The commercial societies of Northern Europe which you champion did not excel via their RESTRICTIONS and INTERFERENCES with trade and property rights, nor did they stand out for their capricious rules, top down master planning and privilege. Certainly they weren’t what a modern day liberal would consider an icon, but they were better at property rights, free markets, limited interference and open competition than the alternatives of that time. Commercial societies were simply better at these than the vast majority of societies in history.
You then go on to state that these are all fine and good ideas, just that they are not the initial key steps, and/or that they might be good but need to be placed in the proper order (or something). But since the commercial societies did indeed stand out on these dimensions, then your argument seems weak.
To the extent that they are good ideas and don’t interfere with economic prosperity, and almost certainly help it, then the economic school stressing proper institutions does seem to be barking up the right tree.
And to the extent that these are indeed later/subsequent institutional fixes, then I still don’t get your argument against these. Places like Mexico, Costa Rica, Vietnam, India and Greece have living standards way above what the US and Britain had in the 19thC. If getting these, as you argue, was a later effect, then these are stilled called for, even using your logic.
In summary,
1) These are good ideas
2) They are good regardless of timing
3) They are, if anything, overdue in the developing world
4) They will help promote prosperity and reduce exploitation
Now, I would certainly agree that these institutions are not adequate for prosperity. Places like China even shows that they may not be necessary. But they are essential recommendations for liberal progress.
Sorry, but I do not understand what you are trying to say.
My argument has consistently been that Commercial societies prospered because they achieved four of the Five Keys to Progress.
And I see little evidence that Mexico, Costa Rica, Vietnam, India and Greece reshaped their Institutions according to what the Economists and Institutionalists wanted.
The title of your post is that economists are giving bad advice that should be ignored. But it is excellent advice. It should not be ignored. Mexico and the others should listen to this advice, and it will likely help them improve the prosperity of their people.
Furthermore, these same concepts contributed to why commercial societies prospered in history (relative to societies which did not protect property rights, or which debased the currency or which prohibited open entry and exit, etc etc.)
In your first comment, you said that Mexico already enjoys high standard of living. You seem to be assuming it is because they followed the advice of institutional reform. But in your second comment, you seem to imply that Mexico has not reformed their institutions.
So has Mexico followed their advice by overhauling its institutions or not? If yes, then what specific institution has been overhauled?
You seem to be looking at the results and then assuming that institutional reform previously took place without looking for evidence.
What I was trying to say was that this list of countries have higher standards of living today than your commercial societies did centuries ago. This is to address your comment that the economists ideas are good, but only if subsequent to the kick-starting of progress. In other words, they already have a kick start when judged against places like Amsterdam 400 years ago.
If these are good ideas, as you specifically state, then they are probably good for developing and mid tier countries.
I need to ask you. Why don’t you think these are good ideas? Or are you just saying they are good but incomplete/inadequate/ambiguous? Please clarify for those of us who might be confused.
I think it is important to conceptually separate “what is good” from “the causes of human material progress.” I am focused on the latter.
There are many things that are inherently good that do not lead to a society transitioning from poverty to progress - science, low corruption, education, democracy, freedom, love, family, friendship. Developing nations need to focus on promoting long-term economic growth.
By the way, I think this discussion shows the benefits of having a very focused definition of progress. Very broad definitions of progress, such as “human flourishing” lead to unfocused efforts that lead to tepid results.
Developing nations need to focus their resources rather than trying to promote everything good.
I have been pretty clear that the reason openness to international markets, property rights, stable currency, sound financial practices, openness to competition, and so on are good is in great part because they lead to and promote economic growth and that the absence of these things and other things liberal economists have been promoting for the last 75 years leads to stagnation. Thus per your definition, these recommendations promote progress.
We can argue another time on the immense value to economic prosperity of science, education and the suppression of corruption and exploitation. For now, let’s stick to the current topic. I am saying that if you don’t think property rights, setting prices based upon supply and demand, allowing constructive and open competition, stable currencies and the other things liberal economists have been promoting are conducive to economic prosperity/progress then we are in complete disagreement.
This school gives a vision, not concrete actionable advice for leaders of developing nations.
Please reread the section entitled “What would you do?” and then add a link to a document with very specific action items in temporal order that Mexico can execute.
I seriously doubt that it exists, and this after 75 years of development economists giving advice.
What is wrong with providing the leaders and people within a nation a vision or goal state? I am no expert on Mexico (or any of these), and would be skeptical of the advice any outsider who suggested he was one. But laying out the value of more international trade, more open markets, easier entry, less interference with prices and wages, a more stable currency, more transparent financial organizations and so on is probably good advice (tell me if you disagree).
