Yves here. I must confess that I do not pay as much attention to Nobel prizes as I should. The role of the Swedish Central Bank Knockoff Nobel in promoting elite-serving orthodoxies has managed to sour me on the genuine article. Here, Jomo provides an excellent takedown of the latest selection.
By Jomo Kwame Sundaram, former UN Assistant Secretary General for Economic Development. Originally published at Jomo’s website
New institutional economics (NIE) has received another so-called Nobel prize, ostensibly for again claiming that good institutions and democratic governance ensure growth, development, equity and democracy.
Daron Acemoglu, Simon Johnson, and James Robinson (AJR) are well known for their influential cliometric work. AJR have elaborated earlier laureate Douglass North’s claim that property rights have been crucial to growth and development.
But the trio ignore North’s more nuanced later arguments. For AJR, ‘good institutions’ were transplanted by Anglophone European (‘Anglo’) settler colonialism. While perhaps methodologically novel, their approach to economic history is reductionist, skewed and misleading.
NIE caricatures
AJR fetishises property rights as crucial for economic inclusion, growth and democracy. They ignore and even negate the very different economic analyses of John Stuart Mill, Dadabhai Naoroji, John Hobson and John Maynard Keynes, among other liberals.
Historians and anthropologists are very aware of various claims and rights to economic assets, such as cultivable land, e.g., usufruct. Even property rights are far more varied and complex.
The legal creation of ‘intellectual property rights’ confers monopoly rights by denying other claims. However, NIE’s Anglo-American notion of property rights ignores the history of ideas, sociology of knowledge, and economic history.
More subtle understandings of property, imperialism and globalisation in history are conflated. AJR barely differentiates among various types of capital accumulation via trade, credit, resource extraction and various modes of production, including slavery, serfdom, peonage, indenture and wage labour.
John Locke, Wikipedia’s ‘father of liberalism’, also drafted the constitutions of the two Carolinas, both American slave states. AJR’s treatment of culture, creed and ethnicity is reminiscent of Samuel Huntington’s contrived clashing civilisations. Most sociologists and anthropologists would cringe.
Colonial and postcolonial subjects remain passive, incapable of making their own histories. Postcolonial states are treated similarly and regarded as incapable of successfully deploying investment, technology, industrial and developmental policies.
Thorstein Veblen and Karl Polanyi, among others, have long debated institutions in political economy. But instead of advancing institutional economics, NIE’s methodological opportunism and simplifications set it back.
Another NIE Nobel
For AJR, property rights generated and distributed wealth in Anglo-settler colonies, including the US and Britain’s dominions. Their advantage was allegedly due to ‘inclusive’ economic and political institutions due to Anglo property rights.
Variations in economic performance are attributed to successful transplantation and settler political domination of colonies. More land was available in the thinly populated temperate zone, especially after indigenous populations shrank due to genocide, ethnic cleansing and displacement.
These were far less densely populated for millennia due to poorer ‘carrying capacity’. Land abundance enabled widespread ownership, deemed necessary for economic and political inclusion. Thus, Anglo-settler colonies ‘succeeded’ in instituting such property rights in land-abundant temperate environments.
Such colonial settlement was far less feasible in the tropics, which had long supported much denser indigenous populations. Tropical disease also deterred new settlers from temperate areas. Thus, settler life expectancy became both cause and effect of institutional transplantation.
The difference between the ‘good institutions’ of the ‘West’ – including Anglo-settler colonies – and the ‘bad institutions’ of the ‘Rest’ is central to AJR’s analysis. White settlers’ lower life expectancy and higher morbidity in the tropics are then blamed on the inability to establish good institutions.
Anglo-settler privilege
However, correct interpretation of statistical findings is crucial. Sanjay Reddy offers a very different understanding of AJR’s econometric analysis.
The greater success of Anglo settlers could also be due to colonial ethnic bias in their favour rather than better institutions. Unsurprisingly, imperial racist Winston Churchill’s History of the English-Speaking Peoples celebrates such Anglophone Europeans.
