In the last few years, social scientists have started heavily appealing to “state capacity” to explain the wealth of nations. Why do some countries prosper? Because they have great state capacity. Why do others flounder? Because they have crummy state capacity. What do floundering countries need to do in order to prosper? Build state capacity, naturally.
Many of these same social scientists see the coronavirus as a great vindication of their research. Which countries are coping well with coronavirus? The ones with great state capacity. Which countries have been devastated? The ones with crummy state capacity. How can we resolve our current crisis? Again, build state capacity.
Two years ago, I heavily criticized the state capacity fad. Weak and question-begging empirics aside, the whole literature is conceptually confused. But the current crisis has convinced me that I’ve been overly generous. How so? Because the coronavirus crisis plainly shows that Western democracies have overwhelming state capacity. Check out the muscles on these governments! They haven’t just effortlessly raised and spent trillions of dollars. They handily shut down their entire “non-essential” economies. In a matter of weeks, they casually disemployed many tens of millions of workers, shuttered millions of businesses, and virtually sealed their borders to trade as well as travel. After this staggering exercise of power, I don’t see how you can fairly attribute any shortcoming of these governments before the crisis on lack of state capacity. The sheer capacity of these states beggars belief.
Why, then, do most of the Western democracies seem to be doing such an incompetent job? Perhaps most egregiously, the U.S. federal government spent over two trillion dollars on relief, but next to nothing on testing or research.* As Alex Tabarrok summarizes:
We would also save medical costs by suppressing the virus. (The focus on ventilators has perhaps been overdone given that ventilators in no way guarantee survival–better to stop people needing ventilators.) We would also save lives. Thus, a program of mass testing seems like a no-brainer. Yet, there is no direct funding for anything like this in the $2.2 trillion CARES bill which is stunning. Here’s Austan Goolsbee:
We literally put in a tax break for retailers and restaurants to expand their capacity but not money for production of more COVID tests.
Here’s Paul Romer:
We have an economic crisis because it is not safe for people to work or consume. Our Congress just passed a bill that will spend $2.2 trillion to deal with the crisis. Can anyone identify any spending in this bill devoted to making it safe for people to work and consume?
What’s going wrong? Simple: Despite fantastic state capacity, the U.S. government has absurd state priorities! Instead of squandering trillions on poorly-targeted relief, the U.S. government could have spent a few hundred billion on testing and vaccine research. Better yet, it could have offered hundreds of billions in prizes for progress in these areas – prizes open to anyone on Earth to win.
So why didn’t this happen? Simple: Because the people in charge in virtually every country are irresponsible, disorganized, innumerate, impulsive, and emotional. Blaming their failures on “lack of state capacity” is like blaming Bill Cosby’s imprisonment on “lack of financial capacity.” Cosby’s in jail because he’s a serial rapist, not because he lacked the money to hire a good lawyer. When your resources are superabundant, the top remaining explanation for failure is your own terrible choices.
My point: As a matter of logic, success and failure depend on two factors.
Factor #1: The total resources you possess – your “capacity.”
Factor #2: How you choose to use those resources – your “priorities.”
Isn’t this obvious? It is to me. But I don’t think I’ve ever heard a fan of state capacity research acknowledge this obvious point, much less try to fairly adjudicate it. I don’t think I’ve ever heard such a fan say, “You could say that some governments fail because they squander resources that are more than sufficient to handle their problems. But using our new measure of squandering…” I don’t think I’ve ever heard such a fan say, “You could say that some governments would succeed if they simply revised their priorities. But using a new data set on priority revision…” I’m tempted to say that appeals to state capacity are tautological, but even the tautologies are half-baked.
The underlying confusion: When a person doesn’t do X, we often casually announce, “He can’t do X.” That, my friends, is a total leap of logic. Yes, perhaps the person in question genuinely can’t do X. On the other hand, maybe he’s simply made X a low priority. The only way to really know is to see what happens when the person in question unambiguously makes X his absolute priority. In slogan form: “Can’t implies won’t. Won’t does not imply can’t.”
The same goes for organizations, including governments. The Soviet Union failed to grow enough food to feed its people. That does not imply, however, that the Soviet Union lacked the capacity to do so. The real story, in fact, is that the Soviet government doggedly prioritized military might over civilian diet.
So what? At minimum, we need to audit the entire state capacity literature. To what extent can the problems it attributes to “state capacity” instead be assigned to “state priorities”? Unless we miraculously discover that capacity, not priorities, explains 100% of all sub-perfect government performance, the next step is to dial-down the multitudinous simplistic pleas for “increasing state capacity” – and replace them with pleas for better state priorities. Instead of pretending that the coronavirus crisis somehow confirms everything they’ve been claiming, this is a time for the fans of state capacity to engage in poignant soul-searching. Western democracies have decisively displayed their gargantuan capacity. But what good is gargantuan capacity in the hands of short-sighted, power-hungry demagogues?