If the key players in that nation (Mexico or whatever) can see the value in the goal, then they can begin the long and messy trial and error process of improving their institutions and organizations. The lack of top down central command and step by step chronology isn’t a weakness, it is a recognition of how complex the change process is going to be.
There are an infinite number of ways to get from Seattle to Miami, but the most important step is setting it as the desired destination. Economists, international organizations (such as IMF and the EU) have spent 75 years preaching the value of international markets, stable currency, open competition, property rights and so on. In addition, the economic success of liberal economies has set their policies and institutions as a goal for other to emulate, which they have tried to do to varying success. The role of the economists’ advice is to make this more actionable and concrete.
And during the last 75 years, we have seen more economic growth than the entire prior history of humanity. Places such as Germany, Japan, Korea, Singapore, Scandinavia, Southern Europe, Hong Kong, Taiwan and so on have seen amazing economic growth and in all of these they are ,according to your definition, more "progressive" than the US or GB at turn of 20thC. Even in the developing countries, we have seen amazing progress in economic development, especially in the last thirty years, and those nations which have liberalized economically the most have tended to outperform those which have not. Compare Puerto Rico/Cuba, North/South Korea or West/East Germany.
Developing countries, by definition, are poor. They also tend to have difficulty levying taxes. The simplest kind of tax for these countries to levy are import tariffs, which inhibit, not promote, economic development.
As a consequence, political leadership and government services tend to be underpaid. Underpaid officials, from teachers to police officers, incentivizes kickbacks and a shadow economy, rending laws moot.
It’s a difficult cycle to break out of. It can often be a chicken and egg problem.
Yes, that is why I believe that developing nations should not try to overhaul institutions, and instead focus on promoting long-term economic growth. I will explain how in later articles.
Government officials in developing are not underpaid. This is a myth. There was a famous study where an Indonesian public school doubled the salaries of its teachers in order to disincentive teacher absentism. But nothing changed. The only outcome seems to be better job satisfaction (wonder why). Similar trend in India where public school teachers are paid 4-5x more than private school teachers while still having rampent absentism.
The problem with developing countries is that the governments create public sector jobs where you are not punished for failure. They're full of people who are too lazy for a blue collar job but too stupid for a white collar job.
I read her first book "The Bourgeois Virtues: Ethics for an Age of Commerce" but I found it too philosophical for my taste.
In the future, I plan to write a critique of other theories of progress including McCloskey's.
In general, I think McCloskey does an excellent job of critiquing other theories and showing where they go wrong. I do not find her Ideas argument persuasive.
In general, I am a materialist, and I think that the causes of progress exist in the material world. Ideas matter, but they are the little ideas of a specific entrepreneur or engineer, not the Big Ideas of philosophers.
I do believe, however, that everyone who is interested in human material progress should come to terms with her views.
Yes, I sympathize with that sentiment. Out of curiosity, since you've also revealed here that you are a materialist, what do you make of the family unit as a predictor of growth. Do you believe there exists a connection at all between the two? Or are they detached from one another to where you could have families remain intact amongst destitute or poor economic conditions on the micro and macro level? Could paying for divorce settlements be indicative of a "broken window fallacy" where yes lawyers get paid, but had the families remained intact, then their time spent divorcing could be time spent producing more goods and services. This is a subject I take interest in and am considering writing on.
I think family structure, particularly married couple vs single-parent is very important for individual upward mobility. I am skeptical that it matters so much in creating economic growth in the past.
Most single families are caused by not getting married, not divorce. I don’t know much about divorce law and it is off topic.
The family unit is the biggest predictor of growth. At the end of the day culture is destiny. The thing you should be looking for isn't necessarily divorce rates (which are low in the developing world to begin with) but kinship intensity. More kinship intensity means more corruption and nepotism.
It appears that some of us have the difficult task of unlearning what we thought was true before we can gain an understanding of a more nuanced reality.
Thanks for the challenges to our past prejudices, as if forces us to think more deeply than we might otherwise be inclined to do. Sometimes it also takes multiple exposures for new views or insights to finally find a solid neuronic home.
[As a student we had opportunities via homework and class discussions and testing to gain multiple views of the material under study. But as busy adults we think we can just read the material once and fully absorb it - and that is not true - at least for me.]
The commercial societies of Northern Europe which you champion did not excel via their RESTRICTIONS and INTERFERENCES with trade and property rights, nor did they stand out for their capricious rules, top down master planning and privilege. Certainly they weren’t what a modern day liberal would consider an icon, but they were better at property rights, free markets, limited interference and open competition than the alternatives of that time. Commercial societies were simply better at these than the vast majority of societies in history.
You then go on to state that these are all fine and good ideas, just that they are not the initial key steps, and/or that they might be good but need to be placed in the proper order (or something). But since the commercial societies did indeed stand out on these dimensions, then your argument seems weak.
