Citizen Economists » freedom

Entrepreneurs and Democracy

Doug Gentry — Mon, 14 Mar 2011 20:51:24 +0000

This column in the March 7, 2011 edition of The New Yorker has an interesting perspective on economic development – particularly in the Middle East. In the language of my University Seminar class, here’s the claim presented by James Surowiecki

The autocracies of the Arab world have been as economically destructive as they’ve been politically repressive. That’s no coincidence. Healthy economies need a thriving and independent private sector, where resources are allocated by markets and competition, and where small and medium-sized businesses can flourish. But in most of the Middle East the state and big business are so tightly intertwined as to be indistinguishable, and competition has been discouraged in favor of central planning and private monopolies.

In my Principles of Macroeconomics class we work on prioritizing investment options to improve long run economic development in the African country of Sudan. And in the first week of class we talk about scarce resources in countries – sometimes including a culture of entrepreneurship as one of the key ingredients of economic health. Surowiecki’s analysis makes but it also relies heavily on western, classical assumptions about individual incentives for innovation and risk taking. Are we missing a perspective here?

Without a Net: Compromise versus Calculation

Thomas Knapp — Fri, 26 Nov 2010 20:02:24 +0000

INTRODUCTION: ORDER OF BATTLE

If we place the ongoing “purist”-”pragmatist” conflict within the libertarian movement under a metaphorical microscope, it immediately becomes apparent that what we’re looking at is not one conflict, but rather a bundle of conflicts composed of numerous intertwined disputes with overlapping intra-movement constituencies for particular outcomes. While the movement can be reasonably viewed as split between overall “purist” and “pragmatist” camps, the vast “No Man’s Land” between them is a constantly swirling milieu in which it’s not always perfectly clear who is shooting at whom — or why. Various constituencies raise their flags over specific coordinates and give battle, hoping to temporarily claim some patch of territory for their concern of the moment or, perhaps, to extend the lines of some larger alliance to encompass more of the disputed field.

The hill upon which I intend to raise my flag — the banner of the “purist” faction, broadly defined — in this paper encompasses the notion of “incrementalism.” Whoever controls that hill in turn overlooks, and may exploit, a key route across the plain of “realpolitik.”

May, I say, or might: The incrementalist high ground has been occupied, for some time and without substantial opposition, by “pragmatist” forces which have declined to actually sally forth versus the state, preferring instead to simply occupy it, hold a few grandiose parades on its slopes, and deny its use to “purists” who might actually use it as a base from which to strike real blows for liberty.

However, it’s come to my attention of late that the hill is only weakly occupied:

- Its garrison’s composition greatly resembles that of a Confederate “home guard” militia regiment during the Late Unpleasantness, as described by an inspecting general: “3 field officers, 4 staff officers, 10 captains, 30 lieutenants, and 1 private with a misery in his bowels.” To put it bluntly, for all their guff about holding the heights over the plain of realpolitik, the “pragmatists” have thus far proven themselves signally unsuccessful, to an even greater degree than the “purists” they disdain, at achieving political victories.

- The “pragmatist” garrison — which had at its disposal the heavy artillery of genuine incrementalism had it cared to use it — chose to mothball that formidable weapon and instead field a lighter piece, of shorter range and minimal power — one more suited to twirling, slapping and shouldering at ceremonies held for the purpose of congratulating themselves on their superior political acumen than for actual use in battle. The popgun I refer to is, of course, “compromise.”

The hill is, in other words, ripe for a bayonet charge. It is occupied by troops who are not interested in fighting, and who, if forced to, have at their disposal a weapon guaranteed to fizzle half the time and explode in its firer’s face the other half. It is the “purists” — unabashed and uncompromising libertarians who may differ on how far to go but who know which way they’re going — who have a rightful claim to, and know how best to exploit the advantages of, an incremental approach.

Forward, march.

THE FIGHT THAT NEVER WAS: INCREMENTALISM VERSUS ABOLITIONISM

Things are not always what they seem. For years, “pragmatist” reformers in the libertarian movement have exercised a virtual monopoly on advocacy of incrementalism, caricaturing “purist” abolitionism as its mutually exclusive opposite. Even a cursory examination of the two concepts, however, reveals that this is not necessarily the case.

Incrementalism involves setting (and achieving) incremental goals — taking “baby steps” in one’s chosen direction. Incrementalism is a proposed means.

Abolitionism is the notion that wrongs should be abolished rather than simply minimized (and, at the abstract anarchist extreme — no insult intended, that happens to be where I live myself — that all wrongs must be abolished in order for the abolitionist to claim victory). Abolition is a proposed end or set of ends.

It is certainly possible to conclude (and some “purists” do) that limiting issues advocacy to abolition, and only abolition, is an appropriate means (perhaps even the only appropriate means) to achieve abolitionist ends.

“Pragmatists,” in turn, have exploited the possibility of such a reification of abstract end into concrete means. By encouraging the erroneous conclusion that that reification is universal within and necessary to “purism,” they create two useful and reciprocally dependent misimpressions:

1) That incrementalist means are not available to “purists;” and

2) That incrementalist means are therefore only available to “pragmatists.”

The theory implied by these misimpressions disintegrates on examination. I could fill a book with the documentary evidence of that disintegration, but I don’t have to: Even one example of a theory’s failure invalidates the theory. I’ll provide two:

- I consider the claim that Alan R. Weiss is a “purist” and an “abolitionist” to be indisputable. He describes himself as an “anarcho-libertarian,” he writes for “purist” publications including Rational Review and The Libertarian Enterprise, and he has a long record of continuous association with “purist” associations and projects. In 2002, Weiss was elected to the Northwest Austin (Texas) #1 Municipal Utility Board. During his tenure on that board, he led a successful effort to reduce taxes associated with its operations by 50%, and then resigned. In other words, he used incremental means (seeking and gaining electoral office) to accomplish an incremental objective (cutting a particular tax rather than eliminating that tax or all all taxation), even though his strong preference would have been, and his ultimate goal is, the elimination of both the board to which he was elected and the retention by government of that board’s powers.

- If you don’t think I’m a “purist” and an “abolitionist,” then you haven’t been paying attention. I have personally engaged in incremental political action numerous times. I’d like to eliminate the US government. Having so far been unable to figure out a way to do so, I serve as an appointed member of a federal board so that I can affect its operations in a pro-freedom way. I’d like to eliminate my city’s government. Having so far been unable to figure out a way to do so, I have personally managed two (winning) campaigns to keep one of its public offices (city marshal) elected rather than appointed, and another (winning) campaign to elect a person (Tamara Millay) to serve in that office who discharged the duties of that office in a more liberty-friendly way than others might have been expected to.

QED, incrementalist means are not only available to “purists” and “abolitionists,” but used by them, and are therefore not available only to “pragmatists.”

