Imagine two places, identical in almost every way—same history, same culture, same geography. Then, an imaginary line is drawn, splitting them in two. One side adopts one set of rules, and the other side adopts a completely different set. Fast forward a few decades. One side is prosperous and thriving; the other is trapped in poverty and stagnation.

This isn’t a thought experiment. It’s the story of North and South Korea. Before their separation after World War II, they were at similar levels of development. By 2000, the difference was staggering: income per capita in South Korea was 16,100**, while in North Korea it was a mere **1,000.

This stark contrast raises one of the most fundamental questions in social science: Why do these huge gaps in wealth exist and persist across the globe? Why are some countries so rich while others remain so poor?

Over the years, thinkers have proposed three major families of explanations to solve this puzzle. Think of them as the big theories competing to explain the great economic divide:

• The Geography Hypothesis: A country’s location and natural environment are its destiny.
• The Culture Hypothesis: A society’s shared values and beliefs determine its economic success.
• The Institutions Hypothesis: The “rules of the game” a society sets for itself are the key.

Let’s unpack each of these powerful ideas, starting with the oldest and most deterministic: the Geography Hypothesis.