How the South was Lost

Vivek Nemana is an economics graduate student in New York University and a student worker at DRI. UPDATE: Art Carden makes an important emphasis regarding this post and contibutes an ungated link to his paper. See comments/bottom of post.

Last week marked 150 years since the beginning of the Civil War. Victory for the North meant more than the preservation of the Union. It meant that slavery could no longer continue as a viable factor of economic productivity. It meant the end of the terrible institution that deemed human beings were property, and heralded an important step in the long American struggle for universal human rights.

But it also reinforced the cleavage between an industrial, prosperous North, and a rural, underdeveloped South, a distinction that persists in some ways even today.’ The Union won in large part because of its industrial advantage, and its victory installed in the South what should have been better conditions for economic growth – liberal, more universal property rights and the abolition of slavery.

So what happened? A 2009 paper by Art Carden{{1}} argues that it was the very insertion of these new freedoms and property rights into a society designed for slavery that led to the divergent development of North and South.

Before the War, Southern social networks were based on hegemonic bonds relying on power imbalances and the threat of violence. The South was heavily invested in racial subjugation – slavery directly accounted for over a quarter of the GDP. The region spent an enormous amount of resources to justify slavery, hiring silver-tongued apologists like John C. Calhoun to spin slavery as humane. In this light, slavery was an economic institution that was designed for racially hegemonic society.

While the Civil War radically restructured Southern laws to promote racial equality and property rights, the hegemonic bonds were resistant to change. This generated a major friction, Carden writes, that manifested through the racist Jim Crow laws and, most gruesomely, lynchings that openly defied the new freedoms for blacks.

The backlash against black self-determination, the politically-enforced segregation, and the conviction that one race was inferior were societal phenomena that hurt economic growth. For example, segregation and racist violence meant that markets were smaller and the division of labor shallower than it could have been. Mutual fear and distrust made contracting and doing business across racial boundaries more expensive. As a result, Carden writes, “Southern entrepreneurs, innovators, and laborers relied more heavily on kinship networks and informal arrangements than on formal markets.”

And these factors were self-reinforcing, Carden argues, breeding a cycle of mistrust, ignorance and poverty.

Gary Becker once wrote that people lose out on the potential gains from trade if one group is able to indulge in “tastes for discrimination” against another. As the legacy of slavery wound its way into postbellum Southern society and politics, it hindered the way freedom and property rights should have boosted the economy, denying the South the full bounty of American development.

[[1]]Here's the ungated version.[[1]]


Photo credit: New York Times and Wikispaces


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Commemorating the Triangle Fire

Today is the 100th anniversary of the Triangle Shirtwaist Company Fire. 146 people, mainly immigrant women, some as young as 14 years old, died when a fire broke out on the top three floors of a garment factory at the corner of Greene and Washington Place, just off Washington Square Park in New York City.

A year before, the women of Triangle Shirtwaist had led a city-wide strike of 20,000 garment workers to protest crowded, unsafe working conditions and low wages. The owners of Triangle Shirtwaist, recent immigrants themselves, opposed organized labor and fought back against the strikers’ demands.

New York at the time was an important center of textile manufacturing. Manhattan alone had more than 450 textile factories, which employed some 40,000 workers. Many of them, like the women of the Triangle Shirtwaist Company, were recent immigrants from Italy, Poland, Russia and Hungary. Factory owners were under intense competitive pressure to keep productivity up and costs low. It was not uncommon for garment workers to work 14 hours a day, 7 days a week, for less than $4 a week.

Ironically, the Triangle building was considered a model of modern safety standards, compared to the dark and crowded working conditions of tenement apartment sweatshops common at the time. Triangle was a “fireproof” building, with freight elevators, high ceilings and windows that allowed light onto the factory floor.

The fire that began at 4:30 pm 100 years ago today started on the 8th floor and spread quickly upwards, igniting machine oil and flammable piles of cotton scraps and shirtwaists on the factory floor. The workers rushed to escape but found the main stairs chained shut (the bosses didn’t want them taking breaks or stealing shirts and routinely searched them before they could leave the building.) While some made it out via the single freight elevator, others were pushed to their deaths in the elevator shaft. The flimsy fire escape came unmoored from the building in the heat, killing many more.

