Results for “Acemoglu”
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My Conversation with Daron Acemoglu

by  Tyler Cowen in

Self-recommending of course, most of all we talked about economic growth and development, and the history of liberty, with a bit on Turkey and Turkish culture (Turkish pizza!) as well.  Here is the audio and transcript.  Here is one excerpt, from the very opening:

COWEN: I have so many questions about economic growth. First, how much of the data on per capita income is explained just simply by one variable: distance from the equator? And how good a theory of the wealth of nations is that?

ACEMOGLU: I think it’s not a particularly good theory. If you look at the map of the world and color different countries according to their income per capita, you’ll see that a lot of low-income-per-capita countries are around the equator, and some of the richest countries are pretty far from the equator, in the temperate areas. So many people have jumped to conclusion that there must be a causal link.

But actually, I think geographic factors are not a great explanatory framework for understanding prosperity and poverty.

COWEN: But why does it have such a high R-squared? By one measure, the most antipodal 21 percent of the population produces 69 percent of the GDP, which is striking, right? Is that just an accident?

ACEMOGLU: Yeah, it’s a bit of an accident. Essentially, if you think of which are the countries around the equator that have such low income per capita, they are all former European colonies that have been colonized in a particular way.

And:

COWEN: If we think about the USSR, which has terrible institutions for more than 70 years, an awful form of communism — it falls; there’s a bit of a collapse. Today, they seem to have a higher per capita income than you would expect a priori, if you, just as an economist, write about communism. Isn’t that mostly just because of what is now Russian, or Soviet, human capital?

ACEMOGLU: That’s an interesting question. I think the Russian story is complicated, and I think part of Russian income per capita today is because of natural resources. It’s always a problem for us to know exactly how natural resources should be handled because you can do a lot of things wrong and still get quite a lot of income per capita via natural resources.

COWEN: But if Russians come here, they almost immediately move into North American per capita income levels as immigrants, right? They’re not bringing any resources. They’re bringing their human capital. If people from Gabon come here, it takes them quite a while to get to the —

ACEMOGLU: No, absolutely, absolutely. There’s no doubt that Russians are bringing more human capital. If you look at the Russian educational system, especially during the Soviet time, there was a lot of emphasis on math and physics and some foundational areas.

And there’s a lot of selection among the Russians who come here…

The Conversation is Acemoglu throughout, you also get to hear me channeling Garett Jones.  Again, here is Daron’s new book The Narrow Corridor: States, Societies, and the Fate of Liberty.

*The Narrow Corridor: States, Societies, and the Fate of Liberty*, the new Acemoglu and Robinson book

by  Tyler Cowen in

Due out in September, by Daron Acemoglu and James Robinson, here is an excerpt from the Amazon summary:

State institutions have to evolve continuously as the nature of conflicts and needs of society change, and thus society’s ability to keep state and rulers accountable must intensify in tandem with the capabilities of the state. This struggle between state and society becomes self-reinforcing, inducing both to develop a richer array of capacities just to keep moving forward along the corridor. Yet this struggle also underscores the fragile nature of liberty. It is built on a fragile balance between state and society, between economic, political, and social elites and citizens, between institutions and norms. One side of the balance gets too strong, and as has often happened in history, liberty begins to wane. Liberty depends on the vigilant mobilization of society. But it also needs state institutions to continuously reinvent themselves in order to meet new economic and social challenges that can close off the corridor to liberty.

You can pre-order here.

Acemoglu and Robinson on Piketty

by  Tyler Cowen in

There is a new paper out by them:

Thomas Piketty’s recent book, Capital in the Twenty First Century, follows in the tradition of the great classical economists, Malthus, Ricardo and Marx, in formulating “general” laws to diagnose and predict the dynamics of inequality. We argue that all of these general laws are unhelpful as a guide to understand the past or predict the future, because they ignore the central role of political and economic institutions in shaping the evolution of technology and the distribution of resources in a society. Using the economic and political histories of South Africa and Sweden, we illustrate not only that the focus on the share of top incomes gives a misleading characterization of the key determinants of societal inequality, but also that inequality dynamics are closely linked to institutional factors and their endogenous evolution, much more than the forces emphasized in Piketty’s book, such as the gap between the interest rate and the growth rate.

For the pointer I thank Nathaniel Bechhofer.

Bill Gates reviews Acemoglu and Robinson

by  Tyler Cowen in

He doesn’t like the book so much. Here is his bottom line:

This points to the most obvious theory about growth, which is that it is strongly correlated with embracing capitalistic economics—independent of the political system. When a country focuses on getting infrastructure built and education improved, and it uses market pricing to determine how resources should be allocated, then it moves towards growth. This test has a lot more clarity than the one proposed by the authors, and seems to me fits the facts of what has happened over time far better.

