Jeffrey Sachs strikes again.
I’m so sorry readers, I know this is getting really, really OLD. But Sachs unveils such a bizarre geographic theory of Africa’s poverty, with such misguided implications for aid policy, that I am forced to respond. I can’t help myself, the stakes are too high. Suggestions for corrective therapy would still be welcome.
At least now we have finally gotten away from personal attacks, so let me say that Sachs is an inspirational and hard-working intellectual. His ideas on Africa are only sometimes totally wrong, the other times they are only fatally wrong.
Summary in brief of Sachs’ geography theory: a region will be poor IF they are tropical, IF rainfed, IF landlocked, and IF they have the wrong mosquitoes – which, yes, fits many African countries. With enough IFs, you can fit ANY theory to any set of facts. If I am a short, balding, grey-bearded, bespectacled, white male economic development professor residing in Greenwich Village, I will be writing this post right now – it fits the facts.
Sachs also has a rather convoluted “aid works” narrative in this column. He says aid was high enough and went to the right things enough to achieve great things in Africa on health and education. So why didn’t it create economic growth? Because aid wasn’t high enough and didn’t go to the right things enough.
The other problem with Sach’s geography story is that it has already been refuted by other economists. The consensus among several academic papers is that destructive governments rather than destructive geography explains the poverty of nations. Acemoglu, Johnson, and Robinson (2006), Easterly and Levine (2003), and Rodrik, Subramanian, and Trebbi (2004) all tested the geography story against the institutions story and came down on the side of institutions.
So Robert Mugabe was a lot worse for Zimbabwe than the Anopheles mosquito. Corruption is more fatal for oil-rich Nigeria and Angola than latitude. Bad health has more to do with bad health systems than bad parasites. Other factors that Sachs mentions such as illiteracy and poor infrastructure are also symptoms of bad government services.
Of course, it is a lot easier to justify giving a lot of aid to African governments if they are helpless victims of geography rather than (mostly) just being – bad governments. Is this why Sachs insists on a bizarre geographic theory of Africa’s poverty and is oblivious to the bad governments that many courageous African dissenters have protested at great sacrifice? I don’t know, but I do know aid does a lot more good when it goes to poor individuals, and not to poor governments.
References
Acemoglu, Daron, Simon Johnson and James Robinson, “Institutions as the Fundamental Cause of Long-Run Growth”, in Aghion and Durlauf, Handbook of Economic Growth, 2005
Easterly, W. and R. Levine, “Tropics, germs, and crops: the role of endowments in economic development”, Journal of Monetary Economics, 50(1), January 2003.
Rodrik, D., A. Subramanian, and F. Trebbi, “Institutions Rule: The Primacy of Institutions over Geography and Integration in Economic Development”, Journal of Economic Growth, vol. 9, no.2, June 2004
Sachs, Jeffrey, John Luke Gallup and Andrew Mellinger, “Geography and Economic Development,”, International Regional Science Review, Vol. 22, No. 2, pp. 179-232, August 1999.
24 Comments
Nice rebuttal. Clearly geographic factors sometimes matter; if the Sahara is covering your cropland, agricultural production is going to suffer. But as you point out, institutions and bad governance have a lot more to do with which countries succeed at development than a simple geographic explanation. This just seems blindingly obvious from most of the literature out there. I guess Sachs doesn’t have time to read much these days.
(Just FYI, the link to Sachs post isn’t working correctly.)
@Texas in Africa, thanks for the heads up, the link should be working now.
Dear Texas, thanks on the link, I think it is fixed now.
Yes, that’s why few people live in the Sahara! The geography view doesn’t understand that people adapt to geography.
Regards, Bill
This is a complex subject, and once again you don’t do anyone a favour by acting like it isn’t. A few points:
1. Oh look, cross-country growth regressions count as valid evidence again! I have to wonder whether you really subject those whose findings you agree with to the same level of scrutiny as those you don’t. The fact that you’re happy to ignore Dambisa Moyo’s howling errors on African poverty (and Sachs’s criticism of same) suggests not.
2. You say “The consensus among several academic papers is that destructive governments rather than destructive geography explains the poverty of nations.” But that is a misleading description even of the papers you cite. Your own paper (with Levine) finds that “tropics,
germs, and crops affect development through institutions”. Rodrik et al find that geography has “a strong indirect effect by influencing the quality of institutions”. Acemoglu has a similar finding in another paper, I believe. Now, Sachs seems to be arguing that geography has a large impact outside of the institutions mechanism and maybe he’s wrong about that, but that indirect effect is still an effect, so arguing the importance of geography is not the bizarre crackpot theory you describe it as..
