Inclusive/Predatory; Exclusive/Predatory; Exclusive/Non-Predatory; Inclusive/Non-Predatory States and the Wealth of Nations

|Peter Boettke & Chris Coyne|

Bill Easterly has a lengthy review of Acemoglu and Robinson's Why Nations Fail in the WSJ.  It is a very insightful review and for the careful reader it touches upon contemporary research in development economics at the analytical, empirical, and most importantly methodological level.

Throughout the book, Acemoglu and Robinson rely on comparative historical case studies to illustrate their main point about the need for the elites to bargain with the citizens and establish an inclusive state, as opposed to establishing a exclusive state.

Early in his review essay Easterly raises a challenge to the current methodological fad of randomized controlled experiments in development economics, but he also raises a methodological objection to the use of comparative historical case studies.  He wonders about "cherry picking" on the one hand, and "ex post rationalization" on the other.  His objections are not new, see Jon Elster's APSR essay, "Rational Choice History: A Case of Excessive Ambitions."

We attempt to address these methodological objections to comparative historical analysis in our paper, "Comparative Historical Political Economy" (with Pete Leeson).  Our defense boils down to the selection of the cases --- pick those which are the least favorable to your hypothesis --- and to the detailed analysis of the institutions under question rather than merely retro-fitting history to a rational choice behavioral model.

The great strength of the comparative historical case study approach to political economy is that done correctly it avoids the problems that large scale empirical testing confront when attempting to provide institutionally rich explanations.  It permits a more detailed examination and unbundling of institutions --e.g., we cannot so neatly divide political institutions into inclusive or exclusive.  What matters most for comparative analysis of the relationship between peace and prosperity is the predatory nature of private and public institutions.  If the institutions established are able to curb predation, peace and prosperity follow; otherwise they do not.  Within this context, Acemoglu and Robinson's contribution is an important one.

Comments

[Greg Ransom]

Notice the contradiction / pathology:

The comparative historical examples give rise to the theoretical / explanatory enterprise -- and ultimately to the "empirical verification" enterprise.

But then comparative historical examples are to be excluded from the "analysis" when it come time to illustrate and substantiate the theoretical / explanatory enterprise.

Here's a parallel test case to examine this "methodological" rule:

Try applying this rule to Darwinian biology ....

[Artcarden]

"Why Nations Fail" is on my Kindle, waiting to be read alongside "Poor Economics." Easterly's review will move both closer to the front of the list, and I see in this discussion a methodology chapter for a future Boettke/Coyne student's dissertation: how are different methods in development economics complements or substitutes? What does "Combining Imperfect Proxies for Institutions: Results From Four Dozen Growth Regressions No One Has Estimated Before Now" tell us that a historical case study can't, and vice versa?

Back to work. Papers to grade, plus I owe Chris a revision on our comparative historical paper on the 1866 Memphis Riot.

[Mario Rizzo]

Cherry-picking only matters if your goal is to make grand trans-historical generalizations. Suppose you want to understand just the exceptional cases, for example. Or you only care about the good-old USA. Can't we understand the cherry?

Furthermore along these lines: Why should I pick the least favorable cases (if I am interested in the big generalizations)? First, how do I know a priori what the least favorable cases are? Second, what do I learn from the least favorable case when all the others are out there too in want of an explanation? Is this some kind of min-max solution -- minimizing the maximum error?

Finally, let me say that an awful lot of explanation is ex post rationalization. We may dress it up as something else but that is what it is.

[Greg Ransom]

Mario,

"an awful lot of explanation is ex post rationalization. We may dress it up as something else but that is what it is."

Incompetent "critics" of Darwinian explanations insist the same about Darwinian explanations.

But these critics simply don't have a handle on the nature of explanation or the character of Darwinian explanations.

Inference to the best explanation, and giving grounds for the best among potentially plausible alternatives is perfectly sound and solid explanatory practice, and nothing "ex post rationalization" about it.

