Holy Bureaucratic Gibberish, Batman!

This post is by Adam Martin, a post-doctoral fellow at DRI. On July 1 the Department of Defense rolled out two notable new projects that will undoubtedly inaugurate a new era of peace and safety for the streets of Gotham international community. Even the world’s greatest detective could not have seen this coming.

Like their caped crusader namesakes, the DoD versions of BaTMAN and RoBIN are shrouded in mystery, their real identities cleverly disguised. BaTMAN is:

Biochronicity and Temporal Mechanisms Arising in Nature (BaTMAN) could develop an understanding of the relationship between biological systems and the spatial-temporal universe through the application of advanced principles from the physical sciences... Topic areas that may be of interest include, but are not limited to: quantum biology and molecular clocks; resetting and synchronization of biological clocks and rhythms; microscale recapitulation in macroscale; evolutionary pressure and time; physiological signal processing and clocks; timing and cognition; and robustness of clocks in development.

His faithful sidekick RoBIN:

Robustness of Biologically-Inspired Networks (RoBIN), seeks to apply the critical control features of biological networks to build unique models for adaptable networks, and create a dynamic biologically-inspired network of scientists and other experts for crisis response and complex decision support.

What does any of this have to do with foreign aid? Most prominently, it serves of a reminder of just how bad an idea it is to ask the military to be more involved in aid. Despite the distilled frenzy of a few prominent voices in the air, the defense establishment is more likely to lead us into a funhouse maze than solve the riddle of development.

But it’s not just military involvement itself that should resisted. The BaTMAN and RoBIN projects are perfect examples of the obfuscating language and flagrant non-accountability that accompanies bloated bureaucracies. These megalomaniacal ideas work great at keeping the funding flowing but achieve little else. The dynamic duo of massive government budgets and weak feedback mechanisms are a source of mischief in military and non-military organizations alike.

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Editor’s note: BaTMAN and RoBIN sound almost too outlandish to be real. We did call Defense Advanced Research Projects Agency (DARPA) to confirm that we were not being had, and the conversation went like this:

Me: Hi, I work at New York University and write for a blog called Aid Watch.

DARPA: OK?

Me: I am wondering if you could confirm that Biochronicity and Temporal Mechanisms Arising in Nature and Robustness of Biologically-Inspired Networks are in fact DARPA programs.

DARPA: Uhmmm...you want to try that in English? (laughs)

Me: Your language, not mine! The acronyms are BaTMAN and RoBIN...

DARPA: (Looks up the programs on his screen…) Well, what we issued was a Request for Information so they are not technically programs per se....They are potential new DARPA programs.

Me: So you can confirm that they are real potential DARPA programs.

DARPA: Yes.

There you have it, BaTMAN and RoBIN are not a spoof.

The Counter-Revolution of Development Economics: Hayek vs. Duflo

This post is by Adam Martin, a post-doctoral fellow at DRI. F.A. Hayek, well known as a critic of central planning, also criticized what he called “scientism,” a blind commitment to the methods of the physical sciences beyond their realm of applicability. In The Counter-Revolution of Science, Hayek opposed to “scientism” the genuine spirit of scientific inquiry.

Esther Duflo’s emphasis on small-scale experimentation has affinity with Hayek’s critique of grand schemes of central planning. As Duflo said in an interview with Philanthropy Action: “I think another untested and potentially wrong idea is that you have to do everything at the same time or else. This is a pretty convenient untested belief because if you live in that world, it is almost impossible to evaluate what you do.”

But Hayek’s concerns about “scientism” might yet apply to Duflo. She continues in the same interview:

Whereas if you say, I am going to press on this button and see whether it provides this result, you might find there are many things that do work surprisingly well with surprising consistency. So it is not that the world is so incredibly complex that every place needs a unique combination of five factors just to produce anything. I don’t know that we would have been able to say the same thing five years ago, but now we are starting to be in the position to say that a number of things, if well designed, just work pretty well in a lot of contexts.

