Charter Cities Podcast Episode 17: Historical Events and Economic Development with Nathan Nunn
There is a growing body of empirical evidence that points toward the important, long-term effects that historic events can have on economic development, and today’s guest, Dr. Nathan Nunn, is a major player in this area of research. Dr. Nunn is a Professor of Economics at Harvard University, and his research ranges across development economics, political economy, economic history, and other areas, especially focusing on the long-term impact of historical processes on economic development today, often mediated through factors like culture, social structures, norms, and institutions. In this episode, Dr. Nunn shares his views on Canada’s response to COVID, his critique of foreign aid tied to the strategic interests of the donor country, and shares the case for unconditional cash transfers or universal basic income instead of foreign aid. He explains the link between food aid and civil conflict, the benefits of industrial policy, and his thoughts on a devolution of authority, as well as urbanization in Africa, the correlation between the slave trade and mistrust in Africa, and the effect of corruption on culture. Dr. Nunn also takes a deep-dive into group level selection and competition, the long-term impacts of mining versus plantation farming in Africa, and why he believes that it’s impossible to understand development without history, and he also includes some suggested reading for grad students outside of economics. Tune in today to find out more!
Transcript (edited for clarity):
Mark: Hello and welcome to the Charter Cities Podcast. I’m your host, Mark Lutter, the Founder and Executive Director of the Charter Cities Institute. On the Charter Cities Podcast, we illuminate the various aspects of building a charter city, from governance to urban planning, politics to finance, we hope listeners to The Charter Cities Podcast will come away with a deep understanding of charter cities, as well as the steps necessary to build them.
You can subscribe and learn more about charter cities at chartercitiesinstitute.org, follow us on social media, @CCIdotCity on Twitter and Charter Cities Institute on Facebook. Thank you for listening.
Kurtis: Hi, I’m Kurtis Lockhart, Head of Research at the Charter Cities Institute. Our guest for today is Nathan Nunn. Nathan is a Professor of Economics at Harvard University. His research ranges across development economics, political economy, economic history, and other areas, and especially focuses on the long-term impact of historical processes on economic development today, often mediated through factors like culture, social structures, norms, and institutions.
Hi Nathan. Thanks so much for joining me today.
Nathan: Thanks. It's my pleasure and it's great to be here.
Kurtis: I wanted to start by putting it up to you, going over what projects you're currently working on today. What's taking up most of your time these days, other than pervasive anxiety over the general state of the world?
Nathan: A number of projects. One that I’ve just finished is actually a review article called “History as Evolution.” It's a bit of a summary. It's for the Handbook of Historical Economics and it's a bit of a summary of the recent work within economics that takes a historical perspective, and specifically an evolutionary perspective, to help understand economic development today and differences across societies today.
That drew a lot from evolutionary anthropology and thinking about how that field has influenced economic history. That's one of the things, although there's a number of other projects which are more primary research. Just one that I’ll mention, because it’s a bit different from what I normally do, it's looking at the Tulsa Massacre of 1921. Next year will be the 100-year anniversary of the massacre. That study just tries to understand what are the dynamic consequences of the massacre on African-Americans, and uses census data, and traces out the consequences of the massacre, in terms of economic consequences.
Then we're hoping to push that forward until today and look at the social consequences as well. That's a work in progress. Looking at US history is a bit different from what I normally do. That's fun.
Kurtis: I thought first, because this is the first time that we have two Canadians on the podcast, as both host and guest that we'd start there. First and foremost, happy belated Canadian Thanksgiving.
Nathan: Thank you.
Kurtis: A big through line in your research is obviously, history matters for contemporary economic outcomes. I wonder if you've applied this framework to the question of why Canada's COVID response has been much better than the US response? What is it historically about Canadians and Canada that allowed us to meet this moment relatively better than our neighbors to the South? What's the Nathan Nunn framing of this?
Nathan: The most proximate answer is, and I think along the lines that you're thinking, culturally and politically, Canadians and Americans are very different. Having grown up in Canada, you know that, as Canadians, we recognize a lot of differences between Canadian culture and Canadians and Americans. I think those can be seen also in the COVID response.