3. It is empirically true to say that tropical, land-locked countries tend to have significantly lower incomes. Just because that effect operates through institutions doesn’t make the argument ‘bizarre’. Adam Smith said the same thing – is he an idiot too? Being land-locked increases transport and communications costs – are you really arguing that has no impact whatsoever on development? If so, what does that say for the importance of trade and technology diffusion?
4. You say there is a ‘consensus’ that Sachs is wrong, but cite just a few papers in support. But Sachs has written papers in reply to those, and others support the geography thesis. If there really is a consensus as you say, you need to go a lot further to demonstrate it. Don’t expect us to just take your word for it.
5. Finally, your snark that Sachs is “oblivious to the bad governments that many courageous African dissenters have protested at great sacrifice” is yet another cheap shot that should not feature in an academic discussion.
I don’t hold any brief for Sachs and find him occasionally wrong and/or tiresome but your attempted smackdown is pretty shabby.
@Jim
First of all, where exactly does Prof. Easterly state that aid is not a complex subject?
ad 1. Bill Easterly is Bill Easterly, holding the opinion of Bill Easterly and not Dambisa Moyo. In fact, he does not even mention Moyo here. So, potential errors of hers are just not the topic.
ad 2. Just add the fact that institutions can be changed as opposed to geography.
ad 3. Yeah, but you could also say, it is a fact countries speaking African languages tend to have lower incomes. It just doesn’t explain too much.
ad 4. Easterly gives some references which is at least a start. You’re welcome to post articles that agree more with Sachs (maybe, from an author other than Sachs).
ad 5. I don’t think the main purpose of that statement is to be snarky but to point out that bad governance is a part of the problem neglected by Prof. Sachs.
Care to comment on this article by Mo Ibrahim in the Financial Times? http://www.ft.com/cms/s/0/66f75478-4bb8-11de-b827-00144feabdc0.html
HT: http://kristof.blogs.nytimes.com/2009/05/29/the-worst-word-in-the-world/
It’s a little odd that you beat up on Collier for data mining, but take the Acemoglu, Johnson, and Robinson settler mortality story seriously.
The validity restriction, which assumes that settler mortality wasn’t correlated with any of the non-institution conditions that would hinder economic growth, isn’t taken seriously by anyone I know.
Of course institutions matter, but isn’t it possible that poor institutions are the result of a long, complex development path involving a number of influences that *might* include geography? What are the chances that most of Africa, a specific geographic region, has the most awful institutions?
It is true that there is a shabbiness to Mr. Sachs’ attack on Ms. Dambisa Moyo (incidentally posted at http://www.voxeu.org/index.php?q=node/3613 as well as at Huffington)in that he targets two specfic weaknesses as a way of undermining an overall position that may not be dependant on the those areas of weakness.
But your reply does not address either of those weaknesses.
Are you saying that you agree with Ms. Moyo that:-
“No surprise, then, that Africa is on the whole worse off today than it was 40 years ago. For example in the 1970’s less than 10% of Africa’s population lived in dire poverty — today over 70% of sub-Saharan Africa lives on less than US$2 a day.”, rather than Mr. Sachs’ “World Bank researchers Shaohua Chen and Martin Ravallion (2007) prepare the benchmark under-$2-a-day historical headcount data going back to 1981. According to their figures, headcount poverty under $2 a day was 74% of the population in sub-Saharan Africa in 1981 and 73% in 2005.”?
And are you really in agreement with Ms Moyo that:-
“Finally, with respect to Mr. Sachs’ remark that I would see nothing wrong with denying US$10 in aid to an African child for an anti-malarial bed net — even labelling me as cruel; I say, if working towards a sustainable solution where Africans can make their own anti-malaria bed-nets (thereby creating jobs for Africans and a real chance for continents economic prospects) rather than encouraging all and sundry to dump malaria nets across the continent (which incidentally, put Africans out of business), then I am guilty as charged. Don’t forget that the over 60% of Africans that are under the age of 24 need jobs not sympathy.”
in the light of Mr. Sachs’ response that:-
“She seems both unmoved by the massive suffering and unaware that Africa has gone from producing exactly zero long-lasting insecticidal nets (LLINs) a few years ago to several million per year now, with thousands of jobs in the local industry, as a result of the demand for nets created by aid for malaria control.”?