The brain automatically "rationalizes" experiences, and political and legal advocates dishonestly and deliberately "rationalize" pre-determined outcomes, but deliberate and careful scientific-historical explanatory practice of the sort found in Darwinian biology and economics isn't of that sort of character at all.

We typically have the innate skill to identtfy and distinguish between these non-alike alternative practices.

[Jim Rose]

I prefer Roger Congleton's king and council template where contemporary liberal democracies are based on this template of gradual co-option rather than revolutionary reforms

Politically and economically powerful men and women voluntarily supported such reforms and the pre-existing institutions were used to adopt the the reforms

congleton use many case studies to show how democracy emerged through constitutional and quasiconstitutional reforms without the threat of civil war or violent revolution.

cumulatively the co-options radically changed the assignment of authority between the crown and parliament. In all the countries discussed, liberal democracy emerged from a long series of constitutional reforms, rather than as a quantum leap from authoritarian to democratic governance.

revolutions and the threat of revolution are over-rated as Tullock teaches. Significant changes in parliamentary procedures have been widely adopted throughout Europe, North America, and in Asia in the past two centuries during times when threats of revolution were minimal.

[Xerographica]

Jim Rose...not sure how it happened but I'm a big fan of overusing the saying, "famous last words". That saying is what came to mind when I read this..."revolutions and the threat of revolution are over-rated as Tullock teaches". Hmmm...maybe it's worth it to try and give them something a bit more substantial than cake...

Of course, I think opportunities are incredibly more substantial than cake...and opportunities are a direct result of efficiently allocating resources. Wasting resources is the most effective way to reduce available opportunities. What's our most valuable resource? Our unique perspectives.

I'm not familiar with Congleton's work...but it sounds quite relevant to the Magna Carta...which was the subject of my latest blog entry.... http://pragmatarianism.blogspot.com/2012/03/magna-carta-movement.html

If you get a chance to read it...I'd certainly appreciate hearing your perspective on any clues/evidence that you or Congleton might have that would either strengthen or weaken the conclusions that I reached.

[James A. Donald]

It is pretty obvious that the west is stagnating, economically, technologically, and scientifically, and certain parts of Asia are not.

This refutes the story told in "why nations fail" The most advanced places in the world are Singapore and Hong Kong, both of them founded by pirates. Raffles repeated renegotiations of the lease of Singapore with the Sultan are reminiscent of Darth Vader:
Sultan: "Hey, that was not our deal"
Raffles: "I am changing our deal. Pray that I change it no further."

[McKinney]

Easterly: “It an eloquent and powerful statement of the long-run success of democratic capitalism at a time when it is under attack.”

My reading of history indicates that democratic capitalism has been the problem, not the solution: as more people gained the right to vote, respect for property and free markets declined in direct proportion. The economic growth we have enjoyed since 1900 is the result of a residue of capitalism that the majority has failed to destroy.

Of course, most socialist countries, including China, have realized that a tiny space for markets is necessary in order to prevent mass starvation, but the democratic majority will guarantee that space is as tiny as possible.

[McKinney]

Boettke: “Institutional stickiness depends on how well formal institutions, such as political institutions to support property rights, map onto informal ones, such as citizens’ norms and beliefs… Where formal institutions align closely with the informal ones, the former tend to function as desired since enforcement costs are comparatively low.”

De Soto makes this point in his history of post-colonial South America. Many nations copied the US Constitution and form of government, but the results were very different because those institutions didn’t match the values system of the natives. McCloskey makes a similar point about the importance of bourgeois values. Harrison and Huntington do the same in “Culture Matters: How Values Shape Human Progress. The point doesn’t get enough air time.

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[Private Schools Australia]

Well The great strength of the comparative historical case study approach to political economy and it is pretty obvious that the west is stagnating, economically,technologically and scientifically, and certain parts of Asia are not.

[sinful bikini]

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