AJR’s evidence, criticised as misleading on other counts, does not necessarily support the idea that institutional quality (equated with property rights enforcement) really matters for growth, development and equality.
Reddy notes that international economic circumstances favouring Anglos have shaped growth and development. British Imperial Preference favoured such settlers over tropical colonies subjected to extractivist exploitation. Settler colonies also received most British investments abroad.
For Reddy, enforcing Anglo-American private property rights has been neither necessary nor sufficient to sustain economic growth. For instance, East Asian economies have pragmatically used alternative institutional arrangements to incentivise catching up.
He notes that “the authors’ inverted approach to concepts” has confused “the property rights-entrenching economies that they favor as ‘inclusive’, by way of contrast to resource-centered ‘extractive’ economies.”
Property vs popular rights
AJR’s claim that property rights ensure an ‘inclusive’ economy is also far from self-evident. Reddy notes that a Rawlsian property-owning democracy with widespread ownership contrasts sharply with a plutocratic oligarchy.
Nor does AJR persuasively explain how property rights ensured political inclusion. Protected by the law, colonial settlers often violently defended their acquired land against ‘hostile’ indigenes, denying indigenous land rights and claiming their property.
‘Inclusive’ political concessions in the British Empire were mainly limited to the settler-colonial dominions. In other colonies, self-governance and popular franchises were only grudgingly conceded under pressure.
Prior exclusion of indigenous rights and claims enabled such inclusion, especially when surviving ‘natives’ were no longer deemed threatening. Traditional autochthonous rights were circumscribed, if not eliminated, by settler colonists.
Entrenching property rights has also consolidated injustice and inefficiency. Many such rights proponents oppose democracy and other inclusive and participatory political institutions that have often helped mitigate conflicts.
The Nobel committee is supporting NIE’s legitimisation of property/wealth inequality and unequal development. Rewarding AJR also seeks to re-legitimise the neoliberal project at a time when it is being rejected more widely than ever before.
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Imagine the disgrace in having such a Nobel Prize recipient; imagine honoring racism:
https://www.project-syndicate.org/commentary/xi-jinping-china-economy-rotting-from-the-head-by-daron-acemoglu-2022-10
October 28, 2022
China’s Economy Is Rotting from the Head
By Daron Acemoglu
Has anyone tried making a Prize for Astrology in Memory of Alfred Nobel as a protest?
That is a Fantastic Idea.
:-)
Much more appropriate, I think, would be a prize for Ptolemaic Astronomy in Memory of Alfred Nobel. That’s because much of Neoclassical Economics is based upon a prior assumptions cast into a mathematical framework.
Ptolemaic astronomy assumes
1. Goecentricy– All of the heavens revolve about a stationary earth.
2. Perfect Motion — Perfect motion, following upon Aristotle, is circular motion.
It then ‘explains’ what it observes by applying
3. Sophisticated Mathematics to every observation, requiring however that those a priori assumptions ‘guide’ those mathematics. The mathematics of the day was used explicitly to explain any ‘irregularities’.
If we look at Neoclassical Economics closely we ‘find’ that ‘Consumer Sovereignty’ is based on the idea of maximizing “Consumer Welfare”, but if we probe that concept we quickly discover that “Consumer Welfare” is the welfare only of Purchasers in markets. It is, in substance, “Purchaser Sovereignty“, the jargon of the ‘Consumer’ basically meaning that only those within a particular market —I.e., those actually buying goods/services in ‘markets’ — can ever experience welfare gains or welfare losses, a notion that those not in these particular markets can never gain or lose well-being due to their operations.
This is because the ‘Consumer’ is defined as an entity having the monies and the willingness to buy goods and services in particular markets, which leaves out the population of all persons who may or do not have the wherewithal to be ‘consumers’ {er, ‘purchasers’} in particular markets. I.e., if you don’t actually spend in any market, you can never experience gains or losses in your welfare from that market’s existence or it operations.
