Tuesday, August 29, 2006

Acemoglu: Gerschenkron's successor

Bumped into the work of Daron Acemoglu who won the 2005 John Bates Clark Medal while I was searching for material on Gerschenkron Gerschenkron was the great 20th-century scholar of economic development and
Acemoglu is the Gerschenkron of present-day economics. Gerschenkron was once cited by Subrahmanyam as being relevant to the "backward" Tai hinterlands of western mainland Southeast Asia (aka Burma aka Myanmar). Acemoglu may be someone with relevance to premodern political economy of mainland Southeast Asia. Can't even access his Wikipedia page, so here is the mirror from Answers.com. In "Why not a Political Coase Theorem" he argues that in politics the Coase Theorem breaks down due to commitment problems. "A Theory of Political Transitions"
(Daron Acemoglu and James A. Robinson September 2001, American Economic Review, volume 91, pp 938-963) sounds like it might address political succession, mathematically I hope. The paper "Kleptocracy and Divide-and-Rule: A Model of Personal Rule" (Daron Acemoglu, James A. Robinson and Thierry Verdier April 2004, forthcoming, Journal of the European Economic Association) looks like it might be relevant, since divide and rule is so frequently cited as a method of governance in mainland Southeast Asia and Yunnan. A lot of his papers are online. Here is the blurb from his new book Economic Origins of Dictatorship and Democracy (Dec 2005):
"This book develops a framework for analyzing the creation and consolidation of democracy. Different social groups prefer different political institutions because of the way they allocate political power and resources. Thus democracy is preferred by the majority of citizens, but opposed by elites. Dictatorship nevertheless is not stable when citizens can threaten social disorder and revolution. In response, when the costs of repression are sufficiently high and promises of concessions are not credible, elites may be forced to create democracy. By democratizing, elites credibly transfer political power to the citizens, ensuring social stability. Democracy consolidates when elites do not have strong incentives to overthrow it. These processes depend on the strength of civil society, the structure of political institutions, the nature of political and economic crises, the level of economic inequality, the structure of the economy, and the form and extent of globalization."

Clearly, relevant to Burma. There is also a good description on his John Bates Clark Medal page. Here are some interesting extracts from an online review:

Extracted from: The Man Who Succeeded Gerschenkron

[Link to whole article]
"...Mathematization conquered the core of economics in the years before, during and after World War II. Then, both because of the power of formal reasoning and the prestige they conferred, those who espoused formal methods tackled the applied fields, one after the other. The mathematizers were not welcomed like so many liberators; acceptance was often grudging."

"Moreover, as mathematical technique was brought to bear, a reduction in detail took place. New insights were more easily transferred from field to field; new tools could be deployed quickly. But the study of institutions, which before mathematization had loomed so large, gradually was eclipsed..."

"...Hence the image of an hourglass that had been suggested by his colleague Paul Romer, with the scope or breadth of topical economics (on the horizontal axis), plotted against time (on the vertical axis). As the language of economics is unified, a dramatic narrowing of topical concerns takes place -- followed in turn by a commensurate widening, as speakers of the language learn to tackle topics that they had been temporarily unable to address. Kreps ventured in 1997, "É[T]he field now seems to be returning to something like the breadth of the discipline before World War II..."

"...He [Gerschenkron] had one big idea, and he made the most of it: the advantages of backwardness in economic development."

"Thorstein Veblen had said as much in telegraphic form in 1915 in Imperial Germany and the Industrial Revolution: late-adopters could sometimes move out to the frontiers of development more easily than the pioneers of the industrial revolution. Gerschenkron now made various forms of slow economic development his specialty. He himself, with his late start, having had to learn to work in two new languages as an adult, exemplified the possibilities. "The more backward a country," he wrote, "the more complex and exciting its industrial history.""

"...Yale's William Parker said, "The resounding theses of Gerschenkron tell the size and shape and weave of the stockings the family hangs out on Christmas eve, but say nothing of when or why Santa Claus comes down the chimney")...

"...Daron Acemoglu's good fortune was to graduate from the University of York at the very moment that the hourglass of development economics was at its narrowest, when all the complications of economic growth had been briefly reduced to an argument about the causes of "technical change.""

"Like Gerschenkron, Acemoglu had been raised in a developing society -- in Istanbul, a Turk of Armenian descent. His father was a professor of law, later an attorney for banks and corporations. Political economy and development strategy came naturally to the dinner table."

"But his parents died when Acemoglu was in his teens. Political science at York disappointed him; he switched to economics instead. And when MIT admitted him to graduate school but failed to offer a scholarship, he did his doctorate at the London School of Economics instead, writing a dissertation on a variety of labor and macroeconomic topics. A year later, MIT hired him to teach -- an intriguing but unknown quantity at whom they wanted a closer look. Four years later they gave him tenure. He added dual citizenship as well."

"The committee that gave the 38-year-old Acemoglu the Clark medal last week described him as "extremely broad and productive," noting that in the course of a dozen years he had made significant contributions to the study of labor markets before moving on to "especially innovative" ideas about the role of institutions in development and political economy."

"In fact, it was a series of investigations in the history of the European colonization of much of the rest of the world, beginning in the 15th century, that made Acemoglu's reputation, demonstrating that institutions of various sorts were more important to development than economists previously had thought. The "rules of the game" -- the structure of property rights, the presence of markets, and their various frictions, the form that governments take -- are key determinants of what happens next, Acemoglu showed, in some unusually inventive and convincing ways."

"Take the rise of Europe in the first place. The importance of the Atlantic trade had long been noted, and various reasons for it advanced. With Simon Johnson of MIT's Sloan School and James Robinson of the University of California at Berkeley, Acemoglu argued in "The Rise of Europe: Atlantic Trade, Institutional Change and Economic Growth" that England and the Netherlands leapt out front because a newly emergent merchant class benefited most from trade -- and was able to successfully demand institutions to protect their property and commerce. In contrast, although they had been the first to discover the richest lands, Spain and Portugal stagnated because their monarchies had managed to capture the early returns, they argued -- and thus were able to thwart their merchants' drive for power."

"In "Economic Backwardness in Political Perspective," Acemoglu and Robinson argued that political elites can be expected to pursue "blocking" strategies when innovation threatens their monopolies and when there is little threat to their power from politics. External threats reduced the temptation to block, they found -- producing a model that suggested why Britain, German and the United States had industrialized during the 19th century, while the landed aristocracies in Russia and Austria-Hungary sought to hold back the tide."

[Niall Ferguson in Colossus has a nice overview of this in his coverage of post-WWII Japanese and German development]

"In "Reversal of Fortune," Acemoglu, Johnson and Robinson argued that colonial powers pursued very different strategies in different lands, with fateful consequences. In rich and densely populated countries such as Mexico and Peru, they extracted wealth; in poor and sparsely settled countries such as British North America and Argentina, they encouraged investment."

"And in "The Colonial Origins of Comparative Development" they inventively teased evidence from differing mortality rates faced by Europeans in different countries of how the choices made in those circumstanced gave rise to different institutions and so to different development paths."

"The Clark committee noted that some of the methods and conclusions were still being debated -- but that a broad and substantial rethinking of the development process was underway no matter what. The appearance this summer of Acemoglu's book with Robinson, The Economic Origins of Dictatorship and Democracy will stimulate much further discussion. The MIT course that he teaches with fellow professor Abhijit Bannerjee on development issues is routinely oversubscribed. And a long list of projects underway testifies to his staying power."