Timur Kuran’s [amazon_link id=”0691147566″ target=”_blank” ]The Long Divergence: How Islamic Law Held Back the Middle East[/amazon_link] joins the classics of economic history. It adds another piece to the jigsaw of understanding the contributory factors to the long trends of economic growth. Kuran emphasises institutional factors, whereas Kenneth Pomeranz in [amazon_link id=”0691090106″ target=”_blank” ]The Great Divergence[/amazon_link] explains China’s falling behind the West after 1800 in terms of inferior access to resources. David Landes in [amazon_link id=”0349111669″ target=”_blank” ]The Wealth and Poverty of Nations[/amazon_link], and Joel Mokyr in [amazon_link id=”0691120137″ target=”_blank” ]The Gifts of Athena[/amazon_link], emphasise culture and knowledge. My instincts – and modern development and comparative economics – lean toward the institutional explanations, but history is over-determined and I’m not sure we’ll ever have a definitive recipe for increasing long-term growth potential.

The preface  and Chapter 1 of The Long Divergence should be read by everyone interested in comparative economic history as a model for thinking about how to go about this assessment. Kuran sets out his goal as identifying the long-term effects of certain economic institutions, those shaped by classical Islamic law. He is clear that he is not making any wider social assessment. In 1700 or 1750, the gap in living standards between workers in Istanbul and London or Amsterdam was not that high. Economic institutions in the Middle East had proven just as effective as those in the west. Yet growth then diverged until the early 20th century. The reason, in a nutshell, is:

“Europe was making the transition from personal to impersonal exchange. In other words, economic relations based on personal connections were giving way to ones depending on complex organisation.” (p20)

The Islamic legal framework – emphasising personal relationships, finite-duration partnerships and oral testimony – prevented this move to large organisations with their own legal personhood, with the development of large scale also inhibited by patterns of marriage and inheritance in the Middle East. It was not until western economic organizational structures were imported or imposed in the mid-19th century that the region could get onto the same trajectory of economic growth. A good companion to this book – which taught me a lot about a region I don’t know much about –  is Douglas W Allen’s [amazon_link id=”0226014746″ target=”_blank” ]The Institutional Revolution[/amazon_link] (I reviewed it here), which describes in some detail the way British economic institutions changed in the 18th century, enabling the Industrial Revolution.

As Kuran points out, the disadvantage of the Islamic legal approach with its emphasis on personal relations and trust, would absolutely not have been apparent in the 18th century. On the contrary, the economic institutions were evidently favourable in many ways, including the vigour of international trade and the provision of welfare. But the dynamic consequences of a small static difference were huge (p281).

Economic institutions that work well in terms of long-run growth in a certain context will become dysfunctional when the context changes. This is in fact the meta-message I took away from The Long Divergence, as it seems pretty clear to me that western economic institutions are losing their long dynamic advantage, and we in Europe and the US are not doing all that well on institutional reform. Large scale, impersonal exchange and the erosion of personal trust are damaging, given the new technological basis of production.

Kuran writes:

“[A] common fallacy is the perception that major social phenomena, such as the decline of a civilization, must have major causes …. [A] chain of responses to a minor initial distinction can produce a cumulatively huge effect.” (p31)

Or as T.S.Eliot put it with poetic licence in The Hollow Men, things end “not with a bang, but a whimper.”

[amazon_image id=”0691147566″ link=”true” target=”_blank” size=”medium” ]The Long Divergence: How Islamic Law Held Back the Middle East[/amazon_image]

The Observer today has a feature about a ‘zeitgeisty’ new US TV series that’s gaining critical acclaim, Girls. It’s being billed as the Sex and the City de nos jours. To give a serious patina to an article that’s really about how much sex there is in the show, the NYU sociologist Eric Klinenberg, author of [amazon_link id=”1594203229″ target=”_blank” ]Going Solo: The Extraordinary Rise and Surprising Appeal of Living Alone[/amazon_link] is quoted. He obviously appreciates the programme for its serious analysis of the dilemmas of modern urban life:

“My book is about the re-organisation of our personal and family lives and so is the show. Compared to Sex and the City it feels more deep and honest.”