One is more within the United States, more of a distrust of government, or more of a suspicion of government. Again, one would want to look at the data to make sure these things I’m saying off the cuff are true, but that's one sense that one gets. You can see that in the fact that you have socialized healthcare, or universal healthcare, in Canada, but not the United States. And higher taxes in Canada, more government involvement. I think, that's important for something like COVID, in terms of one, is people listening to the government and putting their faith in the government. Then also, the government feeling like people will listen to them. It's their place to coordinate this massive effort in the face of this public health crisis. You see two different paths between Canada and the United States.
One thing is in both countries, things are decentralized. The provincial governments have a lot of, in terms of healthcare, and the states within the United States. In British Columbia, which I’ve been following, there’s Dr. Bonnie Henry, who I believe there's an article about her in the New York Times, actually.
Kurtis: I am aware of Dr. Henry. Been following as well.
Nathan: I don't know if that's just luck. People say that British Columbia has done exceptionally well and it's just really lucky that she's there and she has the experience that she has. I think there's also something about recognizing that there's a role for government to help coordinate these efforts and to play a role, which is super important for something that has these huge externalities. Something like this, where people just really have to contribute even though it might not be in their material interest, narrowly defined. They have to contribute to the greater good.
Kurtis: Somewhat continuing with the Canadian line of questioning. In a Canadian journal last year, you wrote this big picture, bird's eye view article on rethinking development as it's currently practiced in both the development policy world, and the academic world. I thought it was a fantastic discussion of international development.
First, foreign aid. I think rightfully, take it a bit to task. One of the critiques mentioned is that foreign aid is oftentimes tied to strategic interests of the donor country, and this isn't good. Playing devil's advocate a bit, why is this bad per se? It’s the donor country's money, they’re giving it away. Shouldn't they be able to place some restrictions on it, like a lot of loans or grants do?
Nathan: If I answer that question literally, shouldn't they be allowed to do that? Then of course, yeah, they should be allowed to do that, but we shouldn't think that this is some charitable act and that the motive is to only improve economic development in the foreign country. As soon as you're tying concessional loans or grants to exports from my country, that's more like export promotion, right? That's a way of having my products sold overseas and you see this with food aid, for example, in the United States.
It's totally fine. The country's agreeing to accept that aid or accept those concessional loans. It's not bad in that sense. If we think that is going to be the key to economic development, or that's what's really going to lift countries out of poverty, then I think there's questions surrounding that. That's how I would think of it. You could think about well, maybe if we don't do that, maybe that will actually help. If we're giving aid, we give it with no strings attached. We don't give it in kind, so we don't ship US wheat overseas to the country, but instead, we give them cash.
Those are I think the things that we should be thinking about. People should be aware in terms of foreign aid, exactly what it is, and what do we mean when we say foreign aid, and how much of it is tied, and those types of issues. How much of it is military aid, for example? Which is very different than economic aid.
Kurtis: You mentioned giving cash. Speaking of giving cash, you did mention some beneficial parts, or sub-components of foreign aid, one of which is unconditional cash transfers. There's been a few studies. One is the Haushofer and Shapiro study in Kenya with GiveDirectly. Then more recently, there's a working paper by Banerjee and some co-authors that found that receiving a UBI, Universal Basic Income, during COVID lockdowns in Kenya, helped individuals cope with the shock.
Are you most bullish on this particular component of aid, the potential of UBI, your unconditional cash transfers and why or why not?
Nathan: I would say yes. I think there's a lot of research that needs to be done still and it's being done. You mentioned the paper by Johannes Haushofer and co-authors. He's on a few papers, which are trying to evaluate the programs that give directly. There's a few things to like about it. One is just that the overhead is extremely low. I think you can go on their website and you find it's a few percentage points. That's the amount. If you gave a $100, how much is going to go to administrative costs, and is not going to reach the recipients? For other forms of aid, I think it's much, much, much higher. That's one good thing, just based on efficiency.
Then the other thing is well, that allows people the most choice. If we're shipping products to them, for one thing, that's not very efficient, which I mentioned. Then also, they don't have a lot of options. They can receive those products or not. With unconditional cash transfer, or universal basic income, then you have the money and you can do a lot with it and use it to buy many different products, or to invest it, or lend it, or whatever.
I think the simplicity, the low costs, the flexibility, those are reasons to think that this could have benefits and maybe be the best strategy relative to all forms of giving that are out there.
