Last updated on January 8, 2011
The Economist‘s Democracy in America blogs has an interesting post on how Nevada has come to specialize in sin:
“What was to be the good or service that [Nevada] could provide relatively (as opposed to absolutely) more efficiently than any other place? The state has little water, so agriculture was hardly the likely answer. In fact, there seemed to be no obvious answer at all. Until the penny dropped. The answer was legislative: “We created our own comparative advantage; we embraced sin,” says Mr Herzik. It started with prize fighting (think of the now-legendary bout between Jack Johnson and James Jeffries in Reno on Indpendence Day in 1910). Then came easy divorce. Then came gambling. And, of course, prostitution, which is legal in all of Nevada’s rural counties (although it can allegedly be found even in cities such as Las Vegas). Nevada’s economy today is based on sin. For example, about half of the state’s revenue comes, directly or indirectly, from gambling in the form of casino taxes or the sales taxes of tourists.”
This is a nice example of how geography can influence institutions and, eventually, culture. But the reasoning really does beg the question of why neighboring Utah, which as far as I know is as resource-poor as Nevada, ended up becoming almost the complete opposite as regards its culture and institutions?
Generally speaking, however, it looks as though institutions are a more important determinant of economic development than geography, as per this paper.