He also objects to the critique of foreign and, and the review closes with this:

As an endnote, I should mention that the book refers to me in a positive light, comparing how I made money to how Carlos Slim made his fortune in Mexico. Although I appreciate the nice thoughts, I think the book is quite unfair to Slim. Almost certainly, the competition laws in Mexico need strengthening, but I am sure that Mexico is much better off with Slim’s contribution in running businesses well than it would be without him.

The pointer is from Jeffrey Sachs.

Acemoglu and Robinson on the great stagnation

by  Tyler Cowen in

Two things are absent in this debate, however.

First, much evidence shows that what determines technological innovations isn’t some sort of “exogenous innovation capacity,” but incentives…

Schmookler illustrated these ideas vividly with the example of the horseshoe. He documented that there was a very high rate of innovation leading to improvements in the horseshoe throughout the late 19th and early 20th centuries because the increased demand for transport meant increased demand for better and cheaper horseshoes. It didn’t look like there was any sort of limit to the improvements or any evidence of an “exogenous innovation capacity” in this ancient technology, which had been around since 2nd century BC. Then suddenly, innovations came to an end, but this had nothing to do with running out of low hanging fruit. Instead, as Schmookler put it (p. 93), it was because the incentives to innovate in this technology disappeared because “the steam traction engine and, later, internal combustion engine began to displace the horse… “

Their full post is here.

I have changed my mind on this issue quite a bit over the last four to five years.  Yes incentives matter, but outside of extreme environments are changes in incentives explaining the changes in what we observe?  I now think it is of critical importance where a sector or economy is on “the innovation curve.”  It was easier to innovate in game theory in the 1980s than it is today, even though the salaries of top economists have risen significantly.  The pharmaceuticals market is larger than ever before, and yet the pipeline is largely dry.  We are simply at a point where further breakthroughs are hard (and it is not obvious that FDA innovation taxes are getting worse over this period of change.)  Weren’t so many inventors of the 19th century largely “yahoos,” with no fancy degrees, relatively low pay, little or no peer review, not at the peak of the Flynn effect, and so on, and yet they were on a fruitful part of the innovation curve and performed wonders.

I think in terms of general purpose technologies and platform-like breakthroughs.  Once you get them, innovation runs wild, otherwise it is tough sledding, with incentives still accounting for some of the variation within a particular place on the innovation curve.

Jeff Sachs reviews Acemoglu and Robinson

by  Tyler Cowen in

As you might expect, he stresses geography rather than institutions:

In places where production is expensive because of an inhospitable climate, unfavorable topography, low population densities, or a lack of proximity to global markets, many technologies from abroad will not arrive quickly through foreign investments or outsourcing. Compare Bolivia and Vietnam in the 1990s, both places I experienced firsthand as an economic adviser. Bolivians enjoyed greater political and civil rights than the Vietnamese did, as measured by Freedom House, yet Bolivia’s economy grew slowly whereas Vietnam’s attracted foreign investment like a magnet. It is easy to see why: Bolivia is a landlocked mountainous country with much of its territory lying higher than 10,000 feet above sea level, whereas Vietnam has a vast coastline with deep-water ports conveniently located near Asia’s booming industrial economies. Vietnam, not Bolivia, was the desirable place to assemble television sets and consumer appliances for Japanese and South Korean companies.

The review is interesting throughout, though I would stress the old saying: “As usual, the truth lies somewhere in between.”

Daron Acemoglu on what to do

by  Tyler Cowen in

In a piece entitled “The Real Solution is Growth,” he makes many good points, here is one:

Foster the commercialization of innovation. Much more can be done to facilitate this process. The Bayh-Dole Act of 1980 was only a small step toward encouraging commercialization of academic research. Even as the U.S. government is trying to cut spending, commercialization of new research would be one area deserving of new funding, particularly to ensure that this process does not undermine the greatest virtue of academic research, its openness.

He is also very good on patents, see this earlier Will Wilkinson blog post too.

Hat tip goes to ModeledBehavior on Twitter.

Acemoglu appointment seems to be a false rumor

by  Tyler Cowen in

It had been reported:

An ethnic Armenian, Daron Acemoglu, was nominated as the new Turkish Ambassador to France, a source in the Turkish Foreign Ministry told PanARMENIAN.Net.

Here is more.  It then changed to an OECD appointment and Acemoglu rejected all offers, expressing an interest in pursuing his academic career.  There are further reports and revisions here.  One Armenian source claims it was all a PR trick from the Turkish government, to win favor from Armenians.  Interpret all reports on this topic with caution.

