Should we believe the institutions and growth literature?

Dietz Vollrath at the Growth Economics Blog has a three part series on problems with the the empirical institutions and growth literature. If you’re a development economist or political economy person you should read these posts, and follow the blog. (It’s probably the best out there on economic growth, because–and in spite of–the fact it dives into the weeds once in a while.)

If you’ve immersed yourself in the literature you might not hear a lot new from Vollrath, but I am willing to bet you will hear at least a little new. I learned a good deal.

The empirical institutions and growth literature he doesn’t review is the largely historical and non-quantitative one. I find it more compelling and rich than the statistical literature, but they’re nice complements.

This has made me want to write up my notes and impressions on the literature, and how I teach it. Given that I don’t have the time, a few quick thoughts and pointers:

  • The institutions literature has focused too much on constraints and not on capacity. Constraints on power matter a lot. But the capacity of the state to get things done is equally or more important (e.g. collecting taxes, waging war, delivering justice and other services). In a statistical sense, you could say there’s an omitted variable problem–when we see constraints mattering it is actually capturing the effect of both constraints and capacity. But there’s actually a deeper problem of these being aspects of political development that have different determinants, and may feed off of one another.
  • You might argue a third dimension of institutions is the political machinery that gets developed to answer the question “Who decides?”. And re-answer it every day without a destructive conflict or tumultuous turnover of power. All the apparatus that helps elites and groups bargain and make and hold agreements, have a political conversation and compete for power more or less peacefully. This kind of political development has a lot in common with “constraints” and “capacity” but is distinct I think. “How to manage peaceful political transitions as the relative power of different interest groups change?” is a really, really, fundamental question a society has to answer to have persistent economic growth.
  • The slightly less-read stuff that should be more read, in my opinion:
    • North, Wallis and Weingast, either their book or this summary paper
    • Tim Besley and Torsten Persson’s work on state capacity (one example). If there is a less technical piece many people would be happy for the pointer (and I could use it in my undergrad and masters classes).
    • Some of the small-sample comparative case study work in Latin America, such as Jeffrey Paige or James Mahoney. most economists only read Engerman and Sokoloff.
    • There’s a huge comparative politics literature (i.e. historical, comparative case studies). One of the nicer, more concise summaries is in John Ishiyama’s short textbook. He’s also the APSR editor at the moment. My master’s class syllabus has more of this in the “recommended readings”
    • There’s a growing empirical micro literature that uses subnational or individual data to show how important are things like social norms, rules, decision-making processes, and all the other things we think of as “institutions” at the micro level. A slightly dated and incomplete set are buried in my PhD syllabus for the political science/sustainable development students. One of the takeaways that is hard to reconcile with the macro literature is that these local institutions appear to be quite malleable in the short term. How do we understand persistence at the macro level then?

Hat tip to the Development Impact blog for reminding me about this series. In my opinion it’s the other essential blog to follow in development economics. 2 of my 4 email subscriptions to blogs are the two mentioned in this post, since I don’t want to miss one.

What is missing is a blog that introduces this audience to comparative politics and political development. The Why Nations Fail blog comes closest, and often has must read posts.

The latest in perpetual surveillance technology

The Zephyr 7 high altitude pseudo satellite.

Airbus is developing a high-altitude, solar-powered drone that can stay aloft indefinitely. It could deliver wireless service where towers are too hard or expensive to maintain.

Look for it to be billed as a low cost Internet platform for the developing world. Perhaps not what the funders (the US and UK defense departments) are most motivated by.

Veteran’s memorial of the day

The five pillars represent the unity of the five branches of the United States military serving steadfast together.

They are staggered in size with their appropriate military seal placements on each pillar based upon the Department of Defense prescribed precedence.

At precisely 11:11 a.m. each Veterans Day (Nov. 11), the sun’s rays pass through the ellipses of the five Armed Services pillars to form a perfect solar spotlight over a mosaic of The Great Seal of the United States.

Additionally, the brick pavers within the Circle of Honor are inscribed with the names of U.S. servicemen and women, symbolizing the ‘support’ for the Armed Forces. The pavers are red, the pillars are white, and the sky is blue to represent America’s flag.


