
Why nations fail - entangld
http://www.economist.com/node/21549911
======
zipdog
The author's key argument is that extractive institutions lead to state
failure. Like most theories of state failure, there's some good examples but
enough weak or counter examples to discredit it as 'the' answer. At best, I'd
argue that extractive institutions are a block to success: countries with them
have one fewer barrier to overcome.

I recently researched the thorny issue of what consititutes art, and the
leading idea in that field is a cluster theory: a set of ten ideas which
commonly associated with things accepted as art. Some objects don't have all
ten, but together they provide a powerful guide. My point in mentioning this
is that state failure seems to follow the same pattern. Geography (ie Jared
Diamond's theory) is a factor in state success and failure. Culture is another
factor. Economic system and the nature of institutions (extractive or
inclusive) are two more factors. (And there's bound to be a few more).

A state can succeed with only a couple of these. Lacking them all is a sure
sign of failure. Having them all likely comes as close to guaranteeing success
as possible. But thinking there's some single indicator that determines state
failure is a doomed project.

~~~
bertm
I often wonder about these types of theories. They are often hard to prove or
disprove. It is fun to try and come up with a theory that is equally as
plausible given the information provided.

To your theory on art, could art be defined as anything which a group of
people would define as art? Or potentially anything valued by a group seemly
without functional value? It seems to be a balance between simplicity and
informational content.

~~~
zipdog
Acceptance by the art community is a key factor, possibly the most important.
Other factors include artistic intention, aesthetic qualities, and being
considered based on what is already considered art.

------
narrator
Joseph A. Tainter's _The Collapse Of Complex Societies_ is a bit academic but
very good study of civilizational collapse. It has a lot of data, studies many
different civilizations and examines all popular theories of civilizational
collapse. It points to diminshing marginal returns on increasing complexity in
civilizations as the mechanism of collapse.

It's far better than the trendy Jared Diamond writing. IMHO, Jared Diamond's
collapse is a book written from end to beginning, much like Guns, Germs and
Steel to simply reconfirm existing left of center ideas by torturing and
cherry picking the data to ignore anything that doesn't reconfirm accepted and
popular political narratives.

~~~
zasz
Really? I found _Collapse_ to be much more boring than I expected. One of the
major reasons he claims that a society collapses is a lack of trading
partners. Not very sexy at all, and not leftist.

~~~
eru
> Not very sexy at all, and not leftist.

I can't make out whether that's meant as a compliment or a complaint. Would
you elaborate on that description, please?

~~~
zasz
It's neither. The parent comment implied that Diamond's book was a leftist
polemic on how the environment is important. I didn't think it was very
leftist or very alarmist. That's all I meant. I was actually disappointed when
Diamond mentioned neighboring nations as a reason for collapse...how utterly
unsurprising and dull. He spent a lot of time talking about it, too.

------
rickyconnolly
I am always wary of these grand theories people come up with about why great
civilisations fall. People tend to project their own values onto history.
Conservatives invariably argue that societies fall because they become
decadent and valueless, while liberals contend that societies became too
stagnant and inflexible to survive. Observer bias is a big problem in the
study of history.

------
nl
Note that this is a review by the (economically conservative) _Economist_.

I haven't read _Why Nations Fail_ , but I do read their blog[1] and my
interpretation of their theories is much less absolute than the Economist's is
- or rather, I think the emphasis is more on the problems of _Extractive
institutions_ (which may well be state institutions, but also could be private
institutions or hybrids or the two).

For example, even in the review the Economist highlights the example of
Botswana which is a good example of state power as a good.

Another example: the (book) authors are very positive about the potential
impact of Jim Yong Kim on the World Bank:
[http://whynationsfail.com/blog/2012/3/27/mr-kim-vs-the-
world...](http://whynationsfail.com/blog/2012/3/27/mr-kim-vs-the-world-
bank.html)

[1] <http://whynationsfail.com/>

~~~
eru
> Note that this is a review by the (economically conservative) Economist.