[amazon_image id=”1594203229″ link=”true” target=”_blank” size=”medium” ]Going Solo: The Extraordinary Rise and Surprising Appeal of Living Alone[/amazon_image]

I’ve not read Going Solo, but absolutely loved Klinenberg’s earlier book, [amazon_link id=”0226443213″ target=”_blank” ]Heatwave: A Social Autopsy of Disaster in Chicago[/amazon_link]. It analyses ‘excess death rates’ in different wards in Chicago during a blistering heatwave in July 1995. The overall death toll was more than 700, among the old, young and ill, and above all among those on low incomes. But the truly striking finding was that the death rate was significantly higher in mainly African-American areas than in mainly Hispanic areas. While factors such as an unresponsive city government and inadequate public services were common to all low income wards, a supportive family and social structure also accounted for large differences between them. One of the chapters is titled ‘Dying Alone’. Maybe the “surprising appeal” of ‘Living Alone’ has its limits.

[amazon_image id=”0226443213″ link=”true” target=”_blank” size=”medium” ]Heat Wave: A Social Autopsy of Disaster in Chicago[/amazon_image]

I read on his website that Klinenberg is working on “an ongoing ethnographic investigation of news production in a digital age,” among other projects. Sounds interesting.

The other day I blogged about Paul Seabright’s Princeton in Europe lecture, about the reasons so few people noticed the oncoming Euro crisis. I’ve only just dipped into his new book, [amazon_link id=”0691133018″ target=”_blank” ]The War Between the Sexes[/amazon_link]. The book is glowingly reviewed by Jonathan Ree in the Guardian today. He describes it as “witty, informative and cogent.”

But here was a line that stopped me short:

“Seabright is an economist by trade, though some of his colleagues regard him as an oddball, even a miscreant.”

That’s bizarre. Nobody I know – and that’s a lot of economists – regards him as an oddball economist. On the contrary, he’s a hugely respected microeconomist working at one of Europe’s leading industrial economics research centres. A glance at his website shows – OK, a picture of him wearing a funny hat – but a long list of very serious publications, exactly what you would expect from a serious industrial economics expert, with an interest in interdisciplinary areas.

So I think maybe many non-economists like Ree believe economists they like must by definition be seen as oddball in some way by the rest of the profession, because they have such fixed (and incorrect) ideas about what mainstream economics is like. If you think the norm is a “neoliberal” ideologue obsessed with free markets and austerity, then every normal applied economist is going to look like a maverick.

[amazon_image id=”0691133018″ link=”true” target=”_blank” size=”medium” ]The War of the Sexes: How Conflict and Cooperation Have Shaped Men and Women from Prehistory to the Present[/amazon_image]

Last night I attended Paul Seabright’s Princeton in Europe lecture, ‘On Lying, Risk-Taking and the Implosion of the Euro.’ The lecture was not, as one might have expected, a trailer for Paul’s forthcoming book, [amazon_link id=”0691133018″ target=”_blank” ]The War of the Sexes[/amazon_link], although I got my copy last night and am really looking forward to reading it.

[amazon_image id=”0691133018″ link=”true” target=”_blank” size=”medium” ]The War of the Sexes: How Conflict and Cooperation Have Shaped Men and Women from Prehistory to the Present[/amazon_image]

Rather, the lecture followed up a workshop Paul organised last autumn at the Toulouse School of Economics, about the problem of attention. There is a write-up of the workshop, The Invisible Hand Meets the Invisible Gorilla (pdf). Put briefly, we are very bad indeed at paying attention to obvious events, and particularly when either change is gradual or there is a lot going on at the same time so it’s all very confusing.

