THREAD (~50 tweets)
My potted history of institutions in macro-development thinking, at the time of the AJR intervention.
I had most of these thoughts earlier, but this week they have crystallised. I don't discuss AJR specifically, but I do have brief thoughts on their impact
My potted history of institutions in macro-development thinking, at the time of the AJR intervention.
I had most of these thoughts earlier, but this week they have crystallised. I don't discuss AJR specifically, but I do have brief thoughts on their impact
1/ Economists’ *own* sense is that AJR made institutions visible, teachable, testable, & analytically tractable. Before that, economists knew about the work of institutional economists, but it was not a central area of research. North was never terribly influential.
2/ Before the 1980s, economists doing growth & development were often area specialists & wrote country case studies with knowledge of the history & institutions of the country under study.
3/ This knowledge was visible in books & studies by the World Bank, various NBER studies of trade & development, including those country studies associated with the Third World debt crisis of the early 1980s. (Today there would be a novel dataset, a model, and some regressions)
4/ North could not influence this older group, because in the 1970s he was still talking about efficient institutions (even serfdom, cf North & Thomas 1973). When he switched gears in 1981 to INefficient institutions, his ideas were still pretty shallow & amazingly anglocentric
5/ ( If you actually read Douglass North in the 1970s and 1980s, it's not difficult to see why he wasn't influential in the economics of developing countries!! )
6/ Earlier economics Nobelists who did pre-AJR work on what today would be called 'institutions' include: Myrdal, Hayek, Simon, Schultz, Lewis, Stigler, Buchanan, Coase, North, Sen, Stiglitz, Ostrom, Oliver Williamson.
7/ Also some pre-AJR non-Nobelists:
Pranab Bardhan (agrarian institutions, super-important)
Mancur Olson (origins of states, roving v stationary bandits, collective action, interest groups)
Jagdish Bhagwati (rent-seeking)
Vishny-Shleifer (legal origins)
Pranab Bardhan (agrarian institutions, super-important)
Mancur Olson (origins of states, roving v stationary bandits, collective action, interest groups)
Jagdish Bhagwati (rent-seeking)
Vishny-Shleifer (legal origins)
8/ But not all of these ideas were relevant to developing countries. Perhaps most were not relevant. In the immediate postwar era, the most pressing institutional issues were in agriculture. That's why Schultz and Bardhan were important -- they did work on agrarian institutions
9/ There's also the fact that 1950-80 was a period of land reform across the world. Most countries accomplished or attempted land reform in this era. And, generally, the perception was that this experience was disappointing.
10/ Agrarian institutions are intensely & extremely local, complex, & heterogeneous – and very difficult to understand without really doing deep dives into some admittedly boring stuff. They are not for the faint of heart. Most non-agr. economists could not be interested by this.
( in point no 7, I could also have mentioned Udry, Fafchamps, de Janvry, Otsuka, and others, doing a lot of work on agrarian institutions pre-AJR, but were not known to most economists. But I can't name everyone! )
11/ Besides agriculture, another pressing issue that most existing institutional lit in the Northern countries did not address, included the effects of structural transformation -- what today we would call 'urbanisation without development' & the rise of the urban informal sector
12/ Developing countries did see industrialisation & struct. transformation in 1950-80, but not enough to create jobs for all the urban migrants from the countryside. Hence, the debate about the Lewis model -- why didn't the "surplus labour" he talked about get absorbed? etc.
13/ With the noted exceptions from above, most of the existing institutional ideas being discussed by North and others at the time, were not self-evidently relevant to developing countries.
14/ Which is why it’s important to mention Engermann & Sokoloff on the Americas, plus the non-economists Bates, Killick, Herbst, van de Walle, & Ferguson with important political economy work on Africa. All prior to the AJR intervention.
15/ The people in (14) will figure later because, IMO, the A&R worldview is constructed from the historical development experiences of Western Europe, Latin America, & Africa, but *not* East Asia, South Asia, Southeast Asia, or even the Middle East.
16/ During the 1980s, the aforementioned old country case study approach in development went out of favour / fashion. And in replacement, cross-country regressions became the primary vehicle of doing macro-development.