I did not add that a “Purchaser” is simply a “Customer” from the perspective of sellers of goods and services. Any theory which implies that only actual Customers have welfare gains or losses in market plays into the hands of neoliberal economists.
Avner Offer, a brilliant economic historian, wrote this a few years’ back with Gabriel Soderberg – the prize has generally reflected the neoliberal preferences of the Riksbank, often with disastrous effects (as if adding a product quality mark to many bad ideas): https://press.princeton.edu/books/hardcover/9780691166032/the-nobel-factor?srsltid=AfmBOor_KE1yuk_6bULkVkSrcAra9EzfpKkk7r77Tiouom3ONvHuaiNK.
https://www.theguardian.com/commentisfree/2016/oct/10/politics-shaping-nobel-prize-economics-social-democracy
October 10, 2016
The Nobel prize in economics takes too little account of social democracy
It’s the highest accolade, but – unlike the other Nobel prizes – it was started to mark a bank’s tercentenary and is subject to political influences
By Avner Offer – Guardian
The Nobel prize in economics will be announced today. For economists, it is the pinnacle of reputation. When the word Nobel becomes attached to a winner’s name, his word acquires newsworthy authority (only one woman, Elinor Ostrom, has won the prize so far). The prize matters to everyone else too, because of market liberalism, which advocates marketisation, deregulation, union-busting, financialisation, inequality, outsourcing of healthcare, pensions and education, low taxes for the rich, and globalisation. In the 1990s, this rightwing platform was endorsed by New Labour, Clinton Democrats, and their equivalents elsewhere.
The faith in markets comes from economics. Confidence in economics is underpinned by the Nobel prize, which gives it scientific authority. Nobel economist Paul Samuelson quoted the poet William Blake: “Truth can never be told so as to be understood, and not to be believed.” There is also a Nobel prize for literature. Is the truth of economics more like physics or literature? How good a warrant does economics provide for the primacy of markets?
Like market liberalism, economics regards buying and selling in markets as the template for human relations and claims that market choices scale up to the social good. But the doctrines of economics are not well founded: premises are unrealistic, models inconsistent, predictions often wrong. The halo of the prize has lent credibility to policies that harm society, to inequality and financial disorder.
Economics does not have the field of policy entirely to itself. A different view of the world – social democracy – is used by governments to allocate about 30% of GDP in most developed countries for employment, healthcare, education, and pensions. Social democracy is not only a political orientation but also a bipartisan method of government. Like economics, it accepts the primacy of markets in production and consumption. Markets reward wealth and success. In social democracy, entitlement is equal, and arises from citizenship, though one-size-fits-all sometimes creates its own problems…
If this make-believe Noble whatever is pushing for property rights, I am taking that as Neoliberalism doubling down. Let me back track. It is not property rights that promote growth, development, equity and democracy but ‘rule of law’. Rule of law gives stability and predictability which is prized in a business environment. Property rights is simply one slice of the rule of law package and a secondary slice at that. If it was so important then, you would have had the American Declaration of Independence talking about ‘certain unalienable Rights, that among these are Life, Liberty and the Protection of Property.’
Actually this brings me to a secondary point and that I think that this is being pushed by American neoliberals. The reason I say this is that the word ‘property’ has a certain resonance that you will not find in other Anglo-Saxon countries but really only in the US. But here the word property is not just talking about a piece of land but intellectual property for which a rent must be paid to use it. In other words, it is what you would expect a rentier society to push which is why I say that this ‘property rights’ push will be used to justify the enforcement of turning civil society into a rentier society.
And that is why they do not want to touch the concept of the rule of law, even with a barge pole, because within it are concepts such as equality under the law, human rights and justice which the US Declaration was talking about. So in spite of the catastrophic consequences of neoliberalism across the world, they are doubling down on their failures and this push for so-called property rights is a sign of this.
“If this make-believe Noble whatever is pushing for property rights…”
Especially incisive comment.
