Institutions v. Nature

Jared Diamond, author of Guns, Germs, and Steel (amongst other books), reviews Daron Acemoglu’s and James Robinson’s Why Nations Fail.  The latter two authors are, of course, skeptical of Diamond’s own theory of national inequality, which — (too?) broadly put — explains this phenomenon as originating from several geographic factors, including those considered in the review.  These academics are truly giants in their field, and Diamond’s review is well worth reading.  Much of it is convincing, but there are areas where I think he is less of an economist than he should be.

For instance, Diamond argues that there is evidence which shows an undeniable correlation between today’s poverty and geographic location.  Specifically, the world’s — per capita — poorest nations are located in tropical belts sandwiched by temperate regions to the north and south.  These tropical countries are characterized by widespread disease, such as malaria, and poor soil.  These traits may be helpful in explaining why these societies, on their own, have not been able to develop strong inclusive institutions that stimulate (or, maybe more accurately, allow for) economic growth.

Yet, an economist knows that one of the great advantages of globalization — growing and strengthening international trade — is the increasing availability of economic goods (and ideas).  Theoretically at least, it should have become easier for these societies to import the bulk of their food, allowing them focus on producing goods that are exchangeable on international markets.  Other goods (that should be) available on the market are means of combating and treating malaria, which ought to at least mitigate the crippling problem of disease.  This is one question that cannot be entirely answered by looking at geography, even considering Diamond’s point about the dilemma burdened by landlocked nations (Switzerland, after all, is landlocked, and so is much of the United States).  Overtime, the division of labor helps overcome these obstacles, yet it has been incredibly slow in making headway in certain countries.

Nor do I think that Diamond’s correlation between the length of history of government and inclusive institutions convincingly suggests causation.  I tend to agree more with Acemoglu and Robinson that much of it has to do with chance.  The latter story helps explain why England, but not Spain.  In other words, there are specific historical circumstances which gave rise to inclusive governments over certain societies.  With regards to the developing world, Diamond touches on them a bit: colonialism did much to inspire extractive governments, especially where colonial governments were especially repressive and brutal.  I think much of it also has to do with race.  The United States, for instance, was a country of Englishmen, which helps explains differences in treatment when compared to Africa and India.  This also helps explain why countries with denser native populations tended to be ruled by extractive colonial governments: large-scale English migration targeted sparser regions, since these provided an opportunity for English-dominated societies.

However, Diamond’s emphasis on a historical explanation of modern institutions, I think, is the right way to go.  It is just that his own history is too ‘geography-centered.’  Perhaps what we need is a mixture between Diamond and Acemoglu–Robinson.  Also, I am not convinced of Acemoglu’s and Robinson’s assertion that the geography-theory explains much less than most think it does.  While it is true that perhaps Diamond stretches it a bit too far, it nevertheless helps explain initial inequities.  It is just that a growing division of labor should be able to surpass these initial obstacles — after all, this is exactly what we have seen the division of labor do throughout history.  Finally, I also see a lot of merit in Diamond’s argument that depletion of natural resources has much to do with continued poverty, but it has to be complimented by an Acemoglu–Robinson ‘institution’ theory.

We should not only look at factors within these societies, though.  How the developing world overcomes its problems is affected by exogenous factors, especially the conduct of foreign nations.  Two examples,

  1. How do regulations which shape the pharmaceutical industries in the developed world (i.e. those which, to a large extent, monopolizes them) affect the availability of drugs in the developing world?  How can poorer nations access them if the source governments contain the potential of their industries to supply the goods?  (This is similar to an argument that Stiglitz makes in Making Globalization Work);
  2. How do policies which control and distort — for better or for worse — food production make it more difficult (or easier) for foreign societies to import this basic necessity?

Sometimes, constraining policies in nations considered to have more “inclusive” governments disallow the division of labor to expand itself to less developed areas, handicapping natural growth.  These too ought to be considered when attempting to explain why some nations remain so poor while others so wealthy.

