school. The family’s annual income, adjusted for purchasing power, is about
$5,500, of which a portion comes from communal resources such as water and woodland. However,
their livelihood is highly vulnerable to fluctuating rainfall, and in years of poor harvest, food
shortages and malnutrition are common. The absence of healthcare and clean water has led to the
death of two of Desta’s siblings and several miscarriages. Without access to education or formal
employment, Desta expects to marry young and live a life much like her mother’s. Her family relies
on informal systems of mutual support and community insurance (iddir) rather than formal financial
institutions, demonstrating a subsistence-based economy with limited upward mobility.
The Economist’s Agenda:
The author uses these two portraits to frame the economist’s fundamental question: why do such
enormous differences in living standards exist, and what can be done to reduce them? Economics
seeks to explain the processes that determine how people’s lives unfold and to identify policies that
can improve their prospects. The discipline studies how households and societies allocate scarce
resources over time and under uncertainty, addressing issues from individual choices to global
outcomes.
Economists build models—simplified, abstract representations of reality—to understand causal
relationships. These models often focus on a few key variables while ignoring others to reveal how
particular economic forces operate. The test of a good model is its ability to explain observed facts
and make reliable predictions about data not yet collected. Econometrics, the statistical branch of
economics, helps test these models using data drawn from countries or regions. Although models
simplify complex realities, they allow economists to uncover the general principles that govern
economic life, such as production, distribution, and consumption.
The prologue emphasizes that economics is not only about describing differences, like those
between Becky and Desta, but also about uncovering their underlying causes—education, health,
infrastructure, capital access, and social institutions—and designing effective policies to address
them. The author also stresses that all disciplines, including economics, use simplified
representations of reality to make sense of complex social systems. By combining theory, empirical
data, and historical analysis, economists aim to explain both individual and collective behaviour and
the unintended consequences that arise from them.
Ultimately, the comparison of Becky and Desta symbolizes the broader challenge of global inequality.
Through economic reasoning, the author seeks to understand how opportunity, resource allocation,
and institutional structures shape human lives. The prologue sets the stage for exploring how
economic theory and policy can help expand the freedoms and capabilities of those, like Desta, who
face severe constraints, while deepening our understanding of the processes that sustain prosperity
for those, like Becky, who live in abundance
Chapter 1: Macroeconomic History
The chapter begins by emphasizing that to understand the lives of Becky and Desta, one must trace
the historical pathways that led to their vastly different circumstances — the domain of economic
history. The author suggests taking a long view, from the beginnings of settled agriculture in the
Fertile Crescent about 11,000 years ago, to explain why the innovations that shaped Becky’s world
failed to reach or transform Desta’s region.
Jared Diamond’s Thesis provides one influential explanation. Diamond argues that Eurasia possessed
two major advantages over other continents. First, its east–west axis and temperate climate allowed
the easy diffusion of people, animals, and crops, unlike Africa or the Americas, which are divided by
deserts and mountains. Second, Eurasia had a greater number of domesticable animal species,
facilitating agriculture, transport, and power generation. Over thousands of years, civilizations across
Eurasia alternated in prominence — from India and China to Persia, Islam, and later Europe — but
overall progress accumulated like gains in a financial portfolio. By the 16th century, Western
Europe’s seafaring nations had achieved such a technological edge that, aided by guns, steel, and
germs, they were able to conquer the Americas. Hence, Becky’s prosperous world emerged from a
societal transplant that began roughly 500 years ago.
To assess such progress, economists use a measuring rod — GDP per capita (Gross Domestic
Product per person) — the total value of all final goods and services produced in a country in a year,
divided by its population. GDP can be calculated as total output or total income (wages, profits,
rents, and taxes). Although GDP measures economic activity rather than wealth, it is used as the
primary indicator of growth, adjusted for inflation to yield real GDP per capita. Economists have
extended the concept to subsistence economies by imputing shadow prices to non-market goods, as
in Desta’s household, where one-fifth of income derives from local commons.
Historically, global income was extremely low. Angus Maddison estimated that around CE 0, world
per capita income was only $515 (in today’s prices) — roughly one dollar a day, the World Bank’s
modern poverty line. For the next 1,800 years, growth was minimal; by CE 1800, income per head
had risen only 50% to about $755, implying an annual growth rate of just 0.02%. It was only after the
Industrial Revolution that income divergence accelerated. By 1800, Western Europe’s income was
three times that of Africa, and by the 21st century, the US–Africa income ratio had widened from
3:1 to over 20:1, with per capita incomes of roughly $38,000 versus $1,850. The U.S. economy’s real
GDP per person has grown 30-fold in 200 years, while Ethiopia’s has stagnated near $700 annually.