Kurtis: Keeping on the subject of aid, another critique on top of the tied stuff we've already talked about is that it can actually increase conflict, I think you mentioned a bit. This is especially true pre-end of the Cold War. Having said this, does it worry you that it seems a lot of the world's big aid givers are moving more towards tied-in with foreign policy goals, or somewhat repeating this Cold War dynamic with the rise of China? DFID merging with the British Foreign Office last month, you have the US's newly established Development Finance Corporation. Then on the other side, you have China's massive aid development aid in Belt and Road.
What about this dynamic worries you when it comes to the effectiveness of foreign aid?
Nathan: I don't know. You nicely described the issues and the concerns, but I don't know of much evidence about if the aid's going to be less effective, or even more dangerous when it's tied to politics in the way you describe. One thing I’ll mention which is I do have a paper that looks at food aid, US food aid, specifically wheat aid, and then looks at the effects of that, and you see that it does increase conflict. Then towards the end of the paper, we actually break it down by during the Cold War, after the Cold War. You find the effects are similar.
Also, we looked at the recipient and do they seem to be aligned with the United States? The effects are similar as well. Their political alignment, or the broader political structure globally, didn't seem to matter in terms of how detrimental foreign aid was for conflict, or how much it increased conflict. According to that, that's a tiny bit of evidence and very indirect, then these things might not matter.
I would think that aid in general is almost always strategic and there's a political dimension, but I think it's a completely open question.
Kurtis: After the critiques, you look at a few alternatives to aid. One is industrial policy and you conclude that industrial policy isn't really a universal model, because it's necessarily zero-sum. Not everyone can be a South Korea. Given this position, what are your thoughts on – he is now the former chief economist of the World Bank, Justin Lin. Justin Lin was pretty successful in pushing to bring industrial policy back onto the World Bank's agenda. What are your thoughts on that?
Nathan: In that article, I didn't have a lot of time. You could imagine writing 50 pages on industrial policy. My views are probably more optimistic than what I focused on, which is the fact that a big chunk of industrial policy and tariffs is zero-sum, so that consumers are going to consume domestic products rather than imports, and there might be some learning by doing and that thing. It comes at a cost in terms of your trade partners.
I think there's actually a lot of reasons, or a lot of benefits to industrial policy, which are not zero-sum. For example, learning by doing, effectively if industrial policy is successful at inducing learning by doing, then producers are going to become more productive. That's an efficiency gain. It does mean that they out-compete others, so that's zero-sum, but there's a lot of it that's actually non-zero sum.
Then the other thing is if you think of that there are externalities in the world, which I believe, production externalities and things like poverty traps, then industrial policy can help alleviate those issues. Just to take the poverty trap example, a temporary industrial policy could move a society from low-income, high-poverty equilibrium to a high-income, low-poverty equilibrium. If that can occur, that's just a pure gain, or a pure efficiency gain. It's not purely zero-sum. Those are open questions, is whether part of industrial policy is non-zero-sum for those. I think there's a little bit of research that's starting to occur to try and understand the effects of industrial policies, but I think we need much, much more.
Just as an example, actually, I think it's a neat paper by a scholar named Matti Mitrunen, which he looked at the industrial policy of Finland after World War II, where Finland had to produce certain products for the Soviet Union. They were forced to do this. It's effectively an externally imposed industrial policy, where there's forced production.
What happens is with this forced production of manufacturers, then what he finds is factors respond endogenously and specifically, education. Now there are higher incentives to accumulate human capital, the next generation goes to school, and that's good for economic development. That might be another example of just a pure efficiency gain because the policy induces human capital accumulation.
Kurtis: I want to discuss one more alternative to aid that you looked at, which is reducing restrictions on the free movement of labor, which you and then other studies suggest would have a huge impact on incomes larger than any aid, or one-off policy intervention. Michael Clemens at the Center for Global Development, and Lant Pritchett, look at this as well.
My question here is that removing labor restrictions, or open immigration, doesn't really strike me as the most politically feasible thing right now. I think you touch upon this in the paper. My thing is couldn't – well, I’m from this institution, so I’m a little biased – but couldn't charter cities make reforms, or you could just call it significant devolution to the city level, be a plan B to open immigration that's a little more politically feasible?
I’m thinking of for example, Shenzhen, where the first actual markets were allowed to form in China in the 1980s, land markets, FDI, labor markets, and people then moved to the city pretty much en masse for decades. They're significantly better off than the population in general. This obviously isn't the free international labor mobility you and Clemens and others call for, but can it be considered as a second-best option given the political constraints to immigration right now?
