The Butterfly Effect of Geography

I’ve never thought about how much history has already been set from the moment your ancestors settled down in a land. Of course, it seems absurd for the future to already be determined by one action, but ultimately, it builds up to the butterfly effect. The butterfly effect is known for how a small initial change in action can lead to an unprecedented, myriad number of differences in the future. As I come to make my point, all these historical events — slavery, colonization, wars, and the plague — contribute to present-day economic development. I claim that economic growth is indirectly affected by geography.

Growth always starts from somewhere. Families need to start from a loving couple, and from then on, they give birth to generations of livelihood. From generation to generation, families pass down values and norms, such as attitudes toward work, morals, and cultural practices. Attitudes toward work are two-sided. You either fall for speculation and propaganda, feeding into that adrenaline-laced gamble rather than making a calculated move, or you think smartly and sensibly about business. This is where most people would say they would “go all in” or make a “calculated gamble.” These two types of attitudes, passed down across generations, are called cultural transmission. Cultural transmission is what shapes economic behavior and macroeconomics today.

Another contributing factor is human capital. Human investments — or lack thereof — in education or health have intergenerational consequences for a country's future. Additionally, in a geographical sense, the historical use of land and resources impacts current land productivity and economic patterns. Different ways of interacting with geography act as natural experiments, influenced by instrumental variables; all of this contributes to historical data reconstruction.

Geography is the starting point for everything: climate, soil quality, and natural resources all shape what societies can do historically. For example, fertile land is easier to farm, so there’s more food for larger populations to grow. Geography also determined what kind of history would take place there. Regions with more valuable resources often attracted colonizers, but the type of colonizers (settlers or extractive) depended on the climate and disease environment.

The type of colonizers mattered more than being colonized. Settler colonies built new societies for colonists to live in long-term, as the name suggests. These colonies usually had a large number of Europeans, and the institutions they built tended to strengthen economies over time. They designed them to benefit the population living there, with strong property rights, representative governments or local councils, schools, infrastructure, and courts. In the long term, inclusive institutions often persisted after independence and supported economic growth. On the other hand, extractive colonies focused on taking as much wealth as possible back to the colonizing country. They usually had administrators, soldiers, merchants, and only a few long-term settlers. The institutions they built were designed to benefit outsiders, and systems often didn’t change after independence, which held back development. Extractive systems relied on controlling the local population, heavy taxation or forced labor, and weak property rights for locals. Over time, these fragile institutions persisted, leading to corruption, inequality, and poor governance. Coastal access also affected trade patterns, as societies near good harbors became involved in global trade earlier, which could bring prosperity or exploitation.

Moreover, geography indirectly affects today’s economy by shaping institutions. In tropical areas with higher disease risk, European settlers often avoided large settlements and created extractive colony systems to send resources home. In temperate, healthier climates, Europeans were more likely to settle and build schools, legal systems, and infrastructure. These differences meant some societies had more rules, systems, and organizations in the past than others. Extractive systems tended to persist and negatively influence the present day.

One example is the Transatlantic Slave Trade. While it wasn’t tied to one specific colony, it was part of a larger extractive system: the “triangular trade.” Africans were taken from Africa and forced into plantations in the Americas to enrich Europeans. Most regions heavily affected by the slave trade tend to be poorer today, and many have developed deep mistrust due to broken social structures.

Overall, geography is not destiny, but it sets the stage for history, institutions, and culture to unfold. Historical events like colonization, slavery, and war created ripple effects that shaped institutions and economic outcomes in the present day. Families pass down values, work attitudes, and norms that influence financial behavior and macroeconomic systems today. Inclusive institutions built in settler colonies often supported long-term growth, while extractive colonies left behind legacies of inequality and corruption, as they were already set up for failure from the start. Slight differences in geography — such as climate, disease environment, or access to coastlines — created massive long-term differences in the types of colonies built and in economic development, fueling the butterfly effect. The current global economic landscape isn’t random; it’s the product of centuries of human choices shaped by geography, history, and culture.