From the Archives: James Robinson discusses 'why nations fail' at George Mason University

James Robinson discusses 'why nations fail' at George Mason University
May 4, 2013 7:37 PM MST

In his first speaking engagement at George Mason University on the evening of May 2, Harvard political scientist James A. Robinson paid a compliment to the school by noting its “distinct intellectual atmosphere.”

Robinson appeared at the Arlington campus of GMU at the invitation of the Mercatus Center to discuss his recent book, Why Nations Fail: The Origins of Power, Prosperity, and Poverty, which he co-wrote with MIT's Daron Acemoglu.

In his lecture, Robinson explained how his and Acemoglu's empirical research had led to a predictive theory about how nations develop economically and politically. All countries, he said, can be plotted on a matrix using the categories “inclusive” (politics and economics) and “extractive” (politics and economics).

Success or failure for nations depends on whether they have inclusive or extractive institutions, Robinson said, and these institutions have their origins deep in history – although circumstances can change through the adoption and adaptations of new, better institutions.

England and Virginia

As an example of this kind of change, Robinson noted that 200 years before the Industrial Revolution, England was an economic backwater on the edge of Europe. Elizabeth I's defeat of the Spanish Armada in 1588 was unexpected and unpredictable, yet by 1788, Great Britain was Europe's most formidable economic power and the world's leading colonizer. This was the result of institutional change in law and society.

After signing books for fans and admirers, Robinson clarified and expanded some of his remarks in an interview with the Charlottesville Libertarian Examiner.

He explained that although the Spanish and English colonies in the Americas both began with the same model, the English experience at Jamestown, Virginia, set North America down a more economically prosperous path than the colonies in South America trod.

The circumstances in Virginia and, for instance, Buenos Aires, “were very different,” Robinson said.

“Because there were very few indigenous people [who were] organized in a very different way in Virginia as compared to, say, the central valley of Mexico, a very different type of society emerged.” This society was “based on creating incentives and opportunities for European [settlers] rather than exploiting indigenous people,” which was the case in Latin America.

Mysterious development?

Asked whether there is a difference in the questions of “why nations fail” and “why nations succeed,” Robinson replied that “they're two sides of the same coin.”

The reason his book has the title it does is that he and his co-author “don't think of economic development as being mysterious.”

Instead, he said, “to us, the puzzling thing is, why on earth don't poor countries that ought to be able to generate huge amounts of wealth and improve the living standards of their people” do so by investing in education, adopting technologies, and securing property rights?

“Why don't they do it?,” he repeated. “We've always found failure more puzzling. Why is it people don't take advantages of these huge opportunities?” This question is particularly salient when countries have abundant mineral resources, climates and soils conducive to agriculture, and convenient locations for trade and industry -- yet still fail to develop economically.

Cultural predictors

Many commentators on economic development – Thomas Sowell, for instance – focus on cultural values as the basis for success or failure. Robinson and Acemoglu take a different approach by emphasizing institutions.

Their approach, Robinson said, came about “mostly because of the empirical work we've done, all the scientific research. We've always found measures of institutions to have much more predictive power than different measures of culture.”

He conceded that “there's a problem of language here. When I talk about institutions, I don't just mean things written down, like the U.S. Constitution.”

He gave the example of the limit of two presidential terms, which was established as “a social norm that lasted for 150 years” by George Washington, before Franklin Roosevelt parted with the tradition and, eventually, the Constitution was amended to make the tradition statutory.

Nobel laureate economist Douglass North, he pointed out, “talks about informal institutions, social norms, and I think that's enormously important. It's not just about written-down laws. Social norms and informal institutions are quite similar to what a lot of people talk about when they talk about culture.”

When Robinson and Acemoglu talk about culture, however, “it's not about values or normative beliefs or normative principles or religious principles. We don't find that to be important; we don't think it's important” in terms of predictive value for economic success or failure.

