The Invisible Hook: Peter Leeson

Economics Political Theory
1

Anyone read this book, it looks awesome? It was kind of always in the back of my mind to get, but after reading these posts it’s jumped up to my “top 10”. I think it can be found at places like “Barnes and Nobles” even.

2 interesting blog posts on the book

http://www.coordinationproblem.org/

Anyway some thoughts (I haven’t checked the links he is discussing yet):

  1. In a more “natural order / natural anarchic” type world Democracy may very well serve a vital function (this seems very intuitive to me) - and this shouldn’t be too alarming for any Austrian.

2) “Efficient institutions, in other words, are context dependent”.

This is an awesome quote. However I seem confused as to what is at stake in what Leeson is trying to defend: whether or not an institution is a pragmatic, organic, or tensions of power = all three are well within the scope of “classic” Austrian views of institutional formation. Is he just trying to show the fact that there are more than one way institutions form, or am I missing something (my wireless is crap right now, I only read the article once, and I dont have the patience to reopen it until I go to work tommorow)?

Anyway, hopefully I can comment more on the next few days, when I can read the article in more detail

2

It is a great book.

3

vive,

Well, I wish they would spell out what they mean by efficiency a little more. Acemoglu obviously has some sort of dynamic efficiency in mind, I assume Leeson does as well, but neither spell out how it should be measured.

In any case, I think the stakes are pretty high. As I undersand it, Acemoglu’s book (Why Nations Fail) basically says that the wealth of nations is determined by the quality of their institutions. Nations with “inefficient” institutions (non-democratic, weak property rights, etc) get bad outcomes (slow economic growth).

Leeson seems to be saying that it isn’t so easy to decide which institutions are “inefficient” because the efficiency of an institution is context dependent. Democracy works in some places at some times and not others. What matters is the costs and benefits of democracy relative to other institutional structures. So the institution in place is likely the best that can be achieved given the constraints the socety faces.

Personally, I don’t read Acemoglu as disagreeing with Leeson on this point. I think they are just saying that one major factor constraining institutional change is the distribution of political power. Once one group gains a political advantage, it becomes harder to switch to an institutional structure where that group no longer has power. This introduces institutional path dependence, which I think makes it harder to make the sorts of arguments Leeson makes in his first post (“inefficient institutions won’t last long”).

At least that’s the way I read it. I could be wrong. In any case, I always enjoy Leeson’s stuff (his article “trading with bandits” literally blew my mind). So I’m glad you posted the link to this exchange. And I should note that nothing he has said seems uniquely Austrian to me (i think the only citation in his first post that was not an article by himself was by George Stigler). In fact, I would think that Austrians would find more to like about Acemoglu’s argument, since their explaination for why nation’s fail rests on bad governance and a lack of property rights. Those sound like pretty comfortable, Austrian conclusions to me. Leeson’s argument seems to imply that institutions like property rights are great, but they might not always be the best solution to a given problem. I don’t think Murray Rothbard would take kindly to that talk.

4

Student,

lol he does only site Stigler - not very Austrian at all!

read everything once over:

Anyway, as to Austrianism, I was thinking in Lachmann, Weber, Taleb, and Weiser* terms (I have been rummaging through works by or about these dudes lately): so it’s Austrian, just not Rothbardian. In short, my line of thoguht is, divergent expectations in a world which are/ can be oriented to extant instutional frameworks is a huge deal to show at once the complexities of coordinating a radically divirgent world, and show how instutions can be used as decent sign posts - and market analogies to institutional frameworks don’t necessarily work as the best model. Maybe it’s this kind of “subjectivist” line that seperates the Lachmenn from the Rothboys - because I think you’re right, Rothbard would not accept Leesons view.

I’ll bring up the perspective I am thinking of more upon request, as I don’t know if I stated it correct (all the thoughts are “packed together” so it may do good for me to further discuss/ think about them, though I am still short on time)

Some thoughts for now:

  1. Yes the word “effeciency” is killing me in these articles - and frankly, so is the word “power” - both these words are always in danger of being pretty useless in trying to say anything meaningful, and are two words I usually like to have an idea of what is talked about, they are kind of “red flag” words to me.

  2. As I kind of stated in my OP, and as you pointed out, I don’t see these views as mutually exclusive. If they aren’t I am still confused as to why the stakes are high.

  3. AM I reading this right:

a) one falsification proves Acemoglu wrong b) one verification proves Leeson right? If so, I just don’t see how Acemoglu has much of a point. Also, Acemoglu’s argument, it seems as he is just using a type of “historical” justification, which is dangerous - moreover Leeson seems to show a much more flexible view of action.

Also (I think this is relevent here):

Let’s take N Korea and an “asteroid” / Plague scenerio. The “evil autocrat” dies in Korea and you inheret his place and know “the truth” about free markets - due to peoples expectations, orientation, and the existing structure: I don’t think instuting an anarcho-capitalistic system / pure market at the time of crisis is a particularly good idea for dealing with what needs to be dealt with.

In fact, my immediate thought, is having a “static” view of “Strong property rights and good governence” as a type of “platonic idea” seems as if it could be just as dangerous as any other radically equilibrating utopian, socialistic, or idealistic thinking. It seems to me it defeats the purpose of a market mentality. I don’t know, am I way oversimplified Acemoglu’s position, or am taking this down a slippery slope? It feels like it

*interesting word I came across stated that Weiser’s methodology was “institutional individualism” (not sure what that means, but it’s an interesting term)