Recorded July 10th, 2020
Read the full transcript
TYLER COWEN: Hello, everyone, and welcome to Conversations with Tyler. Today I am chatting with Nathan Nunn, who is a famous economist, professor at Harvard. His work is wide ranging. I think of his main areas as economic development, history, and contract enforcement, but he’s worked on many additional issues. Nathan, welcome.
NATHAN NUNN: Great. Thanks for having me here, Tyler. It’s great to be here.
COWEN: Let’s start with some Africa questions. Why does it seem that Ethiopia is suddenly so successful in nation building?
NUNN: That’s a good question. I haven’t studied Ethiopia, but the standard answer would be a history of state formation. There was Axum and great kingdoms; it was the one country or area that wasn’t colonized, so that would be a standard answer. I think that’s a pretty superficial answer.
I don’t think that we know intimately, or in great detail, why is it that a history of state formation or having successful states or empires is correlated with economic success in state formation today. But I think that would be the standard answer that your average Africanist or growth economist would give. I think there is some validity to that.
COWEN: But does this get at a broader question about persistence and the importance of persistence? If you look at Ethiopia in the 1970s, it’s a poster child for extreme poverty. If we look at Ethiopia in the time of the slave trade, Eastern Africa — as you point out in your work, a very large number of slaves were taken from Ethiopia, which is supposed to predict low trust and bad long-term outcomes.
And now, they’re good at nation building because of events millennia ago. Over what time horizon does persistence operate? Or is it always supposed to be moving in the same direction? Or is there also some kind of mean reversion?
NUNN: That’s a great point. When you think about persistence, one thing that’s important is how much of the total variation does this factor in the past explain? That is going to be relevant for the type of question that you ask. If we see, in the periods of decades or even centuries, a lot of movement and correlations that are in opposite direction, that’s fine, and that’s completely consistent with persistence, as long as persistence isn’t explaining 99 percent of everything, or 97 percent.
The way I think about it — and hopefully this is answering your question — we’re all pretty confident that smoking, in general, causes lung cancer, so that’s kind of a long-term factor. But you can definitely find counterexamples of that, and that’s individuals who maybe smoked but are healthy and lived a lot longer. Or throughout your lifetime, you might have differences in levels of health. At one point you could be healthier or less healthy.
Exactly similar argument with education. We think, on average, more educated people have higher levels of income, but throughout a person’s life, there could be ups and downs, and the correlation could be different amongst subsamples.
I think that analogy, if you apply it to any country and any country’s experience, goes a long way to understanding why countries are moving often in opposite directions than what we would think. But if you look at a broad cross-section of countries, there is this nonzero correlation that we call persistence.
COWEN: Let’s say you’re in a tournament with a hedge fund manager, and you’re both having to invest in emerging economies, and you understand persistence — you and Melissa Dell probably better than anyone in the world — and the hedge fund manager hasn’t mastered your work.
So even if persistence is explaining, say, only 5 percent of the variation, which would be a modest claim, you should be able to beat that person, right? Because you and Melissa understand persistence, and you will pick the winners, on average, somewhat better than the hedge fund manager. Or no?
NUNN: Well, it depends if there’s a market for . . . if there’s others in the world who are also as knowledgeable as us. But if we were the only two in the world, I would think, yeah, that’s right. The one thing I would also point out, though, is it’s important to think about, is the persistence based on location or based on societies?
There’s been a lot of movement of individuals. Persistence based on societies basically is very strong, based on locations is not strong. That’s the one caveat — if Melissa and I were picking versus this other person — that one would want to take into account, is trace the people, not the places.
COWEN: If you try to think, say, within Africa, what would be some places that you would be modestly more optimistic about than, say, a hedge fund manager who didn’t understand persistence? What would a few of those countries be? Again, recognizing enormous noise, variance, and so on, as with smoking and lung cancer.
NUNN: If I’m true to exactly what I was just saying, then southern Africa or places where you have a larger population of societies that historically were more developed. South Africa, you have the Afrikaans, and they have a different descent than others. That’s if I’m true to what I was saying. But that’s ignoring that, also within Africa, you had a very large number of successful, well-developed states, and that was prior to European colonialism and the slave trade. So one could look at those cases.
One area that I worked at, the Democratic Republic of Congo, where you had the great Congo Kingdom, the Kuba Kingdom, a large number of other kingdoms, the Luba for example — that would probably be one country. That country today is pretty much as low as — in terms of per capita income — as you can be, right at subsistence. But if we’re predicting just based purely on persistence and historical state formation, that would be one to pick.
COWEN: What do you find to be the most convincing account of Botswana’s relative economic success?
NUNN: A few things. One is, Botswana is pretty small in terms of population. Anytime you have smaller countries, you can have more extreme outcomes. That’s one, that it’s small. But then related to that, it’s, in general, ethnically homogenous, particularly compared to other countries within Africa. The Tswana are the predominant ethnicity. They also have a historical social structure, and I think that was pretty well maintained and left intact. That’s a big part of the explanation.
On the lingering effects of the slave trade in Africa
COWEN: You’ve argued that in the context of a cross-country growth regression, the countries that had many slaves taken from them have done worse in the longer term than regions left more intact. You think that same regularity holds true within individual countries rather than across countries, say within different parts of Nigeria?
NUNN: Yeah, I think it does. It’s not something that we ever published, but with Leonard Wantchekon, who’s a political scientist originally from Benin — basically, we looked at subnational measures of the number of individuals of each ethnicity that were taken from different parts of Africa. What we focused on there was actually not income, although you do have measures of income, and you could do that very easily.