Why Nations Fail is published in hardback by Crown Business and in paperback by Profile Books Ltd.


Publisher's note: This article was originally published on Examiner.com on May 4, 2013. The Examiner.com publishing platform was discontinued July 1, 2016, and its web site went dark on or about July 10, 2016.  I am republishing this piece in an effort to preserve it and all my other contributions to Examiner.com since April 6, 2010. It is reposted here without most of the internal links that were in the original.

From the Archives: Will 2011 state election voters feel enough pain to solve state budget crises?

Will 2011 state election voters feel enough pain to solve state budget crises?
December 4, 2010 1:22 PM MST

At the annual holiday dinner hosted by the Mercatus Center on December 1, economist Eileen Norcross spoke to the Charlottesville Libertarian Examiner about the impending crisis in state budgets. Norcross is a senior research fellow at Mercatus and co-founder of the web site StimulusWatch.org.

Norcross answered questions about state budget shortfalls and the “fiscal evasion” tricks that state governments play to create the appearance of balanced budgets. Most states, she explained, are facing serious consequences as a result of distended pension obligations and growing expenditures.

Some better than others
Still, she said, “there are a few states that are not in terrible shape,” such as South Dakota and Wyoming.

Some states are doing better because they “are simply smaller” and “don’t have as big of a public sector workforce. They don’t have the same pension obligations that some of the mismanaged states like Illinois and California do.”

Even so, Norcross warned, “all states are facing one crisis, and that is in Medicaid and rising health care costs. That is a feature of all state budgets.” Another universal feature, she added, is education spending, which “has been baked into the cake.”


Stimulus problems
Referring to research that shows that the federal stimulus money of the past couple of years may lead to budget problems for state governments in the future, Norcross cited research conducted for the Mercatus Center by Russell Sobel and George Crowley on the effects of intergovernmental transfers.

Sobel and Crowley “found that for every dollar of federal money that’s transferred to the state government, that raises future taxes by 40 cents,” Norcross reported.

Why is that?

“Once you undertake a public works project and the stimulus money goes away, you still have to finish that project. You have to pay for those workers [and] you might have to issue bonds to complete the project. In other words, they may have expanded commitments that they now have to fund themselves.”

2011 state elections

Eileen Norcross

In 2011, Kentucky, Louisiana, New Jersey, and Virginia will be holding state legislative elections, and these budgetary issues may have an effect on their outcomes but, Norcross cautioned, “that’s going to depend on the pain that the electorate feels.”

She said the case of New Jersey is “interesting,” because recently “when property taxes got so onerous on the average homeowner, [voters] actually turned out in force during the school budget election and they voted down a lot of school budgets in New Jersey.”

The number of school budgets rejected was “the greatest number since 1976,” she said, “because they were really voting against a tax hike.”

The results of next year’s elections, Norcross concluded, is “really going to depend on the extent to which the electorate is feeling the pain today or whether legislators are engaging in that kind of fiscal evasion, trying to buy more time, [and] pushing that debt onto future taxpayers.”


Publisher's note: This article was originally published on Examiner.com on December 4, 2010. The Examiner.com publishing platform was discontinued July 1, 2016, and its web site went dark on or about July 10, 2016.  I am republishing this piece in an effort to preserve it and all my other contributions to Examiner.com since April 6, 2010. It is reposted here without most of the internal links that were in the original.

From the Archives: Balanced-budget gimmickry hides states' fiscal crises, says Eileen Norcross

Balanced-budget gimmickry hides states' fiscal crises, says Eileen Norcross
December 4, 2010 12:58 PM MST

Economist Eileen Norcross, who specializes in state and local budgetary policy at the Mercatus Center at George Mason University in Northern Virginia, spoke to the Charlottesville Libertarian Examiner on December 1 about the impending crisis in state budgets.

She explained that states are experiencing persistent budget deficits, often as the result of ballooning pension obligations.