Firemen could do little to help, since ladders at that time reached only as far as the 6th floor. The women trapped on the 9th floor began to jump out the windows, and the nets the firemen were holding were ripped uselessly from their hands by the weight of the bodies falling from such a great height. Thousands of New Yorkers out for a Saturday stroll though Washington Square Park witnessed the horrible scene.

The factory owners on the top floor escaped out the roof and onto an adjacent building. They stood trial for criminal manslaughter but were acquitted; the jury wasn’t convinced that the owners knew the exit doors were locked.

Still, the consequences of the fire were far-reaching. Public outrage led to more than 30 new laws passed within two years, creating new standards for minimum wages and maximum hours, encouraging collective bargaining, and addressing all the safety failures at the Triangle Factory.

The Triangle Factory building now houses the NYU Chemistry and Biology Departments. A plaque from the International Ladies Garment Workers Union reads:

On this site, 146 workers lost their lives in the Triangle Shirtwaist company fire on March 25, 1911. Out of their martyrdom came new concepts of social responsibility and labor regulation that have helped make American working conditions the finest in the world.

The fire was a terrible tragedy. But today we can be thankful for 100 years of development and public safety regulation that prevent workplace disasters like this one in New York City.

-- Photos: 1,2,3,4,5 taken by the author with permission at “The Triangle Shirtwaist Factory Fire: One Hundred Years After” at NYU Open House; 6 taken by the author on March 24, 2011.

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Who is qualified to be self-righteous about liberty in other countries?

In 1845, a Virginia man gave his daughter Jane Cox a 15-year old slave named Susan White as a wedding present. Susan White had a daughter named Susan Brown in 1856, who also became a slave for the Cox family.

After Emancipation, Susan White and her daughter Susan Brown left the Cox family to seek free employment. They could not find any, so they came back to the Coxes to work as domestic servants.

This picture from 1903 shows Susan White and Susan Brown with Cox family members. The baby that Susan Brown is holding is  Elizabeth Jane Cox, her middle name in honor of her great-grandmother Jane Cox, and the woman on the far left is her mother Hannah Cox. Elizabeth Jane Cox was my grandmother.

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Wilderness to brothels to Apple store: the History of Development in one block

We usually analyze Development at the national level. Why not other levels? At the other extreme, here is a short and surprising illustrated history of one city block. Before Europeans arrived, it was a wilderness lightly inhabited by the Delaware ethnic group.

By the late 1600s, this block was part of a hilly 200-acre farm owned by the prominent Dutch official Nicholas Bayard (1644-1707). By the time of this painting in 1768, there was more development to the south, but this farm was still owned by the Bayard family.

A map in 1782 shows a 100 foot hill and Minetta Creek. The hill would later be levelled and the creek paved over.

In the summer of 1822, a yellow fever epidemic in the city to the south prompted an exodus of wealthy residents to this block. Anthony Arnoux, a merchant tailor, built this house in 1824. The Arnoux family would remain until 1860, when they relocated further uptown.

Their exodus reflected the deterioration of the neighborhood. The location of many hotels nearby on Broadway fueled a boom in prostitution in the 1850s. In this one block alone, there were 23 brothels. In 1862, Mary Ann Temple was arrested for running a whorehouse in the former Arnoux house.

The next boom was in more traditional sectors. The construction of a railroad depot nearby and good transport connections to national and international markets fueled a neighborhood boom in factories and warehouses.  In 1880, this factory was constructed, next door to the old residence and brothel, using the cast iron process that made it possible to build 6- and 7- story buildings with spacious rooms and high ceilings. The process was pioneered by James Bogardus, who had built a cast iron factory downtown in 1848.

Alas industrial booms don't last forever, and in the 20th century the neighborhood became a decaying industrial wasteland.

