Daron Acemoglu wins the quasi-Nobel for Economics
He's not my favorite Theory of Everything economist...
From my 2012 Taki’s column about Acemoglu and his fellow Nobelists:
Steve Sailer
May 30, 2012
MIT’s Daron Acemoglu is a rock star among economists, one of the ten most cited in his profession. This is largely because of the paper the Istanbul-born Armenian cowrote in 2001: The Colonial Origins of Comparative Development. Other economists have found that it provides a suave way to finally answer the embarrassing question of why, in the 21st century, some countries are rich and some are poor.
Acemoglu has a big new book out with James A. Robinson, Why Nations Fail: The Origins of Power, Prosperity, and Poverty, that makes his case at great length.
To understand Acemoglu’s professional popularity, you have to grasp how awkward the major features of global economic reality are to careerist economists. If you look naively around the world, you might get the impression that, say, Chinese territories such as Taiwan, Singapore, and Hong Kong have been economically dynamic because they have a lot of Chinese people in them. Moreover, the Overseas Chinese control much of business in Southeastern Asia, so we might assume that the Chinese tend to have a lot on the ball wherever they go.
The epochal conclusion that Deng Xiaoping, urged on by Singapore’s Lee Kuan Yew, drew from this in the late 1970s was that if all the Chinese folks in the world were getting rich except the Maoist Chinese, the problem must lie more in the “Maoist” than in the “Chinese” part. And, indeed, once liberated from Mao’s dogmas and whims, the Mainland Chinese responded with one of history’s greatest economic surges.
To an economist looking for invitations to conferences, however, the danger of adopting the Lee-Deng perspective is its flip side: Some other peoples, such as black Africans, New World Indians, and Pacific Islanders, have tended to lag notably behind Northeast Asians and Europeans, whether at home or abroad, and under all sorts of ideologies and institutions.
Acemoglu’s contribution was to come up with a regression analysis that, he claimed, showed that Third World poverty was the fault of those all-purpose bad guys, European imperialists. In colonies where early Europeans settlers faced low risks of dying from tropical diseases (such as Massachusetts), they set up good “inclusive” institutions. But in colonies where white men died like flies (such as Nigeria), they set up bad “extractive” institutions.
Institutions are (practically) everything, you see. If, say, the Central African Republic is poor, it’s not because it’s a republic in Central Africa (or because poverty is the default condition of humanity), but because it has extractive institutions. And that’s because Europeans didn’t set up inclusive institutions for the Central Africanese.
If Australia or New Zealand or Canada are richer than the Central African Republic, it’s not because Australia or New Zealand or Canada are full of Europeans, it’s because the Europeans hogged the inclusive institutions for the places they colonized. Or something. Acemoglu wrote:
These results suggest that Africa is poorer than the rest of the world not because of pure geographic or cultural factors, but because of worse institutions.
According to Acemoglu, that’s pretty much all you need to know. From the abstract of his 2001 paper:
Our estimates imply that differences in institutions explain approximately three-quarters of the income per capita differences across former colonies. Once we control for the effect of institutions, we find that countries in Africa or those farther away from the equator do not have lower incomes.
Now, you might think that Acemoglu’s model for predicting national wealth in ex-colonies, such as the United States or New Guinea, is:
1. More white people means more wealth.
How dare you think such a thing! Instead, it’s a two-step process:
1. More white people hundreds of years ago means better institutions today.
2. Better institutions then means more wealth today.
Two steps are better than one, according to Occam’s Butter Knife.
In Why Nations Fail, Acemoglu and Robinson have extended their Inclusive Good/Extractive Bad dichotomy. If anything good ever happened anywhere in world history, it was due to “inclusive institutions” and vice-versa. Sir Karl Popper, the philosopher of science, would have torn his hair out trying to read Why Nations Fail. He would have found Acemogluism as unfalsifiable (and thus as unscientific) as Freudianism and Marxism.
Now, I’m a big fan of inclusive institutions and don’t like exploitative ones. But Acemoglu’s dogma strikes me as a tad superficial. For instance, he focuses on the border cities of Nogales, Arizona, and Sonora. Why is the American side richer? It must be because America has better institutions.
OK…but what makes for better institutions north of the border? After all, Mexico has had plenty of opportunity to study American institutions. Could the enduring differences have something to do with America having a lot of Americans?
What’s the real story behind good and bad institutions? Two brave economists from Africa, Isaac Kalonda-Kanyama of the University of Johannesburg and Oasis Kodila-Tedika of the University of Kinshasa, have tackled this question head-on in a new study entitled Quality of Institutions: Does Intelligence Matter? Their conclusion:
We analyze the effect of the average level of intelligence on different measures of the quality of institutions, using a 2006 cross-sectional sample of 113 countries. The results show that average IQ positively affects all the measures of institutional quality considered in our study, namely government efficiency, regulatory quality, rule of law, political stability and voice and accountability. The positive effect of intelligence is robust to controlling for other determinants of institutional quality.
Don’t expect Kalonda-Kanyama and Kodila-Tedika to get big career boosts from their finding.
Is the cause of America's decline due to our declining intelligence? With causes as diverse as failure at every level of the educational system and open borders it seems more than just possible.
Another example which doesn’t fit Acemoglu’s model is Japan (before the American occupation & rewriting of its constitution). Highly centralized and coercive “extractive” institutions like zaibatsu but an economic powerhouse.