Working on data on the institutions in the antiquity, Roland(2018) distinguishes them into two institutional clusters resulting in either statist or market systems. The former were present in ancient states like Egypt or China and relied mostly on some form of central planning in the allocation of resources, while the latter emphasized private property with relatively strong property rights. The paper then connects these institutional differences in the modern distinction of the cultural traits of individualism and collectivism. These traits, along with the modern institutional framework, impact today’s economic performance.
Didn't history begin with the advent of the internet?
How did this all come to be in the first place? Geographical, psychological, biological, historical, random reasons: differences in historical pathogen prevalence, frequency of gene variants affecting the intensity of pain from social exclusion, the propensity to depression when faced with stressful events, rice versus wheat, past use of irrigation, all played their part in whether an ancient state would end up resembling the statist or market example. In the same context, factors like the importance of the clan versus family, differences in initial relative benefit of trade versus specialized production (led either to the development of markets, property right protection, or strong state development embracing all society), family structure (whether family trees were unilineal or bilateral), appropriability of agricultural production by the central state, storability of agricultural production, religious forms fostering either individualism or collectivism, affected particular early institutions which were in turn likely to have affected particular values and beliefs.
How are ancient institutions still present in today's social structure?
To accurately measure the institutional structure along with the geographical and economic conditions Roland's paper uses the following variables:
The legal, political, and sociological indexes (created from the relative variables) support the original hypothesis regarding two institutional clusters, the statist and market ones. Similarly, the geographical index capturing potential gains from trade presents a strong positive correlation with the joint (created by aggregating the legal, political, and sociological) institutional index.
Finally, to explore how institutions in the antiquity still bear their mark in today’s world, the author presents the correlation between the aforementioned joint institutional index and the modern cultural trait of individualism (One should keep in mind though, that the present analysis does not purport in favor of solid causal channels. Instead, it attempts to elucidate the existence of a strong two-way path of influence between ancient institutions, geographical factors, and contemporary cultural traits):
To sum up...
Distinct institutional differences in ancient states led to cultural differences (statist systems led to collectivism, market systems to individualism). Given the inertia of culture, early institutions may have affected cultural values and beliefs that are still relevant today. This has resulted in the contemporary mix of culture and institutions that determine economic performance within each society.
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