Posted by: Home Strange Home | June 1, 2009

Book Review: Economic Gangsters

Written by Edward Miguel (University of California Berkeley) and Raymond Fisman(Columbia), this short and entertaining book on development economics is written in a fashion that is accessible to the general public and has been likened to Levitt’s Freakonomics and Harford’s Undercover Economist.   

Miguel and Fisman present their research on corruption, violence, and poverty using empirical microeconomics applied to development problems, but without the jargon.  I couldn’t agree with them more when they state in the opening pages, “We believe that the developing world’s best hope is to base policy decisions on rational analysis rather than ideology.”  

The authors offer interesting insight into the alleged causal correlation between slow economic growth and armed civil conflicts, an idea also addressed in Paul Collier’s Bottom Billion.  They propose that drought and economic hardship have fuelled armed civil conflict in Africa, citing a 1% decline in GDP as being statistically associated with a 2% increase in the likelihood of civil conflict.  “In any given year, armed civil conflict is six times more likely in the world’s poor countries.” 

The argument is that  poverty breeds violence, even in the form of… witch hunts.  Yes, you read that correctly.  Apparently, women attacked as witches tend to come from the poorest families, and during years of drought and flood, witch killings double.  When families are short of food to feed all the hungry mouths, the first to go are the old ladies – they are an unproductive burden and have little social power to resist persecution.  When South Africa’s Northern Province introduced pensions paid to elderly women in the early 1990s, witch killings in the almost completely disappeared. 

Miguel and Fisman also present the results of a very interesting analysis of New York City parking violations by ambassadors from around the world, which the authors use as a gauge of the “culture of corruption” of different countries.  Every time an ambassador’s car double parks in front of the UN or blocks a fire hydrant, the New York City traffic cops issue a ticket and keep a record, but the ambassadors are immune from paying the fee.  As such, they have no immediate financial incentive to follow the parking rules – only their own conscience nagging at them afterward.  It turns out that Kuwait, Egypt, Chad, and Sudan come out on top in terms of parking violations per diplomat.  The only high-ranking Western European country with a “culture of corruption” is Italy. 

In the final chapter, on “Learning to Fight Economic Gangsters,” we are introduced to the “randomized program evaluations” methodology, an approach put into practice by the MIT Jameel Poverty Action Lab.  This scientific approach measures the effectiveness of development projects.  Researchers partner with NGOs and use control groups to track the outcomes of different initiatives.  The results can be surprising – using this methodology, researchers have learned that deworming drugs boost children’s’ school attendance but more textbooks don’t improve their test scores, and auditing by external organisations is more effective at reducing corruption than “self-governance.” 

All in all, this short and enjoyable book is a great layperson’s introduction to development economics and the fight against poverty. 

Source: Fisman, R. And Miguel, E.  Economic Gangsters.  Princeton University Press, Princeton. 2008.  

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Responses

  1. very interesting and amusing the use of traffic violations by diplomats as a compass of the culture of impunity in different countries!


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