Talking about factor endowments sounds like one of the most boring dinner conversation topics ever. The land/labour ratio of India, Europe or Africa does little to whet the appetite, and might actually be a polite way to signal that the evening is coming to an end. And yet, factor endowments explain far more about ourselves – from what we produce and trade, to how we marry and what we eat – than we would care to admit.
The ratio between a country’s endowment of land and labour – the land/labour ratio – is common to economic theory. One of the central theories of international trade, for example – the Heckscher Ohlin theory – uses factor endowments to explain what countries produce and trade. In its most succinct form, it says that a country will export goods that use its abundant factors intensively, and import goods that use its scarce factors intensively. Basically, if South Africa has a lot of land relative to Bangladesh, then we should produce things that use land intensively (like cattle), and export this to Bangladesh, while Bangladesh should produce things that uses its most abundant factor – in this case labour – most intensively (like clothes), and export this to South Africa. Both countries would win from the trade. This is standard Econ 101 stuff.
But increasingly the land/labour ratio is used to not only explain a country’s comparative advantage in production, but also explain the social and cultural differences between places. How we marry is one example. Take the lobola, the bride price that is traditional to most marriages in southern and eastern Africa. Why do Africans have a lobola, while Indians have a dowry? One answer: factor endowments. See, Sub-Saharan Africa traditionally had a lot of land relative to people. A high land-to-labour ratio meant that people were immensely valued for their ability to perform labour. Women, given their reproductive ability, was therefore of great value, and powerful men would claim multiple wives to ensure not only a long lineage but also a large workforce. That is also why polygamy is still popular amongst many African societies across the continent, and why indigenous slavery (raids on neighbouring tribes to poach their people rather than their land) was a feature of precolonial Africa.
By contrast, labour is abundant in India relative to land. There the institution of bride price never emerged; instead, it would be a dowry system, where the bride or bride’s family would pay (in property or money) for the right to marry the husband. This was to consolidate the most important asset – land, not labour – to ensure a successful lineage. Europeans, incidentally, had the same low land-to-labour ratio, which is why it is typically the wife’s family who pays for the wedding in European custom.
Factor endowments, surprisingly, can also say much about what we eat. In a series of tweets on 12 June, Sarah Taber, agricultural scientist and host of the Farm to Taber podcast, explained just how our eating habits are the result of the environment and endowments (the land/water ratio) around us. She starts by mentioning that many cultures have traditionally had low or no-meat diets. Think of the Ganges valley, the Nile valley, or the Amazon. What do these places have in common? It rains a lot. This matters because in such environments, plants that humans can consume tend to grow, like those with tender stems, leaves and fruit, or those with enlarged seeds or energy storing roots. The rest of the plant is basically useless to us.
On the other hand, many societies, like the Mongols, the Bedouin, the Inuit or the Masai, have evolved to consume almost only meat. This is because they live in places that are dry or very cold, where plants are either very sparse or very tough, and made entirely of things that humans cannot digest. These plants are almost entirely cellulose, having tough stalks, fibrous leaves, and so on. But cows, sheep, goats, horses and camels can consume these scrubs with 3- to 4-chambered stomachs that turn the cellulose into sugars.
Taber goes on to say that we neglect to factor in these differences when we debate vegetarianism, for example: ‘Failure to recognize the role of local environment in diet is a major oversight in the vegetarian community at large. Traditional vegetarian societies are trotted out to showcase that low/no-meat diets are possible. But it’s done without recognition as to why those particular societies did it, and others did not.’ The key, she says, is that we fail to recognize that for dry regions, the bottleneck in productivity is not land. It is water.
She then explains that a farm in a dry area, if used for cultivating vegetables, might produce enough food to feed 10x the number of people than it would if it was to produce meat. But, she shows, it would require a 1000x more water to produce those vegetables. ‘In places where there’s limited land and a surplus of water, it makes a lot of sense to optimize for land. So there, grow and eat crops. And in places where there’s a lot of land and limited water, it makes sense to optimize for water. So there, grow and eat ruminants (meat).’
‘It’s really interesting to me that the conversation around vegetarianism and the environment is so strongly centred on an assumption that every place in the world is on the limited land/surplus plan. You know what region that describes really well? Northwestern Europe. In many ways, viewing low/no-meat diets as the One True Sustainable Way is very much a vestige of colonialism. It found a way of farming that works really well in NW Europe, assumed it must be universal, and tries to apply it to places where it absolutely does not pencil out.’
The next time you run out of dinner conversation, a discussion about factor endowments may not be such a bad option after all.
**An edited version of this article originally appeared in the 7 July edition of finweek.