In the field of development economics, a growing body of literature is being contributed towards assessing a states’ capacity and its implication in long run growth economic growth. Rarely, however, do these readings use “liberty” as a primary metric.
Prominent economists Daron Acemoglu and James A. Robinson initially published a book called Why Nations Fail, summarizing their career-long work, taking on what presumably is the most fundamental question of economics: Why are some nations rich and others are poor. Their answer was simple – inclusive institutions create prosperity.
Libertarians and minarchists, after all, have found allies in the world of institutional development economics before. The very first sentence is: This book is about liberty, and how and why human societies have achieved or failed to achieve it.
Although an in-depth analysis of Hayek’s work does appear in Chapter 15, the last chapter of the work, the authors acknowledge Hayek’s concern about the emergence of a despotic state at the very beginning of the book, showing a sincere focus on libertarian-minded thinking. Yet, drawing from Hobbes’s analysis, the authors tenaciously assert the existential need for an all-encompassing Leviathan, a powerful state, as a pre-requisite for achieving liberty. Thinking of the state as a critical mechanism for economic growth is obviously counter-intuitive in a libertarian mind.
Acemoglu and Robinson summarize their two decades of technical work, both theoretical and empirical, in this book with the ambitious and laudable mission of making a simple political-economic graphic model that can be understood by non-technical readers. They keep up with their past approach via a walk-through of history covering the Greek city-state of Athens, the Roman Empire, Great Depression Era America, the Kinship network of the Tiv society in Nigeria, the Sunni-Shia conflict in Lebanon, the birth of Islam, the Militarization of Zulu society in modern South Africa, the Rose Revolution in Georgia, the Valley of Oaxaca in ancient Mexico, the formation of the Chinese State, the Dalit’s in India, the Swiss Confederation, and the Soviet Union to name only a few. They then classify the histories into three types of state-building processes – Despotic, Absent, and Shackled Leviathan to illustrate the core framework of their book – “the narrow corridor.”
The authors posit that the narrow corridor is the key condition for liberty that emerges when there is a balance between a strong state and a strong society. They describe the premise thusly:
This is the leviathan that can resolve conflict fairly, provide public services and economic opportunities, and prevent dominance, laying down the basic foundations of liberty. This is the leviathan that the people, believing that they can control it, trust and cooperate with and allow to increase its capacity.
The key problem with the narrow corridor being a pre-condition for prosperity is that it is inherently unsustainable. Unlike other state capacity growth economists, Acemoglu and Robinson include the indispensable role society plays in allowing the state to grow in the corridor. But they do not sufficiently define what society is, nor do they set forth its optimal function.
Assuming it’s the role of citizens to rein in a growing state, a review of public choice literature is a very obvious expectation. The authors expect citizens to keep on constantly running with the growing state to continue down the corridor. They describe this as the “Red Queen Effect,” a phrase typically used to describe the evolutionary process whereby animals evolve to keep up with surroundings that are themselves evolving. Public choice theorists classically assume that individual citizens, as economic and political agents, have little incentive to invest their time and effort in national political matters with any consistency.
The narrow corridor seems almost impossible to sustain in the long run. Politicians, whose livelihood is dependent on increasing the state in ways that increase their reelection chances, are bound to run faster than citizens dealing with their daily affairs. Numerous political-economic theories such as probabilistic voting theory, rational choice theory, the problem concerning external cost, and decision-making cost to individuals, all point to society’s eventual failure to sustain the author’s corridor to achieve some state capacity for freedom.
Still, the authors insist, “trust the state to acquire more powers but at the same time increase your own control over it,” which presents a nonchalant approach to understanding complex voter incentives in democratic systems.
State capacity – the other key element of the corridor, suffers from similar issues. It is loosely defined as the state’s ability to enforce laws, control violence, resolve conflicts, and provide public services. Acemoglu and Robinson spent most of the book crediting economically and democratically successful nations with high state capacity with their interpretation of the slices of history without often setting forth specific sets of institutions that generate capacity.
In their earlier academic works, the authors devised instruments to define and measure state capacity in various contexts. In one paper, the authors exploit the structure and network of Colombian municipalities to determine the roots of state capacity. A second paper studies U.S. state capacities using the presence of the post office as a proxy and its relation to innovation in the form of patent activity.
