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Koyama Responds on State Capacity

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My colleague Mark Koyama responds to my recent critique of state capacity research.  Reprinted with his permission.  Enjoy!Hi Bryan,   My response is below. I agree with Noel on measures of rule of law.  When one looks at how these indexes are constructed it is hard to put too much faith in them.  At least estimates of tax revenues collected are a "thing".  Bryan is kind enough to link to the article Noel Johnson and I wrote on state capacity.  Bryan's critique is aimed less at the literature per se (at least or our survey of it) but at the concept itself.  Bryan argues that a sleight of hand is involved.  As I understand him, Bryan is saying we don't know that state capacity causes outcome x

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My colleague Mark Koyama responds to my recent critique of state capacity research.  Reprinted with his permission.  Enjoy!


Hi Bryan,

 

My response is below. I agree with Noel on measures of rule of law.  When one looks at how these indexes are constructed it is hard to put too much faith in them.  At least estimates of tax revenues collected are a "thing". 


Bryan is kind enough to link to the article Noel Johnson and I wrote on state capacity.  Bryan's critique is aimed less at the literature per se (at least or our survey of it) but at the concept itself.  Bryan argues that a sleight of hand is involved. 

As I understand him, Bryan is saying we don't know that state capacity causes outcome x (say growth). This is because state capacity is itself correlated with many characteristics that might be associated with growth. 

This is no doubt correct.  It is why our survey article is also a call for more historical research on the origins of highly functional states. But this is also true of all research in the empirical study of economic growth. Moreover, it neglects the extent to which recent research including papers by Melissa Dell, Sascha Becker, and their coauthors do undercover specific causal channels.

In absence of an RCT, how much weight should we put on these findings?  When confronted with any one paper, a skeptic can always claim "I believe it is x rather than state capacity" where x is any of one of many variables. In my view, this is a potential issue for any single paper, but much less of an issue for a literature, if many papers find comparable evidence that state capacity is associated with growth and development and that this link is plausibly casual, then this is something we should take seriously.

If someone finds counter evidence, this is great too. If the evidence is persuasive they can probably get a great publication.

Bryan is a stickler for conceptual clarity.  Hence I understand why he is dissatisfied by a concept like state capacity that aggregates a number of different things.  Other scholars have suggested alternatives.  Michael Mann writes of infrastructure power.  Mark Dinecco uses the term "Effective States". Nevertheless, state capacity is the most widely used term and one that we have inherited. Rather than rejecting it and using alternative bespoke concepts, I prefer to refine and clarify it.  

Moreover, I think Bryan maybe looking for something that may not exist: the cause of economic development.

Approaching the question of state capacity from the perspective of economic history gives me a different perspective.  Spurts of economic growth occurred due to trade, commerce, markets, and division of labor in many preindustrial settings as my colleague Jack Goldstone has argued (ancient Greece, Rome, Song China, the Italian city-states).  The transition to sustained modern economic growth occurred after the Industrial Revolution largely due to the combination of innovation & invention with sophisticated market institutions (see Mokyr and McCloskey).  

So state capacity didn't cause growth.  But state capacity can help to explain why British prosperity was not destroyed by warfare as occurred in Renaissance Italy or Song China.

Moreover, when it comes to the importation of new technology and institutions why were some non-Western countries able to do this successfully (such as Japan) where others were not (such as China)? 

Bryan suggests that our answer to this question is tautological. But I've written a paper with Chiaki Moriguchi and Tuan-Hwee Sng on precisely this question. Suffice to say that the argument doesn't rest on the simple observation that Bryan quotes but on abundant qualitative evidence drawn from the historical literature.

If the literature is a fad then it should be possible to publish a decisive scholarly takedown and the returns from doing so should be substantial.  



Bryan Caplan
Bryan Caplan is Professor of Economics at George Mason University and Senior Scholar at the Mercatus Center. He has published in the New York Times, the Washington Post, the Wall Street Journal, the American Economic Review, the Economic Journal, the Journal of Law and Economics, and Intelligence, and has appeared on 20/20, FoxNews, and C-SPAN. Bryan Caplan blogs on EconLog.

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