Politics

Book review: Why Nations Fail: The Origins of Power, Prosperity, and Poverty, by Daron Acemoglu and James Robinson.

This book claims that “extractive institutions” prevent nations from becoming wealthy, and “inclusive institutions” favor wealth creation. It is full of anecdotes that occasionally have some relevance to their thesis. (The footnotes hint that they’ve written something more rigorous elsewhere).

The stereotypical extractive institutions certainly do harm that the stereotypical inclusive institutions don’t. But they describe those concepts in ways that do a mediocre job of generalizing to non-stereotypical governments.

They define “extractive institutions” broadly to include regions that don’t have “sufficiently centralized and pluralistic” political institutions. That enables them to classify regions such as Somalia as extractive without having to identify anything that would fit the normal meaning of extractive.

Their description of Somalia as having an “almost constant state of warfare” is strange. Their only attempt to quantify this warfare is a reference to a 1955 incident where 74 people were killed (if that’s a memorable incident, it would suggest war kills few people there; do they ignore the early 90’s because it was an aberration?). Wikipedia lists Somalia’s most recently reported homicide rate as 1.5 per 100,000 (compare to 14.5 for their favorite African nation Botswana, and 4.2 for the U.S.).

They don’t discuss the success of Dubai and Hong Kong because those governments don’t come very close to fitting their stereotype of a pluralistic and centralized nation.

They describe Mao’s China as “highly extractive”, but it looks to me more like ignorant destruction than an attempt at extracting anything. They say China’s current growth is unsustainable, somewhat like the Soviet Union (but they hedge and say it might succeed by becoming inclusive as South Korea did). Whereas I predict that China’s relatively decentralized planning will be enough to sustain modest growth, but it will be held back somewhat by the limits to the rule of law.

They do a good (but hardly novel) job of explaining why elites often fear that increased prosperity would threaten their position.

They correctly criticize some weak alternative explanations of poverty such as laziness. But they say little about explanations that partly overlap with theirs, such as Fukuyama’s Trust (a bit odd given that the book contains a blurb from Fukuyama). Fukuyama doesn’t seem to discuss Africa much, but the effects of slave trade seem to have large long-lasting consequences on social capital.

For a good introduction to some more thoughtful explanations of national growth such as the rule of law and the scientific method, see William Bernstein’s The Birth of Plenty.

Why Nations Fail may be useful for correcting myths among people who are averse to math, but for people who are already familiar with this subject, it will just add a few anecdotes without adding much insight.

The CFTC is suing Intrade for apparently allowing U.S. residents to trade contracts on gold, unemployment rates and a few others that it had agreed to prevent U.S. residents from trading. The CFTC is apparently not commenting on whether Intrade’s political contracts violate any laws.

U.S. traders will need to close our accounts.

The email I got says

In the near future we’ll announce plans for a new exchange model that will allow legal participation from all jurisdictions – including the US.

(no statement about whether it will involve real money, which suggests that it won’t).

I had already been considering closing my account because of the hassle of figuring out my Intrade income for tax purposes.

Book review: The Signal and the Noise: Why So Many Predictions Fail-but Some Don’t by Nate Silver.

This is a well-written book about the challenges associated with making predictions. But nearly all the ideas in it were ones I was already familiar with.

I agree with nearly everything the book says. But I’ll mention two small disagreements.

He claims that 0 and 100 percent are probabilities. Many Bayesians dispute that. He has a logically consistent interpretation and doesn’t claim it’s ever sane to believe something with probability 0 or 100 percent, so I’m not sure the difference matters, but rejecting the idea that those can represent probabilities seems at least like a simpler way of avoiding mistakes.

When pointing out the weak correlation between calorie consumption and obesity, he says he doesn’t know of an “obesity skeptics” community that would be comparable to the global warming skeptics. In fact there are people (e.g. Dave Asprey) who deny that excess calories cause obesity (with better tests than the global warming skeptics).

It would make sense to read this book instead of alternatives such as Moneyball and Tetlock’s Expert Political Judgment, but if you’ve been reading books in this area already this one won’t seem important.

Book review: The Righteous Mind: Why Good People Are Divided by Politics and Religion, by Jonathan Haidt.

This book carefully describes the evolutionary origins of human moralizing, explains why tribal attitudes toward morality have both good and bad effects, and how people who want to avoid moral hostility can do so.

Parts of the book are arranged to describe the author’s transition from having standard delusions about morality being the result of the narratives we use to justify them and about why other people had alien-sounding ideologies. His description about how his study of psychology led him to overcome his delusions makes it hard for those who agree with him to feel very superior to those who disagree.

He hints at personal benefits from abandoning partisanship (“It felt good to be released from partisan anger.”), so he doesn’t rely on altruistic motives for people to accept his political advice.