Sadly, this issue should never have required the current argument. The de facto “pragmatist” monopoly on incrementalism, and their use of it as an anti-”purist” cudgel, has been made possible only by an inexplicable “purist” reticence toward contesting the matter. Nearly 30 years ago (at the latest!), “purist” icon Murray N. Rothbard — the bogeyman of the “pragmatists” — was already explicitly endorsing incrementalism:

[I]t is legitimate and proper to advocate transition demands as way-stations along the road to victory, provided that the ultimate goal of victory is always kept in mind and held aloft. In this way the ultimate goal is clear and not lost sight of and the pressure is kept on so that transitional or partial victories will feed on themselves rather than appease or weaken the ultimate drive of the movement. — “Strategies for a Libertarian Victory,” Libertarian Review, 1978

Must the libertarian necessarily confine himself to advocating immediate abolition? Are transitional demands, steps toward liberty in practice, therefore illegitimate? Surely not, since realistically there would then be no hope of achieving the final goal. It is therefore incumbent upon the libertarian, eager to achieve his goal as rapidly as possible, to push the polity ever further in the direction of that goal. Clearly, such a course is difficult, for the danger always exists of losing sight of, or even undercutting, the ultimate goal of liberty. But such a course, given the state of the world in the past, present, and foreseeable future, is vital if the victory of liberty is ever to be achieved. — The Ethics of Liberty, Part V: “Toward A Theory of Strategy For Liberty,” 1982

Not only do “purists” have a rightful claim to incrementalist means but, as we shall see next, “pragmatists” have severely undermined their own claim to those means by attempting to smuggle other, unsupportable, means into play under the rubric of incrementalism.

COMPROMISE: THE POVERTY OF PRAGMATISM

As we’ve previously seen, there is no real, defensible “pragmatist” monopoly on incrementalism. That the “pragmatists” have postured as the possessors of such a monopoly raises the question of why they are so interested in controlling the term and denying its use to “purists.”

The obvious answer is that incrementalism is a visibly worthy political tool. Insofar as the “pragmatist”-”purist” feud manifests itself in demonstrations (or at least protestations) of efficacy and success with the intent of recruiting libertarian newcomers to one side or the other, the side which can (even falsely) claim sole possession of such a tool benefits.

That there are less obvious answers is, well, less obvious. However, there’s good reason to believe that less obvious answers exist.

Assertion of a monopoly on incrementalism is simply not strictly necessary for the purpose of demonstrating efficacy and success. Such a purpose could be more effectively fulfilled by using incrementalism to build a record of electing public officials, winning referendum votes, etc., and then stacking up the results versus those achieved by the allegedly incrementalism-deprived “purists” for comparison. The “pragmatists” have avoided any such comparison — not only because it would explode their pretensions to a monopoly on incrementalism but because it would explode their implicit claim that they use incrementalism effectively, or for that matter at all.

The “pragmatists” have effectively used incrementalism as an advocacy cudgel in intra-movement disputes, but evidence that they’ve used it in, um, “real politics” is sorely lacking. The “pragmatist” case for primacy in the libertarian movement is a hodge-podge of horror stories about “purist” failure and grandiose projects of future victories which can be achieved only after the “purists” have been swept aside. What’s missing from that case is a portfolio of “pragmatist” successes: “We did this, and it worked.”

Why would a movement faction assert a (fake) monopoly on a tool it doesn’t even use? Why would it insist, contrary to fact and evidence, that its opponents don’t have that tool in their kit, even though those opponents have visibly and successfully used the tool numerous times? And why would it refuse to take that tool out of its own kit and visibly use it to tighten some bolts or drive some nails?

The answer is that the “pragmatist” version of incrementalism is a counterfeit tool. Its dark silhouette against the bottom of the toolbox drawer looks, in form, like the genuine article. But when pulled out and examined closely, it turns out to be a “drop-forged in Pakistan” fake. Deep down inside (in their pockets, next to the receipt for $4.95), the “pragmatists” know that their tool — compromise — won’t turn a bolt. And they know that if they pull out their shoddy instrument and hold it up next to the “purist” version, nobody who wants to turn a bolt will select theirs.

As defined above, incrementalism involves setting (and achieving) incremental goals — taking “baby steps” in the right direction.

Compromise, on the other hand, involves trading steps in the wrong direction for other steps in the right direction.

When pressed, many “pragmatists” argue that incrementalism and compromise are not only not mutually exclusive, but that they are actually indispensable one to the other. Suspicion on this point is natural, however, given the lengths of obfuscation to which the “pragmatists” have gone in order to avoid reaching the issue.

That suspicion is well-founded — for, as I shall demonstrate below, compromise destroys, rather than augments, the utility of incrementalism. To put a finer point on it, the inclusion of compromise as a means in libertarian strategy requires a radical and un-quantifiable re-definition of ends.

COMPROMISE’S CALCULATION PROBLEM

In the larger libertarian movement, the difficult question of end-states is a constant topic of discussion. Anarchist and minarchist factions do daily battle over the propriety of particular and general long-term goals. As a practical matter, however, the discussion has been framed in terms of “how to deal with a problem we’ll have to deal with later.”

The anarchist who wants to abolish the state entirely may disagree with the minarchist who wants to retain an ultra-minimal “night watchman” state, but they are able to co-exist beneath the “libertarian umbrella” because their goals are, for the most part, commensurable. While the minarchist might only cut government’s size, scope or power in a particular area by 80%, where the anarchist would cut it by 100%, both agree that pretty much every function of government should be slashed significantly.

Even if we posit a bigger “libertarian umbrella” under which other, additional groups might cluster, that commensurability is present. The geolibertarian and the constitutionalist may make exceptions in that which they subject to “libertarian measurement,” but those exceptions are defined exceptions. The constitutionalist may advocate a specific level of taxation for the specific purpose of “providing for the common defense.” The geolibertarian may argue that a community “ground rent” is not taxation as normally defined. And so on, and so forth.

These kinds of exceptions may be problematic, and they may raise questions as to which groups truly belong under the metaphorical umbrella or just exactly which piece of ground falls or should fall under that umbrella’s shade. What they don’t do, however, is make it impossible to answer those questions.

When compromise is introduced into a libertarian strategy, however, the quality of commensurability disappears, and with it the ability to define any particular end, let alone any end-state, as compatible or incompatible with libertarianism per se. More specifically, the “pragmatist” justification for compromise relies on the adoption of non-measurable or non-quantifiable goals.

While pro-compromise “pragmatists” are understandably shy about explaining their reasons for advocating something they don’t want to admit they are advocating, some cues and clues are available.
When “pragmatist” Brian Holtz states that he stands for “minimizing the overall incidence of coercion” or implicitly characterizes himself, in contrast to someone else, as advocating “the policies and tactics that have the highest expected value in terms of minimizing the net amount of aggression suffered by humanity,” we should pay close attention to exactly what he’s saying.

Ditto when Carl Milsted, head of the Libertarian Reform Caucus, asks “Why should I never endorse an action that employing [sic] aggression even it results in a substantial net reduction in aggression?”
For the sake of uniformity, I’ll refer to the goal which Mr. Holtz and Dr. Milsted implicitly hold out for adoption as “reduced overall net aggression.” It’s a fine-sounding goal, and one to which an approach of compromise lends itself well. Unfortunately, it’s also utterly impossible in most cases to determine whether, or to what degree, such a goal has been achieved.