Nathan: Possibly. I just want to make sure I understand. Are you referring to Paul Romer's charter cities, or something slightly different?
Kurtis: Something slightly different. For all intents and purposes, we could for this question, think of charter seas as just significant devolution of authorities to the local level, which is what Shenzhen and other city-states got.
Nathan: Yeah, so that's super interesting, actually. I guess, a few things. One is, are those two things substitutes? Because part of the benefits of the devolution of authority to cities is then cities can compete with one another, and then the best practices can survive and then be adopted and that sort of thing. I guess, one question is, is part of the competition also competing for people? You mentioned then a lot of people then move to these successful cities. That's a movement within a country, but it seems like, for these charter cities, that's also important, is the movement in general.
Then just one other thing is – which I don't know. I’m sure you're much more of the expert, is how politically feasible are these? A national government, are they willing to basically relinquish control, or authority in a city, or in these smaller regions? I don't know how.
That also sounds like it might not be super feasible politically, but I don't know enough about it.
Kurtis: I would say that just thinking about an analogous concept in special economic zones, SEZs, which we see charter cities as SEZs on steroids a bit. There are over 5,000 SEZs operating around the globe. There has been a demonstrated appetite by governments to do this sort of thing. I guess, just not with the scope and breadth of devolved authority that we think would be.
Nathan: I could see there's definitely, between these special economic zones and charter cities, there is a bit of a difference that makes the former much more appealing politically. One thing I’ll say though, is there's a lot to like about having these smaller units have autonomy so that they can try different policies, or try different strategies.
I think, I mentioned before, externalities. Dani Rodrik has written about this, is when a firm, or a government tries something and fails, there's huge externalities to others and positive externalities, because a lot is learned, and so you learn actually what you're not good at, what are the mistakes, what are the pitfalls. Similarly, when you succeed, there's huge externalities. That’s one thing I like about the idea of having smaller units have some independence over policy and they're able to try things.
Then the other thing too is often, local context really, really, really matters. The central national government, or foreign academics in DC, or the World Bank in DC, or NGOs, really don't have the same knowledge about the local context. That's another thing to like about that strategy. I definitely agree that there's a possibility that that would be effective.
Kurtis: Carrying on the labor mobility point, it ties into a common theme in your work that persistence is transmitted through the people, the societies, not so much the places. Having said this, if we look at the US and trace some migrant groups, most studies suggest that Nigerians are among the most successful immigrant populations in the US.
How do you explain this with your framework? Is there something in Nigeria’s history that helps explain their relative success when transplanted as migrants?
Nathan: That's interesting. Yeah, I didn't know that factor. I haven't looked at different groups of immigrants in the US and which ones are the most successful. It doesn't surprise me, because there are a lot of groups within Nigeria that are extremely entrepreneurial. The Igbo in south eastern Nigeria would be one group that comes to mind. It completely doesn't surprise me.
In terms of why, that's a tougher question. Yeah, so I think that's a tougher question. I think Nigeria is massive and it's very diverse. You have groups like the Hausa in the north, which are Muslim. They, historically, I believe, have a higher level of education. Exactly, why Nigeria and not Ghana, for example, in terms of economic success in the United States. I don't have a clear explanation.
Kurtis: One thing Mark, CCI's Executive Director, likes to joke about at our office is that new cities or agglomerations typically come about from three things; one is you can have a government declare a new capital city, you can have an economic rationale, or you can start a religion. In Salt Lake City, there's Massachusetts and the pilgrims, Israel, and other places.
Obviously, the most common is an economic rationale. It strikes me that in large parts of Africa, where the slave trade was most intense, this economic rationale wasn't really at play. Many agglomerations formed in places that were actively uneconomical in order to avoid the slave trade. You discuss this in your ruggedness paper.
How do you think this has affected the structure of current African cities? What are the implications given the rapid urbanization happening across Africa?
Nathan: I know in the data that we've looked at in the past that, this isn't about cities, but where people live that those effects that you're talking about have persisted, that in Africa more than any other continent, people tend to live in more rugged places. Within their region, they're more likely to live in the most rugged places. Yeah, so those persist. I think, the issue of urbanization might actually be orthogonal to those issues.
A lot of the urbanization has been very recent and pretty rapid. Then, so one question is what –
Kurtis: The path dependence to urbanization, right? They settle in these rugged places and that snowballs, and cities form in these not economically optimal locations?