One part of the book that surprised me was the comparison between human morality and human taste buds. Some ideologies are influenced a good deal by all 6 types of human moral intuitions. But the ideology that pervades most of academia only respect 3 types (care, liberty, and fairness). That creates a difficult communication gap between them and cultures that employ others such as sanctity in their moral system, much like people who only experience sweet and salty foods would have trouble imagining a desire for sourness in some foods.

He sometimes gives the impression of being more of a moral relativist than I’d like, but a careful reading of the book shows that there are a fair number of contexts in which he believes some moral tastes produce better results than others.

His advice could be interpreted as encouraging us to to replace our existing notions of “the enemy” with Manichaeans. Would his advice polarize societies into Manichaeans and non-Manichaeans? Maybe, but at least the non-Manichaeans would have a decent understanding of why Manichaeans disagreed with them.

The book also includes arguments that group selection played an important role in human evolution, and that an increase in cooperation (group-mindedness, somewhat like the cooperation among bees) had to evolve before language could become valuable enough to evolve. This is an interesting but speculative alternative to the common belief that language was the key development that differentiated humans from other apes.

Book review: Manias, Panics and Crashes: A History of Financial Crises 6th ed., by Charles P. Kindleberger and Robert Aliber.

The book starts with a good overview of how a typical bubble develops and bursts. But I found the rest of the book poorly organized. I often wondered whether the book was reporting a particular historical fact as an example of some broad pattern – if not, why weren’t they organized in something closer to chronological order? It has lots of information that is potentially valuable, but not organized into a useful story or set of references.

Book review: The Better Angels of Our Nature: Why Violence Has Declined, by Steven Pinker.

Pinker provides a cautiously optimistic view of the dramatic reduction in violence over the past few centuries. He has tied together a wide variety of violent behavior (from genocide to cruelty to animals) into one broad pattern of people becoming more civilized.

He mostly covers the west, and I wished for more about the trends in the mideast and the more peaceful parts of asia. And why does he avoid commenting on the reported homicide rate for Somalia that’s less than the US – does he have reject the data as inaccurate, or does he want to ignore evidence that’s inconsistent with his claim that the rise of leviathan reduced crime?

The substance of the book is less reassuring than a casual glance would suggest. In particular, the section on the power law distribution of war deaths shows that the model he uses says the expected number of war deaths is infinite, apparently due to small probabilities of really destructive wars. It’s easy to overlook this disturbing implication if you aren’t reading carefully. I’m disappointed that Pinker didn’t talk about this more – how is it altered if we try to incorporate the finiteness of the available population? Should we focus a lot of our attention on avoiding unlikely megawars?

He cautiously speculates about possible causes (increased global communications, trade, democracy, self-control, reason, feminization, education, and intelligence via the Flynn effect).

If you’re an ideologue looking for an excuse to be offended, you’re fairly sure to find one in this book.

Pinker exaggerates the evidence for violence among hunter-gatherers (see the book Sex at Dawn for the other side of this debate). And the evidence Pinker does present is quite consistent with the hypothesis that violence increased when people switched from hunter-gatherers to stationary farmers.

The book is very long, and that’s not due to a simple desire to be thorough. Much of the evidence seems selected more for vividness and memorability (e.g. his evidence from fairy tales – not completely frivolous, but insignificant enough evidence that he wouldn’t have put it in a peer-reviewed article).

I didn’t learn enough from it to justify the time spent, but the ideas in it deserve to be known more widely.

Arnold Kling has a concise summary of the current crisis:

Apparently, the resolution of the debt ceiling restored the dollar’s status as a safe haven in the eyes of the world’s investors. That accelerated the flight from European sovereign debt and European banks. That in turn raised fears in financial markets, driving down stocks, including in the United States.

The European monetary system appears to suffer from the same problems as Bretton Woods.

European voters seem unlikely to tolerate the measures needed to maintain the current system. Yet the breakup will cause enough problems for the banking system that politicians will postpone it as long as possible.

The Frequency of Wars

The frequency of wars (pdf) by Mark Harrison and Nikolaus Wolf has some disturbing claims about the trend in wars. Despite many measures (such as fatalities) showing good trends,

One indicator has moved persistently in the wrong direction. How many countries are at war at any given time? Exploiting the Uppsala dataset on armed conflicts, backdated to 1946 and updated to 2005, Joseph Hewitt has noted upward trends in the annual percentage

That’s not as bad as it sounds, since an increase in the number of countries has played an important role in that trend (recognition of new countries can change the number of countries involved in a given conflict without any change in the violence in a given region). Still, that’s hard to reconcile with the widespread belief that wars are becoming rarer.

They suggest that more effective tax collection has provided governments with the ability to wage more wars than they could afford in the middle ages, and this has had more effect on the frequency of war than changes in the desire for war.

It’s not due to failed states – wealthy countries are as likely to start wars as poor countries. Democracy and international trade don’t by themselves do much if anything to reduce wars – only democracies without term limits engage in fewer wars:

democracies where leaders are subject to term limits are as likely to make war as autocratic states ­ and term limits are increasingly widespread.