17/ The rise of cross-country regressions was partly due to the emergence of personal computers, and partly due to the construction of the Heston-Summers dataset, more famous today as the Penn World Tables.
18/ { Heston's role is ironic, because he was also arguably one of those old-fashioned development economists, in his case a specialist on India, creating yield estimates in colonial Indian agriculture. }
19/ With the rise of cross-country regressions, many people who had had NO interest in specific developing countries or specific knowledge of them, entered into development research. A big example is the macroeconomist Robert Barro.
20/ During the 1980s, macro-development started transforming into something relatively knowledge-free (in terms of specific country histories & institutions) & basically a discussion of coefficients, variables, econometric specifications, etc.
21/ I do think North was indirectly influential in this era His early fixation on the security of property rights percolated into cross-country regressions -- in the form of qualitative index variables like 'expropriation risk' and 'executive constraint'
22/ { even though such variables represented a pretty impoverished version of even North, who I think was pretty superficial before 2000. I think North after 2000 was influenced by AJR, a reciprocity, but that's a different issue }
23/ ( Later you would have other institutional variables thrown into regressions, like legal origins dummy variables, & democracy scores from Polity, and so on. )
24/ That stress on secure property rights as the primary representation of institutions can be seen in the list of 10 propositions by John Williamson in 1990 that he called the Washington Consensus. All were specific policy recommendations, except for one: secure property rights
25/
It was into THIS relatively knowledge-free, ahistorical research scene that AJR made their big splash intervention.
But there's also more to the context. From 1980-2000, you had THREE big global phenomena.
It was into THIS relatively knowledge-free, ahistorical research scene that AJR made their big splash intervention.
But there's also more to the context. From 1980-2000, you had THREE big global phenomena.
26/ (a) The "market turn". People hostile to it call it neoliberalism, but people friendly to it call it free markets. The market turn has origins in the Global North & I would argue the influence went from North to South, but economic events in the South did pave the way for it.
27/ (b) The post-communist transition in the ex-USSR & Eastern Europe. I don’t want to get diverted into this topic, which is separate from developing countries. But suffice it to say, there was a minor 'institutional' debate at the time...
28/ ...with some arguing reform first, institutions will follow; others arguing institutions would scuttle reforms, etc. At any rate, the point is, the transition experience would influence the institutional literature later
29/ (c) Crisis in the Global South. There had been industrialisation in the Gobal South in 1950-80. There is a debate about whether this petered out from nonrepeatable structral transformation & diminishing returns, or because of the failures of state-led development. But but but
30/ I don't want to be diverted into that, either. Suffice it to say, in the early 1980s, many developing countries experienced a big debt crisis, precipitated by the Volcker Shock, which itself was done to solve problems in the North.
31/ And for the next 20 years, developing countries were mired in a cycle of financial crisis & structural adjustment. These were the famous "lost decades". Precise decade depends on region: Latin America, the 1980s; Africa, perhaps 2 decades.
32/ These "lost decades" were crises generated by an inability to deal with debt & macroeconomic imbalances; which do have institutional causes in their own right. But IMO they were not necessarily issues of long-term growth & development.
33/ But there was a shift in perception. When the market turn happened, the lost decades became intrpreted as exhaustion of state-led development & in terms of "too much planning, not enough markets" framework. I don't want to debate that either. Just stating intellectual history
34/ But there was also a perception by 2000 that there had been 2 decades of the market turn, & although you had some roaring successes, overall the performance of developing countries was pretty disappointing. (Perception would change again by 2024, but that’s a different story)
36/
THIS IS THE WIDER CONTEXT OF THE AJR INTERVENTION.
ca 2000, there was developmental fatalism -- the sense, BOTH that state-led development had failed AND that the market turn was also disappointing. But the disappointing-ness of the market turn especially needed explaining.
THIS IS THE WIDER CONTEXT OF THE AJR INTERVENTION.
ca 2000, there was developmental fatalism -- the sense, BOTH that state-led development had failed AND that the market turn was also disappointing. But the disappointing-ness of the market turn especially needed explaining.
37/ Also, methodologically, cross-country regressions were being increasingly deprecated, because of the 'credibility revolution' or 'causal inference revolution' in applied micro research. This also had the effect of moving development away from 'macro' approaches to RCTs.
