Isegoria

The prognosis for the poor world is much worse than the standard picture, David Oks and Henry Williams argue:

The crux of the problem is this: despite attempts to find alternative models of economic development, there is no widely replicable strategy to develop a country — simply put, to turn it from poor to rich — that does not involve an economy becoming highly industrialized. But in recent decades, the growth of manufacturing sectors, and thus of economic development more broadly, has been overwhelmingly concen­trated in East Asia, particularly in China. Across the bulk of the poor world— here we have in mind Latin America, South Asia, the Middle East, and sub-Saharan Africa — economies have been experiencing a more disturbing trajectory: simultaneous deagrarianization and deindus­trialization, especially in the years after 1980.

The result is that industrialization, development, and massive income growth in East Asia has statistically “compensated” for stagnation almost everywhere else — with East Asian industrialization partly re­spon­sible for the loss of other countries’ manufacturing bases. This has been the case even as incomes have risen in most of the poor world, mainly on account of the 2000–15 commodity supercycle driven in part by the explosive growth in demand from the Chinese market — which, ironically, helped lock emerging markets into low-tech, undiversified export profiles. Asian success, in short, has obscured a bleaker picture in the rest of the world.

Most emerging markets have not found an engine of durable growth comparable to manufacturing— most have indeed grown over the last few decades, but dependence on services and commodities exports has not made them rich. Thus most “developing” countries — we are skepti­cal of that euphemistic label — are in a worse structural position than they were a few decades ago: less economically complex and more socially unstable, with their developmental coalitions, if they ever exist­ed, badly frayed. For all the intermittent hype around “rising India” or “rising Africa,” systemic dynamics — deindustrialization, ecological dis­ruption, demographic headwinds — will pose severe challenges to eco­nomic development over the coming decades. New waves of industrialization and meaningful development are unlikely in these parts of the world. From the perspective of poverty statistics, Africa will assume particular importance: by far the continent with the worst economic performance over the last several decades, it is there that the most sig­nificant population growth will occur over the next century. The result, pending dramatic change, is a world in which the progress made against poverty over the last forty years will slow, stagnate, or even reverse.

In The Predictioneer’s Game — and in his EconTalk podcast on The Political Economy of Power — Bruce Bueno de Mesquita makes the point that Leopold II of Belgium was, if anything, quite progressive back in Belgium, where he had to answer to his people, in contrast to how he ruled the Congo, where he did not.

Any discussion of the Congo, or of European colonialism more generally, Bruce Gilley remarks, invariably begins with the question: “Have you read King Leopold’s Ghost?” — but he calls the book King Hochschild’s Hoax:

The first and biggest deceit at the heart of King Leopold’s Ghost is the attempt to equate Léopold’s “État indépendant du Congo” or EIC (long mistranslated as the Congo Free State) with Western colonialism. Yet the EIC was a short-term solution to the absence of colonial government in the Congo river basin. The deal was simple: Léopold was to open the area to trade and eliminate endemic Arab slave empires and African tribal wars. In return, he hoped to bring glory to the Belgian people for having done what no other European ruler dared (one in three Europeans who traveled to the Congo died, usually of illness). The EIC had nothing to do with the Belgian government. To the extent that limited abuses and misrule occurred in some parts of his domain (discussed below), this was a direct result of its not being controlled by a European state. As no less than Morel insisted (not quoted by Hochschild), “Let us refrain from referring to the Congo as a Belgian colony, let us avoid writing of ‘Belgian misrule.’”

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The freelance EIC had at its peak just 1,500 administrative officers and about 19,000 police and soldiers for an area one third the size of the continental United States. As such, it exerted virtually no control over most areas, which were in the hands either of Arab slave-traders and African warlords, or of native soldiers nominally in the employ of Belgian concession companies without a white man for a hundred miles.

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By 1891, six years into the attempt to build the EIC, the whole project was on the verge of bankruptcy. It would have been easy for Léopold to raise revenues by sanctioning imports of liquor that could be taxed or by levying fees on the number of huts in each village, both of which would have caused harm to the native population.

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Instead, he did what most other colonial governments and many post-colonial ones in Africa did: He imposed a labor requirement in lieu of taxes. In a small part of the upper Congo river area, he declared an EIC monopoly over “natural products,” including rubber and ivory, that could be harvested as part of the labor requirement to pay for the territory’s government. From 1896 to 1904, an EIC company and two private companies operated in this area, which covered about 15 percent of the territory and held about a fifth of the population. The resulting rubber revenues temporarily saved the EIC, but only until rubber prices collapsed.