Nathan: Yeah. I guess, I would want to look at the data and see is that the case that’s – yeah, the location of cities in particular tend to be sub-optimal. Then another model, or another story, is during the slave trade populations were spread out, because they were trying to escape the slave trade. Over time with the rise of cities, then populations have been moving away from these places, which are more rugged, or more remote, and moving to city centers.
What you're describing is cities were located in these places that weren't very economically advantageous and, through agglomeration and path dependence, that that's continued. I’m not sure. I haven't looked at cities specifically, to see which of those two stories that I just described is true. It is something I’ve thought about, is why is urbanization rates seem to be pretty high in Africa, particularly relative to the income levels.
Why is that? Is it insecurity? There's a lot of conflict within Africa. Is that part of it? Or are there other explanations as well?
Kurtis: Picking up on this urbanization question, historically, you alluded to this. It has been accompanied with a bunch of these other things that are supposed to be associated with economic development; higher incomes, you mentioned industrialization, non-agriculture jobs, but these things they seem not to be associated much with African urbanization. Dani Rodrik writes about this with premature de-industrialization.
Why isn't Africa seeing the same improvements that have historically come with urbanization in other places, do you think?
Nathan: That's the big question. I think, some of what Dani Rodrik’s written is about lack of manufacturing, but then the question is well, why is that? Yes, I think that's basically, given that so much of growth, particularly early on, comes from urbanization, or from urban areas, including the rise of manufacturing. I think, that's really a question that's part of a bigger question about why is Africa so much less developed than any other region in the world?
There's been a lot of research done on this. I know this was a big puzzle when I was in grad school. I think, one part of the puzzle is the particular history of Africa, and colonial rule was particularly extractive, even though it was relatively short. Also, Africa experienced the slave trade, was another form of external extraction. I think both of these had detrimental impacts on long-run institutions, on governance today, and explain, at least empirically, seem to explain a big chunk of Africa’s underdevelopment. I’m sure there's many different channels.
I think the answer to that question is really what provides insights into why is urbanization and success from urbanization different in Africa, relative to the rest of the world?
Kurtis: On that note, you mentioned the slave trade. Turning to one of your more famous papers with co-author Leonard Wantchekon, who we're also going to have on the podcast in the next few months, the paper about the slave trade on trust levels in African countries today.
First, what were you and Leonard examining just to lay out the paper and what were your high-level findings?
Nathan: I had a previous paper, which came out in QJE, which looked at the slave trade, which is this massive enslavement of individuals within Africa from about 1400 to 1900 AD. That was correlating the number of people taken from a location, which today is a country, with the level of economic development of the country today. He actually invited me to NYU, where he was at the time. I presented that research there. Then we were talking afterwards and he was really excited about the research agenda.
One thing that he thought was well, in Benin where he was from, he really felt that he could see in reality a correlation between the slave trade and then distrust. Those parts of Benin where the slave trade was more prevalent that people trusted each other less. There are even some idioms, or sayings where rather than saying, “I don't trust this person,” you say, “This person would sell me into slavery.”
It's something that based on his living and growing up in Benin, saw this on the ground. Then, so we basically looked at it in the data by combining ethnicity level information on the number of slaves captured from each ethnic group, and information from the Afrobarometer, which is the average trust levels of different ethnic groups. We found consistent with his conjecture that ethnic groups that had the most slaves taken today have the lowest levels of trust in others. That's even trust of those within the ethnic group and trust of family members and neighbors. Trust of those close to you seems like it was eroded by the slave trade.
Kurtis: I keep bringing this back to cities. Forgive me. I’m interested in it. As I was reading the paper, I was thinking like, “Oh, cool. The correlates of trust are also the correlates of urbanization. Education, income, number of cooperative interactions between people.” This begged the question, and I know there's many pathways here, but do urbanites in African countries have higher levels of trust than rural Africans? Or I guess, put a little differently, is this one reason to be really optimistic about the rapid urbanization rates in Africa right now? Especially the relatively un-urbanized parts of the continent, like East Africa.
Nathan: One could look at the data pretty quickly and see, is that the case? I don't think it is the case, actually. It's hard to know, because education is correlated with urbanization, and so the conditional correlation of urbanization and trust really depends on what other things you're controlling for. Are you controlling for the education of an individual?
