I happened to spot Why Nations Fail: The Origins of Power, Prosperity, and Poverty by Daron Acemoglu and James Robinson on a friend's bookshelf and went through it as the topic interested me.
The subtitle says "The origins of power prosperity and poverty" or where's the money, honey?
The book has nice tidbits from history. You may know most of it but you are likely to enjoy it on a lazy Sunday.
1.Book's central Theme
The book is the result of a synthesis of many years of research by Daron Acemoglu on the theory of economic growth and is a defense of New institutional economics (NIE) is an economic perspective that attempts to extend economics by focusing on the institutions (that is to say the social and legal norms and rules) that underlie economic activity and with analysis beyond earlier institutional economics and neoclassical economics
Robinson and Acemoglu see in political and economic institutions — a set of rules and enforcement mechanisms that exist in society — the main reason for differences in the economic and social development of different states, considering, that other factors (geography, climate, genetics, culture, religion, elite ignorance) are secondary.
“Why Nations Fail” is a sweeping attempt to explain the gut-wrenching poverty that leaves 1.29 billion people in the developing world struggling to live on less than $1.25 a day.
2.Book's style
The book is a racy historical account of development in various countries.
The authors claim in their response to Bill Gates's criticism that the book is targeted at laymen.
That's really a fig leaf or there was little or no understanding of target customers(readers of the book)
Laymen include peers in economics, students of economics, other professionals like engineers, managers, doctors interested in development.
A significant chunk are familiar with stuff like charts, graphs, linear regression
There's no justification for omitting nice looking charts/graphs in color. As "one graph or chart is worth thousand expert opinions and perhaps 100 pages of history"
"One Graph Is Worth a Thousand Logs" preferably all in color. The black and white maps do little to buttress their claims.
Same for omitting references.
There are some thirty pages of historical references. zero that are serious studies of development.
Lacking references of the kind required, this is what I have done is to
look at
https://economics.mit.edu/faculty/acemoglu/paper
None in economic development
https://harris.uchicago.edu/directory/james-robinson
https://scholar.harvard.edu/jrobinson/category/categories/published-paper
I had a look at
https://scholar.harvard.edu/files/jrobinson/files/cundinamarca_published.pdf
https://scholar.harvard.edu/files/jrobinson/files/apsa-cdoctober-2013.pdf
https://en.wikipedia.org/wiki/Development_economics
does not mention them in any of the theories though they are listed as Notable development economists
some more
An African Success Story Botswana.pdf
The Colonial Origins of Comparative Development: An Empirical Investigation. By DARON ACEMOGLU, SIMON JOHNSON, AND JAMES A. by D ACEMOGLU
Economic Origins of Dictatorship and Democracy Book by Daron Acemoglu and James A. Robinson
3.Assumptions of the thesis
One goalpost for all
The authors assume that per capita income tells it all. Not even the Gini Coefficient measuring inequality of income makes it into the book.
To give you an idea of how income inequality effects school Drop OutRates I have added a couple of graphs
For more details visit
Individuals don't always work to maximize their income. Some prefer to do social service or meditation or other things once minimum financial requirements are met.
So also nations may want a mix of income and security. The communist regimes prioritize security over other things. Some Buddhist nations on the Silk Road might want to stop industrialization corrupting their way of life
In my opinion, you should judge people by their performance by the targets set by them.
4.Critique
4.1 chapter wise comments
Political power grows out of the barrel of a gun sums up the Origins of Power Spanish/British/American. institutions are more a bid to retain power than any altruistic visions. Goons all over the world know this instinctively no learning required
4.2 value-free economics
The book's title Why Nations Fail begs the question --What is failure?
Failure to meet US expectations? Failure to increase income? Failure to introduce democracy? Failure to distribute poverty?
mplicit success criterion seem to be
average income in a country
health
education
Roads
Law and order
...
Out of these average income in a country seems to be the only determining factor for the Authors
4.3 Methodology
Going by the book the Authors seem to have adopted the technique of comparing two states/nations to arrive at success/failure based on qualitative analysis.