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The rubber quotas imposed on natives in this 15 percent of the territory were enforced by native soldiers working for the companies or for the EIC itself. In many areas, the rubber came with ease and the natives prospered. The rubber station at Irengi, for instance, was known for its bulging stores and hospitable locals, whose women spent a lot of time making bracelets and where “no one ever misses a meal,” noted the EIC soldier George Bricusse in his memoirs. Elsewhere, however, absent direct supervision, and with the difficulties of meeting quotas greater, some native soldiers engaged in abusive behavior to force the collection. Bricusse noted these areas as well, especially where locals had sabotaged rubber stations and then fled to the French Congo to the north. In rare cases, native soldiers kidnapped women or killed men to exact revenge. When they fell into skirmishes, they sometimes followed long-standing Arab and African traditions by cutting off the hands or feet of the fallen as trophies, or to show that the bullets they fired had been used in battle. How many locals died in these frays is unclear, but the confirmed cases might put the figure at about 10,000, a terrible number.

The abuses were first reported by an American missionary in The Times of London in 1895 and quickly brought Léopold’s censure: “If there are these abuses in the Congo, we must stop them,” he warned EIC officials in 1896. “If they continue, it will be the end of the state.” For the next ten years, reforming the Congo’s rubber industry absorbed an inordinate amount of attention in the British and American press and legislatures, not to mention within Belgium and the EIC itself, leading to formal Belgian colonization in 1908.

Europe, particularly northwest Europe, was pushed forward by an expanding market economy, Peter Frost explains, in the fourteenth century, when England and Holland embarked on sustained economic growth:

That expansion was driven, in turn, by a population that tended toward individualism and “impersonal sociality.” For at least the past millennium, Europeans were behaviorally distinct north and west of a line running approximately from Trieste to St. Petersburg:

Almost everyone was single for at least part of adulthood, and many stayed single their entire lives.

Children usually left the nuclear family to form new households, and many individuals circulated among unrelated households, typically young people sent out as servants.

People were more individualistic, less loyal to kin, and more willing to trust strangers (Frost 2017; Frost 2020; Hajnal, 1965; Hartman, 2004; Hbd*chick 2014; ICA, 2020; MacDonald 2019; Seccombe, 1992, p. 94-95, 150-153, 184-190).

According to Schulz et al. (2019), the above behavioral pattern was created by the Western branch of Christianity, particularly through its decision in the ninth century to broaden the ban on cousin marriages to any couple who shared a common ancestor seven generations previously. That ban, they argued, had the effect of creating the Western European pattern of late marriage, frequent celibacy, and nuclear households. That pattern, in turn, encouraged individualism and impersonal sociality.

Schulz et al., however, ignore two points. First, the broadening of the cousin marriage ban resulted from a decision to abandon the Roman method of calculating degrees of kinship, whereby first cousins were considered to be fourth degree. The new method, of Germanic origin, made them second degree, thereby doubling the number of forbidden marriage partners (McCann, 2010, pp. 57-58). In sum, the ban was Church-enforced but of pagan origin.

Second, when the cousin marriage ban was broadened in the ninth century, Western Europe already had high rates of late marriage, celibacy, and nuclear households. This has been shown at two locations in ninth-century France: the estates of the Abbey of St Germain-des-Prés near Paris, where about 16.3% of all adults were unmarried, and Villeneuve-Saint-Georges, where the figure was 11.5%. At both locations, households were small and nuclear (Hallam 1985, p. 56). A ninth-century survey of the Church of St Victor of Marseille shows both men and women marrying in their mid to late twenties (Seccombe 1992, p. 94). Further back, in the first century, the Roman historian Tacitus wrote about the Germanic tribes, “Late comes love to the young men, and their first manhood is not enfeebled; nor for the girls is there any hot-house forcing; they pass their youth in the same way as the boys” (Tacitus, Germania 20, 1970).

It seems more correct to say that Western Christianity promoted individualism and impersonal sociality because it had assimilated a pre-existing pattern of weak kinship, late marriage, and openness to non-kin. A fusion took place between the Christian faith and the pre-Christian values of northwest Europe (Russell 1994). With the loss of North Africa and Spain to the Muslims, and the rise of the Frankish-dominated Carolingian Empire, Western Christianity saw its ideological center of gravity move northward and westward.