There’s a great scene in Kill Bill where Vernita Green tells the Bride: “That’s being more rational than Bill led me to believe you were capable of.” And the Bride responds, “It’s mercy, compassion, and forgiveness I lack; not rationality.” Next time a researcher sees poor government performance and blames “lack of state capacity,” tell them, “Perhaps it’s good priorities it lacks, not capacity.”
Then tell me how they respond, because I’d really like to know.
*Yes, a followup bill added $25 billion for research, but it’s still an afterthought.
READER COMMENTS
Philo
Apr 29 2020 at 9:43am
You might ask Tyler Cowen about this, and report his response.
Philo
Apr 29 2020 at 9:46am
(Maybe he would say, “These governments lack the *capacity* to put in place good *priorities*.)
John Alcorn
Apr 29 2020 at 9:52am
Bryan,
Thank you for articulating a crucial distinction, which I have been struggling to get a handle on since Tyler Cowen raised the issue of state capacity libertarianism, and especially since the pandemic revealed that lots of countries with big governments dropped the ball on public-health readiness.
Thomas Hutcheson
Apr 29 2020 at 11:37am
While “state capacity” has often been equated with government expenditures/GDP by those not sympathetic for the concept (and there are probably some G/GDP ratios that do preclude state capacity) that’s not how proponents have argued it. One could argue that it was the incapacity to have (or rapidly develop) a strategy to minimize the costs of the pandemic that led to supra-optimal costs.
robc
Apr 29 2020 at 12:55pm
The point is we had the capacity to develop a strategy. Thomas Massie suggested spending the stimulus money in much the way Caplan suggests. Since it cost less and was suggested by a member of the government, the us government clearly had the capacity.
Instead they prioritized demonizing him.
Thomas Hutcheson
Apr 29 2020 at 5:28pm
“They” didn’t do a very good job because I had to google him and found nothing demonic about him.
robc
Apr 29 2020 at 10:02pm
Did you miss the whole “he is killing people by making them travel back to DC to vote” rhetoric? Trump wanting him kicked out of the GOP for delaying the stimulus bill 3 days?
BC
Apr 30 2020 at 5:39am
One can’t have it both ways though. If one wants to say that large G/GDP or lots of government powers doesn’t imply high state capacity — that state capacity includes the capacity to put in place good priorities as Philo says above — then one can’t turn around and argue for higher G or more government powers as a means to build more state capacity.
Was “the incapacity to have (or rapidly develop) a strategy to minimize the costs of the pandemic” a result of too few resources available to government or government’s misplaced priorities?
Floccina
Apr 29 2020 at 12:57pm
It is interesting to me that French government spending is 55% of GDP but Paris has many beggars ()I got that reading Scott Sumner) and a lot of graffiti and a fair amount of dilapidation and most of sites we love there were built more than 100 years ago, seems those are not priorities. Interesting.
Matthias Görgens
Apr 30 2020 at 7:44am
The French will tell you that neoliberalism caused the beggars.
Jim
Apr 29 2020 at 3:26pm
Western nations have plenty of capacity (ie welfare state) and good (ie selfish) priorities to old voters (demanding lockdown, of young workers).
it’s how u stay in power and grow more capacity (warfare state) is to take from working young and pay off idle old while skimming off top for themselves. Welfare state is the oldest con in the world.
Jim
Apr 29 2020 at 4:23pm
regarding $6T bailout it’s also got state priorities correct. Bailout big biz (the true tax collectors) and not individuals (tax payers).
Doug S.
Apr 29 2020 at 7:12pm
Shutting down much of the economy was actually fairly easy as far as things go: they asked for it to happen, and people went along with it. It strikes me as something extremely *easy* to do, not a test of “state capacity” that would require sophisticated project management and vast resources. I doubt that the number of man-hours of labor that have gone into enforcing the lockdown is very high at all; probably less than it would take to, say, build a railway tunnel under the Hudson River between New York and New Jersey, like the one Governor Chris Christie cancelled a few years ago after it ran over budget. 😛
Phil H
Apr 29 2020 at 9:55pm
Caplan’s point is a good and striking one. His conclusion is fairly extraordinary, though: He is apparently claiming that all (or a plurality) of the major decision makers in the American government are power-hungry demagogues who deliberately decided to channel money into stimulus rather than research because they are bad people.
I like a powerful contrarian claim, but this one is a little too far for me.
The problem lies in the failure to acknowledge the importance of institutions and structures, and to assign everything to individual actions. Do we really believe that all of the leaders of China are “good” people, and that’s why they responded more effectively to the crisis? Is New Zealand’s good record a reflection of Ahern’s moral excellence?