Papers I liked

  1. Protest economics: More intense protests in Tahrir Square are associated with lower stock market valuations for firms connected to the group currently in power
  2. US judge performance falls when they are up for election
  3. What schools are best managed? “UK, Sweden, Canada and the US obtain the highest management scores closely followed by Germany, with a gap to Italy, Brazil and then finally India”
  4. Analysis of the 2007-10 economics job market

How violence creates social order in prisons

With the antenna up my sleeve and the magazines chafing my ribs, I joined my party in the neutral patch of grass in the middle of the yard. There we met the group of men who were helping their court member collect his bill. It reminded me of Napoleon sitting down with the czar on a raft in the middle of a border river. This central clearing was used for such resolutions every day. After the appropriate declarations of force had been made and sabers had been sufficiently rattled, a solution was reached that did not leave anyone hurt. Our side did not permit their side to harm the debtor, but the debt was acknowledged. A collection was taken to pay the bill, and no blood was shed. The social order had been restored, but only after the prospect of violence had arisen.

A first hand account of the logic of prison violence. Very insightful. Reminds me of Diego Gambetta on the Sicilian Mafia– what fills the gap when the state chooses not to enforce contracts. Highly recommended.

“What has been the best corporate Darwin Award? A decision made by a company that basically killed the business.”

A reddit thread. Some of the best answers:

  • George Lucas wanted X salary to direct Star Wars. The studio thought it was too much. Of course they thought the movie might make money, but they didn’t really think it would become the powerful franchise we know it today. So George said “I’ll take a pay cut of $20K, if you give me all the merchandising rights”. Those rights were part of the $4 billion that Disney just paid him for Lucasfilms. Fox lost billions over several decades, in order to save $20K back in the 70’s.

  • Eddie Lampert, the CEO of Sears is one of the best contenders for the Corporate Darwin Award. He’s an Ayn Rand-loving, free-market ideologist who attempted to take his non-reality-based style of life out of the lobbyist/Congress rigged world of hedge funds and into retail. He laid off, cut, and trimmed back everything he could and forced departments, managers, and employees to fight against each other for resources and pay under the delusion that the company would benefit from a survival of the fittest atmosphere. Since that time, Sears has lost half its value in five years and has closed more than half of its stores, not to mention just about destroyed one of the oldest and most trusted brands in the history of the United States.

  • Enron for paying their executives “idea bonuses” before the ideas turned a profit. They paid one guy millions for inventing an online movie downloading service about ten years before that was feasible. Ironically, the documentary is available on Netflix.

Links I liked

  1. The Onion: “After submitting a ballot, an “I Voted” brand is applied to the flesh of the voter’s chest
  2. To rationalize tonight’s outcome, there is Timothy Egan: “this year’s Senate elections are unrepresentative of the nation to an extent that is unprecedented in elections held in the post-war era.”
  3. Russian subway makes available a digital library of great Russian literature
  4. Should you quit your PhD?
  5. Scientists reverse aging process in mice, early human trials show promise
  6. This tweet:

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Evolving thoughts on the Montana experiments controversy

In response to the Montana experiment controversy, last week I asked, why wouldn’t it be okay for researchers to mess with elections?

I’ve had a few different responses. One is “This guy thinks the Montana business did was fine.” That’s not quite right.

The other is “I think you’re wrong. I wasn’t sure why at first, but you made me think about it harder and now I know what makes me uncomfortable.” That is perfect. That’s why I blog. I’d also say the same thing for myself: having thought and talked about it, I have a better sense what I think is right and what I think is wrong.

The post is now up, on The Monkey Cage.

I thought I’d dwell a little here on my thinking.

Most people have an unpleasant gut reaction to the Montana experiment. Me too. But I’ve learned not to trust my gut all the time.

It helped to think through different scenarios. What if the researchers didn’t use an official looking mailer, and made the research aspect more prominent? What if the researchers were simply studying a campaign by a national organization? What if they’d simply written an op-ed and sent it to 100,000 Montanans? What it they’d done the experiment but only to 10,000?

I won’t try to answer these. Only to recommend the exercise of thinking them through and try to understand why your gut feeling suddenly changes (or not). I found it helpful.