But once I had established that, across countries, there is this relationship between income and slave exports, it’s less surprising, or maybe less publishable, that within countries you’d find the same thing. What we did look at, though, was distrust, and you find a strong relationship there. And obviously distrust — it’s not surprising that that’s going to be correlated with income as well.
COWEN: If I think about West Africa for a minute, putting aside Eastern African slave trade, it seems to me the wealthiest areas, the places people actually want to live, are on the coast. And the places that had the most slaves taken were on the coast, for more or less obvious reasons.
Doesn’t that mean that the raw correlation is a positive one between how well a region has done within a country? I’d rather live in Lagos than in Kano within Nigeria, yet presumably more slaves were taken from the coast.
NUNN: Yeah, it could be. This is a study someone should do, actually. Jeffrey Sachs has been famous, or at least when I was in grad school had famously said things like, “Africans live in strange places. They live away from rivers. They tend to live away from the coast. They live in more mountainous regions which are less fertile. Why would that be?”
That’s true, exactly what you said. Although secretly you want to live next to rivers, you want to live in a fertile plain, you want to live next to the coast except for the slave trade. And so in the data I’ve looked at, your logic is exactly there. But then there’s the slave trade, so in places where there was a lot of slave trade, people are less likely to live close to the coast.
And in particular, what I also looked at was, people are more likely to live in mountainous areas as well. I think everything you said is exactly right, and that’s the omitted factor, is that, ironically, places which otherwise would have been the best places to live were also the places for which you were most exposed to the slave trade.
My guess, and from the data I’ve looked at, is you will see persistent patterns in where people live within Africa that is explained by those geographic features and the slave trade. They moved away from the coast where there was a slave trade. They moved away from rivers. They moved to mountains for protection.
COWEN: Some remarkably high percentage of individuals in sub-Saharan Africa live in Nigeria, which is not that large a country. How did it work out that way? Why did that happen? That’s long puzzled me.
NUNN: I think 25 percent of sub-Saharan Africa lives in Nigeria. That’s a good question. I’d have to look at the geography, but it must be the fertility of the soils, the ability to produce. And that’s exactly the stat that we just said, despite the fact that Nigeria, the Bight of Biafra, was one of the areas that had exported the most slaves. So the counterfactual of what the population would be must be even higher.
I haven’t looked into the geography, but it must be fertility. You have to be able to support that large number of individuals in terms of subsistence and eating. This is even despite the fact that the northern part of Nigeria, we know, is much less fertile.
COWEN: If you think about the effects of the slave trade on, say, West Africa, one measure is per capita income, but if you’re at something close to a Malthusian equilibrium, isn’t another measure of how well the places are doing just population? So to speak, the regions consume doing better in terms of higher population rather than higher per capita income.
It’s what you would expect in a Malthusian model, and you shouldn’t just look at income but look at where the people live. And then you have Nigeria, which was a center for taking the enslaved from Africa and having this very large population, and that seems counterintuitive.
NUNN: Yeah. One would have to look at the data, definitely. One question is, are there other factors like geography? And we just mentioned that. And the one thing with the slave trades — I have to think about how this all works out — but in the research I’ve done, it’s very clear that there was endogenous selection into the slave trade, and you could even think of that as being strategic by Europeans or the slave merchants. It was those societies, those locations that had the most densely populated regions or that had well-functioning states already and well-developed states.
The intuition is, if you’re a slave raider or a slave merchant, it’s going to be much easier to accumulate slaves for export if there’s a lot of people around — slaves are people — than maybe where there’s low population density. The way I think of it is, those densely populated places — those areas were the ones that were targeted by the slave trade. That’s kind of an omitted factor that you’ll want to take into account.
What’s going on with Nigeria, I would guess, is it has geographic factors, geographic conditions that made it very densely populated initially, so it was a target of slave exports. And that had negative effects on income and also population density because we’re in a Malthusian world. But that omitted factor is enough to drive Nigeria’s current large levels of population.
In other words, there’s geography, which causes larger population initially, causes more slaves to be taken, and that means, also, larger population today. You would just have to take all those things into account.
COWEN: How do you think about Cape Verde in your framework? Originally, those islands were not settled. They were a center for the slave trade. It wasn’t the case that slaves, per se, were taken from them. Today Cape Verde has a vibrant multiparty democracy, free speech. Hardly a wealthy place, but institutionally, it seems to be doing pretty well in terms of social and political capital. What’s your hypothesis about Cape Verde?
NUNN: This is one thing in the analysis I did that was hard to think about. There were places that were initially uninhabited or that didn’t supply slave exports. Mauritius, Réunion would be another. I think Cape Verde fits into this bucket. They imported slaves and didn’t export them, so they didn’t experience the detrimental effects to indigenous institutions, the breakdown of traditional social structures. They had established property rights. They had a lot greater inequality.
I think of them as more similar to plantation islands in the Americas, for example. One interesting fact is, there’s another set of islands, Comoros, where they were initially inhabited, and that looks more like the rest of East Africa. Madagascar would be another example. That’s how I think of it: they escaped all of the detrimental effects of the slave trade.
COWEN: So are you a Zanzibar optimist?
NUNN: Zanzibar had an indigenous population as well. That’s a great point. Zanzibar would look like other small African countries that had slaves taken. And because they had indigenous populations and there was slave raiding, that was kind of an entrepôt, but I’d have to think about it. There was a lot of wealth, historically, because it was this trading entrepôt. If Zanzibar was its own country, maybe it would have much better functioning institutions than Tanzania.
COWEN: In the last 10 years, it’s become a fashionable view that East Africa, or parts of it, will lap West Africa because of their location; that there’s geopolitical competition; that China, India are all vying for influence in East Africa. China will invest more in the infrastructure of, say, Ethiopia than it might in Nigeria, and because of strategic location, we should be relatively bullish on East Africa. What’s your view?