I thought they were one of the most liberal papers in existence. (In the
classical European sense.)

~~~
nl
They believe in smaller rather than larger government. Choose your label..

~~~
eru
They actually believe in a certain size of government. For example for some
developing countries they often suggest increasing tax revenues to build a
bigger state.

------
mmaunder
Hour long chat on econtalk with Acemoglu:
[http://www.econtalk.org/archives/2012/03/acemoglu_on_why.htm...](http://www.econtalk.org/archives/2012/03/acemoglu_on_why.html)

------
_delirium
Earlier discussion (57 comments) from another summary (though a shorter one)
of the same book: <http://news.ycombinator.com/item?id=3765492>

------
bdunbar
Reading this review - and others - I was reminded of Ralph Peters essay
'Spotting the Losers: Seven Signs of Non-Competitive States'

[http://www.carlisle.army.mil/USAWC/Parameters/Articles/98spr...](http://www.carlisle.army.mil/USAWC/Parameters/Articles/98spring/peters.htm)

Which doesn't really explain 'why' but does set out in concise form 'what
failure looks like'.

~~~
roguecoder
It seems like "discouraging or prohibiting work" is the common theme, among
both these and extractive institutions. Which may be too tautological to be
useful: in cases where work isn't worth doing or is outright prohibited, less
work/science/innovation gets done.

~~~
bdunbar
_Which may be too tautological to be useful_

Depends on what you need it to be useful for.

Understanding the root problems in a philosophical sense? Maybe not.

A rough guide for where to put a factory, do business with, startup ideas?
Useful.

------
rmm
The authors have a blog over at <http://whynationsfail.com/>

Pretty good reading.

------
el_presidente
_Nations fail because their leaders are greedy, selfish and ignorant of
history_

This is the kind of thinking that got the US stuck in Iraq for a decade.
"We'll change the country by killing this one guy".

If a nation's leader is a failure it's because the nation itself is a big pile
of fail, not the other way around.

------
entangld
The author's main point seems to be that corrupt governments allow _too much
money in too few hands._

Maybe this isn't the grand theory to support them all, but it reminds me a lot
of why cancer is so destructive. One part of a large community using far too
many resources. There could be a cluster theory to support the causes of
cancer as well, but cluster theories are very hard to find solutions for. We
don't just need to casually understand the problem. We need to prevent it if
possible.

At least this theory gives us a reasonable means of experimenting with and
analyzing future failures.

Edit:removed my opinion of others' opinions.

~~~
cynicalkane
No it isn't. The author's main point is that corrupt governments siphon wealth
into privileged hands at the expense of the public good. This isn't same as
"allowing" wealth inequality. You can try to elide these things into being the
same, but now you're misrepresenting things to make a politically charged
point.

~~~
entangld
Geez. I'm not on a soapbox here. Don't accuse me.

If you're going to say I'm wrong, at least point out how I'm wrong. There
isn't a big difference between what I said and:

>> _corrupt governments siphon wealth into privileged hands at the expense of
the public good._ <<

The effect is the same. Too much money in too few hands. Countries don't only
need the rule of law to protect us from violence. We also need it to protect
us from semi-legal forms of theft.

Monarchs gathered wealth and provided protection, and they've been going out
of business for quite a while now. Mexico has the richest person in the world
along with a lot of corruption and lots of very poor people. How can a place
be viable enough to support multibillionaires, and still have people living in
shacks?

