If You Pull a Rabbit Out of a Hat, You Must Have Put the Rabbit in There Why Magic is a Valuable Too

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If You Pull a Rabbit Out of a Hat, You Must Have
Put the Rabbit in There (Why Magic is a Valuable
Tool in Models of Growth)

• Comments on Acemoglu-Robinson
• Persistence of Power, Elites, and Institutions
• Clemson University, Symposium on Economic
  Development, Spring 2006
• Michael Munger, Duke University

2
Political Science Discussant Protocol and Outline

• First, whine about assumptions
• Second, point out other literature
• Finally, make some substantive comments

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The Rabbit is in the assumptions

• 1. Popular taste for democracy, even without
  apparent rational cause. Presumably, means
  voting or some sort of expressive charade, since
  either the wrong candidates are chosen or those
  candidates either neglect or fail to implement
  policies designed by the people.
• P. 41 the elite will be able to impose labor
  repressive economic institutions with a higher
  probability under democracy than in nondemocracy.

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The Rabbit is in the assumptions

• 2. Transactions costs, collective action costs.
• P. 3 a key observation is that landownders,
  by virtue of their smaller numbers and their
  established position, have a comparative
  advantage in solving the collective action
  problem.
• What this means is that capitalists have class
  consciousness, but workers do not. Very
  agricultural basis here, less plausible for even
  slightly urbanized or industrialized society.
  Much more plausible for a feudal setting than for
  Argentina or Colombia. American south?
  Possibly.

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The Rabbit is in the assumptions

• 3. Equilibrium approach
• P. 3 The most interesting of our framework is
  that, because the elites de facto political
  power is an equilibrum outcome, it will partly or
  entirely offset the effect of changes in
  political institutions. In particular, the elite
  will invest more in their de facto political
  power in democracy than in nondemocracy.
• This puts the stability and persistence results
  inside an impregnable citadel. Sure, if the
  equilibrium requires that the total political
  power of elites is a constant, it is hardly
  surprising that change in institutions reduces to
  a wealth effect with no real effects.

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Other Literature From Book Jacket of Economic
Origins of Dictatorship Democracy

• This book develops a framework for analyzing the
  creation and consolidation of democracy.
  Different social groups prefer different
  political institutions because of the way they
  allocate political power and resources. Thus
  democracy is preferred by the majority of
  citizens, but opposed by elites. Dictatorship
  nevertheless is not stable when citizens can
  threaten social disorder and revolution. In
  response, when the costs of repression are
  sufficiently high and promises of concessions are
  not credible, elites may be forced to create
  democracy. By democratizing, elites credibly
  transfer political power to the citizens,
  ensuring social stability. Democracy consolidates
  when elites do not have strong incentives to
  overthrow it. These processes depend on the
  strength of civil society, the structure of
  political institutions, the nature of political
  and economic crises, the level of economic
  inequality, the structure of the economy, and the
  form and extent of globalization.

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Other Literature The Marx-Stigler Synthesis

• When commercial Capital occupies a position of
  unquestioned ascendancy, it everywhere
  constitutes a system of plunder. (Capital).
• regulation is acquired by the industry and is
  designed and operated primarily for its benefit"
  (Stigler, 1971).
• Actually, quite different. Stigler much more
  concentrated benefits, diffused costs, but one or
  the other must fit.
• So, to paraphrase Johnny Cochrane The one that
  fit, you must cite it!

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Other Literature Coase

• Coase theorem If transactions costs are
  negligible, and wealth effects are set aside,
  then the allocation of productive resources will
  be independent of the assignment of property
  rights. And that allocation of productive
  resources will be efficient.
• Acemoglu-Robinson theorem?

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Substantive Points (2)

• Persistence. Belief systems and
  culture.Particularly in the U.S. south.
• Jefferson Davis famously said that the tombstone
  of the Confederacy should read
• Died of a Theory
• (when Georgia announced its intention to secede
  in 1865)

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Mental Models and Persistence

• In February 1865, Jefferson Davis We are
  reduced to choosing whether the negroes shall
  fight for us or against us. Confederate soldiers
  sent supportive petitions to Richmond
• Finally, on February 18, 1865, General Robert E.
  Lee asked the Confederate Congress to authorize a
  New Afrikan mercenary corps The negroes, under
  proper circumstances, will make efficient
  soldiers.

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Mental Models and Persistence

• "I think that the proposition to make soldiers of
  the slaves is the most pernicious idea that has
  been suggested since the war began. You cannot
  make soldiers of slaves, or slaves of soldiers.
  The day you make a soldier of them is the
  beginning of the end of the revolution. And if
  slaves seem good soldiers, then our whole theory
  of slavery is wrong.
• Howell Cobb of Georgia - former U.S. senator and
  Confederate general. (Emphasis added)

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Mental Models and Persistence

• So, Senator Cobb was an acute formal theorist

Yes
Nature slaves are good soldiers
Win or lose, admit that theory of slavery is
false
Use slaves as combat soldiers for Confederacy
Yes
Lose War, humiliated
No
No
Lose War
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Persistence in U.S. South Ideology

• Not elites that perpetuated and propped up Jim
  Crow system
• Belief system, widely shared, and preserved
  throughout the war and Reconstruction
• Southern yeoman, not elites, fought the war,
  beyond all reason
• Southern industry and white workers agreed that
  preserving social structure came first. Not a
  collective action problem along class lines, but
  along conceptions of the good.
• False consciousness? A deus ex machina.

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Substantive Points (2)

• 2. Coase theorem If transactions costs are
  negligible, and wealth effects are set aside,
  then the allocation of productive resources will
  be independent of the assignment of property
  rights. And that allocation of productive
  resources will be efficient.
• Acemoglu-Robinson theorem If transactions costs
  are sufficiently assymetric, with workers facing
  much greater collective action problems than
  elites, than the total allocation of political
  power is constant. In particular, policy
  outcomes will be independent of the de jure
  assignment of political property rights through
  constitutional reform.