I’ve discovered that listening to podcasts is a great way to maximize the value of my morning commute. So far, I’ve only been rotating among a few but I’ve found them all to be both entertaining and informative. As an example, I really enjoyed an episode of Econtalk from last week that had William Easterly (a NYU economics professor) as a guest. Easterly discussed a recent working paper where he explores the concept of a benevolent autocrat. He defines a benevolent autocrat as a leader in a non-democratic country who receives credit for high economic growth rates.
It seems to be a common belief that higher economic growth can come from an autocratic government with good intentions as compared to a democracy ”burdened” by incessant political bickering. Easterly argues that there is lack of empirical support for the existence of benevolent autocrats and that this theory is a misconception. While higher growth rates have been observed in countries with autocrats, they do not seem to be caused by the leadership.
Easterly explains that we observe such high growth rates primarily because those countries have characteristics which make them prone to large swings in growth rates (e.g. low incomes, a reliance on commodities as exports). As a result, we often observe the highest growth rates in autocratic countries like China. On the other hand. Easterly points out that we also see the lowest growth rates in those types of countries.
With no true empirical evidence to support it, why is the benevolent autocrat story so popular? Easterly theorizes that many psychological biases cause us to focus on the success stories and also to confuse the causal relationship. In addition, we want to believe in the heroic story of a powerful leader creating higher economic growth.
I know that I often find myself frustrated after reading a persuasive opinion piece by an economist. I wish that we would just let that economist implement his/her policy immediately. If Paul Krugman were in charge and able to call all of the shots, wouldn’t the economy be in much better shape? Despite Krugman’s expertise and impeccable blogging abilities, the answer to that question seems to be no.
In the end, I find Easterly’s findings comforting to know because it means our country is not economically worse off because of the democratic process. In fact, we are rewarded with the consistent GDP growth (between two and three percent) that we typically see in all industrialized countries. With the rise of so many developing countries in the world economy, I hope to see more research done in this area. We have so much to learn about the true determinants of economic growth.
See Easerly’s website to check out the Benevolent Autocrats paper as well as his other work.