The powerful urban planner Robert Moses wanted to raze the neighborhood for his 8-lane Lower Manhattan Expressway, which he had first proposed in 1928. His plan was finally approved by the City Council and Mayor Robert Wagner on February 13, 1961. Opposing Moses was the great neighborhood activist and author Jane Jacobs, whom New York police arrested at one point for "inciting to riot." But on August 21, 1969,  Mayor John Lindsay finally killed the project.

In 1967, with real estate prices depressed by the uncertainty about the Expressway and the deterioration of the neighborhood, a Lithuanian-American artist named George Maciunas had bought one of the old factories and converted into a studio and residence for his artist co-op. Many artists followed in his wake. The neighborhood was not zoned for residences, so the pioneer artist-residents lived illegally, finding ways to tap into power and water supplies.

Eventually, city bureaucrats passed an artist exemption legalizing the arrangement. The neighborhood was reborn as an artist colony and attracted a huge concentration of art galleries.

Non-artist celebrities and the rich found a way to get lofts for themselves in the neighborhood in the following decades. Upscale shops followed.

The ultimate culmination of centuries of development was of course the Apple store located at the end of the block.

Today this block (Greene Street between Houston and Prince) is part of Soho and one of the wealthiest blocks in the city (and the world).

Its history had been a series of unexpected events involving many actors, from Nicholas Bayard to the yellow fever mosquito to Anthony Arnoux to James Bogardus to Jane Jacobs to George Maciunas, few or none of whom could have anticipated the outcomes of their actions. Like many other examples, Soho illustrates that a lot of economic development is a surprise.

Photo credits: 1,2,3: Manahatta; 4 author; 5 New York Times ;  6,7 author; 8 Life Magazine March 27, 1970, 9 The Historical Atlas of New York City; 10, 11 author; 12 photo from Google Maps.

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Abraham Lincoln in Egypt

Today the doubts begin on whether there will be a happy democratic outcome in Egypt. There are no guarantees. Today is Abraham Lincoln's birthday. His most famous words also addressed doubts about democracy. Could American democracy survive a civil war? Could it make a transition from half slave and half free to emancipation?

our fathers brought forth on this continent, a new nation, conceived in Liberty, and dedicated to the proposition that all men are created equal.

Now we are engaged in a great civil war, testing whether that nation, or any nation so conceived and so dedicated, can long endure.

It is for us the living, rather, to be dedicated here to the unfinished work which they who fought here have thus far so nobly advanced. It is rather for us to be here dedicated to the great task remaining before us ... that this nation, under God, shall have a new birth of freedom -- and that government of the people, by the people, for the people, shall not perish from the earth.

The Americans of Lincoln's generation proved the doubters wrong.

Now it is up to the Egyptians to be dedicated to the unfinished work, to be dedicated to the great task remaining before them, that their nation shall have a new birth of freedom.

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Power from the Manger

Caesar Augustus was the greatest Emperor of the greatest Empire. He could force the  whole population to move back to their ancestors' villages just to pay their taxes. Herod was governor of Judea, a backward province that Caesar likely paid little or no attention. Herod could order a massacre of all children under the age of two in Bethlehem, without having to appear before the International Criminal Court. Yet history would later show that the most powerful person in the world that night was a newborn infant, conceived out of wedlock to a peasant girl, born in a manger.

Is this story of any interest to non-Christians? Is it historically accurate? I don't know, but I think it's a great story. It's a story of transformative power that comes not from the Palace up above, but from the Manger down below.

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It really was better to be British than French

Or so say the authors of a study probing the effects of colonial rule in West Africa.

To identify the effects of colonial legacy, we focus on one case, the West African nation of Cameroon. Originally colonized by Germany, Cameroon was divided between Britain and France during World War I, and the two powers implemented widely divergent colonial policies in their separate zones. The two areas were only reunited at independence in 1960, and despite a strong policy of centralization, they retain separate legal and education systems and a strong attachment to the language and culture of their respective colonizers. A comparison of these regions this permits an excellent test of the colonizer influence hypothesis.

