"That insults my intelligence and raises questions about yours."
Nice one.
If the concept of "Luck" scares the hell out of developmental economist, then I reckon the concept of "Intelligence", let alone "Group intelligence" and God forbid "Genetic basis of group intelligence" would scare them all to death.
That a population whose ancestors ran a massive sophisticated civilization (million plus population centers, literate bureaucracies, specialized artisans etc. etc.) should now be able to do so again, is not very surprising. That a population whose ancestors never did any of those things could do so now, let alone at the same scale and efficiency of the previous mentioned groups, really WOULD be surprising.
“That a population whose ancestors ran a massive sophisticated civilization (million plus population centers, literate bureaucracies, specialized artisans etc. etc.) should now be able to do so again, is not very surprising.”
So maybe the surprise is that Egypt and Iraq (which had all those characteristics) aren’t Japan (or China)?
Not really, Iraq and Egypt still have all those things, their traditions were broken with invasion but they were reintroduced from other places. The classical languages of Mesopotamia and Egypt were lost until rediscovered in the 19th century. There was more continuity in East Asia. The Japanese have had the same royal family for two thousand years. China had more revolutions but in both countries you could have today, bureaucrats writing reports, weavers working looms, smiths banging out widgets, potters spins bowls etc. whose families have been doing essentially that same job in the same language on the same patch of ground for a hundred generations or more.
I believe it's reasonable to assume that a population that has had bureaucrats for hundreds of generations will be more successful in making bureaucrats today than a population that has had no bureaucrats but only hunter gathers for a hundred generations. And that's with all other factors being equal. I believe intelligence is an important factor in economic development and I believe that genetics is an important factor in intelligence, and I do not believe it's bigoted to say so.
Numbers like this are meaningless and can only be used to lie to you.
The fact that you’re a human and not a gorilla, which is the cause of 100% of your “human intelligence”, is 100% genetic.
But it’s also 100% environmental, because the environment is the only thing currently affecting you, and it’s merely the environment’s fault it has so far not contained a wizard or advanced gene therapist who has turned you into a gorilla. Or a rock falling on you, which would cause 100% of your new intelligence of zero by killing you.
a lot of Korean and Chinese success is copying and poaching the Japanese engineering talent that made Japan the #2 economy. I don’t think that’s a Western style of development
Is that why Korea has had one of the highest patents per capita for decades? Or is that how Korea delivered the world's first LNG-fueled bulk carrier and captured almost 80% of LNG ship building contracts with 14% going to Japan? Also interesting that technology diffusion in one continent is evaluated very differently from technology diffusion in another.
Americans brought in British engineers to help set up their textile industry. Copying from a country in the technology frontier is nothing novel (heh).
1. The range of policies that have been pursued more or less successfuly by OECD countries is pretty wide, so going far outside that range is unlikely to be a good idea.
2. AFAICT, countries that avoid military coups and wars, and provide a decent education system, eventually converge to near-OECD levels. Of course, plenty of causality in both directions
How does this sit with the notion that there are strong commonalities in the East Asian model as described by Studwell? To the extent they were taking bets, they were taking bets based on export market successes which would have given policymakers valuable information and helped them avoid squandering resources.
And even if you can't become a big success like the East Asian states, surely it's a big thing to get to Malaysia's or Thailand's level of development, compared to where they were five decades ago. Ok, not exactly third world to first stuff, but real progress in living standards, people being lifted out of absolute poverty. If you don't trust your elites to do the right thing Japan style then this is surely a good consolation prize.
The case of Japan is most interesting but not really mysterious or inexplicable. It's certainly not a case of luck or some wonderful miracle because its current economy did not spring from nothing. Japan was a major industrial and colonizing power before ww2, and a technological innovator. Japan built and ran the world's first aircraft carrier for example c1920. The mindset, capabilities and historical memory survived the war and served the country exceedingly well, yes as it deeply engaged with western economies until today. The underlying question though, is whether or not Japan's development to an oecd level economy really sprang from its American forced 19th century 'opening' from autarky.
In 1917, they launched the Nagato-class battleships, which were the most powerful warship in the world at that time. They were the firsts of their kind that mounted the gigantic 16 inch rifles.
Despite the devastation after WW2, the human capital and critical mass that made it happen before the war were intact. US' Marshall Plan only sped up the process for Japan to return to the development corridor - they would've most likely still made it even without it albeit it would take longer and more circuitous way (like, for example Poland but in grander proportion).