Mr. Holtz, Dr. Milsted, meet Dr. Mises:

Judgments of value do not measure; they merely establish grades and scales. Even Robinson Crusoe, when he has to make a decision where no ready judgment of value appears and where he has to construct one upon the basis of a more or less exact estimate, cannot operate solely with subjective use value, but must take into consideration the intersubstitutability of goods on the basis of which he can then form his estimates. In such circumstances it will be impossible for him to refer all things back to one unit. Rather will he, so far as he can, refer all the elements which have to be taken into account in forming his estimate to those economic goods which can be apprehended by an obvious judgment of value — that is to say, to goods of a lower order and to pain-cost. That this is only possible in very simple conditions is obvious. In the case of more complicated and more lengthy processes of production it will, plainly, not answer. — Ludwig von Mises, Economic Calculation in the Socialist Commonwealth, 1920

The notion of “reduced overall net aggression” requires a system for classifying all of aggression’s varying forms into commensurable units. It’s relatively non-controversial to assert that picking a pocket is less onerous than assault, which is in turn less onerous than murder, but unitizing these forms of aggression for bulk comparison is a different story entirely.

Does it take 2.5 armed robberies to equal a rape, or 3.1?

Is the prevention of two murders a fair trade for 100 unreasonable searches?

Even when aggression is nominally measurable in known units, it’s not necessarily true that the factor of aggression itself will be perceived or valued in terms of those units.
If I can reduce the taxes of Person A by two dollars in trade for raising the taxes of Person B by only one dollar, is that a net reduction in overall aggression? What if Person A’s two dollars would otherwise have been spent on country club initiation fees while Person B’s one dollar would have otherwise been spent buying food for his starving child? Would the decrease in aggression versus Person A truly be commensurate with the increase in aggression versus Person B?

The value of a dollar may be uniform for certain purposes, but it is highly subjective for most. Most people would agree that stealing a piece of 18 holes on the golf course is less onerous than stealing a baby’s bottle of milk, even if the dollar values of the two say otherwise.

Even leaving such questions aside, precisely why should Person A accept an obligation to be aggressed against more, so that Person B will be aggressed against less, specious “overall net” claims notwithstanding? Under what moral calculus should anyone be considered fair game for aggression in any amount?

The unitization problem only grows worse on a political scale: For not only is it impossible to quantify the “amount” of Aggression X versus that of Aggression Y on an individual basis, but American polity deals with wholesale decisions which affect a population of 300 million individuals (excluding those outside US borders, who may also be affected).

The idea that some central “Pragmatic Libertarian Planning Board” could accurately forecast aggregate increases and reductions in the various forms of aggression spawned by particular policy compromises and compare them to reveal which actions would produce “reduced overall net aggression” is pure … well … I was going to say “science fiction,” but no science fiction author I know would touch the idea with a ten-foot pole. Sapient space-faring beer-drinking anarchist squid are one thing, but there’s a limit to the suspension of disbelief.

The commensurable characteristic which unifies libertarianism, however narrowly or broadly defined, is opposition to — not redistribution of — aggression. Assuming the burden of aggression redistribution would rip the fabric of the “libertarian umbrella.” Treating aggression as a commensurable, tradeable commodity would mean that some factions would be required to accept increased aggression on issues dear to them in order to “pay for” decreased aggression in areas held dear by other factions. No libertarian coalition could hold together under such stresses — it would fall to pieces as soon as the compromisers “traded” an increase in the top tax rate for legalization of marijuana, or vice versa, or whatever.

A single focus on institutionalized aggression, i.e. the aggression of the state, and a proposed solution of reducing — never in any case increasing — the ability of the state to aggress, are indispensable to the success (nay, the survival) of any broad-based libertarian political movement.

“Pragmatism” is popularly defined as an emphasis on that which “works.” Compromise does not, and cannot, work in the context of a libertarian political movement.

Economic Growth and Democratic Institutions

Rok Spruk — Mon, 04 Oct 2010 19:00:29 +0000

Professor William Easterly recently presented (link) an intriguing empirical evidence on the relationship between nation’s politics and economic growth. In particular, professor Easterly presented data on long-run economic growth and the scope of democracy for a majority of countries between 1960 and 2008. Professor Easterly identified that the highest-growing countries in the world were those with autocratic political regimes. Among ten highest-growing economies between 1960 and 2008, all of them, except for Cyprus, have been characterized by hybrid and autocratic political regimes. On the other hand, ten countries with the lowest growth rates of real GDP per capita between 1960 and 2008 were equally known for authocratic political systems or flawed democracies.

Presumably, the evidence bodes against the recent prediction by Dani Rodrik that authoritarian political regimes ultimately create economic systems vulnerable to external shocks and structural change, thus hampering the prospects of structural change as a neccessary condition for economic development.

To estimate the general pattern of the relationship between economic growth and the nature of political system, I reviewed real per capita GDP growth rates between 1970 and 2007 for a group of 134 countries across the broad spectrum of different levels of GDP per capita. Based on Summers-Heston dataset of real GDP per capita growth rates (link) between the stated time period, I estimated average rates of growth of GDP per capita and collected data from Economist Intelligence Unit on the level of democracy across the world in 2008 (link). The intuition behind this approach is the identification of endogenous and casual direction between the two variables. From the theoretical perspective, it is nonetheless difficult to establish a relationship between the form of government and long-run economic growth. There are at least two possible directions of casuality.

First, the underlying assumption of the relationship could be that systemic changes in political environment are essential to the structural change and, hence, are the main mechanism behind the enforcement of constitutional changes and public policies. The assertion of the underlying theory is that autocratic and authoritarian political system hinder structural changes and the establishment of institutions and democratic governance that is crucial for economic growth. This particular view has been asserted by Dani Rodrik (link), Andrei Shleifer, Florencio Lopez de Silanes and Rafael La Porta (link). While Dani Rodrik’s perspective heavily relied on the importance of institutions for long-run economic growth, Shleifer, Lopez de Silanes & La Porta captured the essence of economic development in the legal origins of nations.

Second, the causality in economic growth and political system could also stem in the opposite direction. The basic underlying assumption could be that higher rates of economic growth encourage systemic changes in the political system and enable the adoption of democratic institutions. The notion of economic growth as the engine of democratic changes has deserved a strong empirical support.

Robert Barro’s analysis of long-run economic growth across the world (link) has examined the relationship between the level of democracy and long-run economic growth rate. The empirical evidence suggests a non-linear, inverted-U relationship between democracy and 10-year growth residuals, both coefficients in partial quadratic equation and the partial correlation coefficient being statistically significantly different from zero.

The notion would suggest that as countries depart from a low level of real GDP per capita, the adoption of democratic institutions accelerates economic growth but only up to some point. After the tipping point, the economic outcome of further democratization results in lower growth of real GDP per capita, partly because a high level of democracy tends to promote public policies that diminish growth prospects such as higher tax rates on labor and capital and the redistribution of income, all of which exert a somewhat negative effect on productivity growth and incentives for labor supply and investment.