Comparing communities close to but on either side of the colonial border, Alexander Lee and Kenneth Schultz of Stanford discover that rural households on the British side are wealthier and have access to better water sources than those on the French side.

This blog frequently covers how long-ago events have surprising effects on today’s development outcomes: patterns of indigenous slavery in Peru and Bolivia show up in household consumption and stunted children's growth, while taxation regimes in colonial Nigeria influence the quality of public service provision. If that's not long run enough for you, how about 1000 BC?

This new study on Cameroon is among many that find British colonial institutions (as compared to those of their French, German, Belgian, Portuguese or Spanish colonial competitors) lead to better development outcomes today. Lee and Schultz note that the Anglo edge comes from a combination of characteristics generally common to British colonial regimes: “lack of forced labor, more autonomous local institutions…common law, English culture, Protestantism” but stop short of telling us which of these were most responsible for the differences observed in Cameroon.

For some relief from the oppressive conclusion that today’s development outcomes are all pre-determined, the researchers find that post-independence policies matter too.  The positive effects from British rule don’t hold for urban areas or for centrally-provided public goods, showing that post-independence policies, which have generally favored the former French side with greater infrastructure investment, can overtake colonial legacies.


Thanks to reader Blair Reeves for the pointer to the study.

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Planners vs. Searchers in 1958

At the 9th meeting of Hayek’s Mont Pelerin Society (MPS) in 1958, members discussed two papers by P.T. Bauer on economic development and foreign aid. Over at the Foundation for Economic Education’s excellent From the Archives blog, Nicholas Snow recently posted the account of that discussion from the first issue of the Mont Pelerin Quarterly. The entire issue is available for download (NB: as a 20 MB PDF) here.

Bauer’s discussants included Hayek’s mentor Ludwig von Mises and the (according to Bill) perennially under-appreciated Herbert Frankel. Given the number of my favorites there or represented, reading these comments is a bit like watching the 1927 Yankees in action (or for our nerdier readers, the Justice League of America).

Nick singles out a great quote from Mises’s comments, and here is another that captures well the bias that still exists against skeptics and critics in debates over foreign aid:

People will call us negative because we do not consider the plight of the so-called underdeveloped countries as a problem to be solved by the governments. The governments want to solve it by spending the taxpayers’ money for the execution of some spurious plans, of plans that are badly designed and, as a rule, even more poorly put into effect. The popularity of this mode of speech is reflected in the way in which the words plan and planning are employed today. Planning, as our contemporaries use the term, means always planning by the government. The plans of the individuals do not count; they are just no planning. (p. 19)

Herbert Frankel also offers a gem of an insight well ahead of the development literature of his time. He says of Bauer’s on-the-ground work:

The lesson that flows from it is that it does pay to go to these remote areas and find out what the problem is, instead of assuming that one knows the problem before one begins. Until recent years, people have simply assumed in many of these territories in Africa, that there were no real, positive signs of enterprise among the indigenous population, which was supposed to be so uninstructed or inert that it was not able to fend for itself, experiment for itself, or improve itself. It was not realised that a reason why there was this apparent lack of initiative in the population was that there were serious customary or legal obstacles to the exercise of ordinary enterprise, even on a small scale. (p. 16)

Here we have not only the recognition that local conditions matter, but that institutions--the rules of the economic game--matter crucially for explaining cross-country income differences.

The whole document is worth reading. It provides a fascinating retrospective on how the development economics of its day looked from a classical liberal perspective. Certainly the development planners of their day failed; otherwise more recent efforts would never have come to be. Did the MPS members put their finger on why those plans failed? If they did, how many of the same errors guide development research and policy today?

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How foreign aid was invented by accident

Truman’s Inaugural Address on January 20, 1949 is usually taken as the beginning of foreign aid, after it included these stirring words:

Fourth, we must embark on a bold new program for making the benefits of our scientific advances and industrial progress available for the improvement and growth of underdeveloped areas…More than half the people of the world are living in conditions approaching misery….For the first time in history, humanity possesses the knowledge and the skill to relieve the suffering of these people….  And…we should foster capital investment in areas needing development.…this program can greatly increase the industrial activity in other nations and can raise substantially their standards of living.

