18 Nov 2008

Economic Gangsters -- The Review

I read this book on a flight recently. The authors (Ray Fisman and Ted Miguel) are development economists at big schools (Columbia and UC Berkeley; Ted's in the econ department, but I see him and his RAs all the time), and they've written this book to give laymen some insight into the research we (economists) do and how that research can be used to advance development around the world.

Ray and Ted have structured their book around academic papers that they and their colleagues have written, omitting the tedious math and econometrics and adding explanations, stories and context to the questions at hand. (Sounds like Freakonomics, which I haven't read.)

Relative to an economic textbook, this book is much more accessible and intuitive; relative to other development books (Easterly's Elusive Quest for Growth, Scott's Seeing Like a State, and even Perkins' Confessions of an Economic Hitman), this book is, uh, boring and overly didactic.

Yeah, sorry.*

Perhaps I am a jaded reader -- I've read about 2/3rds of the papers behind the book, and I've been "doing" development economics for 5-15 years (depending on whom you ask) -- but the book only grabbed my interest a few times, e.g., the mayor of Bogota who used mimes to shame those breaking traffic laws. Put differently, the opportunity cost of reading this book was noticeable to me.**

For those of you interested in the contents, here's a summary, chapter by chapter:
  1. Economic development is impeded by corruption.
  2. You can measure a company's political importance by watching its stock price when the corrupt dictator (Suharto in Indonesia) gets sick.***
  3. You can detect corruption in the discrepancy between figures of the exporting country and importing country (e.g., Hong Kong to China). Distorted tariff and trade rules encourage corruption.
  4. Some cultures are more corrupt than others. Ray and Ted discuss their brilliant paper, which showed that diplomats to the UN in NYC obeyed parking laws in rough proportion to their corruption at home (and attitudes towards the US) -- despite having the same immunity from prosecution. (I'm guessing that this paper was their book proposal.)
  5. No water, no peace -- conflict rises when water supplies fall.**** Global warming will make this worse. Ray and Ted overlook an important problem in this chapter. They claim that the Rich world will not do too bad with climate change, but they forgot the adverse impact of a sick environment on quality of life.
  6. When people are starving, they look for ways to reduce the demand for food. One way to do this is by finding and killing "witches". One way to stop the massacre of old women and children accused of witchcraft is to provide insurance against such risks, i.e., drought relief.
  7. Countries can recover from war pretty quickly, but it's harder to recover from civil war or when ex-militants are left in unemployed groups. Vietnam succeeded; Iraq is failing.
  8. Randomized trials (one village gets a new program, another "control" village is left alone) are a good way to evaluate anti-poverty programs.*****
Bottom Line: Anyone REALLY interested in development economics (but who is not an economist) should read this book. Everyone else should keep reading and debating at economics blogs :) THREE STARS.
* And who am I, a lowly postdoc without a book to his name, to question the output of two superstar professors? Just me, folks... ** Tyler Cowen is famous for tossing books that don't pull him along. I wanted to stop more than once, but I also wanted to finish the book so I knew all that it said. For an example of something I found "worth" my time, listen to this great podcast in which Richard Epstein discusses inequality and happiness. *** Read this paper [PDF] to really understand how a developing country moves from the "Natural State" to the "Open Access Order." **** Check out the updated "Environment and Security Water Conflict Chronology" [PDF] from Peter Gleick's Pacific Institute for Studies in Development, Environment and Security (yes, that's the full name). It's pretty exhaustive, but it's also pretty inclusive (it includes incidents when one person is attacked, "perhaps" over water...) Also see the post below.

***** I'm still amazed that a PhD student (Ben Olken) was given $5.4 million to study corruption in Indonesian road building. Holy Cow! That's enough to fund 200 "normal" PhD research projects!


  1. Just finished it! I think the most valid premise in this book is that there some global issues which seem unsolvable are actually rooted in economics and thus can be solved with a little calculus. I was completely shocked at how much time the book devoted to analyzing the parking violations of UN diplomats. Seriously? A person may pick up $5 from the ground and keep it but it doesn't mean they would rob a bank...just like a double-parking diplomat wouldn't necessarily enter into corrupt agreements. Also the Intro totally aorked me up for some massive exposé built on economics ...it rote a check it refused to cash.
    Unfortunately for me I have to write a paper on it now.

  2. Noemi,

    Glad that you read it! The authors probably spent a lot of time on parking b/c they had a good paper to promote (and it's a neat example :)

    Their *point* was that there's a correlation between behavior at home and in NYC. What to do about it? Another matter...


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