I tweeted the lecture under the #PUPSeabright hashtag, but to sum up, Paul argued that this attention problem ‘explained’ why so few people foresaw the financial and Euro crisis. The crisis has many causes, it is a complicated phenomenon. Greece – like Belgium – should not have qualified for Euro membership in the first place. The competitiveness of the southern European economies is poor, so for example, the proportion of young Spaniards going to university declined in the 2000s. The loss of the tool of devaluation was crippling. Government spending was unlikely to be controlled, especially as Greece was in the 2000s the world’s fourth biggest importer of arms – extraordinary fact. There was a housing bubble in Spain and Ireland. And so on. The point is that many causes contributed, and unfurled over a long period of time.

In an illuminating parallel, Paul talked about the crash of the Air France 447 flight from Rio into the ocean in 2009. That had various contributory causes, such as a decision to fly through a thunderstorm, a small technical malfunction in the instruments, and so on. Nevertheless, three pilots, two very experienced, ignored a LOUD cockpit warning that the engines were stalling that was repeated 75 times. (See this explanation in Popular Mechanics.) The warning system worked. The humans didn’t pay attention. This is rather sobering if we think we can learn from the financial crash how to build better warning systems, even with data and computer power.

Anyway, a fantastic lecture. Paul is speaking in Bristol on 14th May, this time about the War of the Sexes – do attend if you can.

Paul Seabright giving the 2012 Princeton in Europe lecture

I had a bit of a wander around Marrakech on my holiday there last week, and a day-trip to the Atlas Mountains too. Morocco is a medium development country according to the Human Development Index, and that seemed spot on from the few things that I saw. My reaction set me to wondering exactly what it was that a casual visitor encounters that indicates the economic development status of any particular place. Drawing on other travels, I settled on these non-standard but easily visible indicators – but maybe others can challenge them or think of better ones? The criterion (apart from validity) is that they should be easy for anybody to spot even if they know next to nothing abut a place.

1. Waste management – on an ascending scale from human to household to industrial waste (culminating in invisible greenhouse gas management, I suppose). The worst slums I’ve visited have no sewerage, the richest cities are clean and have good air quality. Along the way you get places where people dump rubbish on waste ground, and that includes, for example, parts of Sicily. (I think this indicator also explains why British householders get so cross when their local council tries to reduce garbage collections from weekly to every two weeks. Dealing with rubbish is a basic of effective government.)

2. Paved roads and floors. If they aren’t paved, there is dust or mud everywhere. Houses and children are impossible to keep clean. Transportation is slow – a donkey may be more efficient than a vehicle in the circumstances. Like indicator (1), this impinges on women’s time as well, as women do most cleaning/clearing up.

3. In the same vein, domestic efficiency. I can’t speak for Moroccan homes, having only seen one that was on display for gullible tourists as an example of a “traditional” house; but was interested to learn once from a student from Cameroon that he had never realised that one could have cupboards or shelves that gave things in the home their specific locations. He said his mother could never find anything because items were put down anywhere. I don’t know how universal this indicator is, so include it only tentatively, but nevertheless I think the value of women’s time is a crucial marker of a country’s development. That value is reflected in efficiency in the home and labour-saving devices and features.

4. No set prices. I know there is far, far less everyday haggling than one experiences as a tourist in the market. Even so, having labelled prices that are the same for every customer is essential for the convergence of prices and market efficiency. The alternative is price discrimination to the benefit of sellers rather than consumers, and an absence of the concise summary of information about preferences and resources that is key to the magic of markets. See John McMillan’s brilliant book [amazon_link id=”0393323714″ target=”_blank” ]Reinventing the Bazaar: A Natural History of Markets[/amazon_link] for more on this.

5. Finally, lack of scale. My generalisation here is that lower income countries are more likely to have very few private sector companies operating at sufficient scale. Scale is an important – and sometimes overlooked – aspect of productivity. Here is a picture of the wholesale market for hides in Marrakech, which I stumbled into. These traders have at most a couple of dozen hides each, and are selling them to manufacturers of leather goods in even smaller amounts.(It was an open outcry market.)  One also peers into workshops where youngsters are making small numbers of shoes and bags by hand. Handicrafts? Or just inefficiently small scale?

In the market for hides in Marrakech (Picture by Rory Cellan-Jones)