Daron Acemoglu on the U.S.-Mexican border

by  Tyler Cowen in

Via Arnold Kling, Acemoglu writes:

On one side of the border fence, in Santa Cruz County, Arizona, the median household income is $30,000. A few feet away, it's $10,000….The key difference is that those on the north side of the border enjoy law and order and dependable government services — they can go about their daily activities and jobs without fear for their life or safety or property rights. On the other side, the inhabitants have institutions that perpetuate crime, graft, and insecurity.

With apologies to Douglass North, I am rarely happy with this kind of explanation.  First, are the bad institutions cause or effect?  Most likely we need a framework which allows them to be both.

Second, I want the theory to also explain the (quite large) difference between the truly poor Chiapas and the relatively wealthy northern Mexico.  By many metrics northern Mexico is more corrupt than Chiapas (there is more to be corrupt over, for one thing, plus drug routes play a role) and it very likely has higher rates of violent crime.  In general I prefer theories which explain three data points to theories which explain two.  Chiapas, of course, isn't some weird outlier which I pulled out of a hat; it's in the same country as northern Mexico and many people from that region have populated both northern Mexico and Arizona for that matter.  I could have picked many other parts of Mexico as well.

One factor is positive selection into northern Mexico, on grounds of ambition and desire for higher wages.  Another factor is that northern Mexican norms are (partially) geared to support American multinationals and these norms have spread more generally, including to Mexican enterprises in the region.

On another point, as I get older, I tend to view "family structure which encourages an obsession with education" as an increasingly important variable for explaining levels in per capita income, if not always growth rates in the immediate moment.  It's not a truly independent variable — when it comes to growth what is? — but it's one good place to start.  It helps explain why the Soviet Union, after decades of state fascism/communism, slid into a living standard higher than that of much of Latin America.  It explains quite a bit of Arizona vs. Mexico but less of northern Mexico vs. Chiapas.  Acemoglu mentions education in his article, but he seems to view it as resulting from instiutions rather than causing them.

I don't buy into the genetic explanations but still I view "family structure which encourages an obsession with education" as very hard to replicate through policy.  Emmanuel Todd's The Causes of Progress has many problems, but it is an under-mined book when it comes to the causes of both liberty and economic growth.

John Bates Clark Award goes to Daron Acemoglu

by  Tyler Cowen in

In a written statement, the [American Economic] association praised Mr. Acemoglu, 37, as a "broad and productive economist" who has made "valuable contributions" in the fields of labor economics, macroeconomics, institutional economics, and political economy. "Especially innovative," the statement says, is his recent work on the role of institutions in development and in political economy.

Mr. Acemoglu was one of the authors of a paper, "Reversal of Fortune: Geography and Institutions in the Making of the Modern World Income Distribution," that appeared in the Quarterly Journal of Economics in 2002. The authors argue that among countries colonized by European powers, those that were relatively rich in 1500 are now relatively poor because of colonial policies — an argument against the notion that geography is destiny.

In a working paper published in March by the National Bureau of Economic Research, Mr. Acemoglu and other authors argue that there is no evidence that countries that increase their levels of education are likely to become more democratic.

That is from the Chronicle of Higher Education, through the Division of Labor blog. 

This is a very good choice.  Acemoglu is an economist who starts with, and sticks with, the critical questions about development and institutions.  He does not let himself get distracted by a model he knows he can solve or a technique he knows he can use.  Here is his home page, with links to research.  Here is an earlier MR post on his work.  Here is David Warsh on Acemoglu.

Bottlenecks and the productivity slowdown

by  Tyler Cowen in
Despite the rapid pace of innovation in information and communications technologies (ICT) and electronics, aggregate US productivity growth has been disappointing since the 1970s. We propose and empirically explore the hypothesis that slow growth stems in part from an unbalanced sectoral distribution of innovation over the last several decades. Because an industry’s success in innovation depends on complementary innovations among its input suppliers, rapid productivity growth that is concentrated in a subset of sectors may create bottlenecks and consequently fail to translate into commensurate aggregate productivity gains. Using data on input-output linkages, citation linkages, industry productivity growth and patenting, we find evidence consistent with this hypothesis: the variance of suppliers’ Total Factor Productivity growth or innovation adversely affects an industry’s own TFP growth and innovation. Our estimates suggest that a substantial share of the productivity slowdown in the United States (and several other industrialized economies) can be accounted for by a sizable increase in cross-industry variance of TFP growth and innovation. For example, if TFP growth variance had remained at the 1977-1987 level, US manufacturing productivity would have grown twice as rapidly in 1997-2007 as it did—yielding a counterfactual growth rate that would have been close to that of 1977-1987 and 1987-1997.

Here is the new NBER working paper by Daron Acemoglu, David Autor, and Christina Patterson.