She noted that these budgetary shortfalls are taking place even though most states have a constitutional requirement to balance their budgets.

Balanced-budget 'gimmickry'
This happens, Norcross explained, because “it’s possible to have a balanced budget yet to grow spending every year.” There are different answers to the question, “What does budgetary balance mean?”

Norcross pointed out that “while on the books they can claim budgetary balance, they also engage in a lot of gimmickry, what I call ‘fiscal evasion.’”

Eileen Norcross

She explained:

“For years, states have been finding ways to balance their books without having to raise taxes directly, so they take on more debt, they dump trust funds into the general fund, they defer their pension obligations: That’s how some of these states have been balancing their books. It gives them the temporary illusion that they’ve met their commitments yet they really haven’t. That’s revealing a structural instability in these revenue streams.”

Noting that “Virginia is doing relatively well compared to the other states,” Norcross added that “there are a few things that concern me.”

For one thing, the Virginia state government “deferred [its] pension payment this year. It’s not a good practice.”

This is not unique, she said.

Pension obligations
“All the states have undervalued the size of the obligation that they owe to their public sector employees by an order of magnitude. What they claim on their books looks bad, but what they actually owe is far greater.”

In Virginia and other states, Norcross continued, “what concerns me is when [they] defer their pension obligations, they’re basically passing the buck [or] kicking the can down the road, but that’s not going anywhere. They’re going to owe those public sector workers” eventually.

In the third part of this interview, Norcross looks at which states are doing a better job, and whether fiscal matters will affect the behavior of voters in 2011 state legislative elections.

Publisher's note: This article was originally published on Examiner.com on December 4, 2010. The Examiner.com publishing platform was discontinued July 1, 2016, and its web site went dark on or about July 10, 2016.  I am republishing this piece in an effort to preserve it and all my other contributions to Examiner.com since April 6, 2010. It is reposted here without most of the internal links that were in the original.

From the Archives: Mercatus Center economist Eileen Norcross notes state budget ‘fiscal evasion’

Mercatus Center economist Eileen Norcross notes state budget ‘fiscal evasion’
December 4, 2010 12:43 PM MST

On December 1, the Mercatus Center at George Mason University hosted its annual holiday dinner, this year featuring novelist Christopher Buckley as after-dinner speaker. About 300 people attended, also hearing pre-dinner remarks from GMU economics professor Russell Roberts, co-creator of the viral video, “Fear the Boom and Bust” with rapping versions of F.A. Hayek and J.M. Keynes.

Economist Eileen Norcross is a senior research fellow at the Mercatus Center who closely follows state and local budgetary policy. Two of her recently published working papers are “Fiscal Evasion in State Budgeting” and “The Crisis in Public Sector Pension Plans.”

At the cocktail reception preceding the dinner, Norcross spoke to the Charlottesville Libertarian Examiner about the crisis in state budgets across the country.

‘Persistent budget deficits’

State and local budgets are an important research topic, she said, “because so many state and municipal governments are experiencing persistent budget deficits. They’re finding it difficult to balance their books and it’s projected that states are not likely to find fiscal balance until 2013.”

There are common reasons for this situation that cross state lines, Norcross explained.

“States have growing pension obligations that they have not funded. These bills are coming due. They’re going to have to contribute more to their pension systems to pay public sector workers. This is going to crowd out their ability to meet their growing Medicaid obligations.”

Workforce cutbacks

Eileen Norcross

Moreover, with state revenues falling, their spending grew “in the decade leading up to the recession,” she said. “They’ve built commitments into their budgets that they’re now finding it very difficult to cut. That means cutting back on the public sector workforce and other things have become very challenging for states.”

Even with money from the federal government, the situation is still serious.

“With the stimulus drying up they don’t have much to go on here,” Norcross said. “They’ve either got to raise taxes or find other places to cut.”

In the second part of this interview, Norcross answers questions about constitutional requirements for balanced budgets, deferred pension obligations, and the negative effect of stimulus money on state budgets.