Jared Diamond is certainly right to argue that the poverty of nations requires a multi-causal explanation.  One problem with academics, and I have seen this elsewhere (such as migration theory), is that they too often focus on theories they have developed.  There is a vested interest in proving the viability of your story.  But all too often this leads to too strongly discouraging the adoption of alternative explanations.  Like with many other things, the “true” answer may be found by a savvy synthesizer and not necessarily a great innovator.

5 thoughts on “Institutions v. Nature

  1. MH

    “For instance, Diamond argues that there is evidence which shows an undeniable correlation between today’s poverty and geographic location. Specifically, the world’s — per capita — poorest nations are located in tropical belts sandwiched by temperate regions to the north and south.”

    Hm, well…

    Some quotes from John R. Baker (“Race”, 1974).

    “Sommerfelt, for instance, says that the differences between ‘peoples and tribes’ are due to ‘natural surroundings and history, not to innate characteristics of these peoples’. [991] This, however, is not by any means always the experience of those who have actually travelled among primitive peoples in their natural environments. Livingstone, for instance, was struck by the mental differences between members of different races living in the Kalahari Desert. The Bakalahari, a Kafrid tribe, had been forced into this environment in the remote past.
    Living ever since on the same plains with the Bushmen, subjected to the same influences of climate, enduring the same thirst, and subsisting on the same food for centuries, they seem to supply a standing proof that locality is not always sufficient of itself to account for differences in races. [676]” (p. 527)

    “It would be wrong to suppose that civilization developed wherever the environment was genial, and failed to do so where it was not. … It has been pointed out by an authority on the Maya that their culture reached is climax in that particular part of their extensive territory in which the environment was least favourable, and in reporting this fact he mentions the belief that ‘civilizations, like individuals, respond to challenge’. [1043] … The Sumerians found no Garden of Eden awaiting them in Mesopotamia and the adjoining territory at the head of the Persian Gulf, but literally made their environment out of unpromising material by constructing an elaborate system of canals for the drainage and watering of their lands. A very large number of Aztecs and members of several other Middle American tribes lived and made their gardens on artificial islands that they themselves constructed with their hands.” (p. 528)*

    See also Kalonda-Kanyama & Kodila-Tedika about the “institution” theory.

    “In each of the simple regression models, IQ explains more than one-third of the variations in the institutional quality variable: 51.8% of the variations in government effectiveness, 30.5% of the variations in voice and accountability, 30.2% of the variations in political stability; 48.5% of the variations in regulatory quality and 44.1% of the variations in rule of law. In addition, the correlation coefficients between IQ and each of the five measure of institutional quality are respectively 0.752 (p-value = 0.000) for government efficiency, 0.552 (p-value = 0.000) for voice and accountability, 0.550 (p-value = 0.000) for political stability, 0.699 (p-value = 0.000) for regulatory quality, and 0.664 (p-value = 0.000) for rule of law.”

      1. Jonathan Finegold Catalán Post author

        I see the point, but I’m not convinced of its relevance. For the historian, events are fact, but it doesn’t mean that we can’t say that had that event never occurred things would have turned out differently. True, it’s no longer the realm of history, but the fact remains that the occurrence of that event did not necessarily need to happen. Diamond’s explanation of history is deterministic, and that’s what I’m really criticizing (I’m not denying that some events can lead to others, but that over thousands of years some historical and geographic/natural traits must necessarily lead to how the world is today).

        I will have to read Oakeshott.

    1. Jonathan Finegold Catalán Post author

      I will have to read the article you link to, but I have never been convinced by IQ arguments trying to explain global inequalities. Economic relationships are enough to overcome divergences in intelligence (e.g. comparative advantage). Moreover, institutions are rarely designed by the average citizen of a society, but by a select few.

      1. Beefcake the Mighty

        “Moreover, institutions are rarely designed by the average citizen of a society, but by a select few.”

        I’m guessing the irony here is totally over your head.


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