"That’s right: there’s huge columns of countries with basically identical settler mortality figures. And this is kinda sus, so an expert looked at it and concluded the data is pretty bad and that, using better data, the relationship only holds for the US, Canada, Australia, and New Zealand."
(The expert cited is: Albouy, David Y. 2012. "The Colonial Origins of Comparative Development: An Empirical Investigation: Comment." American Economic Review, 102 (6): 3059-76.)
Acemoglu, Johnson, and Robinson (2001) established that economic institutions today are correlated with expected mortality of European colonialists. David Albouy argues this relationship is not robust. He drops all data from Latin America and much of the data from Africa, making up almost 60 percent of our sample, despite much information on the mortality of Europeans in those places during the colonial period. He also includes a "campaign" dummy that is coded inconsistently; even modest corrections undermine his claims. We also show that limiting the effect of outliers strengthens our results, making them robust to even extreme versions of Albouy's critiques.
I don't say with this that AJR are right in every aspect, but I think that they are not as bad as Albouy (2012) makes them look.
Interesting post. My critique of WNF is that a better version was written about 239 years earlier by Adam Smith. Of course, people who haven’t actually read Wealth of Nations think Smith just says free markets are why nations are rich. But I read Smith as pointing to institutions, not just trade and specialization (which are certainly part of the equation, but not the whole deal).
Maia, you got a point and your observation is correct but the book actually answers the assertion "Why Nations Fail". Remember it is not answering "Why Nations Succeed" which has many paths. It is possible to have inclusive institutions under dictatorship and that's where I think the book makes an error in not admitting. By the way, Simon is my professor so I have had my arguments
The mix of capitalism, average national iq and the absence of bad events like civil war or climate disasters seem like much better variables to explain why some nations are successes or failures than some complicated institution thing.
Anyway, as an Argentinan economist, what is your opinion of lord Milei?
That was a huge oversimplification. Most poor countries are capitalists, national average IQ was itself determined by poverty (and hereditary IQ itself is a bad explanation of wealth inequality, i.e in case of Eastern Europe) and national disasters rarely affected anything in the grand scheme of things. Obv all of this justification is post-hoc, and is invented mostly by rich countries to justify their wealth like how nobles justified their status in social hierarchy
The point was to have a simplification that works pretty well. Just use the variables I have introduced, assuming IQ is approximately something like East Asian>white/some other Asians >Middle east/Latino>black. It would explain what is going on in the world pretty well. Easter Europe sucks because of communist past, slightly lower iq than Western Europe+getting brain drained today. Chili did better than the rest of South America due to their free market and throwing their communist activist students in the ocean from helicopters. East Asian countries develop at an incredible speed once they stop killing each other in wars and stop (or reduce) their communism.
Relax, I am not an anarcho-capitalist, just a smart guy. If only larger governments was always correlated with better protection of property and crime reduction, better education and stronger armies, then it getting a larger state would be cool. However, it is not the case. Most governments in the world are definitely in the « too large » territory
For anyone interested, here is AJR's reply to Albouy's critique: https://www.nber.org/system/files/working_papers/w16966/w16966.pdf
Good post. I just want to add that when you say:
"That’s right: there’s huge columns of countries with basically identical settler mortality figures. And this is kinda sus, so an expert looked at it and concluded the data is pretty bad and that, using better data, the relationship only holds for the US, Canada, Australia, and New Zealand."
(The expert cited is: Albouy, David Y. 2012. "The Colonial Origins of Comparative Development: An Empirical Investigation: Comment." American Economic Review, 102 (6): 3059-76.)
But there is also a response from Acemoglu, Johnson and Robinson (available at: https://www.aeaweb.org/articles?id=10.1257/aer.102.6.3077). The abstract of that reply paper:
Acemoglu, Johnson, and Robinson (2001) established that economic institutions today are correlated with expected mortality of European colonialists. David Albouy argues this relationship is not robust. He drops all data from Latin America and much of the data from Africa, making up almost 60 percent of our sample, despite much information on the mortality of Europeans in those places during the colonial period. He also includes a "campaign" dummy that is coded inconsistently; even modest corrections undermine his claims. We also show that limiting the effect of outliers strengthens our results, making them robust to even extreme versions of Albouy's critiques.
I don't say with this that AJR are right in every aspect, but I think that they are not as bad as Albouy (2012) makes them look.
Interesting post. My critique of WNF is that a better version was written about 239 years earlier by Adam Smith. Of course, people who haven’t actually read Wealth of Nations think Smith just says free markets are why nations are rich. But I read Smith as pointing to institutions, not just trade and specialization (which are certainly part of the equation, but not the whole deal).
Maia, you got a point and your observation is correct but the book actually answers the assertion "Why Nations Fail". Remember it is not answering "Why Nations Succeed" which has many paths. It is possible to have inclusive institutions under dictatorship and that's where I think the book makes an error in not admitting. By the way, Simon is my professor so I have had my arguments
Dictator's Handbook > Why Nations Fail. Institution quality is downstream from selectorate composition.
The mix of capitalism, average national iq and the absence of bad events like civil war or climate disasters seem like much better variables to explain why some nations are successes or failures than some complicated institution thing.
Anyway, as an Argentinan economist, what is your opinion of lord Milei?
That was a huge oversimplification. Most poor countries are capitalists, national average IQ was itself determined by poverty (and hereditary IQ itself is a bad explanation of wealth inequality, i.e in case of Eastern Europe) and national disasters rarely affected anything in the grand scheme of things. Obv all of this justification is post-hoc, and is invented mostly by rich countries to justify their wealth like how nobles justified their status in social hierarchy
The point was to have a simplification that works pretty well. Just use the variables I have introduced, assuming IQ is approximately something like East Asian>white/some other Asians >Middle east/Latino>black. It would explain what is going on in the world pretty well. Easter Europe sucks because of communist past, slightly lower iq than Western Europe+getting brain drained today. Chili did better than the rest of South America due to their free market and throwing their communist activist students in the ocean from helicopters. East Asian countries develop at an incredible speed once they stop killing each other in wars and stop (or reduce) their communism.
How can you have capitalism without property rights? How can you have an average national IQ without public education guaranteed to all kids?
How can you prevent climate disasters without considerable investment in resiliency and preparedness?
How can you prevent civil war without a centralized state with a “monopoly on violence”
Relax, I am not an anarcho-capitalist, just a smart guy. If only larger governments was always correlated with better protection of property and crime reduction, better education and stronger armies, then it getting a larger state would be cool. However, it is not the case. Most governments in the world are definitely in the « too large » territory
Interesting to read this after the 2024 Nobel Prize awards :-)
https://www.economist.com/finance-and-economics/2024/10/14/an-economics-nobel-for-work-on-why-nations-succeed-and-fail
Some of the colonial terms can be so triggering. 🙁 age of discovery hmm🤮
This is more or less my impression as well. Violence and Social Orders is much better