To the extent that they are good ideas and don’t interfere with economic prosperity, and almost certainly help it, then the economic school stressing proper institutions does seem to be barking up the right tree.
And to the extent that these are indeed later/subsequent institutional fixes, then I still don’t get your argument against these. Places like Mexico, Costa Rica, Vietnam, India and Greece have living standards way above what the US and Britain had in the 19thC. If getting these, as you argue, was a later effect, then these are stilled called for, even using your logic.
In summary,
1) These are good ideas
2) They are good regardless of timing
3) They are, if anything, overdue in the developing world
4) They will help promote prosperity and reduce exploitation
Now, I would certainly agree that these institutions are not adequate for prosperity. Places like China even shows that they may not be necessary. But they are essential recommendations for liberal progress.
Sorry, but I do not understand what you are trying to say.
My argument has consistently been that Commercial societies prospered because they achieved four of the Five Keys to Progress.
And I see little evidence that Mexico, Costa Rica, Vietnam, India and Greece reshaped their Institutions according to what the Economists and Institutionalists wanted.
The title of your post is that economists are giving bad advice that should be ignored. But it is excellent advice. It should not be ignored. Mexico and the others should listen to this advice, and it will likely help them improve the prosperity of their people.
Furthermore, these same concepts contributed to why commercial societies prospered in history (relative to societies which did not protect property rights, or which debased the currency or which prohibited open entry and exit, etc etc.)
In your first comment, you said that Mexico already enjoys high standard of living. You seem to be assuming it is because they followed the advice of institutional reform. But in your second comment, you seem to imply that Mexico has not reformed their institutions.
So has Mexico followed their advice by overhauling its institutions or not? If yes, then what specific institution has been overhauled?
You seem to be looking at the results and then assuming that institutional reform previously took place without looking for evidence.
What I was trying to say was that this list of countries have higher standards of living today than your commercial societies did centuries ago. This is to address your comment that the economists ideas are good, but only if subsequent to the kick-starting of progress. In other words, they already have a kick start when judged against places like Amsterdam 400 years ago.
If these are good ideas, as you specifically state, then they are probably good for developing and mid tier countries.
I need to ask you. Why don’t you think these are good ideas? Or are you just saying they are good but incomplete/inadequate/ambiguous? Please clarify for those of us who might be confused.
I think it is important to conceptually separate “what is good” from “the causes of human material progress.” I am focused on the latter.
There are many things that are inherently good that do not lead to a society transitioning from poverty to progress - science, low corruption, education, democracy, freedom, love, family, friendship. Developing nations need to focus on promoting long-term economic growth.
By the way, I think this discussion shows the benefits of having a very focused definition of progress. Very broad definitions of progress, such as “human flourishing” lead to unfocused efforts that lead to tepid results.
Developing nations need to focus their resources rather than trying to promote everything good.
I have been pretty clear that the reason openness to international markets, property rights, stable currency, sound financial practices, openness to competition, and so on are good is in great part because they lead to and promote economic growth and that the absence of these things and other things liberal economists have been promoting for the last 75 years leads to stagnation. Thus per your definition, these recommendations promote progress.
We can argue another time on the immense value to economic prosperity of science, education and the suppression of corruption and exploitation. For now, let’s stick to the current topic. I am saying that if you don’t think property rights, setting prices based upon supply and demand, allowing constructive and open competition, stable currencies and the other things liberal economists have been promoting are conducive to economic prosperity/progress then we are in complete disagreement.
This school gives a vision, not concrete actionable advice for leaders of developing nations.
Please reread the section entitled “What would you do?” and then add a link to a document with very specific action items in temporal order that Mexico can execute.
I seriously doubt that it exists, and this after 75 years of development economists giving advice.
What is wrong with providing the leaders and people within a nation a vision or goal state? I am no expert on Mexico (or any of these), and would be skeptical of the advice any outsider who suggested he was one. But laying out the value of more international trade, more open markets, easier entry, less interference with prices and wages, a more stable currency, more transparent financial organizations and so on is probably good advice (tell me if you disagree).
If the key players in that nation (Mexico or whatever) can see the value in the goal, then they can begin the long and messy trial and error process of improving their institutions and organizations. The lack of top down central command and step by step chronology isn’t a weakness, it is a recognition of how complex the change process is going to be.
I disagree.
Visions do not achieve results. Development economists have had 75 years to define a concrete plan of action, and have failed to do so.
It is like saying the goal is to “end poverty” or “stop climate change.” It is far too vague to accomplish anything.
Today virtually all leaders of developing nations recognize the value of being as wealthy as Western nations. They don’t need a goal.
And “recognizing how complex the change process is going to be” does not help. Leaders of developing nations already know that.