NUNN: Hmm, I don’t have a strong view. I haven’t thought about that. But if we’re thinking about historical persistence, and going back to your suggestion, then it is true that Eastern Africa, for example, as part of the Omani Empire — there was more trade for long periods of time with the Middle East, for example, across the Indian Ocean. From that perspective, maybe Eastern Africa does have a leg up. But I really haven’t thought about this at all.
I think part of this is — and I think there’s research being done on this — is what are the effects on development of Chinese aid, of Chinese joint ventures, of greater integration with the East? I think part of your story, or that narrative, rests on the assumption that greater integration with China is going to be relatively beneficial, which is very plausible.
COWEN: When it comes to your relative optimism for the southern parts of Africa, how much do you worry about what we call the gravity equation in trade theory? They’re just too far from most other places. Most other countries don’t care strategically very much about them. Perhaps apart from a few minerals, they won’t have nearly as much trade. South Africa in particular has been deindustrializing. What’s their engine of growth, given their trade possibilities seem to be more limited? Is the gravity equation pretty powerful predictively, yes?
NUNN: Yeah, the gravity equation is very, very powerful. One thing to keep in mind is, with the gravity equation, there are traditional variables that are in there, which are distance. But then there’s been a lot of work actually extending this and putting other bilateral variables in there as well — for example, common language, common religion.
If we think of South Africa, obviously, having common language with European countries is going to be important. English, for example, and then common religion. The most controversial is the work by Spolaore and Wacziarg where genetic distance is a super strong predictor of basically bilateral income differences and trade. And so again, these former settler colonies — South Africa, for example — are going to have a leg up in the gravity equation for exactly that reason if one buys the genetic distance story. And so it is —
COWEN: What’s your view of that story?
NUNN: It’s a strong empirical regularity, for sure, that absolute distance genetically between societies explains the absolute difference in income. You see that very, very strongly. I think this doesn’t tell us anything about the importance of genes for per capita, GDP, or for economic success.
If two societies are very similar genetically — what it means is, they’ve had a very similar history. The time since their last common ancestors split is not going to be very distant, so they would have experienced a lot of common shocks, would have lived in common geographies, would have had similar forces that affected cultural evolution, societal evolution.
I think that’s what that’s picking up, basically, is the importance of history and how that affects culture institutions. They really don’t know in that paper what is this vertically transmitted trait. It could be genetics, but they don’t push that. I think it’s all these bundles of things that are affected by history.
COWEN: Why does distance from the equator seem to predict GDP per capita so well? It’s not obvious it should matter at all, right?
NUNN: Yep, that’s right. There’s a time, I think when I was in grad school, this was one of the great questions that the profession was trying to deal with. There’s a lot of explanations. One is pure geography. Malaria is bad, for example. Sleeping sickness is bad. And those are more prevalent closer to the equator — that would be the Jeffrey Sachs view.
The other one is, while history is important and those places — for the Acemoglu, Johnson, and Robinson view — those places had less settlement of Europeans. An extractive strategy was employed rather than a strategy where you build local institutions and try to improve the society.
Personally, I think there seems to be more evidence for the historical view, although I don’t know that that one story explains everything. I think there’s a lot of other reasons why historical geography would have been important.
COWEN: What can Africa do to overcome the limitations of having so many landlocked countries?
NUNN: That’s a good question. The obvious thing would be a transportation network that’s improved beyond what they currently have, particularly railways, so that landlocked countries can transport their goods to the sea. And we know that sea transport is much, much cheaper, much more effective. So that would be —
COWEN: Even then, the final country seems to capture a lot of the rents. India takes rents from Nepal through transportation networks. Djibouti captures a lot of rents from Ethiopia because the actual relevant port to Ethiopia is in Djibouti.
NUNN: That’s interesting. It depends on the number of your outside options, actually. You can think of a country like Niger, Burkina Faso — there are a few different countries which they could go through to get to the coast. If you had multiple lines or dense railway network, then there are going to be outside options, and they can capture more of the rents. But that point is valid. That might not be enough.
And related to this is, if you also developed a network infrastructure or transportation infrastructure that connected different countries within Africa better. If you look at the network right now, what you see is the railway network which exists, which was primarily established during the colonial period, is basically meant to get resources from wherever in Africa to the coast and then shipped to Europe.
It’s not well established to allow African societies to trade with one another, so that would arguably also be beneficial. And this is related to who gets the rents because then you would have more outside options, more choices for each country, particularly these landlocked countries.
COWEN: What should, say, West Africa do to overcome the harmful historical effects of the slave trade, say on trust?
NUNN: That’s a good question. That’s the big development question. What should any developing country do to try and develop? I think one thing —
COWEN: But that problem in particular — you must have some implicit theory. That’s how trust levels are transmitted across generations, right?
COWEN: And then from the micro elements of that theory, you’ll have at least potential remedies at the margin, but what are they for you?
NUNN: I think one is — although I don’t have a strong understanding of the psychology of this — if you look at the data, trust tends to be increasing the levels of education of an individual. That would be one policy recommendation: we can increase education levels.
For low levels of income, trust is increasing in income. It’s kind of hump shaped. But then that’s this chicken-and-egg problem: Well, how do we generate economic development that then results in greater levels of trust? When you have economic development, you’re going to have more interactions between individuals. You’re going to have more successful interactions, positive-sum interactions. People will learn that they can trust one another, and I think that that’s going to be part of the benefit.
