A LANDSCAPE THAT COLUMBUS WOULD RECOGNISE: New research explores whether today”s patterns of wealth and poverty were already determined by 1492

Efforts to change the geography of economic activity face centuries-old forces working against them, according to research by economists William Maloney and Felipe Valencia Caicedo. Their study, which is published in the December 2016 issue of the Economic Journal, finds that the location of today''s prosperous cities and regions within each country in the Western Hemisphere is closely correlated with the location of indigenous population centres before the arrival of Christopher Columbus in 1492.

The startling question that these researchers address is: what if today''s patterns of poverty and prosperity were already determined long ago, even before Columbus got to the New World? Their answer is that throughout the hemisphere, there is a strong correlation between fifteenth-century population densities and today''s levels of population density and income.

For modern-day policy-makers, the reality of such long-term continuity suggests that any grand-scale efforts to alter long-existing spatial and urban patterns would confront formidable challenges – and thus major changes in public policy should be asserted with caution. The economic advantages of a particular city or region reflect factors that have been accumulated over centuries – and perhaps even millennia.

Focusing on the Americas, the authors consider the hemisphere''s history as a natural socio-economic experiment and draw on anthropological and archaeological estimates of pre-colonial indigenous population densities.

Following Thomas Malthus, the authors argue that historically more prosperous areas were able to support more population and hence the high correlation with both population and income today is suggestive that ''fortune persists''.

Massachusetts and California, for example, had the highest density of native Americans – roughly the same average level as in Chile and Argentina – in the territory that would become the United States, and they are among the richest regions today.

The same is largely true among Spain and Portugal''s former colonies in the hemisphere: in Colombia, there is a strong correlation of pre-colonial population density and both population and income per capita. Mexico City, the richest city in Latin America, was founded atop Tenochtitlan, the ancient capital of the Aztecs and the most densely populated pre-colonial area in the hemisphere.

Geographical factors appear to be important in explaining initial indigenous settlements, according to the authors. California, for example, had and retains rich farmland, a productive coast and a temperate climate.

But ''locational fundamentals'' are not enough to explain the patterns of settlements. Tenochtitlan, for example, was founded on a small, swampy island, the chief attraction of which appears to be that it was not coveted by the neighbouring tribes. The weather was unreliable, the growing season was short and famine was not uncommon. Moreover, frequent flooding inundated the city with its own filth, breeding epidemics.

Yet Cortes would build his capital, Mexico City, on what he called ''the great city of Tenochtitlan'' because he valued not only the available labour force, but also the area''s pool of skilled artisans, dense commercial networks, organisational structures and collective knowledge that are associated with dynamic cities and population agglomerations.

Similar phenomena are present in North America, where British, French and Dutch explorers used indigenous knowledge, maps and trade routes to survive, to establish colonies and to establish trading posts and fur-trading networks.

The finding of persistence thus suggests the importance of agglomeration externalities and complementarities in production (as conceived by Alfred Marshall in 1890) as well as to increasing returns to scale (as suggested by Paul Krugman in the 1990s).

The finding of persistence is somewhat surprising, as other articles have stressed a ''reversal of fortune'' at the national level – a finding that the present authors replicate for the Americas. This reversal is attributed to the emergence of growth-inhibiting exclusionary institutions arising from the need to control larger indigenous populations.

Although the new study finds some evidence for this – for example, the researchers confirm that slavery has a depressive effect on current social outcomes – the forces leading to persistence appear to dominate at the sub-national level.

Argentina offers an interesting exception to this pattern. Its reversal was mostly due to the removal of royal prohibitions on trade with Spain through the Atlantic port of Buenos Aires: that policy change meant that goods no longer had to be hauled over the Andes to Lima, Peru on the Pacific Ocean and then back overland to the Atlantic Ocean. Releasing this once-suppressed geographical comparative advantage was a powerful shock to geographical fundamentals.

But according to the researchers, this seems to be the exception to the rule. They conclude that policy-makers attempting to make radical changes in the spatial distribution of economic activity should be mindful of the centuries-old forces working against them.

''The Persistence of (Subnational) Fortune'' by William F. Maloney and Felipe Valencia Caicedo is published in the December 2016 issue of the Economic Journal. William Maloney is Chief Economist for Equitable Growth, Finance and Institutions in the World Bank Group. Felipe Valencia Caicedo is at Universitat Pompeu Fabra.