Foreign Aid was at first referred to as the Point Four program because it was the 4th point in the speech. I recently stumbled across an old article by a participant in the 1949 events, Louis J. Halle.[1]

The events were roughly these. Halle worked for the State Department and one evening in 1948 had a conversation with the Deputy Director of American Republic Affairs (DDARA) about a program of technical assistance that only covered Latin America. The two agreed something similar could possibly be useful other places.

In November 1948, the President’s speech-writing assistant asked the State Department for some proposals to include in the Inaugural Address. A meeting happened and they came up with three proposals. The Director of Public Affairs called for additional ideas. The DDARA remembered the evening conversation and said something like "how about a program of technical assistance for undeveloped countries, like that in Latin America?" The fourth proposal was noted and the meeting adjourned.

The proposals went through the regular clearance procedures in the State Department. The fourth proposal was killed in the clearance process. Halle thought it was probably because officials thought it would be irresponsible to announce such a program when nobody had a clue about what it would mean in practice. So only the first three points were sent over to the White House for the Inaugural Address.

Then the speechwriting assistant called the State Department’s Director of Public Affairs back a few days later complaining that the three proposals were boring. The President wanted something original. As Halle describes it:

At this juncture, without proper time for reflection, the Director of Public Affairs found himself standing on the shore of his own Rubicon. He took a deep breath, and crossed over. There had been a fourth point, he said, but it had been thrown out. What was it? The Director told what it was. “That’s great,” said the voice from the White House, and “Point Four” went back in again.

Halle says nobody gave the matter another thought until the delivery of the address. To continue his narrative:

“Point Four” was a public-relations gimmick, thrown in by a professional speech-writer to give the speech more life. When the newspapers dramatized it in their principal headlines on the morning of January 21, the White House and the State Department were taken completely by surprise. No one – not the President, not the Secretary of State, not the presidential assistant or the Director of Public Affairs –knew any more about “Point Four” than what they could read for themselves in the meager and rather rhetorical language of the speech….It was only now, after the Inaugural Address had been delivered and the “bold new program” acclaimed all over the world, that machinery was set up in the government to look into the possibilities of such a program and make plans.

President Truman was asked six days later about background on the origin of Point Four. He replied with a good story that had no relation to the reality:

The origin of Point Four has been in my mind, and in the minds of the Government, for the past two or three years, ever since the Marshall Plan was inaugurated. It originated with the Greece and Turkey propositions. Been studying it ever since. I spend most of my time going over to that globe back there, trying to figure out ways to make peace in the world.

We want always to think our leaders take intentional, decisive actions , especially on something so important as foreign aid. It's hard to say in this case to what extent it was an "accident," or whether the fundamentals made aid an accident waiting to happen. But it's good for the soul to realize that policies can happen by accident more than we are usually willing to accept.

[1] ON TEACHING INTERNATIONAL RELATIONS , Virginia Quarterly Review, 40:1 (1964:Winter) p.11. I found the reference in Gilbert Rist's wonderful book, The History of Development: from Western Origins to Global Faith (3rd edition 2009)

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In politics as in development, success is fleetingly fleeting

This blog has frequently pointed out that economic growth successes don't last -- rapid growth is fleeting. After last night's election, we are reminded that political success doesn't last either. An action in one direction is followed by an equal and opposite reaction in the other.

The situation of one party having both the Presidency and a majority in the House has been rare in the postwar era, and when it happens, it doesn't last very long.

We often point out that analysis of rapid growth "miracles" is faulty because it fails to notice that the miracles will likely disappear very soon.

Likewise, would behavior of political actors be different -- such as giving moderates in each party much more say -- if both sides fully realized that an electoral "mandate" is a very frail and short-lived creature?

Postscript: this hereby ends the Aid Watch obsession with the elections, we will resume our reguarly scheduled programming tomorrow.