For the benefit of folks unfamiliar with Eco
Explains in laymen's language various Theories of Economic Growth and Development.
Also includes a basic understanding of economics terms like GDP, Innovation, and Invention
In an age of free terabytes, this seems to be an anachronism.
Style I would have preferred
Identify influencing factors --independent variables --This has been done
Identify goals / what is to be achieved dependent variable--seems to be single
Quantify where needed e.g corruption can now be specified by an index (never mind fidelity)
Express dependent variables in terms of the dependent variables
Arrive at the set of equations like
y1 = f1(x1,x2,x3.....xn)
y2 = f2(x1,x2,x3.....xn)
yn = f1(x1,x2,x3.....xn)
x1...xn are independent variables like geography, labor productivity, culture...
y1...yn are dependent variables like per capita income, Gini coefficient, human development indices...
functions f1...fn can be happily and arbitrarily non-linear
because solving the system of equations will be done by the computer. Fitting to data could also be done.
It appears that the Authors seem to have adopted the OLS ordinary least squares.
see https://scholar.harvard.edu/files/jrobinson/files/cundinamarca_published.pdf
Many ways can be there to club multiple outputs to one e.g by assigning weights
There does not seem to be any proof of low correlation with geography...
You can say what's the fuss all about?
Ans: A better model leads to a better understanding and hopefully predictive power.
By the way, What's a Theory without predictive power.
4.4 Data
Just as there is no information on methods, there is no information on economic data used.
The importance of data can't be overemphasized. "Garbage in Garbage out" as the computer folks say
4.5 poverty
Though the subtitle includes poverty there is no mention of any data regarding this or how it was measured in their studies (I am referring to book only)
4.6 China and Japan
But while “Chinese economic institutions are incomparably more inclusive today than three decades ago,” China is still fundamentally saddled with an extractive regime.-- why bother? talk per capita income
Chinese growth, they argue, “is based on the adoption of existing technologies and rapid investment,” not the anxiety-inducing process of creative destruction that produces lasting innovation and growth.--rubbish what about 5g/richest individuals...
5.Selected Comments Chapter wise
page 7
Nogales, Sonora prosperous part of Mexico, the income of household there is about one third that in Nogales Arizona.
Two halves of Nogales are culturally similar--1853 2012 has culture remained the same after more than a century?
The founding of Buenos Aires shows how quickly cultural changes can take place
Spanish loot plunder and generally screw indigenous people
"sau chuha marke billi hajko chali" as they say in India
go greedy for gold
19 Spanish created a web of institutions designed to exploit indigenous people
History is also written by the conquerors see
https://www.smithsonianmag.com/history/true-story-pocahontas-180962649/
p31 political instability -property rights-doubt
why no book on How nations can succeed?
Is it really true just avoid failures to succeed
patents and banking
both had equivalent institutions in earlier times. The word patent was not there but every culture Indian/Chinese had innovators guarding their secrets. Just because there were no patents you can't claim there were no innovations where did sericulture and Gunpowder come from?
egalitarian and dynamic frontier
repression and murder--what about blacks even today.
slim and master at obtaining exclusive contracts
Amparo
Thus, in the same way, that habeas corpus guarantees physical freedom, and the "habeas data" protects the right of maintaining the integrity of one's personal information, the Amparo protects other basic rights. It may therefore be invoked by any person who believes that any of his rights, implicitly or explicitly protected by the constitution, another law (or by applicable international treaties), is being violated.
the law does not apply --legal wizardry
inequality - uses only income
political institutions =>economic institutions
sum good political institutions + economic institutions
chapter 3-poverty
God sang the glory of America
Kim il sung was a dictator-how?
As usual institutions to the rescue
to do: innovations Russia, Japan, India, china
How many had exposure to enlightenment ideas and when? This is an important factor not mentioned in the book
p86
economic growth is "but also a transformative process associated with widespread creative destruction "
why were there extractive regimes in the first place?