I actually looked at that relationship and it's actually not positive, so it's not clear. The reason I looked at it was, I have this other paper which was James Robinson, Sarah Lowes, and Jonathan Weigel, which is about this historical kingdom called the Kuba Kingdom. Much to our surprise, being part of this kingdom was not positively associated with more pro-social behavior. In other words, it's negatively associated with pro-social behavior, and which was surprising to us, because the kingdom was much more prosperous, it was more urban, had all these great things going for it. Yet, we found this relationship.
Then we looked at the Afrobarometer and looked at the relationship between trust and urbanization and also, trust that an individual has and how politically centralized or how politically developed that ethnic group was in the pre-industrial period, or prior to colonialism. It depends on the exact regression, but in lots of those regressions, you find a negative relationship. Trust seems to be lower in places that are more urbanized, or historically are more economically developed.
Like I said, it's tricky, because it's a correlation and the strength of the relationship hinges on whether you control for education, things like that. That was never published, but we were digging into that, in part as response to referee reports on the paper. I think that's an open question, actually. You can think that the correlation is going to be driven by a number of things. If in urban environments, things are a bit more dangerous, it's easier for people to rip you off, then trust could be lower. Then urban environments can have more economic opportunity, so then there's more opportunities for successful interactions that would induce trust to be higher. Then there could be selection of different types of people into urban settings. Yeah, so it's a tricky, tricky question.
Kurtis: Looking at trust today, in the country we're both living in right now, trust – you alluded to this in the first question about COVID. Trust in political leaders, it seems to be a pretty all-time low, especially in the US. I’m thinking, there was a time when FDR, he went on the radio in the middle of a bank run and he told folks to go back to their bank when it opened on Monday and redeposit their money, and people listened to him, like respected him. That seems insane. Now it’s like a completely different world.
Given your research into trust levels and their broader implications and applying that to the US and trust today, what is your best prediction for where the US is headed in the short, medium, long-term? Feel free to be more speculative here, because I know the US isn't your area of research per se.
Nathan: I guess the US could go in different directions and maybe the outcome of the upcoming election and whatever it is, 10 days, 9 days, is going to indicate that a lot, or have an effect on that a lot and provide some indication of how things are going to occur. In terms of trust though in general, I think, I believe in the contact hypothesis. There's other groups in general. You might be inclined to have lower levels of trust with them, but when you interact, then you tend to update positively. There's a lot of work on this. Gautam Rao, who's in my department, has some nice evidence of this that's very causally identified looking at children in India, and so finding evidence of contact hypothesis.
A lot of what could happen in the future, I think has to do with immigration, which is why I’m mentioning this. If the US remains more insular, or parts of the US remain more insular, there's less contact with the outside world, then I think what you'll have is lower levels of trust in general. There's some great work by Ben Enke, which is looking at this. If you think of trust, one way to think of this is, while everyone trusts people close to them, a fair amount; your wife, your neighbors, your family, friends, and then but what seems to be different is, do you trust people that are further away from you? Which is again, why I spoke about immigrants. That's where there's a different slope, and how distant someone is, and then how much trust is lower, and is reduced in distance.
If we think about low trust, really, it's actually having groups which have high trusts in people around them who are close to them, but not people further away from them. Ben has some really nice data, basically showing this. He calls this universal morality, versus group-based morality. The US has a lot of group group-based morality, or group-specific morality. Rural regions, the south for example. It's not that people aren't altruistic, but then they really just focus on helping those and trusting those that are close to them. Those that are more distant, like immigrants, they have less trust and less altruism towards them.
I think immigration has been central in politics recently and it's a part of the issues for this election. I think it really depends on the current election and whether populist rhetoric continues to take hold, which is very group-based, or whether there's a turn in the US. It's more open and globally, which I think can help along these lines.
Kurtis: Do you worry, this is just me responding to what you said about the contact theory, do you worry about the ubiquity or the rapid penetration of cellphones and social media across Africa, how it happened so quickly? Because I’m looking at the impacts of social media on other places where there's data available and it does seem to have an isolating effect, or an insular effect, where it can foster more in-group mentalities, and so that wouldn't bode well for your contact theory to foster trust in Africa?
Do you think about this at all? I know your research is more historical, but I’m curious about your thoughts.
