New at Cato Unbound: Lawrence Harrison on “Culture and Economic Development”

This month’s issue of Cato Unbound, “How Much Does Culture Matter,” asks:

What are the fundamental determinants of economic growth and development? The question is of much more than academic interest in a world where billions of people continue to live at the margins of subsistence. Yet experts’ advice to poor countries has been all over the map. During the heyday of the “Washington Consensus,” the primary emphasis was on implementing a particular menu of policy changes. More recently, economists have been placing greater stress on the role of institutions — in particular, the rule of law, protection of property rights, and other limits on government power. Less widely discussed is a more controversial proposition: culture — basic norms and values — holds the key to a country’s development prospects. The linkage between culture and economic progress was most famously explored by Weber, but in contemporary debates there has been a decided reluctance to “blame the victim” or declare that some cultures are “better” than others. In this issue we examine how much culture matters — and how culture, institutions, and policies interact and mutually influence each other to shape countries’ economic destinies.

Lawrence E. Harrison, author of The Central Liberal Truth, and co-editor, with Samuel Huntington, of Culture Matters: How Values Shape Human Progress, leads off with a rich discussion overview of studies on the effects of culture on growth around the world. Replies are on deck from UC David economist Gregory Clark, author of the forthcoming A Farewell to Alms: A Brief Economic History of the World; George Mason economist Peter J. Boettke, author of Calculation and Coordination: Essays on Socialism and Transitional Political Economy; and Harvard economist James A. Robinson, co-author, with Daron Acemoglu, of Economic Origins of Dictatorship and Democracy.

Equality Isn’t Natural

A New York Times article from the day after Thanksgiving falls into a familiar trap of assuming that equality – among people, among regions, among growth rates, etc. – is a natural condition, so that any deviation from equality is not only worthy of note but a “problem.” Reporter Ian Austen writes:

But [Canadian finance minister Jim] Flaherty did not address a much broader economic problem that has been troubling people who follow the nation’s economy. Although Canada’s economy as a whole is expected to grow by a healthy 2.8 percent this year, there is an expanding gulf between the eastern and western halves of the country.

Indeed, in the past year economic growth has been stronger in oil-rich Alberta than in industrial Ontario, the largest province. Alberta remains the wealthiest Canadian province. But Ontario is not far behind, and it’s wealthier than the other western provinces. The main point is that it would be absurd to expect Canada’s provinces to show the same growth rate each and every year. Yet the Times calls disparity in annual growth rates ”a much broader economic problem that has been troubling people.”

The reality is that nothing is equal. The world is diverse and complex. Different provinces (or states or nations) have different resource endowments, different histories, different policies. Why would we expect them to have the same outcomes, annually or otherwise? The same is true for individuals; we’re all different in infinite ways, so it’s crazy to expect us to end up with the same incomes or assets or accomplishments. And crazy to think that Harvard or the NBA or the Wal-Mart workforce would “look like America.”

Footnote: Google isn’t helping any. When I searched for the New York Times headline “In Canada’s Economic Divide, West Surges While East Struggles,” Google responded:

Did you mean: In Canada’s Economic Divide, West Surges When East Struggles  

Talking to Bad Guys, Part II

Back in July, as the war in Lebanon raged, I questioned the president’s unwillingness to deal directly with Syria and Iran on issues of mutual concern in the Middle East. The issue has resurfaced in the past few days as the Iraq Study Group is expected to recommend that the Bush administration negotiate with Iraq’s neighborsall of Iraq’s neighbors – in an attempt to rein in the escalating civil war in the country.

For now, President Bush appears firm in his opposition to direct talks with either Iran or Syria. He is encouraged in this posture by neoconservatives who believe that talking to either country is tantamount to a reward for bad behavior. A related argument is that negotiations afford respect and legitimacy to regimes that deserve neither.

I have never understood this position. Ronald Reagan, the supposed patron saint of neoconservative hawks, was never afraid to negotiate with our enemies. Indeed, his willingness to reach out, for example, to the leaders of the Soviet Union engendered considerable criticism among neoconservatives. They were equally skeptical of many of his policies in the Middle East and Asia.