From the eleventh century onward, the Western Church also strove to pacify social relations. Both Church and State came around to the view that the wicked should be punished so that the good may live in peace. Courts imposed the death penalty more and more often and, by the late Middle Ages, were condemning to death between 0.5 and 1.0% of all men of each generation, with perhaps just as many offenders dying at the scene of the crime or in prison while awaiting trial. The homicide rate plummeted from the fourteenth century to the twentieth, with the result that the pool of violent men dried up. Most murders would now occur under conditions of jealousy, intoxication, or extreme stress. (Frost and Harpending 2015).

Those three causes — individualism, impersonal sociality, and a pacified environment — allowed the market economy to grow beyond its former limits (Frost 2020; Macfarlane 1978; Weber 1930). The first two causes had long been around in northwest Europe, being what we may call “pre-adaptations” to the market economy. It was the third one, the pacification of social relations, that sparked the economic takeoff of the fourteenth century. The “market” was no longer a marketplace—an isolated point in space and time. It was now a means to carry out transactions wherever and whenever. It could thus spread farther and farther beyond the marketplace, replacing older forms of exchange and ultimately replacing kinship as the main organizing principle of society.

Richard Hanania recently decided to argue that everyone is wrong, and the media is actually good and honest. Bryan Caplan agrees that Hanania zeroes in on the right question — “Compared to what?” — and answers, the mainstream media is awful compared to silence:

The problem isn’t limited to race, gender, and sexual orientation, where Richard agrees that the media is crazy. The problem isn’t specific factual errors, either. The central problem is that the mainstream media’s standard operating standard is to use selective presentation to spread absurd views about practically everything that matters.

Nor is this a recent failing! Mainstream media has been deplorable for as long as I can remember. Let me list some of its chief sins against the Big Picture.

Endlessly complaining about alleged social problems. Poverty, the environment, racism, Covid, Ukraine, terrorism, immigration, education, drugs, Elon… Even if all of the coverage were true, the media is still — per Huemer — aggressively promoting the absurd view that life is on balance terrible and reliably getting worse.

Painting government intervention as the obvious solution to social problems. Often the media openly asks loaded questions to this effect, like “Why isn’t the government doing more about this?!” with an exasperated tone. The rest of the time, they rely on heavy-handed insinuation, like “The people of Flint, Michigan feel like they’ve been forgotten.” Forgotten by who? Government Our Savior, of course. Mainstream media barely considers whether past government policies have worked, or how much they cost, or whether they have important downsides.

Spreading innumeracy. The media endlessly shows grotesque stories about ultra-rare problems like terrorism, plane crashes, police murdering innocents, school shootings, toddlers dying of Covid, and the like. They show almost nothing about statistically common problems like car crashes or death by old age. The media doesn’t just spread paranoia; it spreads inverted paranoia.

Promoting Social Desirability Bias. The media standardly talks as if stuff that superficially sounds good is reliably good, and stuff that superficially sounds bad is reliably bad. As a result, they foment hostility to good stuff that sounds bad, and engender support for bad stuff that sounds good. If a firm downsizes due to technological change, what are the odds that the media chides, “This is how progress works! Tractors put a lot of farmers out of work, too, you know”? If the government cuts spending, what are the odds that the media muses, “We could interview the visible losers, but that’s hardly fair unless we interview the invisible winners. Which we can’t do, so let’s just move on.”
Whipping up support for the latest crusade. Like me, Hanania wasn’t happy with the media’s Covid coverage. But I say the problem goes way back. Just in my living memory, the media has promoted mass hysterias about Islamist Iran (“the hostage crisis”), the War on Drugs, “Free Kuwait,” the War on Terror, the Iraq War, the 2008 financial crisis, Covid, Black Lives Matter, and now the Ukraine War. The mere fact that they keep these topics in the news for months or years, with almost no skeptical or apathetic voices, is a thinly-veiled declaration that “These are the most important problems on Earth – and we should all enthusiastically be on the bandwagon to solve them.” Yet in hindsight, the problems the media deems important are highly arbitrary, and the bandwagon usually turns out to be a major problem in itself.

