Posts Tagged ‘institutions’

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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