I read the chapter thinking there would be a discussion of poverty--it looks like great institutions = no poverty
feels like they are singing the 'glory of American institutions'
10
The australian convicts were as much british as could be so it is a british extensension
291
The french revolution thus prepared not only France but much of the rest of Europe for inclusive institutions and the economic growth that these would spur.
inclusive institutions need not necessarily spur growth -it so happens because folks were waiting for the apple to fall on their head
294 all in all french armies wrought much suffering in Europe, but they also changed the lay of the land.
freedom does not come free there is always a cost number of deaths. No pain no gain.
Authors selectively talk of deaths.
295
political and economic institutions were extractive and japan was poor? really extractive = poverty these days all bosses are extractive
The Meiji restoration did the trick?
https://en.wikipedia.org/wiki/History_of_Japan#Edo_period_(1600%E2%80%931868)
During the first century of Tokugawa rule, Japan's population doubled to thirty million, mostly because of agricultural growth; the population remained stable for the rest of the period.[137] The shogunate's construction of roads, elimination of road and bridge tolls, and standardization of coinage promoted commercial expansion that also benefited the merchants and artisans of the cities.[138] City populations grew,[139] but almost ninety percent of the population continued to live in rural areas.[140] Both the inhabitants of cities and of rural communities would benefit from one of the most notable social changes of the Edo period: increased literacy and numeracy. The number of private schools greatly expanded, particularly those attached to temples and shrines, and raised literacy to thirty percent. This may have been the world's highest rate at the time[141] and drove a flourishing commercial publishing industry, which grew to produce hundreds of titles per year.[142] In the area of numeracy – approximated by an index measuring people's ability to report an exact rather than a rounded age (age-heaping method), and which level shows a strong correlation to later economic development of a country – Japan's level was comparable to that of north-west European countries, and moreover, Japan's index came close to the 100 percent mark throughout the nineteenth century. These high levels of both literacy and numeracy were part of the socio-economical foundation for Japan's strong growth rates during the following century.[143]
14-15
The commies give me the heebie-jeebies
Should tincture of iodine be the cure for all ailments? Should people running to different goal posts be treated as though they were in a race with the US of A?
Are all in the US of A Gods? Trump seems to have claimed he was one.
To what extent was the American GDP a result of black slavery? Look for it in my next blog.
rebirth of china
accompanying these authoritative, extractive political institutions were highly extractive economic institutions
429 ..need a theory "...this book has proposed such a theory...." Oversimplified and we don't know its success/failure rate
inclusive economic institutions
private property rights
inclusive economic institutions
sustained growth needs innovation? really?
theory --needs predictive power -not just explanatory in hindsight
innovation --per capita income growth --before slaves and after slaves
innovation --per capita income growth --before and after innovation
p434
It could have been the Chinese or even the Incas (colonizing)
seem to acknowledge lack of predictive power--Don't' read if you plan to improve your country's GDP-read as entertainment
unlikely to grow Colombia
Tiananmen Square protests/massacre
https://en.wikipedia.org/wiki/1989_Tiananmen_Square_protests
not more than 300 including others killed
Several people who were situated around the square that night, including former Beijing bureau chief of The Washington Post Jay Mathews[c] and CBS correspondent Richard Roth[d], reported that while they had heard sporadic gunfire, they could not find enough evidence to suggest that a massacre took place on the Square itself.
Authors claim Chinese growth can't be sustained.
Orwellian apparatus exists in us of a too as also in other so-called democratic polities
why harp on democracy US style? my daddy best is fine but other daddies are just as good
p446-7
...The Washington consensus... an incorrect perspective that fails to recognize the role of political institutions.."
450
Seva mandir why club institutions with corruption?
452
aid failed-corruption?
"lakh dukhon ka ek dava hai kyon na ajmayein "- institutions Why not the cure for a million diseases?
457
Brazilian success due to inclusive institutions?
460 --implication inclusive institutions can dump corruption?