But I think it’s really related to, how do you spur economic growth so that lots of activities are positive sum rather than just zero sum, so that we have growth and an increasing share of the pie? And then we can cooperate and realize there are benefits to cooperation and that lead to higher levels of trust.
COWEN: Why do you think many parts of the New World — and I have in mind Latin America — have relatively high levels of crime for their per capita income? Latin America also, as you know, has pretty high levels of education for its per capita income. There may be trust at some micro levels, but crime rates in the New World are much higher than anywhere else. Crime rates in Latin America very often are higher than in most parts of Africa.
What has gone wrong there in terms of the intergenerational transmission of trust? And of course, it’s multi-ethnic, but so is much of Africa.
NUNN: That’s a good question. I haven’t thought about that. And also, I obviously know less about Latin America. One is, I’m not sure that it’s related to trust. I think it’s related to whatever tools and mechanisms a society can employ to constrain activities which we call crime.
I can tell you more about what happens in sub-Saharan Africa and the Democratic Republic of Congo, where I spend much of my time. There, you wouldn’t think that the formal institutions are better than in Brazil, for example. The police force is less well functioning, but the crime rates — we were very surprised when we first went to the areas where we stay — are extremely, extremely low.
So what is it? It’s not through formal mechanisms, but it’s through informal mechanisms such that you could almost think of it as mob justice, that if one person commits a crime, there’s going to be informal actions taken to punish that individual. That relies on the strength of indigenous, informal institutions or social structures that prevent that.
In Latin America, it seems like the reliance are on these more modern, formal institutions which aren’t as good as other countries. The other thing about Latin America — I would say there’s extreme inequality. We see this in national Gini coefficients. That’s different than countries where you’re very close to subsistence, and the scope for inequality is much less. I would just guess that that has a big part to do with it as well. But those are all just conjectures.
COWEN: Is it fun to visit Democratic Republic of Congo?
NUNN: Yeah, it’s great. Yeah.
COWEN: Tell us what’s fun. I need to go once I can.
NUNN: Yeah, it’s really, really great. The first time we went as a team — this is James Robinson, Sara Lowes, Jonathan Weigel in 2013 — we were pretty apprehensive. You hear a lot of stories about the DRC. It sounds like a very unsafe place, et cetera. But one thing we didn’t realize or weren’t expecting was just how lovely and wonderful the people are.
And it turns out it’s not unsafe in general. It depends on different locations. In the east, definitely near Goma, it’s obviously much, much less safe. But I think what, for me, is wonderful is the sense of community. Because the places we go are places that haven’t been touched, to a large extent, by foreign aid or NGOs or tourism, I think we are treated just like any other individual within the community.
Because the places we go are places that haven’t been touched, to a large extent, by foreign aid or NGOs or tourism, I think we are treated just like any other individual within the community.
In the psychology literature, it’s often referred to as collectivist versus individualist culture. I think it’s just a culture where the individual is less important. You’re more embedded in the community, their social relations, and I think that’s nice. It’s nice to experience that — coming from a Western society — for a month every year.
COWEN: What’s another favorite place of yours to visit in Africa?
NUNN: That’s a good question. You mentioned Zanzibar. I’ve done archival research in Zanzibar. They’ve great archives there, which are funded by UNESCO. And you can do great things like swim with dolphins and turtles, and there’s the old Stone Town there as well. So that’s another great place. South Africa is also great. Cape Town and Stellenbosch — that’s a very posh part of Africa that’s very, very pleasant.
Actually, what I really enjoy is just going back to the different parts of the DRC, kind of on a regular basis. Given that you develop bonds with different people, that’s really nice to see them, see how they’re doing over time, and that sort of thing.
COWEN: There’s a recent online piece by Morgan Kelly. I’m sure you know it. It’s called “The Standard Errors of Persistence,” and it’s pretty technical. Feel free to give us an answer that no one will understand, but he says, “Many persistence regressions can strongly predict spatial noise.” What do you think of this piece?
NUNN: I think it has an important lesson, which is, we have to really be careful when we’re thinking about societies, or people, or anything really — institutions, policies. Because in the cross-section especially . . . well, actually, not only cross-section but in the time series, there’s a lot of correlation across observations.
If you looked at, for example, the eastern DRC, those groups, those individuals there are going to have a lot of similar experiences as just across the border in Rwanda, and they’re going to be culturally somewhat similar. The further you move away, the more independent they are, but the closer spatially you are, the more correlated they are. So if we’re looking at any correlations and there are these omitted factors, then if you’re close to one another, your error terms are going to be more similar.
That’s basically an important point of that paper. If you don’t take that into account — and it’s hard because there’s a lot we don’t know — if you don’t take that into account, you can get a lot of false positives. And part of that comes from overestimating the effective number of observations that you have.
On the importance of the Catholic Church
COWEN: Your colleague, Joe Henrich, has a new book coming out about WEIRD, based on his earlier articles — the notion that there is a quite unique Western cultural perspective based on the particular notion of rationality and instrumental reasoning, also belief in democracy, particular religious views, even if they’re held in a secular manner. And as I read him, he views that as, really, the driving force behind Western development. Do you agree?
NUNN: Yeah. I think we don’t know the exact details for exactly why, but I think there is something about WEIRD societies that led to the rise of Western Europe, definitely. I think that’s the original — or not the original because you can always go further back in time — but that was an important impetus, was why did Europe diverge from the rest of the world?
He talks about the breakdown of clans, which I think is important, and the breakdown of the extended family unit, the Church disallowing polygamy, the Church disallowing cousin marriage. All these things helped to maintain these lineage structures. That led to individuals being important. And that really is the definition of individualistic culture versus collectivist culture.
