Geography and Economics

How the geography of a country determines its historical economical development

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Made up countries or landmasses with different geography. Judging by just the geography, which ones would see most rapid economic development? Total land area and population assumed to be the same.

The Significance of Water Transport

In book 1, chapter 3 of the Wealth of Nations, Adam Smith among many other things discuss significance of water transport, with respect to economic development.

  • A sail-ship manned by 6–8 men, can transport 200 tons the same distance.
cost per week * weeks per year = 2 * 52 = 104
(300 - 30)/2 = 135
horse upkeep / workman salary = 100/20 = 5
men + horses*5 = 100 + 400*5 = 2100
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Red marks a possible town, and dark gray marks the area accessible for trade and goods transport utilizing sea and land transport. Land allows travel of 1 square. Sea allows travel of 4 squares in this example.

Estimation of Area Affected by Water Transport

Lets try to get an estimate of how big the advantage of water transport is. If you can transport goods at 1/300th of the cost with water compared to land, it means we can go 300 times further and fetch goods without increasing the cost of transport. That is effectively our radius in the whole circular area we may travel to assuming uniform transport costs.

Area of circle = πr² = π300² ≈ 300 000

How Does a Big Market for Goods Affect the Economy?

So we have established that water allows goods to be transported and traded over a huge area compared to land based transport. It is perhaps though not immediately obvious why that matters economically speaking. It might be obvious in present day, but less so in pre-industrial times.

Geographic Fluctuations in Harvest

Farmers, hunters or fishermen in an area might in periods catch or harvest more food than they can consume, and in other periods get less than they need. In times of plenty they might not be able to store this food. One did not have fridges or canning for most of human history. That meant food could easily end of rotting or spoiling before anybody else could enjoy it. Hence precious resources would go to waste.

Division of Labour and Economics of Scale

However most important is probably one of Adam Smiths obsessions which is the division of labour. What we mean by that is that in a larger market there is more opportunity to specialize.

The Significance of Water Transport During the Dutch Golden Age

Having lived for 3 years in the Netherlands I have a special affinity for the Netherlands and fascination for dutch history. The history we are taught at school about the industrial revolution starts with Great Britain and the steam engine. However the precursor to that can very well be said to have been the Netherlands, and key to the Dutch economic miracle was water transport.

Why was Britain the First Industrialized Country?

The story of how Britain industrialized has many parallels to the Netherlands.

The Missing Industrial Revolution in China

China was for most of its existence far ahead of Europe in most endeavors, yet Britain and Europe ended up industrializing much earlier. This is a big topic I’d like to discuss in a future post, but for now I will concentrate on water transport.

The Worst Shaped Landmasses

If we were to look around the earth for a landmass which has high area, and small coastline relative to size, we would be hard pressed to find any landmass worse than Africa and Australia. Both are blob like, and have few rivers covering the land.

Orientation of Landmass

But actually it is worse than that. A perspective Jared Diamond covers in Guns, Germs and Steel, is the significance of the orientation of landmass.

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Landmasses of the same size but different orientation. Orientation matters as climate changes primarily vertically but not horizontally.

Significance of Size

While landmass with a high amount of coastline and rivers relative to area is beneficial, proximity to large areas matter. While Britain has a good geography, it would likely never have industrialized early had it been located far into the Atlantic ocean.


Water transport has historically had 300:1 advantage over land based transport.

  1. Have a lot of coastline relative to landmass, meaning any landmass close to a circle in shape is bad.
  2. Many small rivers tend to be better than a few big ones.
  3. It is better with rivers in many different directions than all going in one direction, as this helps transport all over the country.
  4. The ability to dig canals easily, can be a big advantage to utilize water transport. The Netherlands and Britain being good examples.

Geek dad, living in Oslo, Norway with passion for UX, Julia programming, science, teaching, reading and writing.

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