I'm trying to understand the truth.

~~~
eli_gottlieb
> _How can a place be viable enough to support multibillionaires, and still
> have people living in shacks?_

That's basically how capitalism works if left to its own devices. The _place_
doesn't have to do anything at all.

------
Fando
"Amid weak and accommodating institutions, there is little to discourage a
leader from looting. Such environments channel society’s output towards a
parasitic elite, discouraging investment and innovation"

------
ajays
A good read is the book "The Mystery of Capital" by Hernando DeSoto. It
doesn't address failed states, but talks about why capitalism succeeds in some
countries and not in others.

------
nico
This sounds like game theory, the best solution in this case seems to be when
everybody is better off (inclusive), instead of just trying to achieve
individual gain (extractive).

------
philip1209
I appreciate that The Economist clearly states their thesis as the subtitle -
i.e., it's not a hook - it's an outline for the article.

------
lnmx
The EconTalk podcast recently featured an interview with Acemoglu on this
topic:

[http://www.econtalk.org/archives/2012/03/acemoglu_on_why.htm...](http://www.econtalk.org/archives/2012/03/acemoglu_on_why.html)

------
fragsworth
I can't get past how needlessly wordy this article is. It's as if someone is
trying to flaunt their language skills and it distracts me from the actual
content; I must admit that I read the whole thing and did not catch wind of
the author's point.

Sentences like these just read as nonsense to me:

"The intuition behind the theory is nonetheless compelling, which makes the
scarcity of policy prescriptions frustrating."

~~~
ender7
"The authors do a convincing job of explaining why things are they way they
are, but fail to explain how we might go about changing them."

~~~
JonnieCache
That doesn't express the same thoughts at all though.

I guess what it comes down to is that some people perhaps see it as pompous to
place the precise expression of one's thoughts above the simple and efficient
conveyance of information.

To these people, I say: read more poetry.

To find true opacity-for-its-own-sake one must look to the french postmodern
"philosophers" of the 1960s:

 _We can clearly see that there is no bi-univocal correspondence between
linear signifying links or archi-writing, depending on the author, and this
multireferential, multi-dimensional machinic catalysis. The symmetry of scale,
the transversality, the pathic non-discursive character of their expansion:
all these dimensions remove us from the logic of the excluded middle and
reinforce us in our dismissal of the ontological binarism we criticised
previously._

Utterly unforgivable.

------
nirvana
There is fundamentally sound economics behind the authors theory, but there's
also really easy to understand logic: IF you have a strong state that controls
the economy, then everything that is done must be authorized by the state.
This is necessary if the purpose of the state is to extract the nations wealth
to profit an elite few. If you have a weak state, then experiments can be
tried, and while many experiments will be failures (such as most companies can
fail) the ones that are successful really have a lasting and long term
positive impact across the whole society. DEC, Apollo and many others failed,
but IBM, Apple and Microsoft succeeded.

The other reason this works is that businesses have to accommodate the needs
and desires of their customers, their shareholders and their employees.
Businesses need all three in order to thrive. Governments don't need to
accommodate anyone's desires or needs, short of that which would cause a
revolution that overthrows the government... government imposes its edicts
using violence while businesses can only attempt to pursuade or entice people.

Naturally this means that government is less interested in accepting economic
reality, while businesses have to react very quickly... and if they don't, the
entire economy of businesses overall will react quickly (e.g.: your business
will get supplanted by one that accommodates the new reality.)

The lesson here for those who wish to enslave a populace and extract wealth
from them is rather than have an overarching government with extreme control,
allow a great deal of liberty and then impose a %10 tax on it. %10 is better
than %50 when its %10 of an economy 1,000 times bigger.

Unfortunately, all states I'm aware of historically, no matter how rooted in
liberty, eventually become parasitical and over the years start to extract
more and more of the wealth to profit politicians and more and more
controlling to make protect that extractive policy.

~~~
Retric
There are several problem with your theory. Most importantly those in power
don't know how long they will stay in power. Dictators don't last that long on
average and if you assume there is a 50/50 shot your going to last 10 years
investing in the economy may not actually benefit you. Secondly taxes are just
one of many ways that the connected extract resources from society, often
favors or bribes are an easier target for those with some but not total power.

Finally, the state's real power has little to do with direct force. Functional
society's run on softer forms of coercion. Such as propaganda, tribal
allegiance, religion, or even entertainment. Consider, over 10 million people
live and work in america without permission from the government to do so. And
even those with citizenship the largest crop in many states is marijuana and
such income rarely makes in on the old tax forms.