There are disagreements here on points of fact where either Mr. Sachs is right or Ms. Moyo is.
On the basis of very limited exposure to Africa, I lean heavily towards the views of yourself and Ms. Moyo as I understand them — that institutions, including external aid agencies, often ignore, then get in the way of, and sometimes actively destroy ordinary people’s creativity and enterprise. But making this point (a high stakes one, if ever there was one, as you say) is not served by ignoring essential facts.
Terry, thanks for your comment. I was not trying to argue Moyo Vs. Sachs, that is up to them. I am concentrating on my own disagreements with Sachs’ analysis. Thanks, Bill Easterly
I believe there is a lot of “know unknowns” in the development (aka per capita growth) of a country. Now, if you try something for decades and ends up at the same place or worse off then please let’s try something else. Or let’s take a pause to think.
Prof. Sachs agrees that things went wrong in the past with aid but does not say what is different this time around to ensure it won’t go wrong again. Just pour more money in?
I don’t think the research is clear cut one way or the other. But even without any research, we can easily agree on the necessity of good governance, fair and honest justice system, and other institutions. With that, you will see more entrepreneurship in Africa by Africans.
One thing I know for sure is that each individual knows what is best for them and if you plan for them and it doesn’t fit their own plans they will find ways. That is why bed-nets are used sometimes for fishing or to make wedding dresses. Fertilizers are resold and the proceeds used for other plans completely unrelated to agriculture. The lubricant in condoms are used to polish shoes (Yes, that too). Governments make sure that the numbers/statistics support Prof. Sachs so they get more in the future.
When you talk about long term solutions, Sachs et al. show a picture of a sick child and calls you evil.
It is time for Africa to make tough decisions instead of continuing on the easy path that has led to nowhere so far.
I’m tempted but is trying hard to refrain from repeating my sincere believe that you’re both trapped in the cargo cult, which is knuckle headed economics. Is it really that difficult to acknowledge that individual trajectories has little relevance to calculated averages and vice versa?
Anyway, and in line with particularly Matt’s point above. Did you actually read the Rodrik et al. article and not just the headline? I suggest you have a closer look at their indicators for institutions … I personally find the title misleading if not ‘a fallacy’!
Oh, and another thing. It seems to me that in particular Moyo seems unaware of the multitude of donor(s) strategies and changing paradigms in ODA.
It’s hardly as if ‘Aid’ has been an easily definable, unchanging and standardised thing. Or are you going James Ferguson on us?
I just want to highlight again how silly it is to dismiss geographical theories of development out of hand, especially when they are attracting more and more attention from others in the field. The 2009 World Development Report from the World Bank (I know, I know, they’re the bad guys, but still) is all about the implications of geography for growth and development, and I would stress again that if you don’t think features like distance to the coast or proximity to prosperity matter then you are throwing out everything we know about the importance of trade, transport costs and economic density.
Secondly, it is worth re-emphasising how the ‘institutions’ argument Bill now favours is impossible to disentangle from geography. For a variety of reasons, equatorial regions have much higher levels of ethnolinguistic diversity (or ‘fractionalization’), which in turn is a major driver of poor institutions. A 2002 paper which investigated all this concluded that ” it is difficult to evaluate precisely the size of these effects because of the strong correlation of ethnolinguistic fractionalization variables with other potential explanatory variables, especially geographical ones. In the end one has to use theory and priors to evaluate our results.”. One of the authors of that paper was, er, Bill Easterly. He certainly seems to be relying heavily on ‘priors’ now.
Finally, it is understandable why some of those closely involved in development might feel uncomfortable with geographical explanations of patterns in long-term economic growth – you might think it implies ‘nothing can be done’ for particular areas. I’d rather say that it demands a more geographically nuanced approach. That’s exactly what the WDR says, and I think it’s where Sachs is coming from too. Doesn’t seem all that ‘bizarre’ to me.
I would just say to Prof. Easterly, go ahead and respond to Sachs as often as you like. It is useful to have a direct debate, because many people just assume no reasonable person could disagree with him.
Matt:
You are right there are some question marks about Acemoglu, Johnson, Robinson. But there is no comparison with Collier, they are in different universes. AJR are serious about causality and Collier is
not. AJR are not data mining and Collier is. AJR have a serious theory guiding empirical work, and Collier does not.
