The Unassuming Economist

From reddytoread:

“When I first encountered the ideas central to the winners of this year’s three Nobel Prize in Economics[2] around two and a half decades ago I was startled. The excessive economy of their framework for understanding a complex global reality combined with a set of premises that looked starkly ideological. Despite the time that has passed, the reams that have been written, and the imprimatur these ideas have now received, these charges remain pertinent.

The point of view of the authors remains narrowly focused – even fixated – on property rights, seeing them as defining inclusive economic institutions[3] and as underpinning inclusive political institutions[4], the coupled concepts at the center of their understanding of Why Nations Fail, the sizable volume in which two of the authors elaborated and extended their view.[5] It is understandable that this perspective enjoys a resonance among property holders and enthusiasts, both in the economic discipline and more broadly in society, as it is reflection of a common sense that prevails in such quarters, but it provides an inadequate guide to understanding either democracy or development. This is because property rights play more diverse and ambivalent roles in both phenomena than they acknowledge. Their view is ahistorical. It misses essential aspects of the colonial experience (such as the impact of ethnic and racial prejudices and solidarities based on the global color line) and its resulting legacies. It also misunderstands the sources of success of rising nations in the contemporary world, such as the role of developmental states.

I had been interested in political economy, and in particular the role of institutions, as a way of understanding the economics of development – and the world at large – more deeply, throughout my student years.  As did many others, I had drunk deeply at the well of available knowledge, ingesting tracts on social conflict as it affects inflation and other economic outcomes, about how states are captured by particular interests, the economic causes and consequences of colonialism and imperialism, the role of norms, customs and conflict in shaping the use of shared resources, the political and social underpinnings of economic innovation, and many other topics. The enormous range of writings on institutions and economic life was by economic and social historians, political scientists, sociologists, anthropologists, legal scholars and some economists too, especially those writing outside of the mainstream (running a gamut from the leftist French “regulation school” to the libertarian Virginia school of political economy). It was not unwelcome that well-positioned mainstream economists, sitting at the institutional apex of the discipline, would be interested in these topics, but what was one to make of their reductionistic approach? Many of the writings I had digested did have the unhelpful view that ‘It is complicated’ and a simple framework that cut through the fog would have its appeal – but could such a perspective in fact be offered while respecting facts about the world?”

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