Tuesday, June 16, 2009

The Possibly Vain Search for Laws of Global Development

As an amateur socioeconomist, I've recognized that there is an assumption that is made by economists and development experts, but rarely stated explicitly: that there is a nice clear set of principles governing nation-level material betterment, a kind of socioeconomic answer to the three laws of thermodynamics. In his draft of The Success of Development, Charles Kenny verbalizes it, and names the eight countries that have at least quadrupled their economies from 1929 to 1988: Japan, Taiwan, South Korea, Italy, Norway, Finland, Bulgaria, and the USSR. Tell me what the common thread is there.

Though such laws may exist, we haven't found them yet. After all, how many American economists even saw the recession coming in our own economy? The assumption (or hope) that such laws do exist I think comes from our sense of an orderly unvierse, as well as our sense of fairness; i.e., if country A tried it and it worked, and the world is fair, then it should work for country B as well.

What's becoming increasingly clear to me is that institutions and culture matter, and they're highly stochastic. The accidents of history ensure that development is incredibly substrate-dependent. For example: by this argument, even if China were the same size as Japan, and never had a communist government, what worked for Japan would not have worked for China. This is to illustrate my point and I recognize it's not a testable hypothesis, so over the course of the next few months I'll be asking questions that try to quantify gauge the impact of culture on economics. For example, what impact does the cultural aversion to debt (or lack thereof) have on economic growth and cycles? Beyond ensuring basic necessities, does the relation between wealth and happiness (or the impact of positional goods) change between cultures? What effect does media and Gini have, and does this differ between cultures? These questions are important if the whole project of economic growth and the search for human happiness are to be realized.

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