Bryan Caplan  

The Future of Egypt: Time to Go On the Record

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One good way to guard against hidesight bias is to publicly state your odds in advance.  The Iranian Revolution, for example, spurred a wave of cock-eyed optimism around the world.  But before long, theocracy and bloody warfare left Iran in ruins.  The cheerleaders for the original revolution rarely made mea culpas; most just conveniently forgot their initial enthusiasm.  So now's the perfect time for serious thinkers to go on the record.  Suppose we place equal weight on personal freedom, economic freedom, real GDP per capita, and peace.  What are your odds that by this metric, Egypt will improve, plateau, or get worse over the next ten years?

I say 15% better, 60% plateau, 25% worse.  To actually bet, of course, we'd need to specify the range of the "plateau."  But it's still a useful place to begin.  Who else wants to go on the record?


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The author at Jim's Blog in a related article titled Bryan Caplan’s challenge writes:
    if Egypt gets democracy, will suffer war and economic disaster, both of which will be blamed on Jews. Democracy with universal franchise does not work. It works worse with Muslims. No Muslim should be allowed to vote anywhere, especially in countries w... [Tracked on March 2, 2011 5:42 PM]
COMMENTS (31 to date)
Ryan writes:

Are we discounting. If we are, then over the ten-year period I suspect the situation to get worse. The disturbances of peace, which will be detrimental to other components of the metric, will likely dominate. 40% worse, 45% plateau, 15% better.

Doug writes:

60% (and event 40%) is dramatically underestimating the variance of future outcomes. I just don't buy a plateau is all that likely unless you're defining it very broadly. I say 80% worse, 10% better, 10% worse.

Stephen Smith writes:

60% better, 30% plateau, 10% worse.

Considering that the Mubarak regime was literally bombing Coptic churches and then blaming it on al-Qaeda to get sympathy and support from the West, it's hard to see how things could get much worse.

Blackadder writes:

it's hard to see how things could get much worse.

Danger, Will Robinson!

flawed writes:

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Richard writes:
it's hard to see how things could get much worse.

Ever heard of a place called Iraq?

Faré writes:

I suppose that a "baseline" would be 33% / 33% / 33% (whatever that means) and we're trying to place our odds against that.

Considering that there is no (classical) liberal ideology that can speak up without being repressed, I bet that despite the aspirations of many people, the personal freedom index will go down with 65% probability, stagnate with 25% probability, improve with 10% probability.

As for economic freedom, I predict that it will improve slightly in the beginning, since that's probably how the new power will buy its stability, and new corruption structures won't have the time to build up as bad as the old ones immediately. And the other hand, even with good will, it's not obvious that people in power have any clue, much less the will to cut deep into established privileges. So make it improve 40%, stagnate 40%, get worse 20%.

For peace, I don't see how things could "improve" as the region is going to get less stable, with unreliable bankrupt US incapable of maintaining its hegemony, while radical islamists tone up the discourse. However, the ruling elites don't want a war that would compromise their revenue stream, topple them if they lose, and embarrass them tremendously if they win. Therefore I predict improve 5%, stagnate 80%, get worse 15%.

I predict that GDP will move as an aggregate of the former, so predicting the same as the total outcome: improve 18%, stagnate 48%, get worse 33%.

Interestingly, closer to your estimate than I would have thought beforehand.

fundamentalist writes:

I'm with Doug: 80% worse, 10% better, 10% plateau.

Yancey Ward writes:

Probably worse in the short and long term. There are simply no surrounding cultural influences to guide the Egyptians to better governmental and economic philosophies, as opposed, let's say, to what the East Germans or the Czechs had in 1990. Thus, I expect a somewhat hot civil war to erupt within a year of the coming elections as the losers will be unsatisfied with the results and will return to the streets with guns.

mark writes:

I love how much of a guess this really is. The next 6 months will tell us a lot about what the political balance of power will be. I am not an expert on Egypt by any stretch of the imagination and keep hearing different things about the Muslim Brotherhood; how wide and deep their support is among the people is hard to tell. I am surprised that no one else talked about the pride that ordinary Egyptians have in being Egyptian (and the shame in having fallen behind). While I agree that the region will become more volitile in the coming years I think that many players in the region already see that. Whoever takes control of Egypt will see that U.S. protection will mean less and less in the future and will look to providing for their own defense. Rational expectations of future volitility could be what makes Egypt's future leaders turn to market mechanisms not to help their people but to produce wealth that can be channeled into defense (the unintended consequence, however, would be a strengthened civil society and building of a middle class). I am 75% positive, 25% negative. Whatever happens I don't think that we will recognize the region in ten years.