38/ Early AJR introduced some of the causal inference methods (the infamous settler mortality IV), but IMO this & their empirical methods in general are now overdiscussed.
Far more important is they provided a way to put developmental fatalism in context. “HISTORY MATTERS!”
Far more important is they provided a way to put developmental fatalism in context. “HISTORY MATTERS!”
39/ Why was growth even under the market turn kind of disappointing circa 2000? Well, history & institutions! But why precisely? Because colonialism ruined the institutions of developing countries. But how precisely? Because with bad institutions, markets don't work well.
40/ In other words, the brilliant AJR rhetorical maneuovre was to introduce a very plausible explanation for the (perceived) disappointing-ness of market-led development circa 2000. Colonialism was conscripted in the service of liberal development theories.
41/ Although AJR themselves, & the subsequent research inspired by them, recognise MANY kinds of institutions, their actual influence on the economics profession was to solidify the (early) Northian fixation on secure property rights & executive constraint.
42/ The fact that A&R may have a more sophisticated understanding of economic institutions is not relevant. Their strategy of persuasion had that effect. From 2000 to 2012 the year of Why Nations Fail, A&R were focused on convincing economists that power => economic institutions
43/ For expositional simplicity, their early work left economic institutions as given (unspecified), or they worked with the existing institutional variables from the cross-country regression literature that economists were familiar with.
44/ As a result, many economists take AJR primarily as licence to utter the word 'institutions' when what they mean is really secure property rights & the rule of law.
45/ IMO the triumph of AJR in development has inadvertently sidelined, East Asia from macro-development thinking. This is partly because the inclusive-extractive framework sits awkwardly with the "developmental state" model. (My earlier comments below) 
46/ And partly because of AJR's fixation on democracy, since East Asian development was not paired with democracy, for the most part. But the anti-East-Asia bias of AJR thinking of course precedes them.
47/ But in the 1990s, econs did engage in the 'East Asia model' debate, even if only to stress the market aspects of East Asia & downplay the interventionist aspects of it.
But with AJR, East Asia largely disappeared from mainstream macro development thinking (until recently)
But with AJR, East Asia largely disappeared from mainstream macro development thinking (until recently)
48/ Ironically AJR's historical orientation contributed to the anti-East-Asia bias. Although they introduced non-European history into the institutional conversation, their theory is basically built from reading about the Western European, Latin American & African experience
49/ When I look at the antecedents that I know influenced AJR, I don't see much Asian literature -- not East Asia, not Southeast Asia (with the possible exception of some Scott?), and not South Asia and not the Middle East.
50/ WNY in its bibliographic essay does mention the classic East Asian developmental state authors – Johnson, Haggard, Wade, & Amsden – but I really can’t see too much influence of that literature in much of their work – until recently, & more so in Robinson.
51/ The Western Europe-Americas-Africa orientation of AJR not only shows up in their work, but also in their citation of Marxists! They cite Brenner, Wallerstein, André Gunder Frank, Eric Williams, & Walter Rodney, but not Samir Amin or Amiya Kumar Bagchi.
END, for now, unless I think of something else I left out, or there are reactions I would comment on
BTW, no jokes about me doing history of economic thought ;-) I've always exempted history of development economics, and the history of economic history!
Erratum: Eric Williams was not a Marxist. Neither is Joseph Inikori, whom they also cite but I didn't mention.
https://x.com/pseudoerasmus/status/1847331170436206775
When I say the AJR framework is constructed from the experience of Europe/Americas/Africa, but not Asia, I do not mean their model has no application to Asia. It’s applicable to countries with high land inequality & landed elite capture of politics, Asia has such history BUT
https://twitter.com/IreneProtest/status/1847344032982212726
But the many Asian cases fit uneasily with the A&R framework because of the developmental state & the issue of democracy. And the latter is not just about authoritarian development in East Asia, but also democratic development in India.