Japan was launching amphibious invasions of Korea in the 16th century. Long before the Meiji restoration, Japan had the level of social organization necessary to launch large scale amphibious invasions of their neighbors.
Not many countries in the 16th century could deploy close to 200k soldiers overseas. Even today not many countries can pull off something like this.
Re. Immigration Luck. Whether a co. can bring in a needed worker has also been turned into a lottery: only one of every three under-the-cap H-1B petitions is nowadays accepted for processing.
The reason the world bank is conservative when it comes to developing countries (especially Africa) is because these guys take out big loans, fuck up and then blame their failure on the western neo-colonialism. If you don't people to treat you like children you have to stop acting like children.
Tough to know where to draw the line on any given project, I suppose. Yes, Japan funneled hundreds of millions of dollars into a project that paid off spectacularly, but they also had a very competent government on the basics, and on almost everything else were doing exactly what was prescribed to incrementally improve its economy.
I guess the real lesson is seeing developing countries--and their governments--as corporations. You need the fundamentals in place, or your organization falls apart, but you've also got to differentiate yourself from the competition, and take some risks in order to do so. The basketball metaphor is apt. Most points are basic two pointers, with the occasional free throw to slow things down and line everyone up neatly. Games are won, though, by denying the other team points over time and by upping the number of points you get for each shot (3, instead of 2 or 1). Winners sink threes, but if they don't know how to fire off a quick two when needed, the game's not going to go well either way.
I probably butchered the basketball metaphor, but whatever.
I don't see any mention of Chinese successes. They have built wonderful cities and have spread education throughout their country. I have never been to China, so I know only what I have read and seen on TV. I have no comment on their political structure, which I don't like, but this may be due my lack of knowledge.
Why must everyone be judged by western standards? If we are so great, why are we in the difficult position we are in today?
This was an excellent post and I am looking forward to reading more from this writer.
Well, China, despite the very rapid growth, is still below Mexico in per capita GDP.
"Why must everyone be judged by western standards?"
Which standards? The East Asian countries, to mention the obvious example, seem to be able to excel according to "Western" standards (growth, social indicators, democracy, etc.) while remaining East Asian.
"If we are so great, why are we in the difficult position we are in today?"
Compared to whom? Again, aside a few East Asian countries (including China, which is as admired for its economic success as is chastened -- by its own dissidents and Asian neighbors more than by anyone else -- for its political system and foreign policy) which are already widely praised for their succeses, who is doing better?
"Well, China, despite the very rapid growth, is still below Mexico in per capita GDP."
As of 2021, China's GDP per capita is 20% larger than Mexico. China's growth potential is far greater than that of Mexico.
What is hidden by China's GDP/capita number is that it averages in a ton of people born during the early Mao era when China was poorer than most Sub-Saharan African countries. If you average the GDP/capita of a central European country like Czech Republic with a poor African country like Congo on a 1:1 population basis, you will get China's GDP/capita. The human capital of many older Chinese are such that they can generate $1000/year of annual GDP/capita at best. Even now, 40% of Chinese make less than $140/month, which is basically sub-Saharan Africa levels of income.
This is an excellent piece and robust critique of the orthodox World Bank/IMF advice mindset. It also resonates with S. Korea's big bets, leveraging of Chaebol (heterodox), in their rapid growth period. Also with Algeria's big misses in trying to leverage energy.
My objections: why not take an 'optimal portfolio' approach with some high-risk rather than a boom-bust? Some key portfolio principles might include:
1. Safer assets: the physical and digital infrastructure is so light that there are good investments to be made here.
2. Human capital: another safer investment, education and health (a good bit of innovation/efficiency in delivery needed here, but that makes a case for global learning platforms).
3. The high-risk/high return bets alluded to in the article.
Catch-up growth should produce a higher average growth rate anyway (let's say 4%) using a vanilla portfolio. Let's say that selected risky bets help a country beat the benchmark (i.e. 6%+).
Let's remember the flaws in the Japanese investment led approach, as played out since the 90s.
This is just crazy delicious and great reading!
"That insults my intelligence and raises questions about yours."
Nice one.
If the concept of "Luck" scares the hell out of developmental economist, then I reckon the concept of "Intelligence", let alone "Group intelligence" and God forbid "Genetic basis of group intelligence" would scare them all to death.