Regards, Bill Easterly
It does seem at first glance to be the case that institutions matter a great deal. Just compare North vs South Korea, East vs West Germany or the unusual economic growth in Hong Kong, Singapore & Dubai. But what do you think of Greg Clark’s argument in A Farewell to Alms that institutions really don’t matter, with medieval England (arguable with better institutions than today) having zero long-run growth for centuries? I’d also like to play Devil’s Advocate for corruption. As Theodore Dalrymple has pointed out, it’s often preferable to government officials enforcing laws without the escape of bribery. People associate corruption with greed and greed with the private sector, so politicians stoking anti-corruption sentiment crack down on that sector and give the government more power. The great economic disasters of communism were not due to nefarious thieves grabbing too much of the pie but by the total size of the pie shrinking.
Bill,
You are totally right: AJR bring to their work an econometric rigour that have yet to see in the Collier work. They also have a general theory at their back when they dive into their regression work, so it’s unlikely that they are engaged in any data mining.
However, tiny mistakes in even more rigorous studies can still bring us to the wrong conclusions (we can even be worse off, i.e. with a weak/invalid instrument problem).
My original point was: nearly all econometric studies are flawed – *especially* cross country ones. We need to be cautious when completely rejecting factors like geography based on just a few of these studies.
@Matt
Isn’t the total effect of institutions what we want to know?
Say geography matters, but it did so only through institutions. Then would this not favor (or actually be) Bill’s view? As opposed to if geography mattered in any direct or indirect way other than through institutions (which would more be Sachs’ view).
I thought that we’d like to regress income on geography and institutions where institutions may be endogenous. And that this is where Acemoglu et al use “healthy environment” as an instrument for institutions. What exactly do you criticize about that?
I’m not the greatest econometrician so please correct me if I’m mistaken somewhere.
Florian, you are exactly right. The finding of these papers is that geography has an effect only through institutions, and there is no evidence of any effect of geography that does not go through institutions. Best, Bill Easterly
Florian,
You’re right, we want to know the total effect of institutions, but my point is that a crappy instrument could easily lead to an over-estimation of the effect of institutions. AJR use settler as a proxy an “unhealthy settler environment.”
The crucial assumption though, is that that “unhealthy settler environment” only applies to settlers, and so determines their decision to set up beneficial institutions, or something closer to an extractive state. But, due to the validity restriction, AJR assume that the “unhealthy environment” doesn’t apply to the local population, at least not enough to affect the long-run growth path. They “prove” this by including measures of health, malaria incidence, etc in their regressions.
If AJR are wrong about their restriction (as I think many suspect) then their instrument isn’t valid, which, combined with the fact that it is a weak instrument to begin with, can lead to an overestimation of institutions.
I’m not, by any means, defending Sach’s view. I think that Bill is right in that institutions matter more than any other factor in development, and a lot of other factors actually flow through institutions. But you can’t reject all other factors based on a few cross-country studies – it’s not much more defensible than claiming aid is good for growth!
I’ll stop now
@ Matt
No need to stop
Your posts are very much appreciated!
Thanks for your answers!
@Matt: I think I see… if the effects of environment were not restricted to mortality of settlers only, they might as well be correlated with income, leaving environment an invalid instrument. Thanks again for pointing that out.
To Terry Corcoran RE Mosquito Nets
Your loaded question(”And are you really in agreement with Ms Moyo”) indicates that you’re missing a key part of the debate by (I assume) not having read Dambisa’s book.
On p.44 she gives an example of a local African net maker employing 10 staff being put out of business by a movie star arranging for 100,000 $10 nets to be dropped in as aid.
She calls this the micro-macro paradox. The well-intentioned aid has put the local firm out of business creating more need for aid and knocking out local capabilities. If the $1 million had been invested in the local firm think of the possibilities. Another example of “what is unseen” in the aid debate.
All this intellectual debate is quite interesting but I think everyone gets bogged down in the rhetoric, forgetting the importance that culture plays in the governments that are condemned across Africa. Are we under the false impression that the individuals that make up the governments are somehow not part of the societies they represent? Is corruption limited to these governments or is it rampant across all fields in Africa?? (The Aid industry is one of the biggest purveyors of corruption!)
Culture which evolves over time and is affected by many factors, including geographical adaptation, is the MAIN issue that everyone is afraid to look at when talking about the state of Africa today. Democracy doesn’t work because it is culturally irrelevant in Africa.