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Thank the IRS for giving you your last name

UPDATE 9/13 noon: see end of post Wonderful post by Cafe Hayek on the history of how the state imposed last names to supersede local practices ("Bill who lives in the east"),  featuring an awesome essay on Cato Unbound by James C. Scott and a thoughtful response by Donald Boudreaux.

Query: which societies today still do not have permanent last names?

UPDATE 11:30am: thanks for the responses to the query! keep them coming. The James C. Scott thesis is that a permanent last name (i.e. the same across generations) is some measure of the "modernization" of the state. I think I feel an instrumental variable coming on here...

My own contribution: in Spanish and Latin American cultures, you have two last names, the first is the surname of your father and the second the surname of the mother. If you give only one of these names to identify someone, you use the first, not the second (I always complain to the American bookstore owners who file Gabriel Garcia Marquez under M instead of G).

UPDATE 9/13 12 noon: THANKS  for all the great responses to the surname survey! Looks like we have an awful lot of societies that don't pass the James C. Scott "state modernity" test of having permanent surnames across generations.

Just to clarify: Scott was not necessarily arguing that this kind of "state modernity" was always good. The state wants it to collect taxes, which are not always a good thing, and maybe also to make it easier for the state Gestapo to keep track of everyone, which is even less of a good thing. Donald Boudreaux (see link in the Cafe Hayek post)  has the insightful comment that  even with this state control downside, permanent surnames also facilitate personal identification for many "gains from trade" transactions among private persons.

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The battle for the dream

I have a dream that one day this nation will rise up and live out the true meaning of its creed: "We hold these truths to be self-evident, that all men are created equal." I have a dream that one day on the red hills of Georgia, the sons of former slaves and the sons of former slave owners will be able to sit down together at the table of brotherhood.

I have a dream today!

I have a dream that one day, down in Alabama, with its vicious racists, with its governor having his lips dripping with the words of "interposition" and "nullification" -- one day right there in Alabama little black boys and black girls will be able to join hands with little white boys and white girls as sisters and brothers.

When we allow freedom ring, when we let it ring from every village and every hamlet, from every state and every city, we will be able to speed up that day when all of God's children, black men and white men, Jews and Gentiles, Protestants and Catholics, will be able to join hands and sing in the words of the old Negro spiritual:

Free at last! Free at last!

Thank God Almighty, we are free at last!

Dr. King spoke these words 47 years ago today.The practical implementation was clear: give blacks the vote, give blacks equal rights. The vision is clear: fight double standards, don't give freedom only to some while denying it to others, fight hatred.  How sad that people like Glenn Beck today, who promote hatred against unpopular groups, are trying to invoke some connection to these words.

In a much more subtle way, the aid industry has never come close to the moral clarity of this vision; it often practises double standards, with freedom for white men, but condescension and denial of voting rights and other rights for black men.  It covers this up with euphemisms and jargon, which I satirized on the Huffington Post yesterday with the Powerpoint aid jargon version of I have a Dream.

People don't realize that often the most skeptical and critical people have a soft spot for inspirational eloquence.  It certainly applies to me. I am getting goose bumps as I listen to "I have a dream" right now. ...let's speed up that day when all of God's children can be Free at Last.

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Superstition and Development

By Peter T. Leeson, BB&T Professor for the Study of Capitalism at George Mason University. Gypsies believe that the lower half of the human body is invisibly polluted, that supernatural defilement is supernaturally contagious, and that non-Gypsies are spiritually toxic.

Far from irrational, these superstitions are central to Gypsies’ system of social order. Gypsies can’t rely on government-created legal institutions to support cooperation between them. Many of their economic and social relationships are unrecognized or illegal according to state law. Yet Gypsies’ need for law and order is as strong as anyone else’s.

To provide such order, Gypsies leverage superstition.[1] Consider Gypsies’ belief that non-Gypsies are spiritually toxic and that supernatural toxicity is contagious. Unable to use government to prevent cheating, Gypsies must use the threat of ostracism to prevent socially destructive behavior.