I think the one other thing that’s important is, Joel Mokyr talks about, in his recent book, is that we learned that it was — and this is probably related to individualism and the program of the Catholic Church — we learned it was okay to break from tradition and to question the previous generation.
Once you do that, you can deviate from the traditional structures. You can have the Scientific Revolution. You can have a lot of innovation, and I think that was also important. That’s important for the Industrial Revolution, for example, and that’s something he makes a big point about. I think that’s very complementary to Joe Henrich’s view that the policies of the Church created the society of individualistic psychology.
COWEN: How important a role do you assign to Christianity in the economic and scientific rise of the West?
NUNN: I would say I’m similar to Joe. It’s not so much Christianity . . . Actually, maybe I’m not so similar to Joe Henrich. I think the biggest effects were on these medieval policies of the Catholic Church that broke down lineages and extended family units and created the individual. I think that’s important.
Joe also talks about moralizing gods and an afterlife being important. I’m still undecided about how important that is compared to these policies of the Catholic Church that created an individualistic psychology.
I would also say, if we think of just purely economic development today in the contemporary period, I definitely don’t think it’s the case that one needs to convert to Christianity to be successful. I think that would be confusing causality or confusing correlations we observe historically with causality today.
COWEN: But wouldn’t converting to Christianity, at least predictively, be important today in the sense that it would predict ties to the West? You could dispute which is cause and which is effect. But if you just saw a particular African country or region have a lot of conversions to Christianity, as happened, say, in Ghana, wouldn’t you become more optimistic about that region?
NUNN: That’s one theory, except I think one way to think of it is there’s been massive conversion within Africa. Now, if you’re asked in many countries the fraction of people that are Christian, it’s going to be like 97 percent, right? If they’re not Muslim, which would be the other main religion. And that’s without any really deep ties to the West.
Think of Massachusetts, where I live. Conversion rate is much lower, but we think that Massachusetts is more integrated with Europe, for example. So, I think the logic of that is right, but what we’ve seen is mass conversions of Christianity, and even the development of more indigenous Christian religion or Christian hybrid religions, which have also taken off. So you don’t need actually a lot of connection with the Western world to have the spread of Christianity.
On things under- and overrated
COWEN: In the middle of these dialogues, we tend to have a section, overrated versus underrated. Are you game for a few?
COWEN: Feel free to pass. First one: Canadian football — overrated or underrated?
NUNN: Oh, definitely underrated. [laughs]
COWEN: Why is it better than the NFL?
NUNN: I’m trying to remember. The field is wider, the end zone is deeper, and you only have three downs instead of four downs. So you have much, much more passing. If you like the running game, then you’ll like the NFL. But I think these long bombs are much, much more common within the CFL.
They also had — I don’t think this is a reason — but I remember they had a media campaign arguing that people should watch the CFL. And their logo at one point was “Our balls are bigger,” which is true. So yeah.
COWEN: The city of Ottawa in Canada — overrated or underrated?
NUNN: It’s probably underrated as well. The big thing — it’s cold, but you have the canal which you can skate up and down. Many people actually commute to their government jobs on skates, traveling five, six, seven, eight miles. That would be pretty cool. I’ve never done that.
COWEN: Randomized control trials in economics, as a way of doing development economics — overrated or underrated?
NUNN: That’s a good question. I guess it depends by who. [laughs] Amongst those that the perceptions or how they’re rated by those that developed it, I think accurately rated. Amongst individuals that like to jump onto the next big thing, like machine learning or RCTs, I think those individuals are overrated. It’s a tool that’s helpful, but it’s not the only tool that one would ever want to use for the rest of their life.
COWEN: Do you worry that RCTs are being done in too few locales? That there tend to be economies of scale. You get teams set up and people who know how to recruit locals into the experiments, and you keep on writing trials in just a few places, in say, India, English-speaking parts of Africa, and so on. Is that a problem?
NUNN: Yeah, I think that’s definitely a problem. We see this even more in other fields, say, psychology, where you only run experiments, or behavioral econ, where you only really run experiments amongst Western university students. So development — you can say, “Oh, we’re doing better.” But then, like you say, it’s Nairobi, a few places in India, Uganda. But there’s a lot of Africa where experiments aren’t done.
And the reason is, like you say, it’s huge, huge fixed costs to get things set up. If you’re a graduate student and you want to run an experiment, you could go without any connections, try and figure things out, and set up a site. Or you could code up a survey, send it to IPA or another organization that’s already somewhere, and just run it there. But I think the big problem is that we are learning about developing countries, but a tiny, tiny slice.
And the other thing is, those are the countries that are — or societies that are most accessible. When we started our work — I guess I could be preachy and say, “Oh, well, we went to the DRC and that was remote. No one had been really working in central DRC.” But now we’ve been there for seven years, and we’re not going anywhere else. So we’re falling into the exact same trap.
COWEN: The use of standardized test scores to help shape or determine graduate admissions in economics — overrated or underrated? It’s very hard to get into Harvard if you don’t have an absolute top math GRE score.
NUNN: Yeah, I think that’s overrated. It does measure some things, like your ability to jump through this hoop and learn this information which is pretty much useless, which is how to solve these tricky logic or math problems. And so that’s useful, but the problem is, in order to do that, you have to basically take a summer off and study for the GRE. And if you’re financially strapped or come from a disadvantaged background, that has a huge, huge cost. So I think there’s a bias, a socioeconomic bias that is much worse than the benefit.
COWEN: What should graduate economics stress that it doesn’t now? What should it do more of at the margin?
NUNN: For me, I think what would be — and you can see this in my recent research — know how to do research that’s more descriptive and that’s softer, or where the data collection is softer. In other words, we never learn — and I don’t know of any courses that teach development economists, when you go to a society, how do you interact with people and ask questions face to face? How do you run focus groups? How do you learn in ways other than surveys?