Thus, the world is polarized into two clusters — a rich world (Europe, North America, Japan,
Australia) averaging $30,000 per head, and a poor world (Africa, South Asia, Southeast Asia, Central
America) averaging $2,100.
Agriculture accounts for about 25% of GDP in poor countries but under 5% in rich ones. Over 70% of
the poor world’s population lives in rural areas compared to less than 10% in rich countries,
indicating dependence on biomass-based economies and vulnerability to ecological pressures. The
UNDP’s Human Development Index (HDI), which combines GDP, life expectancy, and literacy, also
shows the same divide — high HDI in rich countries, low in poor ones.
The author then examines the proximate causes behind the differences between Becky’s and Desta’s
worlds:
1. Physical Capital: Rich countries possess more and better tools, machinery, and
infrastructure. Accumulation of manufactured capital—tractors, machinery, medical
technology—has been crucial to productivity growth.
2. Human Capital: Education and health significantly contribute to higher living standards.
Literacy exceeds 95% in rich countries but averages 58% in poor ones (with only 48% among
women). Life expectancy in rich nations is about 78 years, compared to 58 years in poor
ones. Child mortality under age five is 7 per 1,000 in rich countries but 120 per 1,000 in poor
ones. Malnutrition and disease reduce both physical productivity and cognitive
development, reinforcing poverty.
3. Ideas and Technology: Economists such as Schultz and Becker stress that human capital
accumulation complements innovation. Rich countries thrive because they produce and
adopt new ideas—technological inventions (from steam engines to computers) and
improved production processes. Education, science, and technology form a virtuous circle of
innovation and progress.
4. Population Growth: High fertility rates hinder capital accumulation. Since the 1960s,
population in poor countries has grown at 2.4% annually, compared to 0.8% in rich nations.
High fertility in sub-Saharan Africa (TFR 6–8) keeps women bound to childbearing and unpaid
agricultural work, limiting their economic participation. In contrast, declining fertility in the
rich world (TFR 1.8) has supported long-term prosperity.
These factors are interdependent. As economies accumulate capital and improve education and
health, fertility falls, freeing resources for innovation and further investment. This cycle creates
“virtuous circles” of prosperity. Conversely, when these conditions deteriorate, economies fall into
“vicious cycles” or poverty traps—a dynamic that explains today’s global polarization.
To analyse the sources of growth, Robert Solow’s growth model decomposes GDP changes into
contributions from capital, labour, and other measurable inputs. The residual unexplained portion is
called Total Factor Productivity (TFP) — a measure of overall efficiency or technological progress.
Between 1970 and 2000, TFP in the UK grew by 0.7% annually, contributing roughly 30% of GDP
growth. In contrast, TFP declined in sub-Saharan Africa, reflecting inefficiency, political instability,
and institutional breakdowns.
The chapter also discusses the paradox of resource-rich but poor tropical countries. Despite
abundant natural wealth, these regions remained underdeveloped while temperate countries
industrialized. The author attributes this to colonial exploitation, where European powers extracted
resources and labour from colonies but invested the gains domestically. Post-independence, many
former colonies still failed to prosper due to weak governance and institutional decay.
Institutions emerge as the deeper explanation for long-term prosperity. Economic historians such as
Fogel, Landes, and North argue that rich countries advanced because they developed inclusive and
efficient institutions — legal systems, markets, property rights, and governance structures — that
encouraged investment, innovation, and fair exchange. In contrast, weak or corrupt institutions in
poor countries have perpetuated inefficiency and inequality.
Institutions shape economic life by establishing the rules governing collective undertakings—ranging
from firms and markets in Becky’s world to informal networks like Desta’s village iddir. Effective
institutions enforce the rule of law, protect property rights, and minimize corruption. However, poor
countries often suffer from ineffective bureaucracies, where registering property or enforcing
contracts takes twice as long as in rich nations. The corruption index, rated from 1 (highly corrupt) to
10 (very clean), averages below 3.5 for poor countries and above 7 for rich ones. Corruption raises
production costs, reduces output, and lowers total factor productivity.
In conclusion, the chapter establishes that the vast divide between Becky’s and Desta’s worlds arises
from a complex interaction of historical geography, capital accumulation, education and health,
technology, demographic trends, and—most fundamentally—institutions. Prosperous societies
have developed virtuous cycles through inclusive governance and innovation, while poor ones
remain trapped in vicious cycles of weak institutions, corruption, and high population growth. The
study of macroeconomic history thus provides crucial insights into why global inequality persists and
what pathways might lead toward convergence.
