Academics Like Nations?

Why are some nations rich and others poor? Decades ago many thought a big part of the answer was “formal institutions.” Folks understood in rough outline many ways in which institutions could go wrong, which suggested many ways to evaluate institution qualiy. And rich nation institutions do tend to get higher marks in such evaluations. The hope was that if poor nations were fitted with formal institutions like those from rich nations, poor nations would also get rich. But academic consensus has moved well away from that view today, as so many attempts to transfer formal institutions from rich to poor nations have failed miserably. Now most see “culture” as a big part of the answer, and culture is not so easily copied, or even measured.

Why are some communities of intellectuals productive at accumulating insight and accuracy, while others instead become dead, distracted, and dysfunctional? We understand in rough outline many ways that intellectual communities can go wrong, and these suggest many ways to evaluate community health. Furthermore, especially productive intellectual communities of the past do seem to get higher marks in such evaluations. This has led many to proclaim certifiers of intellectual accuracy, such as peer review or randomized experiments, which can give observers confidence in a community’s intellectual authority. To decide which conflicting communities to believe in a confusing controversy, one merely need check for official certifying marks.

Unfortunately, just as with nations, quality markers based on broad features of formal institutions are pretty weakly correlated with actual intellectual productivity and insight.  Whether an intellectual community works well depends much more on complex details of its culture, details that are hard for outsiders to discern.  Choosing who to believe based on weak indicators such as the use of peer review would be like guessing which nations are rich using the text of their constitutions. If there were nothing better, of course, its what you’d have to do. But in intellectual controversies you’d do far better to rely on estimates from prediction market, if such were available; they’d do much better at eliciting honest insider assessments about the health of their communities.  Relying on prediction market estimtes would be much more like moving to a nation that is actually rich, instead of one with a rich-sounding constitution.

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  • http://t-a-w.blogspot.com/ Tomasz Wegrzanowski

    Why are some nations rich and others poor?

    After four decades of Great Convergence, isn’t this question stupid?

    Differences in terms of income are far below their peak, and differences in terms of other outcomes like life expectancy, nutrition, health, education, and personal safety are lowest in recorded history.

    There is nothing here that needs an explanation.

  • Vladimir M.

    I heartily agree with this post, but as far as I see, you’re just restating Richard Feynman’s classic insight about “cargo cult science.” (Except for the part where you propose prediction markets as the cure.)

    As for the 20th century theories about transplanting political institutions, it’s funny and tragic at the same time to see how incurable and recurrent this particular human folly is. “One of the grand errors of an age, which professed them all, was to believe that a political constitution could be written and created a priori… [T]hat which is most fundamental, and most essentially constitutional, in the laws of a nation, is precisely what cannot be written.” De Maistre was talking about the 18th century when he wrote that 200 years ago.

  • Mario Furtado

    Hi Robin,

    I’m glad you took the time to think about this issue, but I think you’re over-thinking the situation and not actively paying attention to quality data that is already available. The success or failure of a nation as a whole is dependent upon the implicit cost associated with doing business within that nation. If a nation’s governing body forces a higher cost, that nation will not do well.

    There is a single website that already captures this data and shows how countries promote (or penalize) business within their borders. Those that promote business are rewarded with higher GDPs. Those that don’t aren’t.

    The name of the website is the Doing Business website (http://www.doingbusiness.org/). It’s rankings are here: http://www.doingbusiness.org/economyrankings/.

    As a single example Haiti vs. Domincan Republic (Rank 151, per capita GDP (ppp) : $1,338, vs. Rank 86, per capita GDP (ppp) $8,896). Both nations are located on the same island. This helps to eliminate other factors (such as survivorship bias, natural resources, synergy effects) that skew other countries.

    I hope this helps,

    Mario Furtado

    • Joseph K

      “The success or failure of a nation as a whole is dependent upon the implicit cost associated with doing business within that nation.”

      I’d generalize it even more and say it has to do with freedom. Cost of doing business is just a measure of the relative freedom for businesses and entrepreneurs to innovate. Other things like protection of individual rights, freedom of movement, freedom of speech and so on matter too.

      And I’d think the same would apply to Intellectual communities as well. The more free and able an intellectual is to advocate and disseminate differing opinions, the healthier and more innovative that intellectual community will be.

      The reason for this is the great power of trial and error. Since no one knows in advance which businesses or which theories will succeed, it’s best to just throw them out there, see which succeed and weed away the failures.

  • http://akinokure.blogspot.com agnostic

    “After four decades of Great Convergence, isn’t this question stupid?”

    A whole 1.5 – 2 generations, eh? Given that most of the world’s people still live in standard Malthusian agrarian economies, this doesn’t count for much. It could easily fluctuate the other way over the medium and long term.

    The rise and fall of standard-of-living in such economies lasts between 100 – 200 years. If life in sub-Saharan African is still this good compared to life in Europe in 2210, then there will be something interesting to ask about.

  • Gabriel Weil

    What objective standard of intellectual output would be used to determine prediction market payouts? Why can’t that standard just be used to evaluate the performance of the academic communities directly?

    Prediction markets might help provide info about what sorts of institutional or cultural innovations are likely to produce future intellectual productivity gains if we already have an objective standard, but they don’t themselves provide a measure that productivity, whichs seems to be the point of the post. Since you juxtapose prediction market data with crude markers of academic quality, it doesn’t seem like you have a better standard in mind that could be used to determine prediction market payouts.

  • Peter St. Onge

    Very interesting way to look at the question.

  • arch1

    I don’t (fully) understand why prediction markets aren’t already widely used for this purpose.

    Certainly the generic topic is hugely important.

  • Wonks Anonymous

    Here’s an argument that forcibly changing a country’s institutions can work:
    http://voxeu.org/index.php?q=node/3727

  • Rebecca Burlingame

    A lot of recent talk about signaling makes me think of how people use big, imposing, massive and impressive buildings for signaling: that is, look at me, I’ve spent a bajillion dollars and therefore people in this space are now free to turn knowledge into action. I am continually amazed at how much effort goes into those buildings (on a smaller scale, nonetheless) in certain developing countries where a terrorist tosses a bomb and voila, no more knowledge into action here. Maybe people don’t really need the building signal. Maybe the ideas for turning knowledge into action can happen first, in people’s minds, individual to individual, before the buildings get built.

  • http://timtyler.org/ Tim Tyler

    Re: Now most see “culture” as a big part of the answer, and culture is not so easily copied, or even measured.

    Digitisation of culture should help there – it makes copying culture pretty trivial.

  • Linda Gottfredson’s Apprentice

    I like ice-cream, but I do not resemble ice-cream.

    Titles help me to determine if a posting is worth reading.

    (However, perhaps you did mean both senses of the word ‘like.’)

  • Linda Gottfredson’s Apprentice

    Tim Tyler said:

    Digitisation of culture should help there – it makes copying culture pretty trivial.

    I don’t think you understand.

    Should I blame it on culture or the underlying genes that drive the level and nature of the culture that results?

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  • http://www.xamuel.com Xamuel

    Part of the problem is, once measures are put in place, the “bad” communities will immediately figure out how to game them.