The first table portrays the distribution of real per capita GDP growth rates across 134 countries between 1970 and 2007. The distributive pattern resembles the properties of normal distribution curves. In fact, the estimated coefficients of skewness and kurtosis suggest a rather very mild departure from the assumption of normality which is of the high importance, especially in testing hypotheses about the effects of explanatory variables on long-run growth dynamics. The normality assumption of normally distributed errors was not tested via normality tests.

Ten highest growing countries in terms of real GDP per capita between 1970 and 2007 are Equatorial Guinea (8.39 percent), Taiwan (5.98 percent), China (5.97 percent), St. Kitts & Nevis (5.49 percent), Botswana (5.45 percent), Bhutan (5.38 percent), Maldives (5.38 percent), Hong Kong (5.37 percent), Macao (5.30 percent) and Singapore (5.29 percent). In real terms, the estimated average real per capita GDP growth rates suggest that it took only 13 years for Singapore’s real GDP per capita to double and 21 years to triple. In China, where the estimated average growth rate exceeded Singapore’s growth rate only by 0.69 percentage point, it took roughly 11 years for real GDP per capita to double and only 19 years to triple. In the lower tail of growth distribution are mostly countries from Sub-Saharan Africa such as Democratic Republic of Congo, Liberia, Somalia, Central African Republic and Niger. Average real growth rates of GDP per capita of these countries were negative. The negative average real GDP per capita growth rate occured in 11 percent of country observations.

Distribution of economic growth across 134 countries between 1970 and 2007

Source: own estimate based on Summers-Heston dataset

The following graph illustrates the relationship between long-run average growth rates and the level of democracy in 2008 for the entire sample of 134 countries. The attempt to analyze the effect of democracy level on long-run economic growth is based on the notion that democratic institutions elevate economic growth in the longer run. The estimated slope coefficient (0.2277) suggest that a one-point increase in democracy index increases the average long-run per capita GDP growth rate by 0.2277 percentage point controlling for other factors.

Although the cross-country variation in the level of democracy explains only about 9 percent of growth rate variance, and even though the direct effect of democracy on economic growth seems minor and almost non-existent, the estimated sample regression coefficient is statistically significant at 5 percent level. It suggests that the effect of democracy on growth is persistant and evident in the particular sample.

Democracy and average long-run growth rates in a sample of 134 countries

Source: own estimates

Hence, to account for different degree of variation in average real GDP per capita growth rates, I divided the sample into quartiles. The goal of the pursued empirical strategy is to see whether the difference in variance composition between countries with similar growth rates persists. I divided the total sample into four groups: high growth performers (average growth rate higher than 3 percent) moderate growth countries (average growth rate below 3 percent and above 2.05 percent) and low growth countries (average growth rate below 1.09 percent). The next graph shows the relationship between democracy and average real GDP per capita growth rate in high-growth countries between 1970 and 2007. The parameters suggests a different relationship. The estimated slope coefficient is negative (-0.1638), suggesting that a one point increase in democracy index decreases the average real GDP per capita growth rate by about 0.1638 percentage point.

The share of variance explained by the democracy variable increased by 22.5 percent. In the statistical sense, the effect of democracy on economic growth in high-growth countries has been more powerful compared to the total sample. The estimated slope coefficient is statistically significant at 5 percent level. I also estimated beta coefficient (-0.338) to account for the effects of standard deviation increase on the average growth rate in real GDP per capita. The estimated beta coefficient suggests that a one standard deviation increase in democracy level (2.4 points) would, on impact, decrease the average real GDP per capita growth rate by 0.338 standard deviation or 0.394 percentage point in real terms.

From a theoretical perspective, the enforcement of democratic policies in high-growth countries would have a minor negative effect on economic growth, holding all other factors constant. Surprisingly, authortarian regimes previal in 44 percent of countries in the high-growth sample. Thus, the hypothetically negative effect of democracy on economic growth is evident but it is far from significantly negative.

Democracy and average long-run growth rates in high-growth countries

Source: own estimates based on Summers-Heston and EIU datasets

The next graph portrays the relationship between democracy and average real GDP per capita growth rates in low-growth countries. Contrary to the sample estimate in high-growth country group, the effect of democracy on real GDP per capita growth rate is positive and persistent. The correlation coefficient is positive and moderate (0.458) and statistically significant at 1 percent level. The beta coefficient (0.458) from the regression specification suggests that a one standard deviation increase in democracy level (cca. 1.497 points) would raise the average real GDP per capita growth rate on impact by 0.458 standard deviation or 0.382 percentage point, ceteris paribus. In fact, the variability in level of democracy explains 21.1 percent of the variance of average per capita GDP real growth rates. The estimated slope coefficient is statistically significant at 2.1 percent level and 0.6 percent level, suggesting a very low probability of rejecting the null hypothesis and a strong influence of democratic institutions on economic growth in the long run.

Democracy and average long-run growth rates in low-growth countries

Source: own estimate based on Summers-Heston and EIU datasets

In the next subsample, I jointly added high-growth and low-growth countries in the single sample and changed the casual direction. The underlying assumption is that democracy level is endogenously determined by the long-run average real GDP per capita growth rate. In real terms, I assumed that the public choice of political institutions across the world depend on the real GDP growth rate. Hence, I estimated the relationship by including the squared term in the regression equation. The estimated slope coefficients suggest a typical inverted-U relationship between real GDP per capita growth rate and the level of democracy. The real GDP per capita growth rate alone explains 30.6 percent of the cross-country variaton in the level of democracy. Intuitively, the results suggest that there exists an optimum level of real GDP per capita growth that maximizes the level of institutional democracy.

Differentiating the conditional expectation function of the level of democracy with respect to the real GDP per capita growth rate yields the partial derivate dy/dx = -(ß2/2ß3). Plugging the two coefficients in the partial derivate yields 3.65. Thus, the growth rate of real GDP per capita that maximizes the level of institutional democracy is 3.65 percent. Hence, both coefficients are statistically significant. The p-values are 0.000 suggesting a zero probability of rejecting a null hypothesis when it is, in fact, true – and a strong predictive influence of both variables on the expected level of democracy.

The effect of long-run economic growth on democratic institutions in high-growth and low-growth countries

Source: own estimates based on Summers-Heston and EIU datasets

Countries with the comparable growth rate are Iceland, Ireland, Trinidad & Tobago and Spain. Except for Trinidad & Tobago, none of these countries is either flawed democracy or an authoritarin political regime. Therefore, the expected level of democracy is low in countries where the average growth rate of GDP per capita is either very low or negative or very high.

Hypothetically, the conditional pattern of real per capita GDP growth supports the notion that the highest-growing countries in the 20th century such as Singapore, Taiwan and Botswana had a relatively low level of democracy and a significant degree of political authoritarianism. In addition, countries with the lowest growth rate of real GDP per capita such as Liberia, Sierra Leone and Somalia were also authoritarian political regimes. The predictive power of the regression equation is reasonably high since more than 30 percent of the variance of the level of democracy is explained by a non-linear shifts in the long-run average real GDP per capita growth rate.