That a population whose ancestors ran a massive sophisticated civilization (million plus population centers, literate bureaucracies, specialized artisans etc. etc.) should now be able to do so again, is not very surprising. That a population whose ancestors never did any of those things could do so now, let alone at the same scale and efficiency of the previous mentioned groups, really WOULD be surprising.
“That a population whose ancestors ran a massive sophisticated civilization (million plus population centers, literate bureaucracies, specialized artisans etc. etc.) should now be able to do so again, is not very surprising.”
So maybe the surprise is that Egypt and Iraq (which had all those characteristics) aren’t Japan (or China)?
Not really, Iraq and Egypt still have all those things, their traditions were broken with invasion but they were reintroduced from other places. The classical languages of Mesopotamia and Egypt were lost until rediscovered in the 19th century. There was more continuity in East Asia. The Japanese have had the same royal family for two thousand years. China had more revolutions but in both countries you could have today, bureaucrats writing reports, weavers working looms, smiths banging out widgets, potters spins bowls etc. whose families have been doing essentially that same job in the same language on the same patch of ground for a hundred generations or more.
I believe it's reasonable to assume that a population that has had bureaucrats for hundreds of generations will be more successful in making bureaucrats today than a population that has had no bureaucrats but only hunter gathers for a hundred generations. And that's with all other factors being equal. I believe intelligence is an important factor in economic development and I believe that genetics is an important factor in intelligence, and I do not believe it's bigoted to say so.
IIRC, latest estimate is that intelligence is at least ~50% genetic.
(hat tip to Razib Khan for that, I had 70% stuck on my head, but that seems to be out-of-date).
That's significant, and it definitely plays a role, but all those myriad hard-to-capture cultural factors are probably about as critical.
Numbers like this are meaningless and can only be used to lie to you.
The fact that you’re a human and not a gorilla, which is the cause of 100% of your “human intelligence”, is 100% genetic.
But it’s also 100% environmental, because the environment is the only thing currently affecting you, and it’s merely the environment’s fault it has so far not contained a wizard or advanced gene therapist who has turned you into a gorilla. Or a rock falling on you, which would cause 100% of your new intelligence of zero by killing you.
It’s all in Taleb.
That would be South Korea then.
a lot of Korean and Chinese success is copying and poaching the Japanese engineering talent that made Japan the #2 economy. I don’t think that’s a Western style of development
Is that why Korea has had one of the highest patents per capita for decades? Or is that how Korea delivered the world's first LNG-fueled bulk carrier and captured almost 80% of LNG ship building contracts with 14% going to Japan? Also interesting that technology diffusion in one continent is evaluated very differently from technology diffusion in another.
Americans brought in British engineers to help set up their textile industry. Copying from a country in the technology frontier is nothing novel (heh).
1. The range of policies that have been pursued more or less successfuly by OECD countries is pretty wide, so going far outside that range is unlikely to be a good idea.
2. AFAICT, countries that avoid military coups and wars, and provide a decent education system, eventually converge to near-OECD levels. Of course, plenty of causality in both directions
How does this sit with the notion that there are strong commonalities in the East Asian model as described by Studwell? To the extent they were taking bets, they were taking bets based on export market successes which would have given policymakers valuable information and helped them avoid squandering resources.
And even if you can't become a big success like the East Asian states, surely it's a big thing to get to Malaysia's or Thailand's level of development, compared to where they were five decades ago. Ok, not exactly third world to first stuff, but real progress in living standards, people being lifted out of absolute poverty. If you don't trust your elites to do the right thing Japan style then this is surely a good consolation prize.
The case of Japan is most interesting but not really mysterious or inexplicable. It's certainly not a case of luck or some wonderful miracle because its current economy did not spring from nothing. Japan was a major industrial and colonizing power before ww2, and a technological innovator. Japan built and ran the world's first aircraft carrier for example c1920. The mindset, capabilities and historical memory survived the war and served the country exceedingly well, yes as it deeply engaged with western economies until today. The underlying question though, is whether or not Japan's development to an oecd level economy really sprang from its American forced 19th century 'opening' from autarky.
In 1917, they launched the Nagato-class battleships, which were the most powerful warship in the world at that time. They were the firsts of their kind that mounted the gigantic 16 inch rifles.
Despite the devastation after WW2, the human capital and critical mass that made it happen before the war were intact. US' Marshall Plan only sped up the process for Japan to return to the development corridor - they would've most likely still made it even without it albeit it would take longer and more circuitous way (like, for example Poland but in grander proportion).