There does seem to be a good case to make that the leadership of the USA has become paralysed by partisan infighting. The problem is that it’s now ingrained into the systems and institutions. Even if a Mr Smith went to Washington, that wouldn’t sort out the problem.
Matthias Görgens
Apr 30 2020 at 7:48am
I don’t see a contradiction. The priorities are bad partially for institutional reasons.
(And partially also because voters won’t bad things. See the Myth of the Rational Voter by Bryan Caplan.)
No need to assume that politicians and civil servants are more evil then average.
BC
Apr 30 2020 at 5:48am
I thought of the government’s misplaced priorities when the Kraft Family, which owns the New England Patriots, sent the team’s plane to China to retrieve 1.2M masks for health care workers. The US government, of course, owns many planes.
Art Carden
Apr 30 2020 at 9:57am
Appeals to “state capacity” seem like a massive dodge, like blaming failing schools on “under-funding.” After all, who couldn’t do more with more resources or power?
In MOTRVOTER, you pointed out the oddity that trust in government increased after 9/11, which was clearly one of its most conspicuous failures. The same seems true during COVID: Tyler is right that the regulatory state is failing us, and yet we continue looking to…the state.
Rob
Apr 30 2020 at 11:57am
Hey Bryan — I had always read state capacity to include the capacity to make intelligent decisions. So a state with a big military or lots of spending power, but without wise politicians or experienced bureaucrats to know how to sensibly use them, it still lacks capacity in some sense. It lacks the capacity to achieve its goals.
So you can imagine a government that has the capacity to shut down its entire economy, but not the research ability to figure out whether it should — or decide on the right specific actions that are needed in order to stop a pandemic spreading. Such a state lacks essential capacities.
This might be an unhelpfully broad concept, but I think that’s how others use the term too.
John Thacker
Apr 30 2020 at 10:11pm
One problem is that the US government didn’t just fail to address the virus. It actively prevented others from doing so. It initially banned all private testing, and currently is still banning and delaying testing. A large part of that is the government being built for a normal situation where the costs of delays may be reduced and less visible, and then not acting as though a pandemic is special.
Jazi Zilber
Apr 30 2020 at 3:09pm
Two misconceptions IMHO
State capacity is equated with size and strength.
Many say capacity and mean efficiency.
The US has not been efficient in getting tests and so on.
the US does have a weak state capacity, as does India. Regardless of size.
Some examples are unrelated to state capacity.
The ability to tell everyone to stay at home is a marker of weak state capacity.
Every state with enough law enforcement will be able to enforce a lockdown.
Here is what I would consider in our context “state capacity”
(Singapore):
Enforcing staying at home of specific persons. And fast enough persecution and punishment that people will take notice (passports, and residency permits have been annuled and jail time given for covid related violations)
(South Korea):
Efficient testing and tracing system.
It takes 48 hours from someone testing positive to all his contacts being located, tested, and told test results.
(Taiwan):
Extremely reliable enforcement of home isolation orders
I am baffled by anyone putting the US high on “state capacity indices”
John Thacker
Apr 30 2020 at 10:20pm
Perhaps, but then you end up also arguing that Greece, Romania, and Bulgaria, plus Cambodia, among others, have much better state capacity than France or the Netherlands. Among people who scoff at the US’s state capacity, I rarely find them similarly arguing that obviously France and the Netherlands are low. (In the case of France, they don’t have the out of blaming a conservative, or a populist.)
Jazi Zilber
May 6 2020 at 8:29am
I am measuring state effectiveness, not number of COVID deaths per se.
France erred at the start. But its strategy later was executed very efficiently. Within limits of reality, of course.
Support for business, communication of strategy with citizens, and handling of case overload in hospitals.
Those – as well as equipment handling and sourcing was – seemingly – handled very professionally, and effectively.
Why did you think that those states are more effective?
and why France less?
Just due to a single decision?
John Thacker
Apr 30 2020 at 10:16pm
This is my problem with Mark Koyama’s recent Persecution and Toleration. It’s an interesting history, but there’s lots of graphs and chapters that straightforwardly measure state capacity purely by spending and increased tax rates. Then at the conclusion there’s a bit about “then Victorian England was so efficient and had high state capacity that it could reduce tax rates and spending and still get government output.”
There’s a logic to the idea that truly inefficient governments are constrained in taxation because of deadweight loss and won’t be able to sustain such tax rates. I am also certainly sympathetic to the idea that a more efficient tax system with lower deadweight loss can be better from a libertarian view than an inefficient one that raises less. But state capacity is one of those motte and bailey arguments where people retreat to the inarguable but vague definition when challenged, but tend to make their case with the easy to measure data of revenue and spending when not challenged.
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