The problem is that Gypsy societies are tiny islands in a sea of non-Gypsies. Ostracism isn't much of a punishment if ostracized Gypsy cheaters can integrate and interact with the larger outside society. To give the threat of ostracism “teeth,” Gypsies cultivated a strong belief that outsiders are supernaturally polluting, that their pollution is contagious, and thus that interacting with outsiders would supernaturally contaminate them too.

Under this belief, the threat of ostracism is serious indeed: cheating cuts one off from all social contacts. This deters Gypsies from socially destructive behavior. Perhaps unexpectedly, Gypsies’ superstition promotes law and order.

We often look down on the superstition of “others,” such as Gypsies. But Europeans also have a rich history of superstitions, some of which may also have been socially productive. When medieval judges were unsure about a criminal defendant’s guilt or innocence, they ordered him to undergo an ordeal.[2] In the hot water ordeal, for instance, the defendant was asked to plunge his hand into a cauldron of boiling water. If the defendant’s arm showed signs of severe burning or infection three days later, the court convicted him. If his arm showed no such signs, the court exonerated him. These ordeals were based on a superstition according to which God performed a miracle for innocents, permitting them to escape trial by fire unscathed.

As in Gypsies’ case, what appears to be an irrational belief on the surface, on closer inspection, is socially productive. Confronted with the specter of boiling their arms at ordeals, guilty defendants would always decline them. They believed in the superstition according to which God exonerated the innocent and convicted the guilty through ordeals. So they expected to be burned and then convicted if they went through with them. Better to fess up or to settle with their accusers instead.

In contrast, innocent defendants would always want to undergo the ordeal. They also believed in the superstition that underlaid ordeals. So they expected God to prevent their arms from boiling, and thus to exonerate them, if they went through with them. Innocent defendants had nothing to fear from undergoing the ordeal. So they were willing to undergo them.

Since only guilty defendants would decline an ordeal and only innocent ones would undergo one, judges learned whether defendants were guilty or innocent by observing how they reacted to the specter of the ordeal. Medieval citizens’ superstitious belief facilitated criminal justice and, with it, law and order.

This isn’t to say that all superstitions promote law and order. They don’t. But we shouldn’t dismiss the possibility that some bizarre, scientifically unfounded beliefs may actually improve social cooperation by substituting for institutions of government where those institutions don't exist or work well. Which superstitions in developing countries are in this category?

[1] For a comprehensive economic analysis of Gypsy superstition see, Leeson, Peter T. 2010. “Gypsies.” Mimeo.

[2] For a comprehensive economic analysis of medieval judicial ordeals see, Leeson, Peter T. 2010. “Ordeals.” Mimeo.

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The Fall of The Southern Elite

The Greenbrier Hotel in White Sulphur Springs, W. Va. was the playground of the old Planter Class in the Old South, going all the way back to Robert E. Lee. The NYT travel section describes how it has fallen on hard times, just as the Old White Elite in the South is not quite what it once was. The Greenbrier's aristocratic visitors, waited upon hand and foot by liveried Negro waiters, were never that popular with the poor boys who actually lived in White Sulphur Springs, W. Va. One of them was my father.

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More well-deserved Crisis Recognition for economists: Carmen Reinhart and Ken Rogoff

The NYT Business Section on their book, This Time Is Different. It's nice when a fat book covering 800 years of financial crises can be summed up in one 4-word title, and then the message of the text in one 3-word response: No It's Not.

Or as the authors put it, We've Been Here Before.

The authors and the article both understandably concentrate most of the discussion on Implications for Today's Crisis. These days you can't even talk about broccoli without discussing Implications for Today's Crisis.

But the book will surely remain a classic long after the crisis ends, and then its long-run message might include a development angle: We've Been Here Before, But We Got (and Stayed) Rich Anyway.

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The Declaration: History has a sense of humor

The man who wrote it owned other human beings. The rich Anglo-Saxon males who signed it believed themselves superior to women, Catholics, Jews, other Europeans, Native Americans, blacks, Asians, and poor white males. It contained no development strategy, no announced intention for poverty reduction, and no nation-building Power Point presentation. For many decades afterward, anyone who took it literally would have been seen as crazy.

