Wednesday, June 04, 2008

William Easterly Jumps The Shark

William Easterly is capable of being perfectly sensible [audio file]. And when he is, he's well worth listening too. Other days though you've just got to wonder.

From Trade Diversion we get this extract of his latest FT column.

What to do in a world of such unpredictability? There are some general principles and they do not require experts. Another Nobel laureate gave the crucial insight a long time ago – the answer is freedom for multitudinous individuals to figure out their own answers. Friedrich Hayek said: “Liberty is essential to leave room for the unforeseeable and unpredictable; we want it because we have learned to expect from it the opportunity of realising many of our aims. It is because every individual knows so little and ... because we rarely know which of us knows best that we trust the independent and competitive efforts of many to induce the emergence of what we shall want when we see it.”

The evidence for this vision is not found in those baffling fluctuations of growth rates, it is in the levels of development attained in the long run. Confirming Hayek, systems that give more liberty to individuals – featuring both more economic and political freedoms – are associated with much less poverty. The evidence for this comes from both history (for example old, despotic, poor Europe compared with modern, free, rich Europe) and cross-country comparisons (for example South Korea compared with North Korea, former West Germany compared with East, New Zealand compared with Zimbabwe). This alternative paradigm has a much smaller role for experts, because experts cannot direct or impose freedom from the top down (or else it would not be freedom).

Yes, the same man who criticisies development experts and their grand plans has one of his own. Liberty - free markets and free politics. It's a nice ideal, particularly if you take freedom to include positive freedoms as well (in which case Hayek should be replaced by Sen). But ever so slightly simplistic, no? And comparing North and South Korea, Zimbabwe and New Zealand (which, by the way still clings to the sort of social democracy that Hayek hated)? That isn't evidence in any meaningful sense of the term. And when you do compare the evidence, it turns out that countries with smaller states (and hence freer markets) don't grow any faster than those with greater government involvement. Similarly, democracies suffer fewer famines and have better distributive outcomes, but the evidence to suggest that they grow faster is pretty week. South Korea, readers will remember, took off economically while a dictatorship and it's growth was state-led.

In saying this I'm not defending dictatorships. I'm not even making the case for a universal social democratic model for the world. I'm just sayin' that Easterly is a hypocrite - accusing others of grand plans while fostering his own - one which can't even be backed up by evidence.

1 comment:

George Darroch said...

The Soviet Union had a per capita GDP 3/4 of that of New Zealand in 1991, high calories per person than the USA, and a high life expectancy. The first has recovered (although a large proportion of that is distributed among a small number of billionaire plutocrats), and the latter has dropped precipitously. Indeed, GDP per capita is increasing rapidly, in part because of a rapidly decreasing population. Which again, is not to defend dictatorships, but to challenge unstated questionable assumptions.