We haven’t done that. How do you ask questions about the social structure, about their beliefs, their values and norms? These things that are kind of invisible, unless you ask about them. How do we do that? What should one think about? How are these societies structured? These sorts of things.
We’ve taken a very scientific approach: What’s the treatment? What are the outcomes? But there’s all this contextual stuff, which traditional anthropology looked at, where we’re just ignoring. And that’s data, and that’s super important, and we’re not taught how to do that.
COWEN: What’s your favorite movie and why?
NUNN: Oh, favorite movie. [laughs] That’s a good question. Favorite movie — in the past it was Dazed and Confused. I must have watched that in university about a hundred times.
COWEN: A wonderful film.
NUNN: I won’t talk about why that was the case. More recently Black Panther, or there was a show, I believe it was called the Queen of Katwe. And one reason I like those is they portray African society in a more positive light, which is more realistic. And I think that’s super important. I think there’s a lot of implicit bias towards Africans, African Americans, which comes out in media and movies or television shows. So I like those because those were empowering and showed African cultures in a positive light.
COWEN: What do you like best in African music?
NUNN: I’m not super familiar with African music, except for the local Congolese music, which is —
COWEN: Well, that’s one of the peaks, right?
NUNN: Yeah, exactly. I like it. It’s fun. There’s memories that bring me back to the first road trip we did, when we went to visit the Kuba Kingdom. It was in this SUV that we rented, and we had these tapes playing with Congolese music, and that was great. We even had the air conditioning for about 10 minutes. Then the tape machine caught on fire, and then the air conditioning broke down.
But that music still reminds me of that trip, which was a two- or three-day trip, or actually four- or five-day round trip into the interior, which was my first trip to the Congo. What I don’t like is it’s usually associated with dancing, and I’m a very stiff, rigid person [laughs] that’s not skilled at dancing.
On the lack of Canadian brands
COWEN: The Canadian economy has been very successful, right? Everyone would recognize that. People love Canada. Canada has amazing soft-power global brand. Yet there are very few international brands from Canada. Maybe there’s Molson beer, but hardly any others. Why is that?
NUNN: That’s a good question. I guess it depends on what you mean. I think international brands — there might be some brands that we don’t know about — the BlackBerry, for example. Maybe people do know Bombardier, so that’s one thing.
The other one is whether you include individuals. Maybe Canadians know this, but others don’t. There’s a large number of singers — Celine Dion, for example, Shania Twain, Avril Lavigne, which are Canadian. And so that’s one of our primary exports. But also comedians, like Mike Myers, for example, Jim Carrey.
COWEN: They’re often not known as such, right? No one . . . Well, not no one, but very few people think of these as being Canadian artists.
NUNN: Yep, that’s exactly right. That’s the point I’m trying to make. There are Canadian products — so let’s call them products — around. We actually often don’t know they’re Canadians just because we fit in pretty well. Even within economics: Ariél Pakes, David Card. They are individuals that don’t have a label of Canadian on their forehead, and they just kind of merge in.
So, I haven’t looked at products, but I wouldn’t be surprised if there are more products than the average American could name that are Canadian.
COWEN: Do you think having a Canadian background has, in any way, shaped how you approach economic development?
NUNN: A little bit. I think it does affect how I approach economics. One thing about having the Canadian background, in particular, going through all of my schooling, including grad school, within Canada, is that you’re very removed from the centers of knowledge within US economics, namely Cambridge, where I’m at now. In some ways, that forces you, for better or for worse, to think differently, or think independently relative to what’s going on within the US. I think that helped me during grad school, actually.
The other thing is, when you’re in this pressure cooker of grad school within Cambridge, let’s say, there’s a lot of pressure, so you can’t help but to think about your career, and you can’t help but to think strategically. And I think that often goes against research. You’re less likely to take risks or to do things that are completely different than what’s being done currently. But ideally, we want scientists to do that.
COWEN: Now, your PhD is from the University of Toronto, correct?
NUNN: Yep, that’s right.
COWEN: As you know, it’s actually fairly rare for someone tenured at a top-five school not to have a PhD from another top-five school. Did you feel there were things you needed to extra learn or catch up on because your degree was from Toronto, that you have to compensate for? Or you felt this was an advantage, or it was just fine?
NUNN: There were things I needed to catch up on. The advantage was exactly less pressure. I would have been happy just having a job at any school. That really frees one up to just do what they love in terms of research, rather than do what they think has the higher probability.
In the particular cohorts I was in, I think this has changed for Toronto, so I don’t want to say anything negative about Toronto now. At the time, I think we were a bit behind in terms of applied empirical analysis and, in particular, all the tools that were developed — this was in early 2000s — that were developed recently to deal with causality. To really be strategic and sharp about, and creative about, instruments and RD and all these tricks we use to identify a causal relationship — I felt I was a bit behind in that, actually.
COWEN: But why aren’t there more people like you in equilibrium? You managed to do it. Not to doubt that you are exceptionally talented, but other exceptionally talented people don’t seem to take the path you took. What happened to make your history different?
NUNN: Yeah, so why aren’t there people more like me? I think the reason is, right now, we’re in an equilibrium — although there’s policies which are undergoing, right now, that threaten to change this — where the best talent from all over the world comes to US schools and top-five schools, I’d say, or these certain US schools.
There are lots of other Canadians. There’s great Canadian graduate students, but they tend to not stay in Canada. So they would come for their PhD to the United States — to Harvard, MIT, and other schools.
