Category: History
Institutions are not always so important (or easy to measure properly?)
Jinfeng Luo and Yi Wen from the St. Louis Fed have a new working paper (pdf), “Institutions Do Not Rule: Reassessing the Driving Forces of Economic Development”:
We use cross-country data and instrumental variables widely used in the literature to show that (i) institutions (such as property rights and the rule of law) do not explain industrialization and (ii) agrarian countries and industrial countries have entirely different determinants for income levels.
In particular, geography, rather than institutions, explains the income differences among agrarian countries, while institutions appear to matter only for income variations in industrial economies. Moreover, we find it is the stage of economic development (or the absence/presence of industrialization) that explains a country’s quality of institutions rather than vice versa.
The finding that institutions do not explain industrialization but are instead explained by industrialization lends support to the well-received view among prominent economic historians — that institutional changes in 17th and 18th century England did not cause the Industrial Revolution.
I am reminded of a puzzle which I think was first posed by Jeff Sachs. Go back to 1960 and choose any measure of institutional quality you want. Then see how well it predicts cross-national growth since then. And that is doing the exercise knowing how the answer comes out!
Toward a new, gender-based economic theory of the Indian caste system
This is just published in the Journal of Development Economics, from Chris Bidner and Mukesh Eswaran, and the title is “A Gender-Based Theory of the Origin of the Caste System of India”:
We propose a theory of the origins of India’s caste system by explicitly recognizing the productivity of women in complementing their husbands’ occupation-specific skill. The theory explains the core features of the caste system: its hereditary and hierarchical nature, and its insistence on endogamy (marriage only within castes). Endogamy is embraced by a group to minimize an externality that arises when group members marry outsiders. We demonstrate why the caste system embodies gender asymmetries in punishments for violations of endogamy and tolerates hypergamy (marrying up) more than hypogamy (marrying down). Our model also speaks to other aspects of caste, such as commensality restrictions and arranged/child marriages. We suggest that India’s caste system is so unique because the Brahmins sought to preserve and orally transmit the Hindu scriptures for over a millennium with no script. We show that economic considerations were of utmost importance in the emergence of the caste system.
There are ungated versions of the paper here. Here are earlier MR posts on the Indian caste system. I think I am not enough of a rational choice theorist to believe in any explanation of this sort, still it is sometimes better to try and fail than never to try at all…
The pointer to this paper is from Michael Clemens.
Arrived in my pile
Ian Morris, Foragers, Farmers, and Fossil Fuels: How Human Values Evolve.
A Tanner Lecture, with comments by Richard Seaford, Jonathan D. Spence, Christine Korsgaard, and Margaret Atwood, and edited by Stephen Macedo. Due out March 22.
Equine markets in everything
Circa the late nineteenth century, in urban America:
Even the wastes of horses were commodified. The collection of urban manure had old, even ancient roots. Again, the process is most easily documented in New York City. Before 1878, individuals roamed the street and picked up manure. In that year the Common Council supposedly sold an exclusive license to a William Hitchcock, who sold the street sweepings to farmers for fertilizer. Street sweepings varied in quality and were worth more if from an asphalt street than if from a gravel street or a dirty alley. They were always worth less than stable manure, a purer product. The older pattern of individuals collecting street manure for urban gardens never fully went away, and as late as the first half of the twentieth century neighborhood children in the Italian American neighborhood of East Harlem did a thriving business collecting horse manure from the streets for backyard gardens in the area.
That is from Clay McShane and Joel A. Tarr, The Horse in the City: Living Machines in the Nineteenth Century, an excellent book from 2007. I am sorry it took me so long to discover this work. It has wonderful sentences such as:
Stables rarely make it into the histories of the built environment, although they constituted a substantial part of that environment.
How can you go wrong with that? There is good economics on every page of this book.
Good sentences from Nick Rowe
The right won the economics debate; left and right are just haggling over details.