Yet the principles the Declaration gave in two sentences have done more than anything else for both liberty and development in the 234 years since that day.

We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable rights, that among these are life, liberty and the pursuit of happiness. That to secure these rights, governments are instituted among men, deriving their just powers from the consent of the governed.

Happy birthday, Declaration, and thank you.

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International Aid Worker Appreciation Day

A big part of what we do on this blog is criticize bad ideas in aid. But in our zeal to get this message across, sometimes other, important messages get lost. Today, we devote the blog to expressing our admiration and respect for aid workers. Aid work can be a tough, grueling, frustrating, even heart-breaking job.

Aid work promises the adventure of foreign travel and the gratification of working for the good of others, but also the monotony of data-crunching and report-writing, the fear of losing funding, and the frustration of fighting bureaucracy.

It demands time spent away from home and loved ones, and is notoriously tough on family life.

Parodies aside, aid work is not all flying business class to stay in luxury hotels. The pace of travel can be punishing, the accommodations uncomfortable, the food unfamiliar. And sometimes conditions are dangerous. Aid workers by profession take risks that range from just inconvenient to lethal: jet lag, homesickness, food poisoning, petty crime, disease, terrorism, war.

Of course these hardships are taken on voluntarily, and small compared to those of the people aid workers are there to help. But many aid workers are highly-educated and come from privileged societies, where they could have easily found jobs that pay more and require less dedication and hardship.

Obviously you will notice that we planned this post months in advance to coincide exactly with the 151st anniversary of the historic day when French acrobat Jean-Francois Gravelet (pictured above) became the first person to cross Niagara Falls balancing on a tightrope. Likewise aid work, whether in the field or at HQ, requires balancing along a thin and possibly nonexistent line reconciling the irreconciliable demands of your bosses, your evaluators, your funders, your critics, your local government counterparts, your clients, your family, and your own ideals.

Today, we recognize and celebrate aid workers’ commitment and sacrifice.

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Big places have small beginnings: increasing returns in Greenwich Village

Bought this great book of New York City historical maps today.

This is a map of "Mannados"  in 1664. The northern edge of New Amsterdam (just in the process of changing its name to New York) was protected by a wall, and hence the street along the wall was called "Wall Street."

The next map is from 1766.  The city has spread a bit north now, but still has a long ways to go. Population had only recently passed 10,000. The port was way behind Boston and Philadelphia and barely ahead of Newport, Rhode Island.

 Way up in the upper right on the Hudson is a little hamlet called Greenwich, surrounded by lots of farmland.  Directly east of this hamlet, which was roughly around where Hudson and Christopher Streets intersect today,  is where I am typing these words right now.

The last map is from 1836, when the city has spread as far as around 14th street. In the summer of 1822, there was a yellow fever epidemic in New York, reflecting the poor sanitation in the city among other things.  This was the last straw for the wealthier inhabitants who moved to a suburb that became known as Greenwich Village, named after the hamlet in the previous map.  To maintain property values in the Village, an enterprising New York mayor named Philip Hone created a Washington Memorial Parade Ground (the land was available because it was a graveyard for the criminals and poor; Mayor Hone just paved over it; many remains are still buried beneath what is today's Washington Square).

In the map, directly beneath the number 15 is a little building on the west of Washington Square that housed the entirety of New York University in 1836.

Why did New York (and Greenwich Village) thrive so much more than other east coast cities? Cities are obvious cases of increasing returns, where the more you have already, the more new stuff you attract.  (Many people have looked for development insights from this, without ever really resolving what they are.)

Another important event between map 2 and map 3 was the opening of the Erie Canal on October 26, 1825.

New York had major geographic luck -- the lowest point to cross the Appalachian Mountains was just west of Albany,  so the Erie Canal could connect the vast interior linked to the Great Lakes to Albany and down to New York City. After the Erie Canal became defunct, New York had now had such a head start that it is still the premier East Coast  city. (Historical neighborhood details from here.)

As Billie Holiday sang, "them's that's got shall have, them's that's not shall lose."

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