Democracy is a controversial question of the modern theory of economic growth. Indeed, the empirical evidence suggests that the highest growth rates were achieved in those countries with a considerable degree of political dictatorship. However, the lowest long-run growth rates of real GDP per capita were achieved by countries in which political dictatorship prevails. The pattern suggest that the quality of institutions such as the rule of law, judicial independence and a constitutional democracy complement the significance of human capital which is the essential engine of long-run economic growth.

The most important growth engine of the highest growing countries such as East Asian tigers and Ireland has been the emphasize on human capital that resulted in a high level of knowledge intensity and high productivity growth rate. These countries were known for heavy doses of state interventionism aimed towards the implementation of industrial policy conducive to economic growth. However, the conclusion should be taken with caution. Political dictatorship or authoritarianism were detrimental to least-developed countries since it encouraged predatory political behavior and resulted in the political environment with a complete absence of the rule of law, judicial independence, protection of private property rights, institutional integrity and constitutional democracy.

The question which set of growth policies is essential to high long-run growth of real GDP per capita involves two answers. First, the primacy of institutional quality alongside the investment in human capital is by far the most important engine of long-run economic growth. Without first-class institutions and human capital, the vicious circle of poverty and social deprivation for less developed nations can be endless. And second, the components of constitutional democracy such as electoral rights and pluralism, good functioning of government, high level of political culture and civil liberties can deliberately increase the prospects of economic growth.

However, if the power of state is left unrestrained by the absence of the rule of law and a coherent set of checks and balances on the coercive strenght of redistributive interest groups, even a high level of democracy would not alleviate the persistence of poverty and weak structural indicators. On the contrary, it would only worsen the prospects of long-run economic growth.

Religion and Economic Growth

Rok Spruk — Wed, 29 Sep 2010 19:19:56 +0000

In the course of economic growth theory, the impact of religion on economic growth and GDP per capita has been largely neglected by the mainstream economic theory. Basically, there have been two major conceptual forces behind the demonstration of the effect of religiousness on economic growth. First, traditional theoretical approach to the analysis of economic growth embodied in the Solow approach emphasized the role of capital accumulation and technological progress in the growth of total factor productivity where the technological progress accounted for the unexplained and exogenous feature that drove the growth of total factor productivity.

Early analysis of economic growth and its main determinants heavily neglected the effect of institutional variables on economic growth. Second, the theoretical framework of economic growth usually follows the empirical evidence on the existence of postulated hypotheses related to the economic growth. Primarily, the effect of religion and other institutional features on economic growth has been displaced to the lack of empirical estimation techniques that could account and control for the effect of the institutional phenomena on the course of economic growth.

The best lucrative and empirically consistent analysis of economic growth and its determinants had been documented by Robert Barro and Xavier Sala-i-Martin. In 2004, Robert Barro published Economic Growth Across Countries. In the explanatory framework, the author included several institutional variables and examined its effect on 10-year economic growth interval in a cross section of 86 countries over 1965-1975, 1975-1985 and 1985-1995 time periods. For a given set of institutional control variables, the rule of law exerted a strong, positive and statistically significant effect on growth. The effect of democracy, the second institutional control variable, was estimated by a single coefficient and its squared term to account for a possible movement of the effect of the level of democracy.

The magnitude of both coefficients was statistically significant. The sign of the squared term was negative suggesting for a typical inverted-U effect of democracy on economic growth. In the meaning of the economic theory, the estimated coefficients suggested that the adoption of democratic institutions and policies in the initial stage of GDP per capita boosts economic growth, particularly by the institutions such as the rule of law, electoral representation, and multiparty political system as well as by the constitutional protection of civil liberties.

However, as countries depart from the initial level of GDP per capita, the political pressure from electoral representation tends to enforce egalitarian policies that negatively effect economic growth, particularly by the fiscal redistribution of income to mitigate income inequality. Consequently, the effect of democratic institutions tends to diminish and, as the curve bends, the predictive effect of constitutional democracy is negative, thereby exerting a negative effect on economic growth. However, the hypothetical relationship between democracy and economic growth is dubious, if not intriguing. In fact, neoclassical growth theories suggest that the rate of economic growth tends to diminish alongside the expansion of the capital stock and productive capacity of the national economy. The hypothesized theoretical assertion postulates that the non-linear, inverted-U effect of democratic institutions on economic growth is overestimated.

In 2003, Robert Barro and Rachel M. McCleary wrote a seminal contribution (link) to the theory and empirics of the relationship between religion and economic growth. Even though in The Protestant Ethics, Max Weber argued that the religious practices and beliefs have had important implications for economic development, the economists paid little or no attention to the role of religiousness as a cultural measure on economic growth. Arguably, the most difficult inferential problem in economic theory is to capture the direction of causality in non-experimental data which indistinguishably confuses the empirical inference from sample estimates. The theoretical relationship between the religion and economic growth is nonetheless a daunting task of the economic theory.

Across the world, there is a whole spectrum of religious diversity in the interplay between religion and economic development. Some countries, such as the United States have been largely influenced by the Enlightenment thought, penned in Thomas Jefferson’s 1779 The Virginia Act for Establishing Religious Freedom, on religious freedom as the principle of freedom from religious oppression. On the other hand, countries in Northern and some parts of the Continental Europe largely adopted Protestantism as the religious establishment while Southern and Central European countries experienced a strong and coercive influence of Roman Catholicism. Hence, the historical bond of nations in the Middle East and North Africa to the Islamic religion accounts for a significant share of the world population and a representative estimate of the effect of Islam on economic growth.

In addition, many political regimes, particularly in China, Soviet Union and Cuba, have attempted to suppress the religious freedom and, hence, establish a system that officially prohibited and punished the religious practice. Surprisingly, countries in Northern Europe such as Norway, Finland and Iceland have established an official religion that is effectively articled in the constitution. Given the vast difference in the distribution of GDP per capita across countries, the assessment of the relationship between the religion and economic growth is not a triviality per se.

Robert Barro and Rachel M. McCleary constructed a broad cross-country dataset which included national account variables and an array of other political, economic and institutional indicators in a cross section of over 100 countries since 1960. The predicted theoretical expectations postulate whether the religion fosters religious beliefs that influence individual cultural characteristics such as ethics, work and honesty. The authors estimated both the effect of different explanatory variables on religious outcomes such as monthly church attendance, the belief in heaven and the belief in hell.