What is missing from their past academic work is a unified measure of state capacity that ties all of these revisionist historical narratives together. Otherwise, it is only a nice story, which, if taken seriously by readers unaware of public choice implications, can have a deleterious effect on the economy and civil liberty.
In Acemoglu’s previous theoretical work, he constructs an agent-based model to illustrate increased redistribution efficiency in presence of higher accountability for political actors. If this is considered past work to define the stateside of the Red Queen Effect, the social side is still largely missing.
Many libertarian enthusiasts of European history might enjoy Acemoglu and Robinson’s interpretation of Western and Northern Europe’s success in modern state-building in Chapter 6. If staying in the corridor is conditioned by the constant motion of state and society, then at the end of the fifth century, the combination of political hierarchy from the Roman Empire interpreted as state capacity, and democratically organized German tribes interpreted as a representative of society is the secret to advanced European states. Readers might conveniently forget the questionably stable centuries that followed after this particular period, about fifteen hundred years ago when reading the rest of this book.
Interpretation (of history) dependency is a core flaw in the authors’ model. And ignorance of related foundational work is almost chronic. Aside from public choice concerns, when debating Acemoglu on this book, John Nye, an expert on the topic, raised concern that classifying all deleterious norms as harmful for growth ignores previous work by Douglass North on the effect of cognitive rule (including seemingly in inegalitarian rule) on growth. When information asymmetry is present, these rules of thumb reduce inefficiency. However, if the bad norms are disproven repeatedly, they eventually are modified.
For instance, geocentric beliefs set forth by Catholic Church persisted until Copernican heliocentrism views became widely known. Acemoglu and Robinson categorize the norms concerning the Dalit caste of India as an example of economic and political freedom caged in the bad norm.
Dalit is a term used for people belonging to the lowest caste in India subject to the practice of untouchability. This was abolished in the Indian Constitution while the practice itself still persists. The authors make a reasonable assertion that arguably aligns with Hayek’s original idea – top-down reforms fail. In the book’s context, the red queen is ineffective when the state, by changing the law, improved capacity towards increased freedom, but society did not follow suit. The authors further posit that this explains why India falls behind on economic and individual freedom. This view ignores the role that norms (including the bad ones) play in reducing market inefficiency and other potential reasons why repeated disproof of untouchability, when confronted with better information, persisted.
In other words, this view makes citizens of India look like a group of unintelligible people who make choices inconsistent with basic self-interest and nonchalant about the amorality of untouchability. A deeper interpretation would be inspired by Doug North’s contribution regarding cognitive norms. An ethnographic account on this topic theorizes that urbanization of Indus Valley Civilization generated class division, or in economic terms, specialization, that might have created a social group that provided services that were deemed unclean for the sweeping and leatherworking. A primitive economy with high information asymmetry allowed this harmful norm to persist because it was efficient for some time.
Before the economic liberalization in India, this primitive specialization system still made sense due to the high entry barrier in the market. Post liberalization India displays a more optimistic picture of the economic and social status of so-called untouchables. And one only needs google to see the Red Queen running effect of Indian society voicing their disgust about this primitive practice.
While The Narrow Corridor is rich with history and engaging with provocative ideas of state-building, it is probably not wrong to say – it is too early to take an addition-subtraction approach to recreate the basket of variables that successful European states have.
Switzerland receives raving comments from the authors on their state capacity, which is fundamental to achieving freedom in authors’ view and yet ignores the basic rights to religious practice that Swiss Muslims are denied. What kind of freedom is that? When the definition of liberty is the default condition without coercion, the state is not responsible for picking a favorite between the competing ideas of liberty. But when state capacity is defined, the state decides what it is to be free. In this context, freedom meant preserving the preference of a majority of the Swiss people and taking away fundamental rights from a religious minority. As observed by Claudia Williamson in The Independent Review, “[Thier] framework assumes that once Leviathan is shackled, it gives people what they want.”
This book concerns libertarians because it promises a new approach to liberty from coveted development economists. That promise remains unfulfilled, and the approach of the book calls for caution. The term liberalism meant something different in the 19th century. Later it was stolen and now is completely unrecognizable from its origin. Libertarians need to be stubborn about the core principles before the ever-revered term freedom falls victim to the same delusion.