And here is another bit, one which is in danger of falling down the memory hole:
We easily forget how daft the 1970’s really were, and some ideas were much worse than pet rocks. (Marxism was by far the worst, of course, and had a lot of support amongst university intellectuals, though not much in economics departments.) When inflation was too high, and we wanted to bring inflation down, many (most?) macroeconomists advocated direct controls on prices and wages. And governments in Canada, the US, the UK (there must have been more) actually implemented direct controls on prices and wages to bring inflation down. Milton Friedman actually had to argue against price and wage controls and against the prevailing wisdom that inflation was caused by monopoly power, monopoly unions, a grab-bag of sociological factors, and had nothing to do with monetary policy.
Imagine if I argued today: “Inflation is dangerously low. In order to increase inflation, governments should pass a law saying that all firms must raise all prices and wages by a minimum of 2% a year, unless they apply for and get special permission from the Prices and Incomes Board to raise them by less.” What are the chances my policy proposal would be accepted?
Friedman had a mountain to move, and he moved it. And because he already moved it, we simply cannot have a Friedman today.
There is more here, mostly on Milton Friedman.
Bad optics, bad PR, the culture that is Germany
…a public outcry has arisen over a town council plan to house refugees in a building that once served as a Nazi command post at the Buchenwald concentration camp.
Schwerte, a community of 50,000 south of Dortmund, has decided to move 21 refugees into the camp’s only remaining building on the outskirts of the town.
The move comes, town officials say, because all the refugee housing in the town’s jurisdiction is already filled with 200 asylum seekers, and the town doesn’t have the money to purchase temporary structures. According to the town council’s spokeswoman, “The solution is a practical one.”
The full story is here, via the excellent Mark Thorson.
Alesina and co-authors respond on European fiscal austerity
They have a new NBER working paper on this topic, here is one key part of the abstract:
Fiscal adjustments based upon cuts in spending appear to have been much less costly, in terms of output losses, than those based upon tax increases. The difference between the two types of adjustment is very large. Our results, however, are mute on the question whether the countries we have studied did the right thing implementing fiscal austerity at the time they did, that is 2009-13.
They also consider, and cannot reject, the possibility that the output declines of recent times were due to additional negative variables, such as credit crunches, rather than higher values for the fiscal multiplier.
I predict this paper will be ignored rather than responded to. For a while now it has been the practice to criticize “austerity” rather than to disaggregate the policies, or describe them with greater specificity, even though that is easy to do. And it is incorrect to describe this paper as defending austerity, rather I read it as being anti-tax hike, and suggesting that “austerity” is not a very useful concept.
There is an ungated version of the paper here.
*Japan and the Shackles of the Past*
What a strange pattern to find in a book. The first 264 pp. are good enough but not exceptional and at times boring through being overly familiar. The last two chapters I found to be a brilliant treatment of recent Japanese politics through the lens of public choice models, probably the best since Karel von Wolferen’s The Enigma of Japanese Power.
Have you wondered what distinguishes the regime of one Japanese prime minister from another? Which are the different interest groups for and against the consumption tax hike and why? What accounts for the initial failure and then later resurgence of Abe? What role does Okinawa play in broader Japanese politics? Which kinds of regular struggles are played out between the elected officials and the bureaucrats? What does a sentence like this mean?: “The people around Abe wanted, finally, to stamp out forever the ghost of Tanaka Kakuei.”
How many other books rise to “superb” status but only through their last two chapters?
Here is a review of the book from The Economist, positive but not along the lines I offer above. Here is a Literary Saloon review. Here is an FT review by the excellent David Piling.
You can order the book here. It came out in December 2014 but will make my best books of 2015 list for sure. For the initial pointer to this book I wish to thank Jim Olds.
*Thermonuclear Monarchy*
That is a new (early 2014) and excellent book by Elaine Scarry, the subtitle is Choosing Between Democracy and Doom. Here is one good sentence:
…the British government arranged a secure fallout shelter for 200 leading officials, it neglected to include the queen in its plans…
Here is a more thematic sentence:
The impossibility of “governing” nuclear weapons emerges across many pages of this book.
Recommended, and consistent with my long held view that the production of nuclear weapons represented one of the most fundamental revisions of the U.S. Constitution. The discussion of nuclear submarines, and how hard it can be to send them revised orders, is both fascinating and scary.