The estimated coefficients suggest that monthly church attendance is strongly affected by urbanization rate and a set of dichotomous religious variables. In particular, a one percentage point increase in the urbanization rate decreases monthly church attendance rate by 1.49 percentage points, holding all other factors constant. In addition, a 1 percentage point increase in religious pluralism fosters the monthly church attendance rate by 1.35 percentage points, ceteris paribus, while the increase in the measure of the regulation of religion by 1 percentage point decreases the church attendance rate by 0.64 percentage point. Hence, the church attendance rate in countries with official state religion, on average, increases the religious participation by 0.87 percent more compared to countries with the absence of state religion, ceteris paribus. The belief in heaven and hell, on the other hand, is positively correlated with state religion and religious pluralism, Muslim religious faction and other religious factions. The belief in heaven and hell is significantly negatively correlated with urbanization rate, communist regimes, Orthodox religion, Hindu religion and Protestant religion. Barro and McCleary regressed growth rates of real GDP per capita on variables of monthly church attendance rate, belief in heaven, belief in hell and dichotomous (dummy) religious variables representing the share of religion in the countries observed. The table below reports dummy coefficients of each religion relative to the Roman Catholicism. The sign of the coefficient is negative suggesting the increase in the share of each religion (see table) decreases the growth rate of real GDP per capita by less than by the anticipated increase in the share of Roman Catholic religion.

The effect of religion on long-run economic growth

Source: R. Barro & R.M. McCleary: Religion and Economic Growth, 2003.

The p-value for religion shares in the regression specification is about 0.001, suggesting that the hypothetical zero simultaneous effect of the explanatory dummy variables of religious share is easily rejected at 0.1 percent level of statistical significance. The estimate suggests that religious shares influence the growth rate of real GDP per capita. Interestingly, sample estimates of regression coefficients suggest that monthly church attendance is significantly negatively related to the GDP growth rate. The estimated coefficient suggests that higher church attendance will, on average, lead to significantly lower growth rate of real GDP per capita and, hence, a lower growth of the standard of living.

On the other hand, the sample estimates of growth regression coefficients suggest that the extent of belief in heaven and hell is positively related to economic growth. Thus, the empirical evidence from the panel of over 100 countries since 1960 suggests that the belief in heaven and hell encourage ethical behavior and honesty and thereby simultaneously increases the growth rate of real GDP per capita. The reported p-value for church attendance and beliefs is 0.000, suggesting the rejection of null hypothesis on a simultaneous zero effect of church attendance and beliefs in hell and heaven on the growth rate of real GDP per capita, and a strong influence of religious factors on the distribution of economic growth across countries since 1960.

The empirical evidence of the relationship between religion and economic growth suggests that the church attendance and the rate of economic growth are substitutes, not complements. The philosophical premises of Roman Catholicism often scrounge individualism and personal liberties and encourage collectivist mentality by punishing individual work, thrift and effort. Incidentally, the empirical evidence suggests strongly negative effect of the share of Roman Catholic religion on the long-run growth rate of real GDP per capita.

Regarding the true importance of religious freedom, not oppression, on the emergence of order alongside the abstract rules and the pursuit of individual liberty, Friedrich August von Hayek wrote in The Constitution of Liberty: “It should be remembered that, so far as men’s actions toward other persons are concerned, freedom can never mean more that they are restricted only by the general rules. Since there is no kind of action that may not interfere with another person’s protected sphere, neither speech, nor the press, nor the exercise of religion can be completely free. In all these fields … freedom does mean and can mean only that what we may do is not dependent on the approval of any person or authority and is limited only by the same abstract rules that apply equally to all.”

In the microeconomic perspective, religious market is highly oligopolistic, especially in Europe where government subsidies to large religious groups discourage the entry of competitive religions in the market. Therefore, in strongly Catholic countries, such as Italy and Spain, Roman Catholic church firmly resembles the behavioral pattern of a dominant firm, facing price inelastic demand and price elastic supply. Subsidies to churches do not quite differ from subsidies to corporations and enterprises – the net effect are lower marginal costs, increasing the total producer surplus of the church and increasing the deadweight loss to the consumers of religious services. A cautionary approach would require not only the precise modeling of the religious market upon the theoretical assumptions but also the contestable empirical evidence on the existence of the Catholic church as a dominant firm in highly oligopolistic religious market.

Incidentally, the empirical evidence suggests strongly negative effect of the share of Roman Catholic religion on the long-run growth rate of real GDP per capita. Nonetheless, religion is an important determinant of economic growth. However, the evidence from the second half of the last century suggests that the prosperity and wealth of nations is greater if people allocate fewer resources to the exercise of religious activities.

The Mind Conspirators

Bron Suchecki — Thu, 09 Sep 2010 19:27:30 +0000

Worthwhile read for libertarians – The Mind Conspirators by Nelson Hultberg. A quote:

Philosophical fallacies and socialist falsifications of economics and history have gained sway in the school system to poison our citizens’ minds against the American concept of freedom. Such fallacies have created a grossly distorted image for the man in the street about the way the world works. Freedom is now seen as inimical to human dignity. Creative entrepreneurship is portrayed as exploitation of the poor instead of their only hope. Gold is termed a “barbarous relic” instead of history’s proven store of value. …

We are being conditioned to accept sloth as normalcy, servility as dignity, weakness of will as compassion, and government conveyed privilege as justice. The world of sanity and rationality gives way to regimental nightmares of Orwellian “newspeak” and “political correctness” in order for legions of middle-class sluggards to feel good about themselves while they live out their spiritually squalid lives queuing up to the entitlement troughs of the mega-state.

My response to the article agrees very much with the comments of MetaCynic:

Accepting Hultberg’s argument that ideas are the engine of not only entire civilizations but of every individual, begs the question why do some ideas gain traction and not others. Why did the ultimately unworkable collectivist ideologies of the big picture intellectuals, Rousseau, Hegel, Comte and Marx, find acceptance in the midst of the wondrous prosperity produced by the Enlightenment’s Industrial Revolution? Why does the siren call of unaccountable collectivism to this day continue to outsell individual liberty with all its attendant responsibilities?

Despite its clashes with reality, do collectivist intellectuals really have to work very hard to find widespread acceptance for their ideas? Maybe there has always been a ready market for their disabling poison. In politicians and bureaucrats they have, of course, an enthusiastic audience eager to legitimize their own drive for wealth and power. In the envious masses they have deluded voters proudly participating in the process to redistribute the wealth of others into their own pockets. And in the captains of industry they have “capitalists” in need of protected markets and guaranteed profits. The great majority of humans are conformists and clock watchers interested only in comfort and entertainment.

The Empirics of Corruption, Institutions, and Economic Development

Rok Spruk — Thu, 06 May 2010 19:08:13 +0000

Urska Zagar posted two very interesting empirical articles (here and here) about the connections between corruption, economic freedom and economic welfare. The first two indicators are qualitative while the third one is rather easily measurable. In a sample of 50 advanced, developing and least developed countries, she found a positive and robust correlation between corruption perception and GDP per capita, meaning that higher GDP per capita, on average, reduces the scope of corruption. The relationship between corruption and economic development is in fact even more intriguing than empirical figures suggest.

The impact of corruption on economic growth is an important theoretical and empirical theme in the economic literature. In this theoretical and empirical post, I will briefly review the main literature on corruption and development and discuss the empirical studies.