Errata2: Yes, Tony Killick is an economist. The thing needs a bit of editing, what can I say
https://twitter.com/jeaujanres/status/1847394792025498101
Oh my God, yes! Unforgiveable, seppuku-worthy omission on my part in rattling off economists who had done work on agrarian institutions in the long pre-AJR era. Don't forget Deininger too.
https://x.com/LabricotierTr/status/1847383629011554312
Someone has criticised my thread for failing to talk about the tradition of political economy in the Global South & for exclusively talking about scholars based in the North Atlantic...
But the thread was about the intellectual history of the "institutions" concept in mainstream (alas, North-Atlantic-based) development economics up to circa 2000, because it's intended to show the context in which AJR made such a big impact on mainstream development economics !!!
It would not have made sense to talk about scholars outside of the North Atlantic mainstream. Now, I did mention AGFrank and Bagchi as someone A&R did read and someone A&R hadn't read, respectively.
( Actually, it might be interesting to do an intellectual geneology of the Acemoglu-Robinson institutional ideas, including all the Marxists they read. But that would be a very different thread. )
Demands in the comments that I should have done
— (more on) East Asia & AJR
— India in the AJR universe
— Marxist antecedents of AJR
— Liberal antecedents of AJR
— End of the Cold War & AJR
— other social sciences in AJR
— absence of Global South thinkers in AJR
🤯🙀🤕
— (more on) East Asia & AJR
— India in the AJR universe
— Marxist antecedents of AJR
— Liberal antecedents of AJR
— End of the Cold War & AJR
— other social sciences in AJR
— absence of Global South thinkers in AJR
🤯🙀🤕
@IreneProtest But the Asian case fits uneasily with the A&R framework because of the developmental state & the issue of democracy. And the latter is not just about authoritarian development in East Asia, but also democratic development in India.
@IreneProtest but in TNC, there is a recognition that society can weaken the state and society may be too weak to protect against a too powerful state. That's why they used fragmented societies, 'cage of norms', & similar concepts.
@IreneProtest And this is my interpretation of how they try to deal with democracy in India
@mgaldino I also have an interest in modernisation theory but I find that people get very emotional about it, I don’t quite understand why. Maybe because of association with Vietnam war?
I wd argue DNorth became influential outside a niche audience _as_a_result_of_AJR_. The institutional turn in mainstream development caused by AJR, induced curiosity toward other inst. literature, incl. AJR's soruces. This opened North to a wider audience.
https://x.com/carlosmontes1/status/1847638415606472938
Open/limited/etc access order concepts in North, Wallis & Weingast etc. arrived ca 2007 & I speculate this was an influence of AJR on North. To the extent AJR's inclusive/extractive thing was also influenced by North et al, then it's a reciprocal influence
https://x.com/carlosmontes1/status/1847625527365886074
@GrahamBrownlow North was far more concerned with the *origins* of prosocial, market-orientated behaviours than AJR. This is because North was obsessed with Polanyi in a way that AJR just aren't. The latter barely notice Polayni, I think.
@GrahamBrownlow a way restating the above is that North prefigures both A&R and Greif -- formal and informal institutions, respectively.
@carlosmontes1 @GrahamBrownlow @patricionavia North's (strong) interest in Polanyi, and providing an alternative to Polanyi's economic anthropology & sociology, is well known! He doesn't need to keep citing P.
@estariade First, it's not just a critique of AJR, but also a critique of Nunn/persistence lit, & it was made too early -- in the middle of the persistence craze. And the substantive arguments -- not everything is explainable about colonialism or slave trade -- would not have been popular
@estariade Have you ever read the Fenske-Jerven-Hopkins row?
@estariade LOL but that's sociology and philosophy of (social) science, I guess
A preemptive caveat. Earlier I said I don't discern much influence of the 'developmental state' literature on AJR "until recently, & more so in Robinson", this is what I meant. Robinson in Annales! and in the World Bank Observer
https://x.com/pseudoerasmus/status/1847331084108804309
How much more AJR-esque can it get, for Robinson (& Pincus) to take the Glorious Revolution & call it the start of the British Developmental State ?! ?!
Also, Robinson shares the same issue of the World Bank Observer with Ha Joon Chang.
Also, Robinson shares the same issue of the World Bank Observer with Ha Joon Chang.
@estariade and yes you do have to give them credit for bringing history into things; cartoon history is still better than no history
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