Thomas C. Schelling on why international terrorism is so rare
From a 1991 essay, “What purposes can “international terrorism” serve?”:
…I want to offer another conjecture on why international terrorism is so rare…whereas individual acts of terrorism may be easily within the capabilities of quite ordinary individuals , a sustained campaign on any scale may require more people and more organization than could be viable in most target countries. And there may be some negative feedback from the low success rate to the low attempt rate: Resourceful individuals, people with brains or people with money, may find terrorism so unpromising that they do not choose to contribute effort or money. And any organization that is secret and dangerous risks both defection and infiltration; a group of people large enough to carry on a sustained campaign, perhaps simultaneously in different target areas, may simply be too vulnerable in defection and infiltration. Even seeking financial help risks being informed on.
That is one of the essays in the book Violence, Terrorism, and Justice, edited by R.G. Frey and Christopher W. Morris. By the way, Schelling cites the campaign of Palestinian radicals against Palestinian moderates as one of the examples of a successful terrorist plan.
Robert Tombs, *The English and Their History*
I ordered this book through the UK, as it does yet have a U.S. publication date on Amazon. It has a fascinating 891 pp. of text (and an excellent annotated bibliography), virtually all of which are worth reading. In just about any year it is one of the top five non-fiction books of that year. I found it especially strong on English-French relations, and early modern times, and perhaps a bit weak on post-1970 developments, which are in any case harder to cover.
It is not an easy book to excerpt but here is one short bit on Shakespeare:
…at deeper levels he is astonishingly not the product of his times, which is an evident reason for the continuing power of his work. Most obviously, he is not dogmatic; he displays a wide variety of cultural and religious influences, but is not defined by the religious conflict that shaped his time — hence continuing modern debate about his personal beliefs. He pays little respect to social and gender hierarchy. He writes of a ‘deep England’, beyond London and the court. Women are always important and often dominant in his plays, and women came in large numbers to see them, scandalizing foreign visitors. It is often said that he conceals his opinions; it seems rather that the ideas he explores transcend the limits of contemporary polemics.
Definitely recommended, I quickly became addicted to this book. Do any of you know when it will have a formal release on this side of the Atlantic?
The effect of the TseTse fly on African development
Marcella Alsan has a new paper in the American Economic Review:
The TseTse fly is unique to Africa and transmits a parasite harmful to humans and lethal to livestock. This paper tests the hypothesis that the TseTse reduced the ability of Africans to generate an agricultural surplus historically. Ethnic groups inhabiting TseTse-suitable areas were less likely to use domesticated animals and the plow, less likely to be politically centralized, and had a lower population density. These correlations are not found in the tropics outside of Africa, where the fly does not exist. The evidence suggests current economic performance is affected by the TseTse through the channel of precolonial political centralization.
You will find ungated versions here.
Do sinking ships put women and children first?
There is a new paper on this topic, not by Bruno Frey, rather by Mikael Elinder, the abstract is this:
Since the sinking of the Titanic, there has been a widespread belief that the social norm of “women and children first” (WCF) gives women a survival advantage over men in maritime disasters, and that captains and crew members give priority to passengers. We analyze a database of 18 maritime disasters spanning three centuries, covering the fate of over 15,000 individuals of more than 30 nationalities. Our results provide a unique picture of maritime disasters. Women have a distinct survival disadvantage compared with men. Captains and crew survive at a significantly higher rate than passengers. We also find that: the captain has the power to enforce normative behavior; there seems to be no association between duration of a disaster and the impact of social norms; women fare no better when they constitute a small share of the ship’s complement; the length of the voyage before the disaster appears to have no impact on women’s relative survival rate; the sex gap in survival rates has declined since World War I; and women have a larger disadvantage in British shipwrecks. Taken together, our findings show that human behavior in life-and-death situations is best captured by the expression “every man for himself.”
The pointer is from Ben Southwood.
Happy New Year!
The piece is by Ibrahim Miranda. Here is a painting by Ruperto Jay Matamoros, my favorite Cuban painter. Here are further paintings by Matamoros. Here is an on-line gallery of Cuban art.
*Hall of Mirrors*
The author is Barry Eichengreen and the subtitle is The Great Depression, The Great Recession, and the Uses — and Misuses — of History. My copy has now arrived.