I would firstly refer to the article by Rodrik, Subramanian and Trebbi (2002) where the authors discuss the primacy of institutions for economic development over the exogenous factors such as geography (link). There has been an extensive amount of literature on the role of geography in economic development. The empirical strategy is quite simple. Usually, the basic equation includes the list of explanatory variables such as distance from equator, the percentage of land used for agricultural production and so forth. For example, the basic equation might take the following form:

log(GDP)=b1+b2(Dist)+b3(Land)+b4(Dummy_SubAfrica)+e

where GDP stands for GDP per capita, Dist for distance from equator, Land for the percentage of fertilized land and Dummy_SubAfrica is a dummy variable, taking the value of 1 if a country is located in the Subsaharan Africa and 0 if otherwise. In addition, e represents stohastic error unexplained by the selected predictors.

However, the basic problem with geographic approach to explaining economic development is that the approach does not, by itself, distinguish between the endogenous features of economic development. In regressing GDP per capita on the distance from equator, the empirical estimates usually result in a modestly negative correlation between the two variables. However, the distance from the equator cannot itself explain the nature of economic development and its significance over time mainly because of its low predictive power in explaining the evolution of institutions and governance.

An interesting approach has been incorporated by Acemoglu, Johnson and Robinson (2001). They incorporate a historical and institutional perspective in the empirical framework of the explanation of economic development. The authors used mortality rates of colonial settlers to explain the institutional quality. They further argue that where settlers encountered few health hazards compared to European settlement, they established solid institutions, strong enforcement of property rights and a robust system of law. In other areas where health hazards frequently occured, colonizers focused on the extraction of natural resources and showed little or no interest in building high-quality institutions. Rodrik, Subramanian and Trebbi (2002) further estimated the impact of geographic variables, institutions and openness on macroeconomic variables.

The main findings in their study were the following. First, each degree distance towards equator, on average, reduces the income per capita by 0.94 percent. The geographical location by the equator is also negatively related to capital per worker (-1.68), human capital per worker (-0.25) and total factor productivity (-0.32). Second, the quality of institutions is a very good measure of the economic welfare. In their panel, the authors found that each additional improvement in the rule of law, on average, leads to 2.22 percent increase in income per capita. The result is statistically significant at 1 percent. The improvement of institutional quality is both positively related and statistically significant when capital per worker, human capital per worker and total factor productivity are regressed on the institutional quality.

Back in 1997, Peterson Institute published an extensive study, searching the causes of corruption (link). The author estimated that the highest cost of corruption in regressing a series of macroeconomic variables on corruption index is lower education expenditure and a decrease in private investment. The estimate of the total macroeconomic cost of corruption is a difficult and daunting empirical task.

The main causes of corruption are mostly endogenous and related to the institutional evolution ranging from legal origins, colonial historical variables to the public sector efficiency variables. In search of the grain of truth, it should be noted that capturing the stylized effect of corruption of economic growth and development requires an interactive empirical approach. In other words, it would be impossible to establish “cause-and-effect” connection between corruption and development indicators without extracting a large amount of historical data and regressing it on the key endogenous variables.

Clearly, the role of geographical characteristics should not be neglected. However, the primacy of institutions in explaining the contemporary patterns of economic development is rather undisputable. Daron Acemoglu recently wrote an in-depth article on the distribution and explanatory factors regarding world poverty (link) where it clearly stressed the lack of institutions of human capital in the evolution of world poverty. When discovering the true causes of corruption, there should nonetheless be a clear and distinct rationale underlined by the evolution of institutional quality over time as the most significant measure in explaining the evolution, causes and effects of corruption on economic development.

A Time for Choosing

Thersites — Fri, 12 Feb 2010 16:10:29 +0000

You and I have a rendezvous with destiny.

We’ll preserve for our children this, the last best hope of man on earth, or we’ll sentence them to take the last step into a thousand years of darkness.

Thus spoke Ronald Reagan some forty-six years ago. Tragically, today in America it appears the time for choosing may have passed. As each day goes by our debt grows more unsustainable; our security further imperiled; our economy more shackled; our government more tyrannical.

These are symptoms of an America that has chosen the wrong path: the road to serfdom over the road to civilization. This plight is the result of a hundred-plus year campaign by the socialist sophists to slowly but surely undermine the principles that built our nation to its hegemonic place. While the ends of a nation are peace and prosperity, there has always been a difference in opinion as to the means to achieve these ends. This fundamental tension has rested upon the difference between liberty and tyranny.

As Frederic Bastiat argued, “The state is the great fictitious entity by which everyone seeks to live at the expense of everyone else.” James Madison, perhaps slightly more optimistic shared Bastiat’s concerns, arguing, “If men were angels, no government would be necessary. If angels were to govern men, neither external nor internal controls on government would be necessary. In framing a government which is to be administered by men over men, the great difficulty lies in this: you must first enable the government to control the governed; and in the next place oblige it to control itself.” Herein lies the problem of government. We grant government its privileges in order to protect our natural rights, yet it is difficult enough for man to govern himself let alone others. Thus, in devising a governmental system, our founders set up a Constitution of diffuse powers, ensuring that the majority of power rested with the states or the people.

As our country grew, slowly but surely the state consumed our rights instead of securing them. Government grew whilst the individual shrunk. Whereas the law was meant to protect against the diminution of the individual, instead it was used as an instrument of plundering him. Bastiat argued, “Legal plunder can be committed in an infinite number of ways; hence, there are an infinite number of plans for organizing it: tariffs, protection, bonuses, subsidies, incentives, the progressive income tax, free education, the right to employment, the right to profit, the right to wages, the right to relief, the right to the tools of production, interest free credit, etc., etc. And it the aggregate of all these plans, in respect to what they have in common, legal plunder, that goes under the name of socialism.”

We allowed for the planting of these seeds of destruction. We have always had the better ideas, but we have failed to adequately defend them. Our ideological counterparts, realizing that they could not win on the basis of substance propagandized through academia and the media, and co-opted the poorest and the richest in their lust to undermine our rights for their personal gain. Anecdotally, we can see a clear difference in the logical ends of the policies the statists espouse. A good example would be in looking at West Germany and East Germany during the Cold War. Similarly, if we compare and contrast the liberal urban areas in America with more conservative suburban ones we see a clear difference in wealth, crime and quality of life. Yet even with the stark differences in results, somehow we have succumbed to the path to barbarism.

The battle lines between our sides are clear, but we have not articulated them well. We have not promulgated the dangers of liberalism, progressivism or socialism, nor the virtues of freedom. We have sacrificed the individual to the state. But if Americans were to examine the following questions, who would support this system? Do Americans believe in private self-reliance or public largess? Do we believe in meritocracy or a thugocracy? Do we reward success or failure? Do we stand upright or bow to the world? Do we wish to return America to fiscal order, or condemn future generations to debt slavery? Do we believe that solutions to our problems come through the ingenuity and toil of the American people, or from faceless bureaucrats in Washington? Do we wish to be the shining beacon of civilization, or a mere footnote in a history book? Do we believe in the individual, innovation, morality and the spontaneous and organic harmony of freedom or the collective, backward, perverted morality and destitution of centrally planned servitude?