AMW writes:

I'm cautiously optimistic:

33% better, 50% plateau, 17% worse. I'll further predict that personal freedom would be the main driver in improving the index. Economic freedom will likely remain somewhat low and GDP per capita will therefore follow suit. Peace is the main area I see where things could get worse, because for the last couple decades Egypt has been on reasonably good terms with its neighbors.

By the way, some of my optimism comes from the fact that my worst fears were not born out in Iraq. (Given how badly things DID turn out, you can imagine how horrific my worst fears were!)

LTPhillips writes:

In the short term, economic and political freedom will improve slightly, perhaps imperceptibly. In the long term, freedom will decline, especially as the Muslim Brotherhood begins to dominate political life; moreover, the economy will not generate nearly enough jobs to improve conditions for younger Egyptians.

cassander writes:

Percentages create an artifical impression of certitude. I think a better way would be to define a best and worst case that seem equally probable.

With Egypt, I think the best case would be if it began to look something like Turkey. The military installs a secular modernizer with at least a fig leaf of democracy, but then goes back to the barracks and does not interfere in daily politics. The worst case is that the military decides to actively participate in regular politics, rapidly becomes as corrupt and dysfunctional as the rest of Egypt, and ends up even more oppressive and plutocratic.

N. writes:

Put me down for 75% positive, 15% plateau, 10% worse. I've been scrutinizing the region for the past eight years and I do think that this is it--"the avalanche has already started; it is too late for the pebbles to vote." In late 2007 I predicted this would happen (sporadic regime collapse in the Middle East) in 2012; if I was off by a year, so sue me.

In 2007, mindful of Bryan, I was looking for ways to put my money on it, and, he'll be happy(?) to know that I have collected on a few $100 bets. As far as larger investments for someone bullish on the Middle East, I am just as stumped now as I was then. Timing exactly when sufficient inroads against corruption and towards transparency have been made in the region such that it becomes ripe for investment is going to be extremely challenging. If anyone has any suggestions, even if (especially if) they think I'm nuts, I'm all ears.

Full disclosure: I'm wrong way more often than 50% of the time, so much so that I am known to certain colleagues as "often-wrong-N." But I don't care -- you don't have to be right often, just when it counts. And I see enormous latent potential in the Middle East that is straining, after so long, to burst free.

Doc Merlin writes:

90% percent sure that the islamists will gain more power than they have now, and that the military will continue operating as a socialist style government run corp for most of the goods and services as it does now.

I'd put money on it, if anyone is willing to place bets.

Blackadder writes:

90% percent sure that the islamists will gain more power than they have now, and that the military will continue operating as a socialist style government run corp for most of the goods and services as it does now.

I'd put money on it, if anyone is willing to place bets.

How would we determine who won the bet?

Yancey Ward writes:

I think Cassander is going to be wrong 22.95% of the time.

Dan writes:

What would your guess have been 3 months ago? In other words, have things gotten better or worse as a result of recent events?

Blackadder writes:

Cassander,

Your best case scenario sounds about right, but I think your worst case is too rosy. For me, a worst case scenario would involve a takeover by the Muslim Brotherhood, followed by either an attack on Israel, a closure of the Suez canal, or some kind of ethnic cleansing or genocide of the Coptic population. Civil war is also a possibility.

malavel writes:

"Suppose we place equal weight on personal freedom, economic freedom, real GDP per capita, and peace."

What does this mean? Is one year of peace equal to 1% real GDP growth? You have to be very specific if you want to compare four very different variables like that.

Dave Schuler writes:

My crystal ball doesn't go that far into the future. For predicting the near future I only have one bit of advice: the revolution isn't over.

andy writes:

Whichever way it turns out, you can claim you predicted it :) If it gets better - well, that was the 15% - no need for Mea culpa ;)

fundamentalist writes:

For the optimists among us, check out the Pew Research poll of Egyptians. 84% favored capital punishment for anyone leaving the faith. The rest of the survey was no more encouraging. Egyptians don't have the tolerance for differences and respect for freedom that democracy needs. They may not agree with the tactics of the MB, but they certainly agree with the MB's philosophy and will therefore support it.