As Stefan Halper and Jonathan Clarke write in their book America Alone: The Neo-Conservatives and the Global Order:

Reagan had presented the conflicts of international politics in essentially moral terms, and for this reason he looked like the president whom neo-conservatives had waited for. But as his declaratory policies gradually moved toward pragmatism, those events that seemed to be disasters in foreign policy to neo-conservatives appeared as major achievements to the moderates who were making the key decisions in the administration.

One of those moderates was James Baker. The New Republic’s Martin Peretz urges us to ”Ignore James Baker,” and AEI’s Michael Ledeen accuses Baker et al of “active appeasement.” It is easier to understand Baker’s ability to shrug off such neoconservative sniping when we recall what he learned from the master communicator and strategist. You can almost see a Reaganesque gleam in his eye when Baker explains “it’s not appeasement to talk to your enemies.”

It may be impossible to avert Iraq’s slide into full-scale civil war. But Iraq’s neighbors surely do not want to see the chaos expand over Iraq’s borders, and threaten their own peace and security. That seems reason enough to want to reach out to others in the region, including those countries we don’t like very much.

Throwing Another Foreign Policy Log on the Fire

With so many foreign policy issues dominating the news lately (Lebanon, the Gates confirmation hearings, Baker-Hamilton, the ongoing mess in Iraq, North Korea…), I wonder whether people don’t get burned out and stop wanting to hear about foreign policy.

But if you aren’t sick of hearing about the various foreign policy challenges we face, today marks the release of a new policy analysis on Iran [.pdf] authored by yours truly.  I’ll comment on the paper at our half-day conference next Monday, which hosts a whole group of prestigious Iran watchers: Michael Eisenstadt, Larry Korb, Lt. Gen. Thomas McInerney, Trita Parsi, Sanam Vakil, Flynt Leverett, and last but not least, my highly esteemed boss Ted Carpenter.

Please register to attend.

Ideology and Critical Infrastructure Protection

I recently received a pair of reports on critical infrastructure protection in the mail, and have now had a chance to read them. Both are written by Kenneth Cukier, reporter for The Economist. They are well-written, thought-provoking, balanced, and blessedly brief. They summarize a roundtable and a working group convened by an organization I had not heard of before called The Rueschlikon Conference.

One is called Protecting Our Future: Shaping Public-Private Cooperation to Secure Critical Information Infrastructures. The other is Ensuring (and Insuring?) Critical Information Infrastructure Protection. They focus on an important question: How do we make sure that the facilities of our networked economy and society survive terrorists acts and natural disasters?

I want to come back to the ‘compliment’ I gave both papers: “balanced.” The first report finds, among other things, that we should “harness the power of the private sector” and “use market forces” to protect critical information infrastructures. It notes that Wal-Mart had 66% of its stores in the region of Hurricane Katrina back in operation 48 hours after the storm. It also notes how, with electrical lines downed by Katrina, BellSouth’s backup generators had kicked in. When fuel supplies ran low, government officials confiscated the fuel being trucked in to keep them running. Yet, for reasons I cannot discern, the report maintains that “public-private cooperation” is what’s needed rather than getting the public sector out of the way.

The second report finds that the marketplace is insufficient to protect critical infrastructure because it lacks proper incentives. It also finds that the insurance industry can create a market for security. It’s got to be one or the other. The “balance” of these reports becomes more and more just contradiction.

A telling line can be found in the second report: “[O]ne person expressed skepticism that relying on the market to solve [critical information infrastructure] security would work, since it seemed to fall too neatly into the modern ideological mantra that markets solve all problems.” In other words, a conclusion in favor of market solutions was avoided because it might further validate markets as a problem solving tool.

The uncomfortable search for “balance” in these otherwise good reports may reflect an ideological preference for government involvement – despite the harm that did in the case of Hurricane Katrina.