Estonia was an erstwhile soviet state, also 21 are better than the bastion of democracy
Estonia became free from soviets in 1987
6. Other critiques
https://www.gatesnotes.com/books/why-nations-fail
Why Nations Fail is easy to read, with lots of interesting historical stories about different countries. It makes an argument that is appealingly simple: countries with “inclusive” (rather than “extractive”) political and economic institutions are the ones that succeed and survive over the long term.
Ultimately, though, the book is a major disappointment. I found the authors’ analysis vague and simplistic. Beyond their “inclusive vs. extractive” view of political and economic institutions, they largely dismiss all other factors—history and logic notwithstanding. Important terms aren’t really defined, and they never explain how a country can move to have more “inclusive” institutions.
When a book tries to use one theory to explain everything, you get illogical examples like this.
The book also overlooks the incredible period of growth and innovation in China between 800 and 1400. During this 600-year period, China had the most dynamic economy in the world and drove a huge amount of innovation, such as advanced iron smelting and shipbuilding. As several well-regarded authors have pointed out, this had nothing to do with how “inclusive” China was, and everything to do with geography, timing, and competition among empires.
--Theory of everything
https://oxfamblogs.org/fp2p/why-why-nations-fail-fails-mostly-review-of-acemoglu-and-robinsons-big-new-book/
The trouble with these grand theories is that when they coincide with your own prejudices, they feel like a flawless romp through history. But if you are uncomfortable with the numerous assumptions, explicit and implicit, you get a sense of suspicion and vertigo – it feels like you’re being conned (and the complete absence of footnotes make it harder to check the source of some of the sweeping claims). The reader is being asked to take an awful lot on trust here. And I kept hearing a phrase of Thandika Mkandawire’s in my head: ‘a theory that explains everything, explains nothing.’
The book’s biggest problem (at least for me) is the authors’ love affair with the American Dream (though not perhaps, American Reality). In their account, successful institutions bear a remarkable resemblance to America’s constitution, separation of powers, etc. That means that the China question hovers over the book throughout, and their fairly perfunctory attempt to answer it is deeply unconvincing. China is portrayed as on the wrong side of history, pursuing ‘authoritarian growth’, while trying to defy an inexorable push towards matching economic inclusion with the political equivalent.
http://whynationsfail.com/blog/2012/11/21/response-to-jeffrey-sachs.html
Right, we do not in the book. But that’s because a book for a general audience is not the right forum for presenting academic research, and we spent many years of our lives precisely on writing academic papers providing exactly the sort of evidence.(Author's reply)
But we digress. Actually, Sachs is again misrepresenting our views. First, much of the book is about the difficulty of building inclusive institutions out of the ashes of extractive ones. So the Gambia, Ecuador, and Suriname would not have been our ideal inclusive societies, perhaps they are Sachs’s. Moreover, we put a lot of emphases throughout, as we have already noted, on extractive growth in Chapters 14 and 15.
https://www.theatlantic.com/business/archive/2012/04/whats-good-and-bad-about-why-nations-fail/255484/
A candidate needs only a majority to win, and he might be able to "buy" a majority by transferring income from the population at large to a prospective majority. The taxes needed for this transfer would impair incentives and reduce society's output just as an autocrat's redistribution to himself does. Would this competition to buy votes, generate as much distortion of incentives through taxation as a rational autocracy does? That is, would a vote-buying democratic leader, like the rational autocrat, have an incentive to push tax rates to the revenue-maximizing level?
No. Though both the majority and the autocrat have an encompassing interest in the society because they control tax collections, the majority in addition earns a significant share of the market income of the society, and this gives it a more encompassing interest in the productivity of the society. The majority's interest in its market earnings induces it to redistribute less to itself than an autocrat redistributes to himself.
https://foreignpolicy.com/2013/03/12/what-bill-gates-got-wrong-about-why-nations-fail/
https://oxfamblogs.org/fp2p/
7.In conclusion I will say that it has whetted my appetite for the field of development and I will pursue some of the themes started here,.