Japan was launching amphibious invasions of Korea in the 16th century. Long before the Meiji restoration, Japan had the level of social organization necessary to launch large scale amphibious invasions of their neighbors.
Not many countries in the 16th century could deploy close to 200k soldiers overseas. Even today not many countries can pull off something like this.
Re. Immigration Luck. Whether a co. can bring in a needed worker has also been turned into a lottery: only one of every three under-the-cap H-1B petitions is nowadays accepted for processing.
The reason the world bank is conservative when it comes to developing countries (especially Africa) is because these guys take out big loans, fuck up and then blame their failure on the western neo-colonialism. If you don't people to treat you like children you have to stop acting like children.
Tough to know where to draw the line on any given project, I suppose. Yes, Japan funneled hundreds of millions of dollars into a project that paid off spectacularly, but they also had a very competent government on the basics, and on almost everything else were doing exactly what was prescribed to incrementally improve its economy.
I guess the real lesson is seeing developing countries--and their governments--as corporations. You need the fundamentals in place, or your organization falls apart, but you've also got to differentiate yourself from the competition, and take some risks in order to do so. The basketball metaphor is apt. Most points are basic two pointers, with the occasional free throw to slow things down and line everyone up neatly. Games are won, though, by denying the other team points over time and by upping the number of points you get for each shot (3, instead of 2 or 1). Winners sink threes, but if they don't know how to fire off a quick two when needed, the game's not going to go well either way.
I probably butchered the basketball metaphor, but whatever.
I don't see any mention of Chinese successes. They have built wonderful cities and have spread education throughout their country. I have never been to China, so I know only what I have read and seen on TV. I have no comment on their political structure, which I don't like, but this may be due my lack of knowledge.
Why must everyone be judged by western standards? If we are so great, why are we in the difficult position we are in today?
This was an excellent post and I am looking forward to reading more from this writer.
Well, China, despite the very rapid growth, is still below Mexico in per capita GDP.
"Why must everyone be judged by western standards?"
Which standards? The East Asian countries, to mention the obvious example, seem to be able to excel according to "Western" standards (growth, social indicators, democracy, etc.) while remaining East Asian.
"If we are so great, why are we in the difficult position we are in today?"
Compared to whom? Again, aside a few East Asian countries (including China, which is as admired for its economic success as is chastened -- by its own dissidents and Asian neighbors more than by anyone else -- for its political system and foreign policy) which are already widely praised for their succeses, who is doing better?
"Well, China, despite the very rapid growth, is still below Mexico in per capita GDP."
As of 2021, China's GDP per capita is 20% larger than Mexico. China's growth potential is far greater than that of Mexico.
What is hidden by China's GDP/capita number is that it averages in a ton of people born during the early Mao era when China was poorer than most Sub-Saharan African countries. If you average the GDP/capita of a central European country like Czech Republic with a poor African country like Congo on a 1:1 population basis, you will get China's GDP/capita. The human capital of many older Chinese are such that they can generate $1000/year of annual GDP/capita at best. Even now, 40% of Chinese make less than $140/month, which is basically sub-Saharan Africa levels of income.
Noah, Thanks for this selection. It is an informative read, and I learned a lot. It’s a good way to start a day.
this is so good
This is an excellent piece and robust critique of the orthodox World Bank/IMF advice mindset. It also resonates with S. Korea's big bets, leveraging of Chaebol (heterodox), in their rapid growth period. Also with Algeria's big misses in trying to leverage energy.
My objections: why not take an 'optimal portfolio' approach with some high-risk rather than a boom-bust? Some key portfolio principles might include:
1. Safer assets: the physical and digital infrastructure is so light that there are good investments to be made here.
2. Human capital: another safer investment, education and health (a good bit of innovation/efficiency in delivery needed here, but that makes a case for global learning platforms).
3. The high-risk/high return bets alluded to in the article.
Catch-up growth should produce a higher average growth rate anyway (let's say 4%) using a vanilla portfolio. Let's say that selected risky bets help a country beat the benchmark (i.e. 6%+).
Let's remember the flaws in the Japanese investment led approach, as played out since the 90s.
This post is sensational!!! great great great work by Karl. Thank you Noah for bringing him on!
What impact, if any, did Japan's gold reserves had after WWII? I am under the impression they were given back after the war...
Also, and I can't stress enough my excitement, this article bodes well for the incoming travel guide to Japan !
An excellent Sunday morning read.