Hayek, in contrast, argues that sheer, context-independent experimentation is not a viable path to development:

An experiment can tell us only whether any innovation does or does not fit into a given framework. But to hope that we can build a coherent order by random experimentation with particular solutions of individual problems and without following guiding principles is an illusion. Experience tells us much about the effectiveness of different social and economic systems as a whole. But an order of the complexity of modern society can be designed neither as a whole, nor by shaping each part separately without regard to the rest, but only by consistently adhering to certain principles throughout a process of evolution. (Law, Legislation, and Liberty Vol. I, p. 60)

Experimentation, for Hayek as well as Duflo, is the chief instrument of social change. Making experimentation work for development requires institutional feedback mechanisms which can fit together newly-discovered ways of doing things in mutually reinforcing ways. What Hayek defends as "liberal" principles are the ways of coordinating individual experiments in a way that enhances human welfare. Ad hoc, "pragmatic" approaches might solve some local problem, but without coordination with other projects the progress will not be reinforcing and self-sustaining.

Promoting progress is like playing leap-frog in the dark. Big leaps into the unknown can easily end in disaster. Experiments are small leaps. Only when we combine those small leaps together according to some rules do we leap-frog in a definite direction and reinforce each other's progress, rather than ambling about and running into each other. Without systematic feedback mechanisms that are effective at coordinating different projects, randomized trials are like those small leaps. They might be able to solve particular problems--especially in mitigating the ill effects of poverty--but they would not lead to the self-reinforcing process of wealth generation necessary to eliminate poverty.

An oil purse is a curse, of course?

This post is by Adam Martin, a post-doctoral fellow at DRI. In development economics everyone knows that natural resources are a curse. A well-known study by Sachs and Warner found a negative correlation between resource abundance and growth rates, while subsequent studies have shown a negative relationship with democracy.

The Curse enjoys wide appeal. Aid skeptics like that it implicates oppressive domestic government and nationalized industries. Aid supporters are drawn to its emphasis on geography (destiny!) and the indictment of global markets. And on the popular level, no one makes a better villain than oil companies. But popularity doesn't stop the story from being hot, flat, and wrong.

New research argues that empirical work on the Curse suffers from two interrelated problems. First, it uses dependence (the share of GDP from that resource) and calls it abundance (the stock of a resource in the ground). But dependence in turn depends on institutional quality—if you have sound institutions, natural resources take their place along other industries. If not, natural resources will by default constitute a large share of GDP because poor institutions stifle an advanced division of labor. When you look at cross-sectional data using dependence as a proxy for abundance, it will look like natural resources compromise institutional quality.

That reliance on cross-sectional data is the second major problem. The Curse story does not claim that Nigeria is Britain plus oil, but rather that Nigeria is less democratic than Nigeria would be in the absence of oil. One way to get around this problem is to test whether oil makes country X less democratic using panel data with fixed country effects. That’s fancy econometric speak for taking into account other factors that might make country X more or less democratic—its history, institutions, culture, etc. Fixed effects also allow testing a corollary of the Curse known as the "First Law of Petropolitics": as oil prices go up, oil-rich autocrats crack down on democracy even more.

Digging into the recent research:

• Christa Brunnschweiler and Erwin Bulte tackle the first problem. They find a positive correlation between resource abundance and both growth and institutional quality, and argue that it is conflict and poor institutional quality that lead to dependence.
• Stephen Haber and Victor Menaldo offer a great review of the second problem. They present evidence that even natural resource dependence does not undermine democratization.
• Romain Wacziarg corrects for both problems, testing for the effects of high oil prices on democracy using panel data. Again, there is no evidence for the Curse.

These studies argue that, while the Curse is plausible, domestic institutions are simply too persistent for it to matter much. Will belief in the Curse likewise prove too persistent in the face of new and better evidence?

Population Wars: Adam Martin replies to Global Population Speak Out

by Adam Martin I appreciate the thoughtful GPSO reply to my blog post. But I respectfully decline the offer to sign their pledge. Here is why:

Projections of population into the future that fail to account for the power of changing incentives are intellectually sterile explanations and policies that deny the rational response of individuals to incentives will prove impotent or worse.

Why are market-oriented economists so confident that population will be self-regulating? Well, under a regime of property rights, as we use up any scarce global resources, they will become relatively more scarce. This will put upward pressure on their prices. The first response is for individuals to cut back their consumption, but that's not the most important adjustment (that's only short term, after all).

The more important response is the one Julian Simon pointed out: the increase in resource prices creates an incentive to find more efficient means to use them or to come up with substitutes. Innovation of what we use and how we use it is the best path we know of to sustainability in development. Institutions such as property rights, the family, and, yes, even money are preconditions for aligning incentives with conservation and unleashing systematic resource-saving innovations.

