Tuesday, July 28, 2009

Institutions and Values Matter

This evening I was playing around with cost of living, quality of life, latitude and average temperature numbers. Basically I was investigating the idea that countries at very high or low latitudes had a worse quality-per-cost ratio than those in temperate regions; that is to say, sure, maybe Norway has a higher quality of life, but it costs a lot more to live there than Spain, and do you get that much more? There is a lot of forced investment in infrastructure because of the marginal environment that they don't have to worry quite as much about in Spain.

I found only extremely weak connections, so I won't bother posting the data and graphs. But this isn't the first time I've looked for such connections. In fact whenever I've looked for connections between some economic or social indicator on one hand, and a non-human aspect of a country's real estate on the other (latitude, resources, climate) I either find no relationship, or a relationship that cannot be separated from the confounding facts of history, like the inheritance of certain values and institutions, particularly from Enlightenment Europe as it was colonizing the West. In fact, the first question on examining such relationships is whether we should try to separate the trend from history.

More and more I find myself siding with the development experts who state that it's the institutions of a country that matter more than anything else - not its resources or climate, temporarily wealthy petro-theocracies notwithstanding. One assumes that the values of the people have to support such institutions. As the U.S. is learning, you can't just drop a democracy onto a culture that has no history of open discourse and personal responsibility, even before the Hussein regime, and in fact I would argue that Indo-European cultures in general have at their root a value of parliamentary decision-making and openness that is rare elsewhere; why would the world's oldest parliament, the Althing, have appeared in Norse Iceland in the guts of the brutal Middle Ages?

Another way of emphasizing the importance of institutions, and underlying values, is in traditional economics terms; that it's the labor and not the land that makes life better and generates wealth. This shouldn't be surprising; it tracks the development of technology, which continually increases the potential productivity of human beings and their power to shape their environment. The last school of economics that discounted the role of labor entirely was the physiocrats in the eighteenth century, and no one has been able to make that mistake since. This can also explain the (near) disappearance of slavery, from a purely cynical economic standpoint. Three thousand years ago, there wasn't a whole lot more you could contribute as a scribe or farmer than you could as a slave. By the nineteenth century, the institution had shrunk enough in importance that moral concerns could override whatever clout the related industries retained, first in England, and later in the U.S. In 2009, from an economic standpoint, the idea of forcibly feeding and housing a person so they can pick plants instead of voluntarily build a better microchip seems patently absurd. In 2109 it will seem moreso.

The question remains then of how to measure the goodness of institutions without the tautology of just saying that whatever raises per capita income and gross national happiness must be good. Measuring values would be trickier still. Encouraging values that support good institutions and therefore the elimination of misery is the most important and difficult question of all.

No comments: