Are Dictators The Future?

How many governments around the world would use force to try to put down a rebellion? Pretty much all of them. So why does “my” country say it is invading Libya, which is using force to put down a rebellion? Mainly because Libya is not a democracy:

Threatening the use of force against a brutal tyrant, in the name of democracy and human rights, to advance US national security interests and cloaking it in the flag of the United Nations and regional stability—it does sound familiar. (more)

This campaign against non-democracies also fuels the hyperbolic hate and fear of China. How, how, people cry, could a non-democracy out-grow most democracies, when everyone knows that democracy is the future and non-democracies are failed hold-outs of the past?

Actually, non-democracies seem more our future than democracies, because while the two groups have the same average economic growth rates, non-democracy rates vary more, and high rates dominate. Let me explain.

First, democracies tend to play it safe – avoiding risks that lead to both really stupid bad outcomes and really great spectacular outcomes. (See this post by Bryan Caplan.) So, as most folks know, the worst basket-case nations tend to be non-democracies. However, it is less well known that the fastest growing nations, like Ethiopia or Qatar, also tend to be non-democracies.

In the short run, the democratic play-it-safe approach is good for citizens, who tend to be risk-averse. But in the long run, democracy’s descendants fall behind. Whenever you have a portfolio of items with different (log) growth rates, your portfolio’s long run average return is dominated by the portfolio items with the highest average rates. The few items that tend to grow the fastest eventually overwhelm all the rest, even if in the short run their growth rates are all over the map.

So in the long run, the world’s wealth should end up being dominated by the types of nations with the highest average stable growth rates. Even if those nations start out small, or have large year-to-year growth rate variations. And the nations with the highest stable growth rates over relatively long time periods tend to be non-democracies. This suggests that non-democracies will eventually dominate world wealth.

Of course if non-democracies tended to naturally transition into democracies when they got rich, and almost never switched back, then even if most wealth was made within non-democracies, most nations could end up as democracies. This democracy-as-attractor vision seems to be the main hope of democracy fans, and over the last two centuries we have indeed seen lots of movement toward democracy, and much less movement away. This drift to democracy can also be understood as a natural result of farmers who feel more like foragers as they get rich, since forager governance tended to be more democratic.

But this recent drift to democracy need not reflect a fundamental long term law. It might, for example, just be fashion – since the first rich nations chose democracy, maybe other nations wanted to look similar in order to appear high status. So now if non-democracies like China become the richest nations, maybe other nations will try to emulate them instead.

Also, the trend toward higher per-capita wealth may well reverse if, as I anticipate, we get dramatic new techs that can quickly create many human substitutes. This could take the steam out of a rich-folks-feeling-like-foragers push for democracy. Also, high payoffs for reacting quickly in a transition era may also favor a high tail of flexibility, also probably dominated by non-democracies.

So how would futarchy do by this measure? Yes a futarchy might grow faster than a simple democracy or a simple autocracy. But if low democratic growth variance is mainly due to voters wanting to avoid risk, then vote-on-values-bet-on-belief systems would still tend to fall behind king-sets-values-bet-on-belief systems. And in fact, autocrats are probably more likely to take a chance and try a bet-on-belief system.

Futarchy can’t save risk-averse voters from themselves, if they don’t want to be saved. While humans today don’t care much about the future, random human and institutional variation will make some places care more than others. The future will be owned by the high tail of that distribution of caring, which favors any factors that increase caring variance. Non-democracy is one such factor.

Added 9p: The paper Bryan cited clearly shows that democracies have less than half of the (residual) growth variance of non-democracies even after controlling for these factors: GDP per capita, black market premium, terms of trade shock, investment, fertility, life expectancy, govt consumption, govt school investment, male schooling, female schooling, OECD dummy, democracy, democracy squared. This result is not being driven by democracies being closer to the feasible frontier!

Added 8a: The ratio of dictator lifespans to economic doubling times should continue to rise, increasing the timescale over which dictator growth rates correlate.

Added 30Mar: Easterly notes that this might just be because dictators have bad growth statistics.