COWEN: But even within the US, you won’t find many people at top-five schools with PhDs from UCLA, for instance, or Brown, which are very good schools with some fantastic researchers. But the top students just don’t want to go there. Was there some breakdown in the mechanism for spotting your talent, and we ended up lucky that you were slotted somewhere different, got a different perspective? Why is there so much concentration?
NUNN: Yeah, that’s a good question, and I don’t know the answer to that, actually. If there’s more concentration than in other fields — I think there is, actually. Talking to people in other fields, economics is extremely hierarchical. The difference between the first and the fifth is huge. In other fields, it’s more horizontal, and you would just go to different schools based on maybe focuses.
One could think about expectations being important, that perceptions about the students that would go to a school that’s outside of the top 10, for example, and maybe advisers being less likely to write really strong letters or to get behind an individual just because of perceptions about how vertically structured the discipline is.
One other thing possibly, too, which is related to that — I think, really, in grad school you overestimate, as a student, the differences between schools with different rankings. Once you are at the stage I am at, you realize there’s amazing research at all different types of schools, so this vertical difference that we have in our minds as graduate students isn’t really there and so clean and so strong.
I haven’t answered your question. [laughs] I don’t know why there’s more mobility, but maybe it is related to your GRE question or the fact that tuitions are so high in the US, but I don’t have a strong sense.
COWEN: Gender roles — what is the mechanism tying the use of the former traditional plough in earlier societies to low female labor-force participation today?
NUNN: That mechanism is basically — if we look at agriculture historically, some societies used an implement called a plough, and others used a hoe or a digging stick or other implements. The plough is great. You can turn over a lot of soil, and that kills weeds, aerates the soil, prepares it for planting. You can do that very quickly, but it requires a lot of upper body strength to control the plough or to pull an animal that uses the plough.
So what you see, because there are biological differences between men and women, that that difference — even though it doesn’t mean that women can’t use the plough — caused men to specialize in agriculture and women to specialize in home production. Where you have hoe agriculture, there was more mixing.
And so, what the data that we’ve looked at seemed to indicate is that generated norms, that it’s just natural for men to work outside the home and women to work inside the home. This is over hundreds or thousands of years. Then you have industrialization, and those same norms are applied to factories or to service jobs. That’s the link, basically, to female labor-force participation today and using the plough thousands of years ago.
COWEN: But if I look, say, at Russia or the Nordic countries, they’ve had a long history of the plough and now very high levels of female labor-force participation, right? Doesn’t that mean it’s not very persistent? Or even the United States.
NUNN: Yep, that’s exactly right. So it’s coming back to, well, how much of this is this going to explain? And are there other factors? If you go far enough north, there’s going to be less plough use. That’s one thing to keep in mind, but I think the other one is, well, there’s something else that’s been changing, which is we’ve had increased gender equality, which is, in my view, due to economic development and then women being pulled out of the home, right?
In over the last 50 years, there’s been this dramatic increase in female labor-force participation within the United States, within Europe. But if you actually look at the data, even now, the level of female labor-force participation rates, which is 60 percent, 70 percent — that’s actually much lower than African countries, which are much more poor, for example.
So part of the answer to that question is, we really overestimate the amount of gender equality in Western societies. We think, of course, “We’re developed, we’re great. We must be great on all these dimensions. We’ve made so much progress since World War II.” But I think that’s overestimating just how great we are. Once you account for these things like income, then why we’re not better than we should be, I think, is explained by the plough.
COWEN: Being a former communist country in Eastern Europe seems to explain female labor-force participation very well in those countries. They tie almost uniformly.
COWEN: In your worldview, is that something we should expect to persist, or is that a temporary aberration, and now they’re going to return to their older, plough-based histories?
NUNN: No, I would expect it to persist, and there is some work. Pamela Campa has a paper in the Review of Economics and Statistics that shows persistence at least up until the contemporary period, so I would expect it to persist, actually.
One thing about that — in this form of persistence, which is — one would have to look at — but a plausible story is, once you have women participating in manufacturing, low-end manufacturing, for example, or light manufacturing, then you develop a comparative advantage in that. Then the norms affect your comparative advantage, and so the supply of women working affects the demand because that’s what you’re good at; that’s what you export. And then that affects the supply.
So there’s an equilibrium where women work and you specialize in female-friendly products, and another equilibrium where women don’t work and you specialize in other products which are less female friendly. And so, one would be, for example, Eastern Europe, and the other one could be Saudi Arabia, for example.
COWEN: You’ve written a very famous paper showing that a society or a country skill at contract enforcement helps explain a good deal of the patterns of its trade. Within your framework, how would you explain the last 30 years of China? Do you see it as fitting your hypothesis? An exception? How good is China at contract enforcement, and indeed, how good are they at trade?
NUNN: They’re very good at trade. I could look at China — that would be super interesting to go back and look at China. There’s two things. One is, if you thought that the contracting environment in China was not good, which is not a given — just because you have an autocratic regime doesn’t mean that you have mechanisms for dispute resolution, and you’re able to enforce contracts, and that things are dependable and reliable.
But let’s say that China isn’t as good as other countries, Western countries, at contract enforcement. It’s not as dependable. What you would expect, then, is for China to specialize in goods that are not contract intensive. There’re still specializing in manufacturing, so that analysis was only looking at manufacturing, but they’re going to be producing lower-end products.
That’s actually not inconsistent with what they’ve specialized in historically. which is manufacturers, but lower-end manufacturers. That would be my best guess, at this point, at that issue.
COWEN: If I think of Singapore as a paradigmatic example of what your theory would explain, should we expect skill at contract enforcement to actually explain FDI [foreign direct investment] patterns more strongly than trade? Because trade — at some point you can just take the goods, right? And you have the stuff, and you can forget about the contract.
