Daron Acemoglu on the Struggle Between State and Society (Ep. 81)

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On institutions and human capital

COWEN: As you know, there’s a famous paper by Comin, Easterly, and Gong showing there’s a reasonably high correlation between per capita income in AD 1500 and the current day, especially once you account for the movement of settlers. Is that because the quality of institutions is so stable over time, over more than 500 years? Isn’t that better explained by having the quality of human capital be more stable over time? That seems more plausible.

It’s not that the European ideas directly came. It’s the European ideas interacting with the local conditions, and often the success came from local conditions making European strategies of dominance unsuccessful.

COWEN: If we think about the USSR, which has terrible institutions for more than 70 years, an awful form of communism — it falls; there’s a bit of a collapse. Today, they seem to have a higher per capita income than you would expect a priori, if you, just as an economist, write about communism. Isn’t that mostly just because of what is now Russian, or Soviet, human capital?

On democratization and progress

COWEN: There’s another paper I’m sure you know, by Casey Mulligan and coauthors, and he even argues maybe having democracy doesn’t matter that much. It affects your political institutions, but if you adjust for demographics, that doesn’t predict your educational spending. If you look at either Chile pre- or post-Pinochet, Spain pre- or post-Franco, other than how politics works, most of the budget doesn’t change much. What do you think of that argument?

When a country democratizes, for another three or four years, it takes time for it to get out of the crisis. Then it starts a much faster growth process. It’s not going to make Nigeria turn into Switzerland, but a country that democratizes adds about 20 to 25 percent more to its GDP per capita.

And then the second thing, again, completely the opposite of what you said from Mulligan’s research — one of the most important mechanisms for that seems to be that when you democratize, you tax more, so the taxation, the budgets go up. And you spend more, especially on education and health, so the health of the population improves. Child mortality is one of the things that improves very fast. Primary and secondary enrollment improves a little bit more slowly, but it improves very steadily.

On European exceptionalism

COWEN: Just empirically, what do you think is the best underlying preexisting predictor of getting into that positive synergistic dynamic?

On Chinese exceptionalism

COWEN: And Why Nations Fail — you’re quite bearish on China. Do you still agree with that assessment?

On things under- and overrated

COWEN: Now in these conversations, we usually have a segment, underrated versus overrated. I’ll toss something out. You give your opinion. You’re free to pass. Orhan Pamuk.

Publishing in the top five journals is a good discipline because it makes sure that we don’t slack off, we don’t do shoddy research and get the credit for it. But if it becomes an obsession, it is at the cost of communicating with the rest of the world. And that’s not healthy either.

Since at the moment, all of the incentives in academia and economics depend on publishing in the top five journals, I would say somewhat overrated because we should also value people who are able to reach a broader audience, think outside the box.

On political liberty in Turkey

Now, the future of political liberty in Turkey. Are you optimistic? And what’s the path back?

This is one of the things that we try to grapple with in the book. Freedom, liberty is a process. It’s all of these various social hierarchies and restrictions on what people can do in their economic and social lives being broken down one by one, and women’s freedom is a very important element of it. And along the lines of what we are emphasizing, it’s not something that was given as a gift by men. It’s not something that naturally came just in and of itself. It was a process of political change.

People protested. They wanted more rights, they wanted more voice, and it was, even more importantly, a process of cultural norm change. Even after women got the vote in the US and Britain, for example, you wouldn’t say that women were free. There were so many norms that discriminated against them in the workplace, in the family, and what they could do in social life. And all of these had to change slowly, but it’s this process of political and social change together, and economic change follows from that.

On the Daron Acemoglu production function

COWEN: Our final segment — we call this the Daron Acemoglu production function. So how do you work? How do you and Jim Robinson collaborate? What’s your mix of talking, writing? Do you go for three-hour walks like Kahneman and Tversky did? How does it work?

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A podcast in which esteemed economist Tyler Cowen engages with today's most underrated thinkers in wide-ranging explorations of their work, the world, and everything in between. For new episodes, visit conversationswithtyler.com/episodes.

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