A short reading list for development economists and practitioners

Below is a list of books I am currently reading and that I think most development economists (and anyone interested in development) would benefit from reading. The reading list is America-centric and provides a mix of economic history and the history of governance in the US.

Let’s make this a year in which development economists and practitioners read more economic history.

  1. The Tycoons: Charles Morris’ book outlines American economic history from the perspective of four of the country’s most celebrated businessmen: Jay Gould, John D. Rockefeller, Andrew Carnegie and J. P. Morgan. You think corruption is bad for development? Can industrial policy help poor countries overcome the poverty trap? And how exactly do countries become rich? These are some of the questions that are implicitly addressed in this rather easy to read book.
  2. FDR by Jean Edward Smith: If America ever had a developmental president, it was FDR. His big push to help regular folk with the New Deal and other government programs took water and electricity to many corners of America that had previously been forgotten by mainstream politics. The story of American development is a caution agains the prevailing fascination in the development community with small-scale pro-poor initiatives that largely sidestep the state. Development is political (because it creates relative distributional winners and losers) and those who ignore this fact will always fail.
  3. The Search For Order, 1877-1920: Want to know more about how America became modern? This book provides a glimpse of the period in American history between the era when robber barons ran the show and when formal institutional arrangements became commonplace in business and government alike. The book provides an excellent account of the dynamics of institutional development both in the public and private sectors.
  4. The Evolution of American Legislatures: Want to know how US State Legislatures have evolved from the colonial times to the present? The you must read Squire’s book. I loved reading this book [yes, because I study African legislatures myself] precisely because it gives a detailed account of the very undemocratic origins of the democratic institution of the legislature(s) that we associate with modern United States. The book is a caution to institutionalists who peddle the false idea that good institutions are born good and stable. The lesson from American history is that it is all about how checks are enforced, and that sometimes to guarantee enforcement you might need to limit political participation and choice.
  5. Abraham Lincoln by Lord Charnwood: I now live in the land of Lincoln and so this was a must read for me. The big development lesson from this book is that civil wars are complex and that sometimes nations ought to be left to recover autonomously. Just imagine how the history of the US would have played out if the UN already existed (and at the time dominated by the UK, France, and Germany) and had sent in peacekeepers right after the Confederates seceded…. The book is also a nod to the Great Man theory by showing us how Lincoln’s personal life and conviction played a big role in determining the course of US history.
  6. 1913 The Eve of War: This is a random addition to the list, I know. But I added it to remind readers that things can always go wrong in the international system, with grave consequences for the entire global community. The book is also a good lesson on how Great Powers can sometimes be forced into conflict even when they would prefer not to fight.
  7. The Great Escape: I know I am late to the game on this one but Angus Deaton’s book (which got glowing reviews in the Fall) is a great account of the public health advances of the of the last century in both the developed and developing worlds. The book also reminds us that economic inequality is not always a bad thing, as long as everyone’s living condition is improving – which he says has been the case for much of the last century. Also, Deaton reminds us that aid is not the panacea to underdeveloped and that it might actually lead to more harm than good. But the solution he runs to – good governance – is equally problematic. 21st century good governance means zero tolerance on corruption, crony capitalism, and state capture by the business elite. Yet if you read the books above, you realize that because of the political risks involved in poor (or less institutionalized) countries, sometimes the habits associated with bad governance are the only means available for incentivizing investment. The point here is not that we should neglect the fight against bad governance, just that “Governance” shouldn’t be the only consideration when thinking of factors that retard economic growth. Just imagine how the Transparency International report on corruption in the US circa 1920 would have read like.

The decline of Economic History at MIT

What is the cost of not having economic history at MIT? It can be seen in Acemoglu and Robinson, Why Nations Fail (2012). This is a deservedly successful popular book, making a simple and strong point that the authors made originally at the professional level over a decade before (Acemoglu, Johnson and Robinson, 2001). They assert that countries can be “ruled by a narrow elite that have [sic] organized society for their own benefit at the expense of the vast mass of people” or can have “a revolution that transformed the politics and thus the economics of the nation … to expand their economic opportunities (Acemoglu and Robinson, 2012, pp. 3-4).”

The book is not however good economic history. It is an example of Whig history in which good policies make for progress and bad policies preclude it. Only transitions from bad to good are considered in this colorful but still monotonic story. The clear implication is that if countries can copy the policies of English-speaking countries, they will prosper. No consideration is given to Britain’s economic problems over the past half-century or of Australia’s relative decline for a century.

That is Peter Temin writing about the story of Economic History at MIT in the 20th century. For more click here (H/T Greg Mankiw).

Also, to be honest, one of the reasons I am into development (and the politics around it) is because of my fascination with economic history. I wish more development practitioners and theorists alike cared a little bit more about economic history. At the very least, looking at how things really actually worked out in the past serves to temper the urge to completely fall for the latest fad within the development industry. 

Rational Impatience and marshmallows (and development)

Back in 1972 Stanford psychologist Walter Mischel conducted experiments in which he claimed to show a correlation between patience and later success in life – in the experiment kids who could wait for 15 minutes before getting two marshmallows, instead of eating one immediately, were likely to be more successful and self-controlled later in life. Michel attributed patience and self-control to some of the kids’ innate capacities.

It turns out that that might not be the case after all. Researchers in Rochester revisited the experiment and show that kids’ choices over whether to wait or not are “moderated by beliefs about environmental reliability,” in other words, kids react rationally to the proposed deal based on prior experience.

According to Celeste Kidd (more on this here), a University of Rochester grad student and lead author on the study:

“Being able to delay gratification — in this case to wait 15 difficult minutes to earn a second marshmallow — not only reflects a child’s capacity for self-control, it also reflects their belief about the practicality of waiting,”

Adding that:

“Delaying gratification is only the rational choice if the child believes a second marshmallow is likely to be delivered after a reasonably short delay.”

This reminded me of the interesting works in economic history (gated, sorry) that try to tackle issues of culture and socialization and their role in economic development. The punchline from these works is that group-specific socio-cultural values have long-lasting effects on attitudes towards investment, saving, entrepreneurship and ultimately economic development (Think of the fabled frugality and self-discipline of Weber’s protestants). Putting some of the critiques of these works aside for a moment, they are a reminder of just how COMPLEX development is.

Because material conditions both shape and are a result of prevailing cultural norms and practices (both Marx and Weber were right!) it becomes difficult to change one thing while ignoring the other (And this is even before you open the pandora’s box, viz: POLITICS). To put it simply, you cannot increase the investment rate in a society simply by throwing money at people. They will spend it on a new shrine for their god or marry a third wife.

This is not to say that it is impossible to transform entire societies in a short while, just that it is not easy, and that we should be humble enough to accept this fact when thinking about how to promote economic development in the bottom billion societies of the world.

economic history… and some people’s lived experience

I am currently doing some research on the economic history of medieval Europe and came across an interesting quote from one Francesco Guicciar commenting on 16th century Spain:

... poverty is great here, and I believe it is due not so much to the quality of the country as to the nature of the Spaniards, who do not exert themselves; they rather send to other nations the raw materials which grow in their Kingdom only to buy them back manufactured by others, as in the case of wool and silk which they sell to others in order to buy them back from them as cloths of silk and wool

The quote reminded me of the thoughts I have whenever I buy Nescafe in Kenyan supermarkets or read about Nigeria importing refined petroleum products.