Increasing Marginal Utility

A blog so good it violates the law of diminishing marginal utility.

those controlled experiments in development

Both Boettke & Coyne and Fukuyama today dismissed the wave of controlled experiments in the development literature as being a mere “fad,” in the context of Acemoglu and Robinson’s new book. I am somewhat annoyed by this, as I see it as finally taking the con out of econometrics, and I had to censor myself from posting something angrily earlier today about it.

But another common theme running through the reviews (and in Easterly’s review) is that these experiments don’t solve the problem of making poor nations rich. Well, of course they don’t! I have absolutely no idea why Easterly contradicts himself in his review, but for scores of pages in The White Man’s Burden, he talks about how performing these experiments will NOT make poor nations rich, but they can help the poor on specific margins.

Meanwhile, I thought the whole question of how to make them rich was thought to be a non-question because the transition to communism contradicted the imposition of liberalism from the outside. I don’t put a lot of stock into this, although I cooled a bit on it since reading Easterly (Acemoglu and Robinson might make it seem even more reasonable). But if that’s the case, the big picture question is unimportant. Either we can divine that private property and rule of law and whatever are the prerequisites to making the poor rich in such a way that they are instituted top-down, or we can’t. If we can, Sachs is back in business. If we cannot, then we go back to arguing we shouldn’t screw poor countries up anymore than they are already screwed up.

My understanding was that libertarians had taken the latter position. If that’s the case, then we shouldn’t be dismissing the experiments since they are the hope for making the lives of the poor suck a little bit less until they evolve the correct institutions/culture/whatever.

There may have been some event in the last four years in the literature I never became aware of. But I don’t know what I’m missing here. We can go back to navel-gazing and come up with a better way of econometrically distinguish human capital from good institutions, or we can do the experiments.

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