Here both our deepest moral commitments, as well as sound economics, overlap with the professed beliefs of GPSO: certainly women should not have reproductive decisions forced upon them. So the message is not that nothing can go wrong. Absent secure individual rights, individual responsibility, and free markets, quite a bit can: first and foremost for the victims of injustice. However, simply admitting that these problems are real is a long way from endorsing statements like this (from the email I was sent):

the current size and growth of human population [is] a sustainability issue no less crucial than over-consumption in developed nations and all the resultant emissions, habitat loss and toxic pollutants. [emphasis in original]

I want to raise two problems with these sorts of statements. First, admitting that population growth can have adverse consequences is a long way from admitting that anyone has the knowledge to determine the "right" population size, even roughly. Statements like the one above, not to mention the affiliations of some of GPSO's signees--convince me that they believe otherwise. And I'm not arguing that sustainable population size is a difficult calculation to make, I'm arguing that it's meaningless. Sustainability means a balance between what present and future individuals want to do and can do. When human capacities and desires are by their nature heterogenous and changing over time--as in the long run that sustainabilitistas worry about--then what counts as sustainable is simply not knowable unless one knows current and future capacities and desires.

Second, I want to raise the question as to whether a "public discussion addressing the size and growth of human population" is compatible with those individual rights. If governments decide what the right population size is, and the actions of free and responsible individuals give rise to a different population size, either the population target or individual rights must be sacrificed. I believe--I hope--that the GPSO signees would abandon their plan. History has shown too many willing to do the opposite. It is for this reason that, while I obviously do not believe women should be coerced, I cannot sign onto "population justice" as defined by GPSO.

If it is excessive procreation we are worried about, we would do well to remember the words of Henry Simon: "Academic economics is primarily useful, both to the student and to the political leader, as a prophylactic against popular fallacies."

Malthus vs. Malthusian Population Scares

This post is by Adam Martin, a post-doctoral fellow at DRI. The laws of economics are more powerful than the laws of physics. I once saw Deirdre McCloskey illustrate this by placing a $100 bill on the table. The laws of physics, she reminded the class, dictate that an object at rest tends to stay at rest. Economics tells us that errant $100 bills laying out in the open do not remain unattended for long. She assured the students that, were she to leave the room for several hours, economics would better predict Mr. Franklin's fate.

But how do the laws of economics fare against a tougher opponent: the laws of sexual attraction? Against them, economists--especially those march under the Malthusian banner--have been willing to cede more ground. Everyone knows, after all, that Malthus judged the "passions between the sexes" as both universal and powerful. Everyone knows that this passion leads to "geometrical" increases in population that inexorably outpace "arithmetical" increases in food. Everyone knows this is why economics is called the "dismal science." But what everyone "knows" is dead wrong.

This is not another argument about how ol' Tom-Bob got it all wrong. No, the problem with Malthus--a problem for both his self-proclaimed friends and foes--is that he we wasn't a Malthusian. Ross Emmett offers a detailed and trenchant analysis. Malthus was not arguing in a vacuum. He was responding to William Godwin's proposal to overthrow basic social institutions like private property and the family.  In a free love-fest where no one is responsible for the offspring resultant from their passions, Malthus argued, population growth would run amok. If individuals don't bear the cost of procreation, they will procreate too much. If they do bear costs of offspring, "preventative checks" such as birth control and delayed marriage will make population self-regulating. In his own words:  "Impelled to the increase of his species by an equally powerful instinct, reason interrupts his career, and asks him whether he may not bring beings into the world, for whom he cannot provide the means of subsistence." (An Essay on the Principle of Population, Chapter II). Reproductive choices respond to incentives. The laws of economics are more powerful than the laws of attraction.

Note that Malthus does not say that the incentives for procreation are automatically aligned with the common interest. If individuals do not bear the full costs of their offspring, such as any effects of Junior on the environment, they may make irresponsible decisions. But parents are no more socially responsible if they fail to account for the benefits their children will generate for others (such as new ideas on technology). What matters is that, when discussing population, we do not forget the basic lessons of economics. A top-down perspective on population that treats individuals like mindless lemmings will panic: "Unless we reduce the human population humanely through family planning, nature will do it for us through violence, epidemics or starvation."

