Jeffrey Sachs: evaluation

Transcript context

…Here’s the tension I’m trying to figure out. It relates to a number of issues in your thought. You’ve written some very interesting pieces lately about how the role of institutions is overrated in predicting growth, but institutions seem to play a key role in making the resource theory stick. As you say, Norway has done fine. The US in earlier times did fine with a lot of natural resources. Does thinking about resources lead you back to seeing institutions as important in some new and different way or are you still basically skeptical about institutions mattering at all and wanting to look most of all to geography? Do you see what I’m getting at? Of course, but again, I’ll say it repeatedly, I’ve never said institutions don’t matter. I’ve said institutions aren’t the only thing. I find often that people take an idea and carry it to an extreme. It’s not surprising that different things matter at different times and different places. Of course, institutions make a difference. The art of good economics, in my view, is trying to figure out what’s important, where, when, and in which context. Here’s a claim you’ve made. It’s very striking. It’s one of the most important claims in development economics. Personally, I think it’s true. When you reviewed Acemoglu and Robinson, you said, “If we go to the year 1960, even knowing who the winners and losers have been, much less forget about forecasting, it’s very hard to come up with a metric of institutions that predicts which countries end up doing well and which countries end up doing poorly.” When I read that, I tend to think somehow we’re mismeasuring institutional quality. We really need a better measure of institutions, which we don’t have yet. Institutions will someday matter again, but I’m looking for this in vain. Where does your thought stand on this now? Do you actually think there’s some deeper understanding of institutions that will rescue this proposition? When you throw out North Korea and some other crazy countries, institutions don’t really have the predictive power for growth. What are your thoughts on this, given that in the across-country regressions, they can do so poorly within the set of semireasonable countries?…

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