As usual, ethical dilemmas are hard, there are no quick answers, and we’re not very well trained to deal with them. The honest answer to “what’s ok” is still “I’m not sure.” Anyone who argues differently is being foolish. I thought the more libertarian view needed more airtime, especially in response to some of the knee-jerk demands for more regulation.

I sincerely look forward to more emails and hallway conversations telling me I’m wrong. I can’t link you to the mealtime, jogging, hallway, and even bathroom conversations I’ve had about this all week, but here are links to the online information and opinions I found helpful:

The science of activism

A new APSR paper by Daniel Carpenter and Colin Moore:

Examining an original dataset of more than 8,500 antislavery petitions sent to Congress (1833–1845), we argue that American women’s petition canvassing conferred skills and contacts that empowered their later activism.

We find that women canvassers gathered 50% or more signatures (absolute and per capita) than men while circulating the same petition requests in the same locales. Supplementary evidence (mainly qualitative) points to women’s persuasive capacity and network building as the most plausible mechanisms for this increased efficacy.

We then present evidence that leaders in the women’s rights and reform campaigns of the nineteenth century were previously active in antislavery canvassing. Pivotal signers of the Seneca Falls Declaration were antislavery petition canvassers, and in an independent sample of post–Civil War activists, women were four times more likely than men to have served as identifiable antislavery canvassers.

For American women, petition canvassing—with its patterns of persuasion and networking—shaped legacies in political argument, network formation, and organizing.

Also, a couple of days ago The Monkey Cage did a Q&A with Hahrie Han on her new book, How Organizations Develop Activists.

many organizations maintain a purely transactional relationship with their members, simply asking them to donate money or take action without being responsive to members’ needs in return. In a series of field experiments, I found that organizations that emulate characteristics of social relationships—such as being responsive to people’s goals, referring to a shared past and implied future, and acting as openers who invite others to open up to them–make people more likely to sign petitions, recruit others, and attend meetings.

I think activism could be a really important area of study in developing countries. Is it a technology that can be easily adapted and transferred, but there are barriers to diffusion? Could they be overcome? And what’s the social science embedded in classic organizing techniques. What could we learn about how rebel groups or parties grow support by looking at activist tactics.

I’d welcome pointers to literature.

Is it ok for researchers to mess with elections?

The events:

  • Three political scientists sent out official-looking election mailers to 100,000 Montana voters
  • The mailer described the ideological standing of technically non-partisan candidates for the Montana Supreme Court, putting one close to Obama and one close to Romney.
  • The mailer had the state seal among other logos, and the fine print said that the mailer sent by researchers from Dartmouth College and Stanford University, part of their research into voter participation

The academic controversy, from Talking Points Memo:

…political scientists consulted by TPM described the study as “malpractice” and “improper and unethical” because, by introducing the ideological position of non-partisan candidates, the flyers could — intentionally or not — influence the results of the elections.

“It’s basically political science malpractice. That’s what I’d call it,” Jennifer Lawless, professor of government at American University in Washington, D.C., told TPM. “When you’re going to engage in an experiment as a political scientist, I think you have a responsibility not to affect election outcomes, let alone break the law.”

…”This strikes me as a lapse in judgment. If the election’s actually happening, they’re intervening in it,” Theda Skocpol, a political scientist at Harvard University, told TPM

Is this malpractice? It’s obviously questionable. But I haven’t jumped to an answer yet. In fact, the more I think it through, the more difficulty I have seeing a wrong, especially one the profession could or should ever rectify.

It sounds to me like Lawless and Skocpol are saying that you can’t do research and be an activist at the same time, even if it’s an activist for relatively benign things, such as “more information for voters”. I’m not so sure we can or should regulate this as a profession.

Let’s use a different example. I run field experiments trying to reduce poverty and violence. Sometimes I design experiments and interventions myself. Seldom do people say to me, “You are mucking around with real world outcomes. Who gave you the permission to do that?”

Maybe people should ask. It’s a good question. Thinking it through, I get a more nuanced answer than malpractice.

When you’re working in your own country (say the US for example) the law generally protects your right to help other people, or give information in elections. This is true even if you want to give very, very large sums of money for partisan causes (like Buffett or the Koch brothers do).

