The Idea Trap

Wednesday, November 3rd, 2004

Bryan Caplan’s The Idea Trap explains why poor countries don’t catch up to rich countries:

If we look around the world, there is a lot of circumstantial evidence that bad performance is not self-correcting. One of the most important facts about economic growth is that, on average, poor countries do not catch up to rich countries. The main reason seems to be that poor countries consistently have bad policies. Many of these countries are democracies. But they almost never elect a candidate on the theme ‘We need to copy the policies of more successful countries like Hong Kong and Singapore, and turn our backs on our failed national political tradition.’

Thus, the least pleasant places in the world to live normally have three features in common: First, low economic growth; second, policies that discourage growth; and third, resistance to the idea that other policies would be better. I have a theory to explain this curious combination. Imagine that the three variables I just named — growth, policy, and ideas — capture the essence of a country’s economic/political situation. Then suppose that three “laws of motion” govern this system. The first two are almost true by definition:

  1. Good ideas cause good policies.
  2. Good policies cause good growth.

The third law is much less intuitive:

  3. Good growth causes good ideas.

The third law only dawned on me when I was studying the public’s beliefs about economics, and noticed that income growth seems to increase economic literacy, even though income level does not. In other words, poor people whose income is rising — like recent immigrants — have more than the average amount of economic sense; rich people whose income is falling — like the Kennedy family — have less.


A society can get stuck in an “idea trap,” where bad ideas lead to bad policy, bad policy leads to bad growth, and bad growth cements bad ideas.

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