An old joke talks about being “mugged by reality.” When mainstream media speaks, it is reality that gets mugged. Truly, mainstream media is the great Mugger of Reality. Even when its individual stories are rock solid, it promotes a deeply false Big Picture of the world. And unless you have the intellectual steel to constantly remind yourself, “This is a horribly misleading perspective,” consuming media tends to make you believe this deeply false Big Picture.

Last January, Scott Alexander — along with amateur statisticians Sam Marks and Eric Neyman — solicited predictions from 508 people:

Contest participants assigned percentage chances to 71 yes-or-no questions, like “Will Russia invade Ukraine?” or “Will the Dow end the year above 35000?”

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Are some people really “superforecasters” who do better than everyone else? Is there a “wisdom of crowds”? Does the Efficient Markets Hypothesis mean that prediction markets should beat individuals? Armed with 508 people’s predictions, can we do math to them until we know more about the future (probabilistically, of course) than any ordinary mortal?

After 2022 ended, Sam and Eric used a technique called log-loss scoring to grade everyone’s probability estimates. Lower scores are better. The details are hard to explain, but for our contest, guessing 50% for everything would give a score of 40.21, and complete omniscience would give a perfect score of 0.

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As mentioned above: guessing 50% corresponds to a score of 40.2. This would have put you in the eleventh percentile (yes, 11% of participants did worse than chance).

Philip Tetlock and his team have identified “superforecasters” — people who seem to do surprisingly well at prediction tasks, again and again. Some of Tetlock’s picks kindly agreed to participate in this contest and let me test them. The median superforecaster outscored 84% of other participants.

The “wisdom of crowds” hypothesis says that averaging many ordinary people’s predictions produces a “smoothed-out” prediction at least as good as experts. That proved true here. An aggregate created by averaging all 508 participants’ guesses scored at the 84th percentile, equaling superforecaster performance.

There are fancy ways to adjust people’s predictions before aggregating them that outperformed simple averaging in the previous experiments. Eric tried one of these methods, and it scored at the 85th percentile, barely better than the simple average.

Crowds can beat smart people, but crowds of smart people do best of all. The aggregate of the 12 participating superforecasters scored at the 97th percentile.

Prediction markets did extraordinarily well during this competition, scoring at the 99.5th percentile — ie they beat 506 of the 508 participants, plus all other forms of aggregation. But this is an unfair comparison: our participants were only allowed to spend five minutes max researching each question, but we couldn’t control prediction market participants; they spent however long they wanted. That means prediction markets’ victory doesn’t necessarily mean they’re better than other aggregation methods — it might just mean that people who can do lots of research beat people who do less research.2 Next year’s contest will have some participants who do more research, and hopefully provide a fairer test.

The single best forecaster of our 508 participants got a score of 25.68. That doesn’t necessarily mean he’s smarter than aggregates and prediction markets. There were 508 entries, ie 508 lottery tickets to outperform the markets by coincidence. Most likely he won by a combination of skill and luck. Still, this is an outstanding performance, and must have taken extraordinary skill, regardless of how much luck was involved.

Davis Kedrosky explains how institutional reforms built the British Empire:

In 1300, few English institutions actively promoted economic growth. The vast majority of the rural population was composed of unfree peasants bonded either to feudal lords or plots of land. Urban artisans were organized in guilds that regulated who could enter trades like glassblowing, leatherwork, and blacksmithing.

The English state was in turmoil following a century of conflict between Parliament and the Crown, and though nominally strong, it was deficient in fiscal capacity and infrastructural power. The regime lacked both the will and the means to pursue national development aims: integrating domestic markets, acquiring foreign export zones, securing private property, and encouraging innovation, entrepreneurship, and investment. England resembled what has been called a “natural state,” in which violence between factions determined the character of governance. Institutions pushed the meager spoils of an impoverished land into the pockets of rentiers.

By 1800, all this had changed. Britain’s rural life was characterized by agrarian capitalism, in which tenant farmers rented land from landowners and employed free wage labor, incentivizing investment and experimentation with new crops and methods. The preceding two centuries had seen the waning of the guilds, which now served more as organizations for social networking. Elites that had mostly earned their income by collecting taxes were now engaging in commercial enterprises themselves.