It is insufficient, of course, to identify ideological bias (or anti-ideological bias?) in the reports. I did find them useful and interesting, and they inspired a few thoughts that I think deserve more exploration:

  1. Anti-trust law thwarts communication among companies responsible for infrastructure protection. Rather than convening so many government work-groups, the root of the problem in anti-trust law should be addressed.
  2. Government secrecy is one of the things undoubtedly keeping the insurance industry from having the confidence to insure against terrorism risk. Thus, it does not promulgate better terror-security practices among its insureds, and a valuable tool in the struggle against terrorism lies on the shop floor. Rather than subsidies, the government should give the insurance industry information.
  3. People interested in these issues should attend or watch Cato’s upcoming forum on John Mueller’s book Overblown: How Politicians and the Terrorism Industry Inflate National Security Threats, and Why We Believe Them.

Is the White House Worth More than a Wii Console?

On government radio Friday, a panel of journalists were bemoaning the high cost of politics. The two leading candidates for president in 2008 might end up spending $500 million each — a billion-dollar election, the pundits wailed in italicized outrage.

It would be nice if politicians and special interests didn’t think it was worth half a billion dollars to gain the most powerful office in the world. But it is. The president not only has the power to bomb people, invade countries, hold citizens in jail without a lawyer, burn down churches, and strongly influence policy on issues ranging from abortion to youth unemployment — all of which might cause opinionated citizens to contribute money to political campaigns — he or she also plays a huge role in allocating $2.8 trillion a year of federal spending to favored clients, not to mention tweaking government regulation to help or hurt a candidate’s friends.

In Saturday’s New York Times, lefty journalist Tom Edsall gloats over the Republican-leaning interest groups who can expect to bear the brunt of Democratic wrath:

Topping the Democratic hit list are the G.O.P.’s closest corporate allies, including the oil and gas industry, student loan companies, and the pharmaceutical manufacturers known as Big Pharma. The list is much
longer… .

In many cases, Democrats can exact reprisal against companies that financed the Republican revolution and won special legislative favors in return … with the same avoidance of public scrutiny.

A billion dollars for the presidency? Coincidentally, that’s just about what Nintendo will take in on the 4 million units of Wii it intends to sell in the last five weeks of 2006.

Genetic Engineering: The Eugenics of Tomorrow?

I received a request today to comment on the possible dangers of genetic engineering. Michael Crichton’s latest book, Next, explores some of the horrors eugenics could bring, such as the mixing of animal and human DNA. Here are some of my thoughts:

Isaac Asimov, another great science fiction writer, said, “If knowledge can create problems, it is not through ignorance that we can solve them.” 

It is impossible to estimate, let alone know, the balance of good or evil that scientific knowledge will bring. In everything humans do, they are daunted by the principle of unintended consequences, but the answer is not to stop looking for answers. The pursuit of knowledge is the only true path to improving the human condition, yet there are almost as many views on what knowledge should be pursued as there are pursuers. The answer is to proceed cautiously, allowing small steps and small corrections, so with time the truth will show itself.

The best way to ensure caution is to keep government out of the pursuit of knowledge, whether scientific or otherwise. In the private sector, endeavors are supported only by those who believe they are ethical and worthwhile. The more extreme and outlandish the idea, the less likely it is to receive support. When mistakes are made on a small scale, they have small scale effects. Governments, which are run by individuals no less fallible than the rest of humanity, are influenced by bad ideas as much as by good ones. But, unlike the individual mad scientist with a small group of supporters, government mistakes loom larger than life — its policies affect the lives of whole populations.

In the beginning of the 20th century, eugenics was touted as the answer to all of humanity’s problems. Great scientists such as Alexander Graham Bell and Carol Campbell Brigham at first supported eugenics, as did every U.S. president between 1901 and 1933. Many people all over the world worked hard both in their private lives and through government policy to implement its principles. 

Individuals had their own ideas about improving the human gene pool by marrying only superior specimens of humanity. If the eugenics movement had resulted in nothing more than discriminatory marriage practices, the word “eugenics” wouldn’t represent anything more than a silly fad. The reason eugenics has become almost synonymous with mass sterilizations and genocide is because governments got involved.

Genetic engineering may be the answer to many of humanity’s problems or it may be the next eugenics. Let’s keep government out of science and let the advances and mistakes take place in small steps so that humanity can learn from scientific successes and failures on a realistic scale. Only with government intervention do potential mishaps become disastrous tragedies.