By Arnold Kling
As part of an online seminar, Adam Przeworski writes,
When in 1993 Limongi and I reviewed studies of the effect of political regimes on economic growth, we found that the results perfectly fitted the ideological climate of the period when they were published: before 1982 none found that democracies promoted growth, after 1982 none found that dictatorships did.
This is from Henry Farrell’s seminar on Dani Rodrik’s book. The quote confirms my bias that econometrics is not robust relative to confirmation bias.
In his response (see the link to Przeworski and scroll down), Rodrik writes,
Mark Thoma makes a number of interesting suggestions, in particular on what it takes to transform growth accelerations into sustained growth. He posits that maybe the transition has to do with a “process of clearing out unproductive, unprofitable firms … [as] an essential part of getting to the second stage and that this process must begin fairly early in the development process …” Perhaps. One can make his point more broadly not just about firms but all pre-existing institutions. At some point, inherited institutions can become dysfunctional-even if they served to ignite growth (think of China’s property regime or Germany’s welfare state). Figuring when you want to get out, while things are still going relatively well, is a complicated dynamic programming problem.
…I am happy that Daniel Drezner liked parts of the book. As for the other parts, I wonder if his complaints are not the result of his having read them a bit too quickly. One complaint is that “It’s far from clear whether the political organizations that Rodrik is counting on are up to the task.” This is odd in light of the amount of attention I devote to how the requisite organizational arrangements can be designed…
The last sentences in each of the last two paragraphs are indicative of what bothers me about the outlook of Rodrik and a number of other seminar participants. For all of the emphasis on pragmatism and humility, there is lurking within most of them an inner elitist who thinks in terms of solving dynamic programming problems and believes that “the requisite organizational arrangements can be designed.”
Why are we assuming that the best way for an economist to help an underdeveloped country is to give policy advice to the government? What about giving advice to ordinary citizens?
Why would not our best contribution to an underdeveloped country be to start a business in that country? If we think that we are not competent to start businesses, then why do we think we are competent to initiate policies?
Those are my subversive thoughts.