The state was now better-financed than any before in history, thanks to an effective tax administration and the ability to contract a mountain of public debt at modest interest rates. This allowed Britain to fund the world’s strongest navy to defend its interests from New York to Calcutta. The British government also intervened frequently in economic life, from enclosure acts to estate bills, and had limited its absolutist and rentier tendencies through the establishment of a strong parliament and professional bureaucracy.

Mark Koyama called the five centuries of institutional evolution the “long transition from a natural state to a liberal economic order.” The state capacity Britain built up during this early modern period went side by side with its emergence as a major commercial power and, within a few years, the first nation to endogenously achieve modern economic growth. Twenty-first-century economists increasingly deem institutions an “ultimate cause” of industrial development. The differences between North and South Korea, for example, are not the result of geographical disparities or long-standing cultural cleavages on either side of the 38th parallel. While it’s not exactly clear which kinds of institutions cause growth, it’s pretty obvious that some sorts inhibit it, if not stifle it altogether. The story of Britain’s rise to global power, then, is also the story of a 500-year-long transformation that saw institutional changes to law, property ownership, the organization of labor, and eventually the makeup of the British elite itself.

In his 1982 book The Rise and Decline of Nations, Mancur Olson argued that societies are engulfed in a perpetual struggle between producers and rent-seekers. The former invent and start businesses, increasing the national income; the latter try to profit off of the producers’ hard work by lobbying for special privileges like monopolies and tax farms. In contrast to Douglass North, who emphasized the importance of secure property rights for economic growth, Olson distinguished between good and bad forms. Bad property rights entitled a specific group to subsidies or protections that imposed costs on consumers and inhibited growth—like, say, a local monopoly on woolen cloth weaving allowing a guild to suppress machinery in favor of labor-intensive hand labor, lowering productivity and output.

Backed by its elite commercial and landed classes, the English and eventually British state came to favor the removal of the barriers to growth that had plagued most pre-modern economies. “Peace and easy taxes,” contra Smith, isn’t a sufficient condition for endogenous development, but its inverse—domestic chaos and rent-seeking—may be sufficient for its absence. But Britain’s real achievement was that its elite class, over time, began to align themselves with market liberalization. In France, by contrast, the nobility and king were constantly at odds, and the monarchy actually supported strong peasant tenures in opposition to large landowners. The pre-1914 Russian Empire would do the same thing.

Applying Olson’s framework to the seventeenth century, what we see is a decline of “rent-seeking distributional coalitions” like guilds, which helps to explain England’s “invention” of modern economic growth. “The success of the British experiment,” write the economists Joel Mokyr and John Nye,

was the result of the emergence of a progressive oligarchic regime that divided the surpluses generated by the new economy between the large landholders and the newly rising businessmen, and that tied both groups to a centralized government structure that promoted uniform rules and regulations at the expense of inefficient relics of an economic ancient regime.

Mokyr and Nye theorize that the state’s demand for revenues led it to strike a bargain with mercantile elites: if you pay taxes, you can use our ships and guns. This was the basis of a grand alliance between “Big Land” and “Big Commerce” who used the government as a broom to sweep away local interests. It manifested in projects like the Virginia Company, whose investors involved both the nobility and mercantile venture capitalists.

Parliament was the instrument for fulfilling the pact, issuing a raft of legislation altering local property rights to open up markets throughout the 1700s. Estate acts, for example, allowed landowners to improve, sell, and lease their plots. Statutory authorities permitted private organizations to set up turnpikes and canals, helping to unify the English market. This allowed firms to increase production, exploit economies of scale, and compete with local artisans. Enclosure acts, meanwhile, provided for the transformation of open-field farming communities, in which decisions were made at the village level, into fully private property.

The origins of this process, however, are deeper than Mokyr and Nye suggest. The development of a national state began soon after the Norman invasion of 1066. William the Conqueror replaced the Anglo-Saxon aristocracy with a Norman one, redistributing the country’s lands to his soldiers and generating a mostly uniform feudal society. The result was a precociously unified and homogenous polity—as opposed to France, which grew by absorbing linguistically distinct territories. English kings who were seeking to fund domestic or military projects called councils with individuals, usually the great barons of the nobility, whose cooperation and money they needed. With the waxing of the late medieval “commercial revolution,” they eventually included representatives of the ports, merchants, and Jewish financiers. Kings would make “contracts” with these factions—often customary restrictions on arbitrary taxation or the granting of other privileges—in exchange for resources. These councils later became Parliament.