Tuesday, March 14, 2006

I want this badly.

Paul Krugman once wrote:
When I was young and naive, I used to imagine that my career as an economist could eventually branch out into one as a general social scientist. And I still love to read and think about the broader questions - a book like Jared Diamond's Guns, Germs, and Steel can keep me happy as a clam for weeks. But the clarity and power of economic analysis can spoil you: once you have a taste of what it means to have a really insightful model, you tend to be inhibited about looser speculations.

The truth is that other social sciences are still waiting for their Adam Smiths. Someday they will find them; as Colin McEvedy wrote in his introduction to the Penguin Atlas of Ancient History, "History being a branch of the biological sciences, its ultimate expression must be mathematical." But for the meantime I guess that I am stuck with my day job.
Well, now we have Economic Origins of Dictatorship and Democracy by Daron Acemoglu and James A. Robinson. Tim Harford reviews it for FT:
With these four cases, Daron Acemoglu of the Massachusetts Institute of Technology and James Robinson of Harvard begin an ambitious attempt to explain the different paths that democracies and non-democracies can take when viewed in retrospect: steady progress as in Britain; oscillation in Argentina; stable, high-performance dictatorship in Singapore or the repressive apartheid regime. What they produce is an abstract model that will infuriate historians but deserves their attention.


Acemoglu and Robinson model the struggle for democracy as a piece of game theory - a strategic contest between a small number of players. Social classes are collapsed into individuals: the basic model is a two-player struggle between the “elite” player and the “citizens” player. The players are rational, foresighted, take each other’s responses into account and are motivated by economic interest rather than ideology.

Game theory is an ostentatiously spartan tool for analysing mass historical movements. Intra-group conflicts and distinctions between different types of democracy are swept aside.

Acemoglu and Robinson know they are simplifying aggressively: they often use the phrase “Occam’s Razor”, meaning that by shaving away superficial historical details, they will expose the underlying structure of the emergence of democracy. I think it’s worth suspending disbelief to see where the model goes - but historians and political scientists may be less patient with its reductionism.


Acemoglu and Robinson argue that for the elites as well as the FBI, the answer to this dilemma is to give up the kid. That is, the elites can irrevocably hand over some power to the masses by creating democratic institutions. By doing so they dissipate the threat of revolution and keep some power for themselves, too. The concession is more credible than offering a change in policy (such as bigger welfare payments or lower taxes) because policies are easily changed but democratic institutions are not easily disbanded. Because the concession is more credible, it is also more effective: by making such concessions the elites avoid revolution.
Also see Econoclasm's comments on the book (scroll down a bit.) I had some opportunity to see Acemoglu in action this summer at a number of applied micro seminars and he was brilliant. I expect that this book will be as well. Things like this are why I am getting into economics...


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