But, curiously, it was a ‘rule of law’ that ultimately always decided in favor of the technological ‘institutions’ that produced the decisive weaponry.
This is perhaps the central insight of Carroll Quigley’s Weapons Systems and Political Stability which I cannot recommend highly enough.
Yes, I think rule of law was especially important when the US was stealing land from Indigenous Americans. :-)
Rule of law was especially important when slavery was legal.
Unfortunately, the Louisiana Purchase Treaty (which gave the indigenes the same rights to their existing property (land) in the Louisiana Territories (most everything west of the Missisppi River) as those under US law, were ignored. The US has been agreement incapable for a very long time.
Too late — we are already governed by and for economic rentiers.
I don’t see why Sweden’s Central Bank should have sole exclusivity in awarding these ‘not quite Nobels.’ Alfred himself was not around to sanction them & various family members have objected.
From Wikipedia
Misuse of the Nobel name
Some critics argue that the prestige of the Prize in Economic Sciences derives in part from its association with the Nobel Prizes, an association that has often been a source of controversy. Among them is the Swedish human rights lawyer Peter Nobel, a great-grandnephew of Alfred Nobel.[40]
Nobel accuses the awarding institution of misusing his family’s name, and states that no member of the Nobel family has ever had the intention of establishing a prize in economics.[41] He explained that “Nobel despised people who cared more about profits than society’s well-being”, saying that “There is nothing to indicate that he would have wanted such a prize”, and that the association with the Nobel prizes is “a PR coup by economists to improve their reputation”.
https://en.wikipedia.org/wiki/Nobel_Memorial_Prize_in_Economic_Sciences
This site could (& should) award an alternate, the ‘Naked Capitalism Prize in Economic Sciences in Memory of Alfred Nobel’ It should claim just as much authority as the interlopers (& probably earn more respect)
And why so few female award winners?
I propose the Yves Smith Prize in Economic Sciences in Memory of Alfred Nobel to be awarded exclusively to female economists.
At the same time we could have the Hilary Clinton Prize in Economic Sciences in Memory of Alfred Nobel (exclusively for minority groups) What correct thinking Democrat could object?
Once you create a free market in alternate Nobel prizes (as the Sveriges Riksbank would attest)
the boundless enthusiasm of the Capitalist system will do the rest.
This is a classic oxymoron.
I don’t regard economics as a ‘science’ by any conventional standards.
It doesn’t even reach ‘social science’ benchmarks.
It doesn’t tick any of the boxes for genuine scientific enquiry.
It is actually all political economy (I believe this term was Adam Smith’s preference) as all economics includes a set of political presuppositions and values.
The current “conventional wisdom” (another oxymoron) is entirely neoliberal, with ‘homo economicus’ as the ‘laissez fairy’.
Challengers to this even have their own “heterodox” tag as an identifier – and a badge worn with pride by many.
Correct — it never stopped being political economy despite the efforts of the neoclassical orthodoxy to drop “political” from their subject discipline, the better to masquerade as a “science” and hide the fact that they smuggle normative judgements into their (abjectly non-representative of reality) models behind the unexamined assumptions underlying them.
They are a priesthood engaged in the oldest form of priestcraft — justifying the status quo on behalf of their oligarchic paymasters.
priesthood nails it best
Ah, AJR “are well known for their influential cliometric work.” I was hanging out with history majors when Time on the Cross (Wiki but a reasonable summary) made a big splash back in the Dark Ages. After that, I have continued to believe that cliometricians would be better described as “cliomeretricians.”
Nobel Peace prize has a pretty spotty record too. Obama himself has lampshaded his Nobel Peace prize on a comedy skit with Colbert.
Yasha Levine’s critique is evergreen: https://exiledonline.com/the-nobel-prize-in-economics-there-is-no-nobel-prize-in-economics/
Maybe it’s better to list the non-terrible economics prize winners? Elina Ostrom, David Card, Amartya Sen , and Daniel McFadden come to mind.
