I am an economist therefore I assert

About a decade ago, as a relative development aid neophyte I read Bill Easterly’s White Man’s Burden. Despite a few flaws, I loved it, not least since it validated a number of opinions that had been steadily growing in my mind. I was worried that my view was rather narrow but here was a world renowned economics professor saying almost exactly the same things. Aha!

Such, alas, was not quite my primary reaction upon reading Acemoglu and Robinson’s recent tome Why Nations Fail. Not that there isn’t something compelling about their central thesis that ‘institutions’ (defined very broadly) matter hugely for economic development. The book is quite argumentative – which I am fine with, indeed I often write like that – but for a piece of popular science it often seemed somewhat lacking in supporting facts to bolster its arguments. For instance they repeatedly reject Jared Diamond’s hypothesis, as set out in the excellent Guns, Germs & Steel, that the natural geography of the various continents had a big impact on the history of economic development. Indeed I came away thinking, that they had rather failed to demolish Diamond’s proposition, and that in all likelihood both theses were relevant, but neither sufficient on their own.

Reading their book it seemed to me that they had simply written down the words they would use in a lecture without the footnote that appears on the slide indicating the source of their conclusion. For two more world renowned economist professors it seemed a surprising omission, especially since a book format gives you more than adequate space to set out your arguments in detail.

Imagine my pleasure, then, upon recently reading Dietz Vollrath’s rather sceptical review of the academic literature on ‘institutions’. It seems the evidence is actually a bit flimsy. He concludes that in fact what really matters is path dependence, a concept broad enough to also include Jared Diamond’s work, and not so useful as a theory, in that it doesn’t give many pointers as to what approaches to take in addressing under-development in the modern world, except perhaps for the importance of understanding context, something upon which all development veterans will agree.

Hat tip: Terence

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2 responses to this post.

  1. I noticed that Professor Blattman had a post on Professor Vollrath’s series, admirably put up by Vollrath himself on his own blog, although I thought his conscience needed not be burdened as heavily as he suggested.
    I’ll need to read Diamond but I have read Prof’s Ace&Rob. and I think it is convincing. The poorest institutions prevent the picking of even the lowest hanging fruit. Whereas poor institutions allow the picking but not as much as could have been picked. If we were totally critical we could say that China could have added x per cent of growth in addition to the remarkable records that have already been been achieved, if it had addressed corruption earlier. Additionally when growth there slows down, which is probably inevitable, as it is a thing that just seems to happen eventually, if corruption had not been present then the growth would slow down more slowly and they would be better prepared for the slow down when it comes.
    But certain movements are appearing in the development world. No doubt it is in response to the discussion of the proposed SDG’s. These include Doing Development Differently (posted on Princeton) and Growth to be the main thing in the SDG’s (posted on CGDEV). In addition Professor Pritchett and Professor Summer have a paper out on growth and the difficulty of sustaining it. In their paper they link all the way back to Professor Easterly and themselves when they worked together at the World Bank. Yes, they are all economists, superstars actually, and I mean that respectfully. I think that there is a serious attempt to get things right but without the institutions problem being addressed, I fear that it won'[t happen. I suppose this brings me back to the point below. It has to keep being done or else the poor suffer.
    I am glad you have started posting again. I thought, both you and Toro, had given up. Independent critics of development tend to hit harder and more accurately.

    Reply

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