Koyama Responds on State Capacity, by Bryan Caplan

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.  

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