Losing to Dani Rodrik

You know, it's not just "developing nations" that live or die by their institutions.

Why is Detroit a basket case? Why are some suburbs of Detroit, just mere miles away, so much better off?

I live in Northwest Indiana, hard up against the Southside of Chicago. You go across the border from my county to Chicago, and the median income increases by 40%. 40%! And it isn't like Chicago has the best institutions. But compared to, say, Gary, they're very well run.

You may come into agreement with Rodrik, but I imagine that will only harden your position against Klein...

Kling: Adaptive government is an oxymoron. In reality, you never observe adaptive government.

Rodrik: The same could be said of limited government.

The conclusion I draw is that government is a lost cause; no one can make government do what he thinks it ought to do, nor can he make it (or "the people") set up the right institutions. In Tyler Cowen's mind, I suppose that makes me guilty of "the libertarian vice."

"Stiglitz without arrogance"

I don't think he's just speaking about Stiglitz. Any economist who starts sentences with "As an economist" as a means to imply "What I'm about to say is unbiased truth" ought to consider his or her own arrogance.

Economics is interesting and important. But when I first approached it, I found the level of arrogance and ideology off-putting.

Debating whether limited government is better than adaptive government is like debating who would win in a fight between unicorns and leprechauns. The question is whether movement is possible toward adaptability or limitedness, and in whether the possible movement will be an improvement over the status quo.

The U.S. Constitution enshrines a form of "limited government." It may not be as limited as it used to be, or limited in all the ways you might like, but it's limited nonetheless. Overall, I'd say it's been a great success.

I'd go for ditching mass politics.

ed: The U.S. Constitution enshrines a form of "limited government."

You're exactly right! We DO have examples of limited government and adaptive government. The Dutch Republic of the 17th & 18th centuries and the US in the 19th century are excellent examples of limited government. Colbert's France, all socialist countries and the US since the 1920's are good examples of adaptive governments.

The review on Prineton's site wrote: "To most proglobalizers, globalization is a source of economic salvation..."

Some great economist has written that trade is an effect of economic growth, not a cause. I think he is closer to the truth than anyone.

Thanks very much for the gracious review and your humility, which greatly exceeds mine in this instance.

Governments lay claim to legal authority to collect taxes or impose restrictions on trade across borders. But there is no moral significance to a border. If John, Mary, and Sam all lived within the same country, the question of whether free trade is good for "us" would never arise. John's right to trade with Mary without interference on behalf of Sam would not be questioned. It is hard to see how moving Mary across a border changes the situation from a moral or economic standpoint.--Arnold Kling

Yet governments have rules and regulations governing the economy, I like to call it economic morality. In a democracy those rules and regulations don't eminate out of the government but out of different social groups. They are social in orgin not governmental.

The rules and regulations governing the American political economy are different than those governing the Mexican or Chinese political economy. There is also the question of how well institutions--if they are even in existance--can enforce the rules and how much money it takes to do so effectively.

So considering that countries have different political economies along with different levels of institutional and material capital, trading across borders isn't the same as within ones own country.

For instance the financial crises caused by sub-prime loans here has spilled over onto European investors. Part of the reason is that we have poor regulations on the financial industry. Now as the New York Times writes the "Calls Grow for Foreigners to Have a Say on U.S. Market Rules."

Sorry, Professor Kling I don't think that Masonomist are the wave of the future. The evidence points to greater intergration and intervention.

I felt much the same way (as a non-economist who has been reading development-economics books lately). But I was and am bothered by the opening to Rodrik's book in which he talks about a finance minister who described having done "all the reforms" without getting economic growth in exchange. The reforms as described had nothing to do with corruption/transparency, so far as I can see, and when I look at Transparency International's maps, it really doesn't look like Latin America is a lot better that way than I remember it from growing up there -- except for Chile. All the reforms, except for reform? Now, the book does scatter phrases such as the "noncorrupt" you quote above...but I'm still feeling an unresolved tension from that first page. (And just went on and on about it at my own blog. Whatever.)

Much of this chapter continues what I call his "Austrian slant" on government. He criticizes "one size fits all" blueprints for government institutions. In contrast, he argues for government evolution that is based on "local knowledge," "tacit knowledge," and the like.

Sounds a bit like Oakeshott on Rationalism, too.

[Quote display fixed--Econlib Ed.]