8.References
ref https://www.washingtonpost.com/entertainment/books/book-review-why-nations-fail-by-daron-acemoglu-and-james-a-robinson/2012/04/20/gIQAcHs8VT_story.html
https://en.wikipedia.org/wiki/Why_Nations_Fail#:~:text=729065001-,Why%20Nations%20Fail%3A%20The%20Origins%20of%20Power%2C%20Prosperity%2C%20and,authors%20and%20many%20other%20scientists.
https://www.worldometers.info/gdp/gdp-per-capita/
9.Some additional information
india $7,166
china $16,842
us $59,928
Brazil $15,553 $9,881
Russia $25,763 $10,846 151%
https://en.wikipedia.org/wiki/List_of_countries_by_income_equality
https://en.wikipedia.org/wiki/Gini_coefficient#Countries_by_Gini_index
A Gini coefficient of zero expresses perfect equality, where all values are the same (for example, where everyone has the same income). A Gini coefficient of one (or 100%) expresses maximal inequality among values (e.g., for a large number of people where only one person has all the income or consumption and all others have none, the Gini coefficient will be nearly one)
India 8.6 5.5 37.8 2011 8.6 2004 35.1 2011
China 21.6 10.2 38.5 2016 21.8 2004 46.5 2016
US 18.5 9.4 41.4 2016 14.0 2014 est. 47.0 2014
Theories
https://en.wikipedia.org/wiki/Modernization_theory
https://en.wikipedia.org/wiki/Good_Economics_for_Hard_Times
Gross Domestic Product (GDP) per capita shows a country's GDP divided by its total population. The table below lists countries in the world ranked by GDP at Purchasing Power Parity (PPP) per capita, along with the Nominal GDP per capita. PPP takes into account the relative cost of living, rather than using only exchange rates, therefore providing a more accurate picture of the real differences in income.
Purchasing power parity is an economic term for measuring prices at different locations. It is based on the law of one price, which says that, if there are no transaction costs nor trade barriers for a particular good, then the price for that good should be the same at every location.[1] Ideally, a computer in New York and in Hong Kong should have the same price. If its price is 500 US dollars in New York and the same computer costs 2000 HK dollars in Hong Kong, PPP theory says the exchange rate should be 4 HK dollars for every 1 US dollar.
https://www.businesstoday.in/current/economy-politics/india-remains-3rd-largest-economy-in-purchasing-power-parity-still-way-behind-china-us/story/407776.html
India accounts for 6.7 percent, or $8,051 billion, out of the world's total of $119,547 billion of global Gross Domestic Product (GDP) in terms of PPP, a measure of relative consumer prices across countries, as against 16.4 percent in the case of China and 16.3 percent for the United States, World Bank data for the reference year 2017 show.
Human Development Index
(HDI) An index measuring
national socio-economic development,
based on combining
measures of education, health,
and adjusted real income per
capita.
2019
hdi china rank = 85 val =.761
hdi india rank = 131 val =.645
several neighbouring countries better than india
https://www.statista.com/topics/4868/agricultural-sector-in-india/
The history of agriculture in India dates back to the Indus Valley civilization era and even before that in some parts of southern India. The agriculture sector is one of the most important industries in the Indian economy, which means it is also a huge employer. Approximately 60 percent of the Indian population works in the industry, contributing about 18 percent to India's GDP. This share decreases gradually with each year, with development in other areas of the country's economy.
In a 2010 study, Melissa Dell used historical district level
data to examine the long-run impacts of the
Mita forced labor system in Peru and Bolivia, which
“required over 200 indigenous communities to send
one-seventh of their adult male population to work
in the Potosi silver and Huancavelica mercury mines
between 1573 and 1812.” Forced labor can severely
harm subjected communities. But Dell finds even
today—two centuries later—districts covered by the
Mita system have lower household consumption and
higher probability of stunting in children.
HDI
Bangladesh 133 .632--slightly lower than India
Pakistan 164 .557
https://en.wikipedia.org/wiki/Corruption_Perceptions_Index#:~:text=The%202019%20CPI%2C%20published%20in,0%20(highly%20corrupt).%22