Publisher's note: This article was originally published on Examiner.com on December 4, 2010. The Examiner.com publishing platform was discontinued July 1, 2016, and its web site went dark on or about July 10, 2016.  I am republishing this piece in an effort to preserve it and all my other contributions to Examiner.com since April 6, 2010. It is reposted here without most of the internal links that were in the original.

From the Archives: After the census: GMU political scientist Michael McDonald forecasts Virginia's 2011 redistricting

After the census: GMU political scientist Michael McDonald forecasts Virginia's 2011 redistricting
September 4, 2010 12:47 PM MST

The 2010 census was just the first stage in a process that will lead to the redesign of legislative districts all across the United States over the next two years. Districts for the U.S. House of Representatives, state legislatures, city councils, county boards of supervisors, and school boards will all be affected.

Michael P. McDonald

In Virginia, the redistricting process is accelerated because it is one of only four states that hold their state legislative elections in odd-numbered years.

George Mason University political scientist Michael P. McDonald is an expert on reapportionment and redistricting. He has served as a consultant on redistricting issues, sometimes “helping jurisdictions produce redistricting plans that are in conformance with federal and state criteria,” sometimes serving as an expert witness in lawsuits on behalf of either the plaintiff or the defendant, “defending or challenging whether or not a redistricting plan is legal.”

After McDonald spoke to local election officials from across the Commonwealth at the State Board of Elections’ annual Election Uniformity Workshop, McDonald answered questions from the Charlottesville Libertarian Examiner about what Virginia voters can look forward to in the coming months.

Historical First
For the first time in Virginia history, redistricting in 2011 will be done by a General Assembly in which the House of Delegates is controlled by Republicans and the state Senate is controlled by Democrats. After the 1990 census, both houses were controlled by Democrats, and after the 2000 census, both houses had Republican majorities.

“How it’s played out in other states,” McDonald explained, “is that one chamber will draw its districts, the other chamber will draw its districts, and then the two will do a logroll,” in which each chamber approves the other’s proposal. In effect, McDonald said, “you will have two different partisan gerrymanders, one for each chamber.”

Virginia differs slightly from other states, however.

“The wrinkle that we have in Virginia,” McDonald pointed out, “is that the governor can amend legislation.” As a result, “there’s a little bit of concern on the Democratic side” that “even if the House passes their version of the Senate plan” the governor might not “keep his hands off of it.”

There is some discussion, McDonald said, that “the governor may form a commission or a committee of some sort to help assist him in evaluating the redistricting plans that come out of the legislature.” Such a commission, he explained, “may play a mediating role there.”

Time Constraints
Given how fast the state legislative elections are approaching (in November 2011), there is some concern about whether the General Assembly can pass a redistricting plan in time to meet the needs of the electoral calendar.

“Plenty of other states have done it,” McDonald said. “We’ve done it in the past in Virginia.”

Can the process be completed in time?

“Presumptively, yes, the answer should be yes, that we can do it in time,” McDonald noted, also pointing out that “if it is not done in time,” federal courts will intervene.

“That’s one thing that the voters of Virginia can know to be true,” he said, “that the federal courts will step in if the state government can’t produce a redistricting plan.”

The courts, he added, “will basically draw their own map or they will accept a map that was not considered during the legislative process.”


Publisher's note: This article was originally published on Examiner.com on September 4, 2010. The Examiner.com publishing platform was discontinued July 1, 2016, and its web site went dark on or about July 10, 2016.  I am republishing this piece in an effort to preserve it and all my other contributions to Examiner.com since April 6, 2010. It is reposted here without most of the internal links that were in the original.

Does Robert Sarvis Disdain Austrian Economics?

Robert Sarvis

Various individuals who have been trying to cast doubt on Virginia gubernatorial candidate Robert Sarvis' libertarian credentials have pointed to a comment he made in an interview with Ron Paul biographer Brian Doherty in Reason magazine, which has been interpreted to mean he is not entirely dedicated to Austrian economics, a staple of libertarian thinking.