If these researchers were mucking around in another country’s elections, the law of the land would say whether or not the level of informed consent was a problem. In the case of Montana, it sounds like the researchers disclosed their purpose and identity, which is more than I can say for most electioneering in this country. With the exception of the State Seal question (I don’t know if this is legal or not) it sounds to a non-expert like me that they were within the law.

I don’t think it matters for what Skocpol and Lawless said. The political scientists calling this unethical don’t seem to be quibbling about the use of the seal or adequacy of disclosure. It’s the fact that an experiment could affect outcomes that they seem to question.

Let’s go back to my poverty and violence work for a minute. When I work in other countries, I generally have the consent of both the government and the participants. I also work with organizations doing this sort of intervention anyways (though not always).

I’m willing to bet that, had the researchers worked with a non-partisan institute that was mucking around in elections already, there would be no blowback to the researchers at all. They would simply be evaluating a real world intervention. Even if it was clear they had worked with the institute to tweak or even design the mailers, for most this would never be an issue.

My hunch is that it’s the fact that the academics are the interveners that makes “other political scientists” question the appropriateness.

You can also argue the finer points of informed consent in a democracy, but for me I think it really comes down to this question of whether academics can also be activists at the same time. Naturally I can come up with reasons why they shouldn’t, but I don’t find any particularly compelling. Most of us have political agendas, and we write books and articles pushing those agendas. It’s not obvious to me that as an academic in a democracy I am not allowed to use my work to achieve certain political ends.

I think it would be fair for universities to set out guidelines of appropriate behavior beyond what is required by law. And maybe disciplines and journals too. Personally I would prefer a university and discipline that restricted its members as little as possible.

I’m sure there are sides I’m not thinking of. I’d love to hear why people think intervening in an election is off limits for academic research (especially when it’s done by citizens in their own country). I promise to post again if you change my mind.

What I’ve been reading

  1. Factory girls, by Leslie Chang. A WSJ journalist writes about factory girls she met in China. It is not what you might expect. This is possibly one of the best long form journalism books I’ve read in a year or two.
  2. Augustus, by John Williams. A life of Caesar Augustus, through fictional letters written by his contemporaries. A classic re-released. This is the NYRB review that made me buy it. Perfect if you have an appetite for history but you prefer a compelling narrative over true facts.
  3. Ides of March, by Thornton Wilder. The life of Julius Caesar, told through letters by contemporaries. Read before Augustus, which I recommend.
  4. What’s up with Catalonia?, by various authors. A set of pro-Independence essays that border on propaganda, but are useful for understanding the independence movement.
  5. All our Names, by Dinaw Mengistu. His third novel, which is very good. I liked it as much as his first. The story of two friends living through tumultuous times in Uganda, intermingled with the story of one of the friends, now resettled in Missouri, and his relationship with a white woman in the 1970s.

Unwilling entrepreneurs

A common sensical but useful new paper by Nagler and Naude, on how many if not most African households make their money. Descriptive analysis is underrated.

Although non-farm enterprises are ubiquitous in rural Sub-Saharan Africa, little is yet known about them. The motivation for households to operate enterprises, how productive they are, and why they exit the market are neglected questions. Drawing on the Living Standards Measurement Study — Integrated Surveys on Agriculture and using discrete choice, selection model and panel data estimators, this paper provide answers using data from Ethiopia, Niger, Nigeria, Malawi, Tanzania, and Uganda.

The necessity to cope following shocks, seasonality in agriculture, and household size can push rural households into operating a non-farm enterprise. Households are also pulled into entrepreneurship to exploit opportunities.

Access to credit and markets, household wealth, and the education and age of the household head are positively associated with the likelihood of operating an enterprise. The characteristics are also associated with the type of business activity a household operates. Rural and female-headed enterprises and enterprises with young enterprise owners are less productive than urban and male-owned enterprises and enterprises with older owners. Shocks have a negative association with enterprise operation and productivity and a large share of rural enterprises does not operate continuously over a year.

Enterprises cease operations because of low profits, a lack of finance, or the effects of idiosyncratic shocks. Overall the findings are indicative that rural enterprises are”small businesses in a big continent”where large distances, rural isolation, low population density, and farming risks limit productivity and growth.

Hat tip to Logan Cochrane.