Malthus gets right what both his followers and his more technocratic critics get wrong: the institutions within which individuals make reproductive decisions matter. The way to increase GDP per capita is not to cut the denominator. And while today’s scare tactics (Mali is “really in for a Malthusian disaster,”) and recommendations to stop having babies are not as monstrous as those of yesteryear, we should be wary of those who would intrude on one of the most personal and sacred choices individuals confront – whether to have a child. Nor is population sustainability a mere horse race between libido and technology. Consistent with the approach of classical economists, Malthus treats human nature as constant. Different institutions drive differences in fertility outcomes. In this we should all be Malthusians.

Lies My Poets Told Me: The Prehistory of Development Economics

This post is by Adam Martin, a post-doctoral fellow at DRI. A couple months ago, Bill addressed the imperial origins of state-led development, arguing that economic development was a substitute for racism as a rationalization of empire. I think it’s worthwhile to delve a bit further into the intellectual and social context in which these ideas were put forward.

Why bother? Because ideas matter for policy. There are good, hard-nosed reasons for believing that rationales are not mere epiphenomena of political interests. Understanding why and how certain policies are implemented requires some digging into the justifications of policymakers. A bit of intellectual archaeology might also identify some path dependence in economic thinking about development. The point is not to impugn the motives of current policymakers or academic researchers, but to shed light on any hidden intellectual baggage that might be weighing down their efforts. Old dead economists might teach us something valuable after all.

How do the ideas of economists fit into this historical collision of racism, imperialism, and international politics that gave us the development establishment? Before jumping right into more proximate causes, a bit of pre-history might help set the scene. WWII was not the dismal science's first collision with race and empire. As it turns out, the "dismal" moniker that economists have long enjoyed stems from those very debates.

David Levy and Sandra Peart have extensively chronicled the relationship between classical economics and the racism contemporary to it. The surprise ending? The economists were the good guys. That's right. Vile, contemptible economists--apologists for markets, purveyors of selfishness--were the public defenders of racial equality (along with the "Exeter Hall" evangelical Christians). Then who were the bad guys? The poets: Thomas Carlyle, John Ruskin, and everyone's favorite literary critic of capitalism, Charles Dickens. It was Carlyle who christened economics as the dismal science, in contrast with the "gay science" of poetry. The context is shocking:

Truly, my philanthropic friends, Exeter Hall philanthropy is wonderful; and the social science -- not a "gay science," but a rueful --which finds the secret of this universe in "supply and demand," and reduces the duty of human governors to that of letting men alone, is also wonderful. Not a "gay science," I should say, like some we have heard of; no, a dreary, desolate and, indeed, quite abject and distressing one; what we might call, by way of eminence, the dismal science. These two, Exeter Hall philanthropy and the Dismal Science, led by any sacred cause of black emancipation, or the like, to fall in love and make a wedding of it -- will give birth to progenies and prodigies: dark extensive moon-calves, unnameable abortions, wide-coiled monstrosities, such as the world has not seen hitherto!

Carlyle is arguing here for the reintroduction of slavery in the West Indian colonies. John Stuart Mill responded, in line with classical economists' assumption of a deep human homogeneity. Differences between societies are the result of the incentives individuals face, meaning that history and institutions are the root cause of different levels of development. By contrast, the Romantic poets argued that inherent differences between individuals justified hierarchical relationships--for the good of the lesser races, of course. They longed for bygone feudalism when better men cared for their inferiors, while the economists argued that equals should come together in mutually beneficial market exchange.

Economists played this part again in the debate over Irish home rule, arguing that Ireland's economic backwardness was due to bad institutional arrangements, themselves the result of centuries of British invasions. For their part, the economists' opponents depicted them--personified as John Bright--as peddling snake oil to the subhuman Irish.

In both these cases, economists' underlying egalitarianism clashed with paternalism of an ugly sort. The "dismal" label should be worn as a badge of honor for precisely this reason. But why did later dismal scientists sign on so readily to the paternalist project of development? Why were voices like Bauer and Frankel so rare? I don't think the abandonment of racist language is a sufficient cause. Other tectonic shifts in economic thought took place in the intervening decades. Which were decisive? This is an open question worth pursuing further.