Sarvis is the Libertarian Party's nominee for governor. He faces two rivals on Election Day, November 5: Republican nominee Ken Cuccinelli and Democratic nominee Terry McAuliffe.

Current public opinion polls show Sarvis might expect 8 to 10 percent of the vote, an unusually high number for a Libertarian (or any third-party or independent candidate for statewide office) so close to an election.

Charles C.W. Cooke cited the Reason interview on National Review Online on October 31, for example. 

Another instance of the questioning of Robert Sarvis' libertarian bona fides can be found on Examiner.com, where International Politics Examiner Andrew Moran wrote:

George Mason University is known for its free-market economics program (see Walt Williams). This is where Sarvis attained his economics degree. However, he doesn’t adhere to the principles of Austrian Economics, which is usually what libertarians promote.

Here is what Sarvis said in his interview with Reason: “I’m not into the whole Austrian type, strongly libertarian economics, I like more mainstream economics and would have been happy to go elsewhere.”

Wait does he mean “mainstream economics” that has gotten us into this current mess and continues to cause more problems?

An answer to that question may be found in an interview I did with Sarvis two years ago, when he was running for the Virginia state Senate.

That interview was also published on Examiner.com (just a coincidence). I had asked Sarvis about his favorite economist, and he offered up names of three people he admired: Friedrich Hayek, Adam Smith, and Scott Sumner.

It seems that, to Sarvis, "mainstream economics" means that derived from the work of Adam Smith, author of An Inquiry into the Nature and Causes of the Wealth of Nations.

Here's the relevant excerpt:

His libertarian philosophy is reflected in his answer when asked about his favorite economist. Without pausing, he named Friedrich von Hayek, the Austrian Nobel laureate who taught at the London School of Economics and the University of Chicago.

“Hayek is someone who really influenced my thinking,” Sarvis explained: “How to think about problems that face national economies and how public policy can influence it in many unintended ways.”


While a lot of people, such as talk-show host Glenn Beck, focus on Hayek’s 1944 book, The Road to Serfdom, Sarvis said he “was more influenced by his 'The Use of Knowledge in Society,' which was probably the seminal paper that won him the Nobel Prize, and also [volume] one of Law, Legislation, and Liberty, where he talks about rules and order.”

In addition to Hayek, Sarvis cites Adam Smith as an influence in his economic thinking.

“In philosophy, they say, there’s Plato and all else are footnotes,” he quipped. “I think that can be said more truly of Adam Smith than of Plato.”

Among contemporary economists, Sarvis pointed to Bentley University professor Scott Sumner, who blogs at TheMoneyIllusion.com. As Americans have focused on the financial crisis and the recession, he said, “Sumner has been the most persuasive in what exactly is going on [with regard to the] monetary policy mistakes of the Fed. We really are in many ways repeating some of the mistakes of the depression.”

Then there is Sarvis' biographical sketch on the web site of the Mercatus Center at George Mason University. (Both the Mercatus Center and the GMU economics department are hotbeds of Austrian economists.)

Emphasis added below:

Robert is a native of Northern Virginia and a lifelong believer in freedom, free markets, and the rule of law. He holds degrees in mathematics from Harvard University and the University of Cambridge and a JD from NYU School of Law. During law school, he co-founded a libertarian and classical liberal law journal, the NYU Journal of Law & Liberty, dedicating the first issue to Friedrich Hayek, and he has been outspoken in arguing against government regulation of the tech industry. Robert has worked as a software developer, a lawyer, and a tech entrepreneur, and his research interests span a wide range of topics relating to law, economics, and public policy.

Can the off-hand comment Sarvis made to Reason about his choice of a graduate school overwhelm the other evidence of his admiration for, and influence by, Austrian economists?