Tuesday, March 29, 2016

It's Still a Unicorn

The latest polemic from biologist David Sloan Wilson is an attempt to “update” the work of Friedrich Hayek on the nature of the state and spontaneous order. In it, Wilson interviews economist Daron Acemoglu on his work on the role of institutions in economics. The title, “Stop Crying About the Size of Government. Start Caring About Who Controls It.” is indicative of the level of discourse provided in the article. I'd wager that nearly all those who are skeptical of government power are pretty much equally concerned about its size, scope, and the identity of those in power.

So with that red herring as the start, let's see what Wilson and Acemoglu have to say. The first interesting claim is about the beginnings of the post office. Acemoglu's research indicates that there is a positive correlation between the establishment of early post offices in the U.S. and the number of patents filed from that region. This is then taken as evidence that where there are more post offices, there is more innovation. The problem here is that patents aren't a very good indicator ofinnovation, especially in the more distant past. Equating the two is akin to the proverbial drunk searching for his car keys under the light of the nearest lamppost.

The crux of Wilson and Acemoglu's argument comes a bit later in the piece:
Some think that human cooperation can develop in a spontaneous way (Hayek comes close to this at times), or because cooperation creates an edge, the forces towards the evolution of a psychology of group cooperation are going to ensure that tribes, villages or even bigger polities can develop a sophisticated order without the state. The famous book by Robert Ellickson, Order without Law, claims that the complex relations between farmers and ranchers in Shasta County, California happens not thanks to the law, but without any reference to the law, instead relying on informal norms that have evolved over time. This may well be true, but is not the general pattern of what happens without law and the state playing the role of conflict resolution and law enforcement in much of the world. In Why Nations Fail, we explain why Somalia is so dysfunctional, linking this to the almost complete absence of conflict resolution from the state. Even small disputes in Somalia can spiral into feuds or even clan warfare because there is no central authority to resolve these conflicts. The one big difference between Somalia and Shasta County is, of course, that in the former there really isn’t the state, whereas everything that happens in Shasta County happens under the shadow of the state. For example, if a group of ranchers decide that these informal social norms aren’t working for them and take up guns and shoot some of the farmers, they know that it will be the US marshals coming after them.
As a general rule, and this is consistent with the Hayek quote you started with, no civilization has flourished economically, and I would also say socially, without a state powerful enough to provide security, property rights protection, dispute resolution and some amount of public goods to its citizens. It is also the case, and this is something we emphasize a lot throughout Why Nations Fail, that most states throughout history and even today serve the interests of the political elite and are part of their economic problems, not their solution. But this is not because the state is unnecessary or evil, but because of who controls it and what capacities it has invested in and developed.
There are several problems here. First, there are plenty of examples of spontaneous development of human cooperation. The mutual aid societies that operated across the U.S. until the mid-20thcentury, which went extinct thanks to legislation supported by politically powerful medical organizations, are one example. Among otherexamples, the (actual, historical) story of the “wild west” is a clear demonstration that rules of conduct can and do emerge spontaneously to benefit everyone involved. David Friedman lays out theoretical and empirical cases in thisarticle. Peter Leeson has done significant research on theoretical and empirical examples of spontaneously-generated governance structures.

Acemoglu cites Somalia as a counterexample, but the reality is that Somalia isbetter off now economically than it was in 1991 when it became anarchic. The chaos that continues there is largely a result of outside attempts to establish a new government. The bottom line is that there are many differences between Somalia and Shasta County, CA, not just the presence or absence of a state.

The rest of the article is essentially an exercise in the unicorn fallacy, attempting to define the state as something other than a “monopoly of the legitimate use of physical violence”, as sociologist Max Weber defined it nearly 100 years ago. Acemoglu is right that we should be concerned about who is in power. The trouble is, we have been for a very long time and it hasn't fixed the problems Acemoglu and Wilson seem to think it will. 

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