The people of this nation know that the progress of man has always come from the individual, free to question, experiment and fail. In fact, it is often out of failure that opportunity arises. Our nation was built on principles derived from the wisdom of founders who had studied the failures of their predecessors. They understood that powerful centralized government could never advance man, but only restrain him. That the sole purpose of government was to protect man from tyranny, and build a foundation on the basis of property rights and the rule of law to allow man to flourish. But generation after generation, we have allowed our government to slowly but surely usurp our freedom — to steal from us the life, liberty and property that make us men. We have allowed politicians to weaken our constitution and dehumanize us.

While our intellectual foes have had over a hundred-year head start on us, we now have a populace galvanized against our largely corrupt stewards. We must capitalize on this time to educate a captive audience on history; on principles; on the ideals that we have allowed to grow decadent. In the meantime in trying to roll back years of ideological subversion that have numbed Americans to truth and morality, we must elect officials who will stop government from expanding. Then, we must go to work in stripping it back to the bare bones explicitly attributable to it by our Constitution. In order to achieve this monumental task, we will need to seek out those candidates who are unafraid of the censorship that is political correctness; who have a clear understanding that the state is always to be subservient to the individual; who are willing to stand for principle even if it means political pain; in other words, we will have to seek out the people that would have in the past avoided government and who do not stand to gain from serving in it.

This battle will take many, many years, and we may not be successful. But difficult as this struggle may be, appeasement and the choosing of the middle path will surely lead to failure. Reagan understood this when it came to the Cold War. He argued, ”every lesson of history tells us that the greater risk lies in appeasement, and this is the specter our well-meaning liberal friends refuse to face—that their policy of accommodation is appeasement, and it gives no choice between peace and war, only between fight or surrender. If we continue to accommodate, continue to back and retreat, eventually we have to face the final demand—the ultimatum.” We must fight this same war but on ideological grounds. For as Reagan further noted, “You and I know and do not believe that life is so dear and peace so sweet as to be purchased at the price of chains and slavery.” We might add that chains and slavery will never lead to a dear life or sweet peace.

We must express to all those who cherish this country that nothing less than our existence rests upon our fight against the tyranny of our democracy. Our state is a Leviathan, hurtling towards fiscal and moral bankruptcy and war. History will either remember us as the generation that twiddled our fingers while Rome burned, or the underdogs who overcame great evil to return this nation to its rightful place as a shining city on a hill. We lie very close to the precipice today. So as Reagan argued, though we may be late we still must still make the proper existential choice. We must choose to fight the fight for civilization or risk dishonoring our founders and men like Reagan, enslaving our children and debauching our once great nation. In a world being consumed by the ideologies of socialism and its ally in Islamism, we still remain the last best hope of man on Earth.

A Brief Message to President Obama

Thersites — Thu, 28 Jan 2010 12:55:40 +0000

Government cannot fix America’s problems. Only innovative, responsible individuals acting according to their own free will can help cure what ails us. If government could solve all our problems, then government might as well centrally plan society, but as we have seen in every instance in which this has been tried, the sole result has been poverty and mass genocide.

Of course it is naive to think that this President cares about solving our problems. The man’s sole concern is power, obtained by “fundamentally transforming the United States of America.”

Credit Where Credits Aren’t Due

Thomas Knapp — Tue, 26 Jan 2010 20:34:19 +0000

Ilana Mercer concisely and elegantly makes a point that I’ve been harping on among big-L Libertarians for some time.

“Targeted tax credits” aren’t “incremental moves toward liberty,” they’re just social engineering — shifting the tax burden from those who spend their money the way bureaucrats decide they should spend it, and onto those who . . . → Read More: Credit Where Credits Aren’t Due

Do All Well-Being Indicators Tell Similar Stories About Human Flourishing?

Winton Bates — Thu, 10 Dec 2009 19:36:40 +0000

Human flourishing is about enjoying the things that it is good for humans to have. It is more than economic opportunity; it is more than feeling happy or satisfied with life; it is more than safety and security; it is more than good health and longevity; it is more than educational opportunity; it is more than being free to choose how you live your life; it is more than the opportunity to participate in political processes; it is more than social capital; it is more than the opportunity to enjoy the natural environment. These things may all be relevant to human flourishing but no single aspect incorporates everything that contributes to individual flourishing. Any list of aspects of human flourishing is likely to be incomplete and include items that are more important to some individuals than to others.

Hopefully everyone who reads the above paragraph will consider it to be a statement of the obvious. However, the idea that there is more to life than feeling happy or satisfied actually seems to be quite controversial. Some happiness researchers, including some economists, seem to think that everything that is good for humans to have can be reduced to a single number reflecting feelings of happiness or satisfaction with life.

In an earlier post (What are the characteristics of a good society?) I suggested that nearly everyone would agree that a good society would provide its members with opportunities to flourish – to have more of the things that are good for humans to have. In another post (Is a good society index a good idea?) I foreshadowed that I would attempt to identify the suite of indicators that are most relevant to assessing to what extent particular societies might qualify as good societies. This post goes some way toward that objective. It presents indicators of the performance of various societies in relation to a range of aspects of human flourishing.

In the following table countries have been ranked by per capita income levels. The ratings of countries with performance in the top quartile for each indicator are shown against a green background, those for the second quartile are shown in yellow, the third quartile in orange and the fourth quartile in red.

The table shows that many well-being indicators tell a similar story about human flourishing. It also shows, however, that both per capita GDP and subjective indicators of the quality of life have limitations as well-being indicators. This is particularly evident in regard to societies such as United Arab Emirates, Singapore and Kuwait. (Many of the indicators used in the table are sub-indexes of the Legatum Prosperity Index. Indicators are defined and information sources are presented below the table.)

Notes:

Income index: Real GDP per capita (rgdpl) for 2007 from the Penn World Table, expressed as a fraction of per capita GDP in the United Arab Emirates, the country with highest per capita GDP. Source: Alan Heston, Robert Summers and Bettina Aten, Penn World Table Version 6.3, Center for International Comparisons of Production, Income and Prices at the University of Pennsylvania, August 2009.

Quality of life index: Gallup World Poll data on “life today” (latest available) country averages, expressed as a fraction of the rating for Denmark, the country with the highest rating.

Safety and Security: A sub-index of the Legatum prosperity index. High ratings reflect the existence of a safe environment and peaceful society.

Health: A sub-index of the Legatum prosperity index measuring how well citizens are capable of living long and healthy lives.

Education: A sub-index of the Legatum prosperity index reflecting mainly the years of schooling that a nation’s citizens complete.

Freedom: A sub-index of the Legatum prosperity index which measures how well citizens are able to freely choose the course of their lives and their perceptions of societal tolerance.

Democratic Institutions: A sub-index of the Legatum prosperity index which reflects civil liberties, political rights, the independence of the judiciary etc.

Social capital: A sub-index of the Legatum prosperity index which reflects how well people are engaged in social networks and relationships that are trustworthy and supportive.

Environmental satisfaction: Gallup World Poll data on the satisfaction of citizens with efforts to preserve the environment in their country, presented in index form such that the highest rating country has a rating of 1.0 and the lowest rating country has a rating of zero.