And developing nations have already been in a “long and messy trial and error process” for 75 years.
There are an infinite number of ways to get from Seattle to Miami, but the most important step is setting it as the desired destination. Economists, international organizations (such as IMF and the EU) have spent 75 years preaching the value of international markets, stable currency, open competition, property rights and so on. In addition, the economic success of liberal economies has set their policies and institutions as a goal for other to emulate, which they have tried to do to varying success. The role of the economists’ advice is to make this more actionable and concrete.
And during the last 75 years, we have seen more economic growth than the entire prior history of humanity. Places such as Germany, Japan, Korea, Singapore, Scandinavia, Southern Europe, Hong Kong, Taiwan and so on have seen amazing economic growth and in all of these they are ,according to your definition, more "progressive" than the US or GB at turn of 20thC. Even in the developing countries, we have seen amazing progress in economic development, especially in the last thirty years, and those nations which have liberalized economically the most have tended to outperform those which have not. Compare Puerto Rico/Cuba, North/South Korea or West/East Germany.
Developing countries, by definition, are poor. They also tend to have difficulty levying taxes. The simplest kind of tax for these countries to levy are import tariffs, which inhibit, not promote, economic development.
As a consequence, political leadership and government services tend to be underpaid. Underpaid officials, from teachers to police officers, incentivizes kickbacks and a shadow economy, rending laws moot.
It’s a difficult cycle to break out of. It can often be a chicken and egg problem.
Yes, that is why I believe that developing nations should not try to overhaul institutions, and instead focus on promoting long-term economic growth. I will explain how in later articles.
Government officials in developing are not underpaid. This is a myth. There was a famous study where an Indonesian public school doubled the salaries of its teachers in order to disincentive teacher absentism. But nothing changed. The only outcome seems to be better job satisfaction (wonder why). Similar trend in India where public school teachers are paid 4-5x more than private school teachers while still having rampent absentism.
The problem with developing countries is that the governments create public sector jobs where you are not punished for failure. They're full of people who are too lazy for a blue collar job but too stupid for a white collar job.
Great read, also have you found worthwhile Diedre McCloskey’s work on the role of ideas? I’d like to know your thoughts.
Yes, I have read much of her work. I also have summaries of what I think are her two best in my library of online book summaries:
https://techratchet.com/2020/05/18/book-summary-bourgeois-dignity-why-economics-cant-explain-the-modern-world-by-deirdre-mccloskey/
https://techratchet.com/2020/05/19/book-summary-bourgeois-equality-how-ideas-not-capital-or-institutions-enriched-the-world-by-deirdre-mccloskey/
I read her first book "The Bourgeois Virtues: Ethics for an Age of Commerce" but I found it too philosophical for my taste.
In the future, I plan to write a critique of other theories of progress including McCloskey's.
In general, I think McCloskey does an excellent job of critiquing other theories and showing where they go wrong. I do not find her Ideas argument persuasive.
In general, I am a materialist, and I think that the causes of progress exist in the material world. Ideas matter, but they are the little ideas of a specific entrepreneur or engineer, not the Big Ideas of philosophers.
I do believe, however, that everyone who is interested in human material progress should come to terms with her views.
Yes, I sympathize with that sentiment. Out of curiosity, since you've also revealed here that you are a materialist, what do you make of the family unit as a predictor of growth. Do you believe there exists a connection at all between the two? Or are they detached from one another to where you could have families remain intact amongst destitute or poor economic conditions on the micro and macro level? Could paying for divorce settlements be indicative of a "broken window fallacy" where yes lawyers get paid, but had the families remained intact, then their time spent divorcing could be time spent producing more goods and services. This is a subject I take interest in and am considering writing on.
I think family structure, particularly married couple vs single-parent is very important for individual upward mobility. I am skeptical that it matters so much in creating economic growth in the past.
Most single families are caused by not getting married, not divorce. I don’t know much about divorce law and it is off topic.
Well the current divorce laws are the reason a lot of men don't want to get married.
The family unit is the biggest predictor of growth. At the end of the day culture is destiny. The thing you should be looking for isn't necessarily divorce rates (which are low in the developing world to begin with) but kinship intensity. More kinship intensity means more corruption and nepotism.
It appears that some of us have the difficult task of unlearning what we thought was true before we can gain an understanding of a more nuanced reality.
Thanks for the challenges to our past prejudices, as if forces us to think more deeply than we might otherwise be inclined to do. Sometimes it also takes multiple exposures for new views or insights to finally find a solid neuronic home.
[As a student we had opportunities via homework and class discussions and testing to gain multiple views of the material under study. But as busy adults we think we can just read the material once and fully absorb it - and that is not true - at least for me.]