Whereas when you do foreign direct investment, you’re always at the mercy of the other country. Singapore has amazing contract enforcement. They even export it as a service widely, and FDI in Singapore is remarkably high. So should contract enforcement explain FDI better than trade?
NUNN: Yeah, it might. Yeah, I think FDI — we have less data. The data is less precise. Trade countries around the world — they’re charging tariffs on these products, so you have imports very precisely documented. FDI — I think that’s not the case.
COWEN: So we broadly know where it goes.
COWEN: They’re not huge mysteries, even if we don’t have exact numbers.
NUNN: Yeah. And then, the one thing that one needs to know or keep in mind — the research I was doing was about the composition of trade or the composition of FDI. So we’d want to know FDI that produces which types of products. But otherwise, I agree completely that the pattern of FDI or where a foreign investment is and in which industries, in which countries, should also be predicted by the ability of a country to enforce contracts.
COWEN: What did you learn about development that was unusual, living for six months in South Korea?
NUNN: That’s a good question.
COWEN: Obvious lessons, but above and beyond those, what really struck you?
NUNN: I think the importance of culture, actually, living in South Korea. The culture in South Korea is very different. Obviously, South Korea is a dramatic success story, and I think a lot of that has to do with what South Koreans viewed as important: education, working hard, allegiance to the company. Those things are all hugely important.
I have a lot of very close friends in South Korea. Until recently, they would never take vacations. You would get vacation, but it would be very shameful or against the norms if you actually took them. Same with Saturdays — you would always work on Saturdays.
And then the drive for education was amazing. There’s a saying in Korea — I might not get it exactly right, but “If a high school student sleeps five hours a night, they’ll fail.” They need to work so hard, they’re only sleeping four hours a night. And I think these are all just motivations. They’ve internally motivated their norms, their values.
So South Korea has these values of individual achievement, but then overlaid with values of collectivism, like wanting to have individual success go towards the greater good, which was the success of the country. And so that, I think, again, coming from an individualistic background, was eye-opening to me.
COWEN: But why was South Korea then so poor for so long? Maybe it was somewhat well off under Joseon Dynasty, but if you look at 1960, 1900, 1800, as far as I know — we don’t have good data, but it had a reputation for being a place of extreme poverty, right?
NUNN: Yeah, but it did have all of these kingdoms, historically, which makes it similar to — in terms of its history of state formation — to Japan or to China and more similar to that. It was geographically a terrible place, sandwiched between China and Japan, but it was able to survive, actually. So that’s actually a testament to the Korean society.
And if you look at things like architecture, food, academics, I think Korea has always been extremely sophisticated. There were periods of colonization, and I have to go back and look at the data of Korea from the early 20th century or 19th century, but that explains a lot of it, I would guess. I would say there are these latent characteristics that aren’t reflected in per capita income, which are important for subsequent development.
COWEN: But doesn’t this get us back to some problems with the persistence idea? Korea, like most places, has multiple pasts. It has a past of extreme poverty, a past of extreme sophistication. You can always pick out one or the other path and explain, through persistence, a present. You could pick out the past of extreme poverty and explain North Korea as a persistence of that. But ideally, you want to know if there’s persistence on net in the whole dataset, and then you’ve got to line up all the pasts.
But the Jeff Sachs point that we’re just not very good at predicting which countries will do well next — shouldn’t that just make us outright skeptical about persistence? If you go back to 1960, who predicted then which countries would do well? Even knowing ex post which ones did well, it’s very hard to find measures that will predict that, even knowing the winners.
NUNN: I think one important thing here is thinking about levels or growth rates. Jeffrey Sachs’s statement, it sounds like, is about growth rates. We can’t predict which is going to be the next country that’s going to grow successfully over the next 10 years, though I don’t know if that’s true, but let’s say that that’s true.
If you had money, I’m sure you would bet on certain countries having a higher level of income over 10 years from now than others. I think we have a pretty good sense of which countries will have higher levels of income.
So the persistence isn’t about growth rates. I don’t know of any actual studies that look at growth rates in the past and growth rates today because you’re going to have convergence and all these sorts of things. But it’s about levels. The way you think of it in the Solow model, it’s underlying characteristics which are going to change the steady-state level of per capita income in different societies.
Hopefully that makes sense. I think we can predict which society is going to have higher levels of per capita income 20 years from now.
COWEN: Last question. This is a quotation from you. I’ll read it off. “I’ve done a lot of different jobs, working at a range of places, including automotive stores (stock boy), newspaper (editor/photographer), freight company (laborer), paint factory (filled paint and made paint), ski hill (worked in the office), book publisher (laborer), and private tutoring.” How has that shaped your worldview? Not everyone who teaches at Harvard has that background, right?
NUNN: [laughs] Yeah, yeah. I think I shaped my worldview in terms of opportunity, thinking about opportunity, thinking about policies that affect mobility, thinking about policies that affect inequality. And the reason is, I have experience growing up in a family that was definitely lower income or very low income and having some insight into what that does to you psychologically, how difficult it is to get out of that environment.
And I was extremely lucky growing up in a country like Canada, where, actually, there were many pathways for a family that’s very low income.
After moving to the US, it’s very clear, there are many fewer pathways. And if you grew up in upper-middle-class, upper-class family, that’s something that you just don’t realize, just how hard it is for an individual that’s at the lowest rung of the ladder within the US to move up. You basically can’t make any mistakes. So I think that’s one thing that my history has taught me.
COWEN: Nathan Nunn, thank you very much. It’s been a pleasure chatting.
NUNN: Great. Thank you. Great to talk with you.