Douglas Gibler who suggests that peace and democracy are joint symptoms of stable borders, not the other way around.

Trade and democracy are traditionally thought of as goods, both in themselves, and because they reduce the willingness to go to war, conditional on the national capacity to do so. But the same factors may also have been increasing the capacity for war, and so its frequency.

Martin, Thierry Mayer, and Mathias Thoenig have shown that trade had a double effect on the relative frequency of pairwise conflict. More bilateral trade reduced this frequency, but more multilateral trade raised it. Over time both multilateral and bilateral openness increased on average, but the net effect was positive. For any country pair separated by less than 1,000 kilometers, globalization from 1970 to 2000 raised the probability of conflict by one fifth (from 3.7 to 4.5 percent). On the interpretation of Martin and his co-authors, the same forces that widened the scope of multilateral trade made bilateral war less costly.

Britain relied overwhelmingly on imported calories. Despite this, in two world wars Britain had little difficulty in feeding its people. In contrast, those countries that believed themselves secure [due to abundant local crops] were the first to run short of food.

One encouraging point – starting wars probably isn’t rewarded:

On the record of all wars since 1700, to start one attracts a 60 percent probability of defeat.

Do these claims have any implications for the desirability of seasteading (i.e. could increasing the number of “countries” via seasteading have the same association with increasing frequency of wars as on land)?

It’s unclear whether a seastead that flies the flag of Panama would be an additional country in the relevant sense. They might be more like British colonies for quite a while, although that analogy has unpleasant long-term implications if their relations with their affiliated country deteriorate they way Britains relations with it’s colonies did.

New land-based countries are often the results of conflicts (e.g. Kosovo). Creating seasteads that way appears less feasible.

It’s unclear whether seasteads will have borders sufficiently similar to land-based borders to produce similar disputes over where the border should be.

And the societies that seem most seastead-like (Singapore, Hong Kong, Dubai) seem peaceful.

(HT FuturePundit).

Book review: The Rational Optimist: How Prosperity Evolves by Matt Ridley.

Ridley is more eloquent than Julian Simon, but like Simon he seems like a lawyer focusing all the reader’s attention on the evidence most favorable to his conclusions rather than an objective scientist.

A lot of what he says is right, but I’m bothered by the frequency with which he exaggerates. E.g. he says “justice has improved” [since the 1950s] because 234 innocent Americans were freed due to DNA evidence. That seems like such a tiny fraction of the total injustices that’s it’s nearly useless – it’s easy to imagine that declining jury quality has overwhelmed the improvements.

The book has a bit more history than I wanted, much of it devoted to the idea that free trade is an important cause of progress. He has an interesting claim that trade an important factor in pre-agricultural human success – it reportedly was virtually nonexistent in other species (even Neanderthals), and it may have started around the time that human population began to grow significantly. But the industrial revolution has been discussed often enough elsewhere that I got little out of his summary of the causes.

I’m disappointed that he presented trends of slowing population growth as reasons for optimism. There are many ways those trends could change, such as evolution or cheaper ways reproducing. And there are good arguments that more population growth would be desirable at least for this century.

The Honor Code

Book review: The Honor Code: How Moral Revolutions Happen by Kwame Anthony Appiah.

This book argues that moral changes such as the abolition of dueling, slavery, and foot-binding are not the result of new understanding of why they are undesirable. They result from changes in how they affect the honor (or status) of the groups that have the power to create the change.

Dueling was mostly associated with a hereditary class of gentlemen, and feeling a responsibility to duel was a symbol of that status. When the nature of the upper class changed to include a much less well defined class that included successful businessmen, and society became more egalitarian, the distinction associated with demonstrating that one was a member of the hereditary elite lost enough value that the costs of dueling outweighed the prestige.

Slave-owners increasingly portrayed the labor that slaves preformed in a way that also implied the work of British manual laborers deserved low status, and rising resentment and political power of that labor class created a movement to abolish slavery.

The inability of Chinese elites to ignore the opinions of elites in other nations whose military and technological might made it hard for China to dismiss them as inferior altered the class of people whom the Chinese elites wanted respect from.

These are plausible stories, backed by a modest amount of evidence. I don’t know of any strong explanations that compete with this. But I don’t get the impression that the author tried as hard as I would like to find evidence for competing explanations. For instance, he presents some partial evidence to the effect that Britain abolished slavery at a time when slavery was increasingly profitable. But I didn’t see any consideration of the costs of keeping slaves from running away, which I expect were increasing due to improved long-distance transportation such as railroads. He lists references which might constitute authoritative support for his position, but it looks like it would be time-consuming to verify that.

Whether this book can help spark new moral revolutions is unclear, but it should make our efforts to do so more cost-effective, if only by reducing the effort put into ineffective approaches.