------
moldbug
Once again Occam's butterknife is spotted in the wild. Richard Lynn, call your
office:

<http://en.wikipedia.org/wiki/IQ_and_the_Wealth_of_Nations>

~~~
hristov
Wow, this thread just became some kind of magnet for racists, didn't it. Since
you are apparently very proud of your IQ, perhaps you can read the actual
article and try to comment on something related to the article's substance,
and not just give us a knee jerk reaction based on the title.

~~~
moldbug
The implicit comment is that the article's substance is of no conceivable
relevance, because it fails to mention the most obvious possible cause - human
genetic diversity - for the pattern it purports to analyze. It's one thing to
refute or qualify the null hypothesis. It's another to ignore it.

Why shouldn't it be the null hypothesis that genetic diversity is the cause of
global inequality? Human beings have been thinking about this subject for a
lot more than the last 50 years, you know. All I think is what more or less
everyone used to think - since when Jesus was a little boy. If that's not a
null hypothesis, what is?

So, from my perspective, the OP is like a long, vague explanation of how
stress causes ulcers or marsh miasmas cause malaria. It's impossible for any
such analysis to be any more cogent than any other - all are equally wrong.

~~~
tatsuke95
The situation is bad enough that I'm a little sensitive to agreeing with what
you've said here. According to a few posts up, that makes me a racist, I
guess.

The problem is, I never really understood _why_ it's a stretch to believe that
in all of the messy soup of chromosomes and culture (variables of a magnitude
beyond what we could ever possibly research) that there are tangible
differences between human beings. And once you start acknowledging
_differences_ , you have to acknowledge that those _differences_ are going to
give rise to advantages and disadvantages to things so random that they might
not ever matter. But sometimes they do.

Are these differences, this genetic diversity, the root cause of global
inequality? Based on my understanding of economics, I don't believe so. But
that doesn't mean the conversation should be off the table.

~~~
barrkel
Keeping the conversation off the table removes oxygen in which racists with
less noble goals thrive. Human nature being what it is, they make judgements
based on first appearances. When people are highly invested in having opinions
on people based on things that come from first appearances, they are very
likely to mistreat people on an individual basis - i.e. prejudge them,
literally, and _unfairly_ , because individual variance is far greater than
group variance.

So in the overall scale of things, I think it's better not to have those
discussions. The costs are too high, and frankly, history has shown that the
public can't be trusted with authoritative opinions that can give cover to
heinous acts. The conversation should be off the table.

~~~
nkurz
Thanks for your explanation. I disagree with your conclusion, but now better
understand your reasoning. I'm more of the theory that rather than avoiding
this conversation, we should confront it head-on: so long as it's accurate,
prejudice can be beneficial, but should never trump individual reality.
Instead of arguing against all bias because bias is bad, we should argue
against false bias because it's false and misleading.

If you're in the mood for an excellent book on these topics, with what I think
is good representation of both arguments, you should check out
[http://www.amazon.com/Defenders-Truth-The-Sociobiology-
Debat...](http://www.amazon.com/Defenders-Truth-The-Sociobiology-
Debate/dp/0192862154). It's one of the best books I've ever read.

~~~
entangld
I don't think he's saying all bias is bad. But bias finds support too easily,
even when it's not accurate (prejudice, nationalism, etc). And that reasoning
is easily repeated by uninformed people which just adds more noise to an
already complex discussion.

When you're trying to have a rational discussion about which factors
contribute to certain effects, it's better to exhaust all possible theories
before attempting to prove that "some people are just better than others."

~~~
nkurz
I guess I'm more in favor of putting all the theories on the table rather than
deciding in advance which ones are permissible to hold. Let the false ones
fall out because they are false, not because they cannot be discussed. What I
deny is that there are true ideas so unpalatable that they must be taboo. I
think this is what Barrkel is suggesting is necessary in the case of race.

------
hugooconnor
States are engineered to fail by foreign entities who wish to pillage their
resources.

------
mynameishere
Nations fail due to low average intelligence and high average psychopathic
tendencies. The reasons for those things are multitudinous, of course, but the
ruling class is a result more often than a cause.