We, the peoples of the South, are underrepresented for various reasons: we do not publish in English, we have limited access to the media, but above all there is a lack of political will to know and understand what we do. But beyond that, the Nobel Prize is just one of several categories of prizes that exist worldwide. Perhaps the BRICS should promote prizes in science, engineering, medicine, culture, environmental conservation, which reward not only individuals but also organizations from the South.
That’s because you, along with the rest of “the global majority” only have one job in the eyes of the Western donor class and your own comprador elites — to shut up and go right on being exploited/extracted.
i am sure that those fake nobel winners, would shill for the taking over of the nations parks by the private sector(rich parasites)as being responsible and creating growth.
One need only look to Gaza to see that this argument is extremely flawed. Unless of course you count vast increase of property turned to rubble as an economic boon.
What happened to Simon Johnson? During the financial crisis in 2007/2008 I’d thought he was one of the good guys.
johnson never was. he like many other quack economists, he got caught flat footed when their vaunted free trade economics collapsed.
he appeared rather quickly to get out in front of it by saying he was wrong, then going right back to what he was before.
another quack freidman look a like/shill martin feldstein was quick out of the box saying he was stunned, then went right back to being what he was, a quack/shill.
“Rule of law was especially important when slavery was legal.”
This an important comment, which has recently been extensively about:
October 3, 2014
Harvesting Cotton-Field Capitalism
Edward Baptist’s New Book Follows the Money on Slavery
By FELICIA R. LEE
“Have you been happier in slavery or free?” a young Works Project Administration interviewer in 1937 asked Lorenzo Ivy, a former slave, in Danville, Va. Ivy responded with a memory of seeing chained African-Americans marching farther South to be sold.
“Truly, son, the half has never been told,” he said.
This anecdote is how Edward E. Baptist opens “The Half Has Never Been Told: Slavery and the Making of American Capitalism,” an examination of both the economic innovations that grew out of the ever-shifting institution of slavery and the suffering of generations of people who were bought and sold.
Mr. Baptist, a history professor at Cornell, said in an interview that his book represented his decade-long effort to blend these two aspects. Published in September, “The Half” joins a new wave of scholarship about the centrality of slavery — and the cotton picked by slaves — to the country’s economic development…
It is important to put John Locke in a tighter historical framework in order to appreciate the radical dimension of his thinking in 1689.
Acemoglu and Robinson note in their new paper “Culture, Institutions and Social Equilibria: A
Framework,” that John Locke spent a significant portion of his First and Second Treatise arguing that:
“It having been shown in the following discourse, I. That Adam had not either by natural right or fatherhood, or by positive donation from God, any such authority over his children, or dominion over the world, as is pretended”
In his Second Treatise entitled “On the State of Nature,” Locke reinterprets the “law of nature,” as justifying, not absolutism, but constitutional monarchy created by a social contract.
The English cultural/political transition from The Divine Right of Kings to an admittedly somewhat primitive conception of popular sovereignty is significantly due to the courage of John Locke in the late 17th century.
Maybe. But as Hume asked, what social contract? When was it made? Where is it? How do we access/read it? And – as Hume did not say, but Marx pointed out – “contract” is a peculiar thing to have as a foundational creator of a polity when a contract implies – already – a mechanism of enforcement. Thus social contract theory arises from within, and “legitimates”, an existing regime of politico-economic exploitation.
This hearkens on the old classical notion that, per se, meso-American culture failed due to human construct dramas that were lesser than the Wests, not a combination of epic environmental factors [some human driven and some pure environmental], and per norm elite driven machinations.
As I commented before this award was given on the study and authors just for eyeballs. The rub is the Orthodox posse is attempting too, on one hand, and on the other, without any mea culpa casts off some old cornerstones like Says Law et al. Only to rebrand the or alter the neoliberal framework too justify its heavy old testament roots in what is property and presents it as Natural Law/s.