I first crossed paths with my future debate partner, the noble David Balan, when the AER asked me to referee his paper on ability, morality, and economic performance.  The AER ignored me of of course, but years later, a much-revised version of the paper (now with co-author Steve Knack) is near acceptance.  The key idea: For productive workers, more ability causes more prosperity.  But for rent-seekers, more ability causes less prosperity.  If we equate “morality” with “distaste for rent-seeking,” we can conclude that prosperity is strictly increasing in morality, but actually has an ambiguous connection to ability.

The paper’s changed a lot over time; hopefully some of my original suggestions ended up improving the piece.  But you can judge for yourself.  Here, with David’s permission, is my original referee report.

Referee Report on “On Morality and Economic

This piece starts
with the premise that taste for moral behavior is heterogeneous.  If we interpret “morality” as
“distaste for rent-seeking,” we can derive some interesting
conclusions.  Economic performance is
unsurprisingly increasing in morality. 
But counter-intuitively, performance is not necessarily increasing in
ability.  The reason is that higher
ability levels raise performance in both the productive and the rent-seeking
sectors.  It turns out that the morality
of high-ability people is especially critical. 
The article ends with applications to development economics, school
vouchers, and higher education.

This is an
interesting piece.  The conclusion that
greater ability may be counter-productive is especially intriguing.  But the article can be significantly
improved.  This is particularly true for
the applications.

School vouchers seem
like a particularly poor choice.  Is
there any empirical evidence that
graduates of private schools exhibit lower levels of morality than graduates of
public schools?  I would suspect the
opposite, though admittedly there is a selection problem.  But that selection problem itself cuts
against the thesis, for it suggests that parents who send their children to
private school DO want to inculcate morality. 
One plausible explanation is that the externalities of morality are
largely infra-marginal.

Furthermore, it
appears that a significant part of the values taught in public schools actively
encourage and even glorify rent-seeking. 
Approved history texts normally treat the adoption of new redistributive
legislation as a social gain.  Probably
the most value-laden topic in modern public schools is environmentalism, the
main thrust of which is to make children enthusiastic supporters of strict
environmental regulations regardless of their efficiency.

This holds a fortiori
for higher education.  University students
are frequently exposed to moral rationalizations for rent-seeking.  Other than a few economist/preachers (as
Stigler might put it), who is trying to convince students that rent-seeking is
a social ill?

It is also odd that
on the one hand, the author takes a dubious view of able people “close to
the regime” in
Third World countries, but simultaneously takes a favorable few of
keeping education close to the regime via centralization.  This seems likely to lead to inculcation of
the view that true immorality consists in opposition to or criticism of
government leaders.

A couple more
detailed comments:

1.  (p.5) 
Even if centralizing education helps solve the intra-national
externality problem, it runs the risk of making the inter-national problem worse.  This is well-expressed in historians’ theme
of “peasants into Frenchmen”: centralized public education builds a
national identity, perhaps reducing conflict among Frenchmen, but intensifying
conflict between the French and other nations.

2.  (p.22)  The author might want to cite Hayek’s famous
chapter on “why the worst get on top.”

this is a very well-motivated and interesting theory paper.  But there must be less debatable ways to
illustrate its empirical relevance.