What I’ve Been Reading

1. A Farewell to Alms – a fascinating book, by Gregory Clark, with a number of competing and slippery theses. Its main points:

– Growth is very, very hard. Most gains in living standards were wiped out through population growth – this changed only in Britain and the US starting in the late 1700s. Why this changed is the central question of economic history, and very poorly understood. Clark posits that institutions have much less to do with this than is commonly assumed and that the institutions of medieval England were actually more conducive to growth than modern highly taxed and regulated OECD countries. Overall I’d say that even with some interesting stats Clark presents the violence, uncertainty and infrastructural weaknesses of pre-18th century societies were still important constraints on growth.

– One possible reason for the shift is that the rich had many more children than the poor possibly resulting in a gain in cultural or genetic factors that made labor more efficient. A lot of doubt has been shed on this thesis.

– The Great Divergence between the rich and poor societies (which, as Clark says, has led to a 40:1 difference in living standards between the richest and poorest countries) can be explained through differences in labor efficiency. These differences have grown through time; in combination with the necessity of attention to detail that modern manufacturing demands this explains why much of Africa has been left out of the huge gains in technology and trade. When you add in Paul Collier’s explanation of the untapped labor of Asia (see below) this presents a somewhat grim picture for Africa. Still, Clark fails to present a compelling understanding of why there are these huge differences in efficiency beyond falling back on “cultural” differences.

Ultimately, a rewarding read but Clark fails to really lock down his points well and as David Henderson has said this seems overall more useful as throwing explanations into the pile than presenting a clean and novel narrative of growth.

2.  The Bottom Billion – Paul Collier’s stripped down explanation of his “empirical” work on poverty, civil war and development generally. His points are very concise and many, from an economic perspective, are intuitively correct. He identifies several traps which keep the bottom billion, as he calls the lowest tier of economies which have stagnated over the past 30 years, from making strides away from indigence. While I’d have concerns, as Will Easterly does, about the certainty that any economist can have in numbers generated through these complicated regressions and vast studies, their general trends do seem to show heavily that aid as a solution cannot be much more than a bulwark. They may indeed have staunched the wounds but they cannot foster growth. Africa, which holds most of the bottom billion, is facing traps such as untapped labor in Asia, landlockedness and many other factors which need to be addressed from the interior through education, government reform and a focus on infrastructure. Unfortunately, as with many of these books, its solutions are not nearly as convincing as its critiques.

3. When Brute Force Fails – A quick read, this book packs a logical take with intelligent takeaways. Its main points:

– We need to consider punishment not as a benefit but as a cost. Having 1% of our population jailed is an untenable situation, and a heavy weight on society.

-We are well beyond the point of diminishing returns with incarceration. A focus on quick, certain and light punishments will stigmatize criminals and also increase the perceived costs of crime.

– Structural changes, like letting schools start and end later, can affect behavior in very positive ways. This is also covered in Nudge.

-There are some massive and unexpected side effects to certain programs. Lead reduction, for example, has apparently decreased crime by, at conservative estimates, 5%. As above I’d be skeptical about these types of claims but still something to be aware of.

What’s the takeaway from these books for aid? Focus on small projects that can be scaled up. In developing countries we need to be always working on health, saving lives at the margin. Even if we can’t prompt growth we can still, with as little as $1000, save a life.

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Filed under Books, Organizational Models

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