The demonstrators did not represent the majority of Egyptians. Sure, if the demonstrators themselves could take control, Egypt might have a chance at democracy. But the majority of the people want an Islamic state. That means no freedom.

More importantly, socialism has become the Islamic economic system. The MB and all conservative Islamic groups see socialism as Islamic. It's partly due to the influence of Iran and partly as a reaction to their seeing the West as Christian and capitalist. They're wrong on both counts, but that's their impression.

OneEyedMan writes:

We really need to figure out a reasonable way to index these categories. Life expectancy, real GDP per capita, and peace are all increasing everywhere, so I'd like to see some sort of improvement vs. trend rather than absolute improvement.

Telnar writes:

I claim no special knowledge of Egyptian political culture or the level of current influence various parties have. Still, I think this is an interesting exercise.

Starting from Faré's 33/33/33 baseline, I'll begin by noting 3 things:

-- A (very) weak analog of the efficient markets hypothesis would argue that on average (if with very high variance), the difference in political cultures between Egypt and Switzerland should already be reflected in the differences in their governments today. Because of that starting point, I'm not going to focus on the negatives that I am aware of in Egyptian political culture, since I don't have a model better than the efficient markets analog to argue for how those negatives might express themselves.

-- Over very long periods of time (say, 200 years or even 3000 years), the quality of government in the average state as measured by the proposed metric has been improving. If I know nothing else, this trend should encourage me to bias my estimate towards a higher chance of improvement than worsening.

-- Changes in technology over the last 200 years have increased the impact on the average person of both good and bad central government decisions. If this trend is ongoing, I should tend to estimate higher variance at potential inflection points, and therefore a smaller chance of plateau than the historical average.

There is more I could try to do to review historical experience so that the numbers I pick mean something quantitative rather than just expressing an intuition, but for now I'll settle for transforming 33/33/33 into 35/20/45 as a way of expressing that I expect extra variance and mild upward drift compared to history.

Lars P writes:

On a "macro" level it's a simple prediction that Egypt can't remain stagnating on the bottom of a world that is rapidly moving up for ever. The streak must be broken at some point. If it's within 10 years is of course less obvious, but my guess is 60% chance for better and 20% for worse.

The Stratfor analysis is a must read to understand Egypt. This is not a new revolutionary regime. It is the 60 year old military regime who removed a failed CEO.

PrometheeFeu writes:

I like what Telnar said.

10% significantly better, 30% very slightly better, 50% stagnate, 10% worst

Faré writes:

1- The "33%" baseline could be computed retrospectively from a weighted progress of all other countries (weight: square root of population? measure: the basis from some established freedom indexes?)

2- Considering that most of the negative development I see are on the side of personal liberty, my assessment of Egypt still makes it look like a decent place to invest into, though probably not stellar. See e.g. economic vs personal development in Iraq.

Doc Merlin writes:

@Lars P:
"This is not a new revolutionary regime. It is the 60 year old military regime who removed a failed CEO."

I agree, only now they seem to have brought in the MB which had been previously excluded.

Stephen W. Stanton writes:

>50% chance first three dimensions will improve modestly faster than "Plateau" definition.

>60% chance Peace will deteriorate... Which has knock-on effects for the other metrics.

Net/net, it's a path-dependent coin toss. Either improvement or belligerence... With a small chance of "neither" (peaceful stagnation/decline).

cassander writes:

Blackadder> The point isn't an absolute worst case, but a probable worst case. A couple weeks ago I was worried about an Iran style revolution, but I no longer consider that very likely. The Egyptian military seems to be sticking together and not going anywhere, and as long as that is the case, no one else can come to power. Even if they did, however, I would consider it extremely unlikely that they would close the canal or attack Israel. The Egyptian government derives a lot of revenue from the canal and can't afford to shut it down. As for an attack, if they did, the war would be over quickly and the Egyptians would lose badly. Again. Even if the MB doesn't know this, the Egyptian military certainly does, and I can't imagine it accepting orders to humiliate themselves, destroy their extremely expensive equipment, and cut themselves off from replacements parts all in one go.

What I think will happen is the military appointing a government that will maintain the status quo, and the status quo is slow decline.

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