This post is about three books I’ve polished off recently, all quite different from one another:
- Timothy Besley & Torsten Persson, Pillars of Prosperity: The Political Economy of Development Clusters – nothing to do with industrial districts or network externalities; this is a (mostly) theoretical exploration of the reasons why rulers might choose to invest in fiscal and legal capacity, generating a strong state and good conditions for economic development
- Ralph Raico, Great Wars and Great Leaders: A Libertarian Critique – an excoriation of wartime leaders beloved by those whom Rothbard called “court intellectuals”
- Mark Pennington (our very own!), Robust Political Economy – a defense of classical liberalism as being more institutionally robust to imperfections in markets & governments than various alternatives
Besley & Persson‘s work is a dense slog, if you read the math. Its contribution should be seen as mostly theoretical, rather than empirical – although there are some simple empirics along the lines of demonstrating cross-national correlations. The central aim is to try to understand why GDP per capita tends to correlate positively with other things like tax take as a share of GDP, income tax and VAT take as a share of total tax take, years in external war, and executive constraints, and negatively with things like expropriation risk and years in civil war. The basic story is that there are three types of societies: common-good societies in which political leaders focus on providing collective goods to the entire population, long-run redistributive societies in which political leaders invest in fiscal capacity because they expect to be in power for a long time and want to redistribute funds to their favored constituencies, and kleptocratic societies in which political leaders steal as much as they can in a short period of time. In common-good societies, expected tenure in office is irrelevant to investments in fiscal and legal capacity: leaders invest whether or not they expect to stay in power, because they are interested in doing good things for their citizens. In long-run redistributive societies, leaders also invest in fiscal and legal capacity in order to grow the pie and their take from it. In kleptocratic societies, leaders’ pillaging keeps the economy in an underdeveloped state. Ethnic diversity is bad (in a sense) because it makes societies more redistributive (more internal rivalries), but this is not necessarily a critical failure so long as leader tenures remain long. External war is good (in a sense) because it brings people together and helps create a common-good society.
The book advances some new arguments, and the theoretical framework alone is impressive. However, I have at least two fundamental concerns as well. First, I question how many societies really fall into the “common good” category. In the strict economic sense, there are hardly true collective goods for an entire political society. National defense, for instance, is a collective bad for pacifists. The fact that external war correlates with tax take does not imply to me that war is good for bringing people together and fostering development, but that war is the health of the state, sharpening the competitive blade that pares away “inefficiencies” in governments’ extractive capacity. Second, the modeling of fiscal and legal capacity as simply being a matter of leaders’ past decisions to “invest” is so simple as to be a gross distortion. There’s no politics here, no grappling with influential prior arguments from North, Weingast, and others that leaders must be forced to limit their own power, because it is impossible for them to make credible commitments to private property rights on their own initiative.
Raico‘s book isn’t for the faint of heart or for someone looking for an impartial academic account of “great” historical figures like Woodrow Wilson, Winston Churchill, and Harry Truman. On the other hand, it is blood-pumping red meat to the contrarian libertarian, as Raico moves from exposing the bizarre authoritarian fantasies of Wilson and his cronies to calling Truman out as a war criminal and mass murderer of innocent men, women, and children in the atomic bombings of Hiroshima and Nagasaki. (I’ve addressed in slightly more depth Raico’s criticisms of Churchill in these virtual pages.) Raico stands firmly in the Rothbardian tradition of focusing critical revisionism on the actions of one’s own government and its allies. I wouldn’t assign this work on its own to students; I would include alternative perspectives. Nevertheless, this perspective is an important one for every student of history – that is, everyone – to address.
Mark Pennington‘s work proceeds in a style that should be familiar to faithful Pileus readers. He examines the stances of critics of classical liberalism and demonstrates how their critiques rely either on implausible assumptions or on premises that undercut their own position. The book includes a fair and enlightening exposition of (and response to) Joseph Stiglitz’s critiques of Hayekianism and the market economy and a compelling takedown of “deliberative democracy” theories. The latter half of the book shows how classical liberal conceptions of markets can appropriately address difficult policy issues like the environment, health care, and education. If there is a gentle criticism I would make of the work as a whole, it is that Mark never makes his own moral theory explicit. It’s definitely consequentialist, but beyond that it is difficult to say. On the one hand, getting bogged down in endless debates about the meanings of utility and hard cases for consequentialism would critically undercut the power and import of the book, and therefore I understand why it has the focus it does. On the other, I do not think that more “deontological” critiques of classical liberalism such as those of distributive justice theorists (Rawls, Dworkin, Young, et al.) can be comprehensively refuted by the approach taken here (see ch. 5). Overall, this is an original and enlightening work that takes as given the latest critiques of the rationality and benevolence of market actors, yet finds that markets still do a better job than governments in a wide range of human endeavors.