Nathan: It's not something I studied, or thought a lot about. In theory, I guess, the Internet, social media should provide you access to individuals that are further away, or more different, but doesn't mean that that's what happens in reality, I guess. With social media, you might end up forming a community of individuals, which are really, really similar to you. A lot of a positive assertive matching. Yeah, so I think that's possible in terms of an issue. I guess, in the parts of Africa which I’ve been, social media really hasn't taken hold in the same way that it has in the US.
I can see what you're saying in the US for sure. Whether social media is to blame or not is a question, but it seems like now, there's a lot less and people have talked about this, Jon Haidt, for example. There's a lot less diversity in neighborhoods, in terms of political opinions, in terms of social groups, and so there's a lot less discussion, or discourse, or debate, and it's part of the US becoming much, much more polarized. The polarization can be associated with social media. I can see that these are an issue just from everyday life. In the parts of Africa that I’m in, I think it's not near as big of an issue as in the United States. That doesn't mean that that won't be the case in the future. Yeah, interesting questions though.
Kurtis: I have some questions more just about historical economic development research and I guess, economic research more generally here. Another well-known study about cultural norms is the UN parking ticket paper by Fisman and Miguel. What were your takeaways from this paper when it comes to shaping cultural norms, or the impact of laws and culture?
Nathan: Well, I think the big thing about that paper and its main contribution at the time and even today was that it provided evidence for culture. That was an important first step, I think, within the economics literature.
The way it did it was by examining this natural experiment, where you had people from different cultural backgrounds. They're in one setting, one naturally occurring game, if you will, and where the rules of the game are held constant. Then what they show is that well, people behave systematically differently based on their cultural background. People from countries that have a higher rating of corruption –
Kurtis: They did it with exploiting the UN diplomatic community in New York around parking tickets, right?
Nathan: Yeah, exactly. Individuals which were from these countries with higher corruption, they accumulated more unpaid parking tickets. They were all diplomats that were stationed in Manhattan, or were located in Manhattan. In that sense, they're all facing the same decision. They have the same payoffs, because they're all exempt from paying parking tickets, or they don't have to because of diplomatic immunity. Then you find people behave systematically different.
The one thing they had which was interesting, the back of the paper. I think lots of people miss it, but they actually looked at the dynamics of behavior of individuals over time. One thing they found was okay, when somebody first got there, then if you're from Sweden for example, you're going to have less unpaid parking tickets. Then those from a more corrupt country are going to have a higher. Over time, actually, those from a less corrupt country, their behavior converged to those from a more corrupt country. Their background morals were brought over, but over time, it seems like these groups became more homogeneous as incentives took over.
Yeah, I thought it was a very super interesting paper. You can test for culture by bringing lab games to different parts of the world, but this was a really smart, intelligent, natural setting that you could also test for cultural differences.
Kurtis: Paul Samuelson was famously asked to name a proposition in all social science that was both true and non-trivial. He said, comparative advantage. I’m finding myself reading a lot of social science papers and shrugging and being like, “Yeah, that makes sense. That's not too surprising.” I want to ask you the same question. If you had to select a phenomenon, or proposition in development economics, or just generally across your reading, that's both true and non-trivial, what do you think that would be?
Nathan: Yeah, exactly. One thing which I think is likely true and non-trivial and I think the insight hasn't been brought into economics is actually, the notion of group level selection from evolutionary studies or evolutionary anthropology. This is actually related to our discussion about charter cities. This is arguably one of the benefits is that when you have groups which are competing against one another, you can have, in equilibrium, traits, or actions, which are not individually beneficial, but are socially beneficial.
In other words, people being extremely cooperative, people helping each other out, even though it comes at a cost to them.
Kurtis: Like locking down during a pandemic.
Nathan: Yup, exactly. The interesting thing is, what is group level competition, which induces group level selection? Things like warfare, is an example historically, of group level competition. Certain states fighting other states, or certain villages fighting other villages. Population pressures, so that there's scarcity of resources and there's competition in that way. This thing that we think of is typically not a great thing, or not a great outcome and it's true, it's not a great outcome for welfare, actually, has these benefits, because it causes groups to compete against other groups. Then that induces traits or behaviors which are beneficial for the group.
I think that's one thing, which is actually outside of economics. It's in evolutionary biology, or evolutionary anthropology. It's pretty standard insight. Within economics and economic history, it's not recognized. It does provide a particular framework, or a way of understanding research, like Charles Tilley, or people who hypothesize that the rise of Europe was because of all the conflict that there was within Europe and that might have had to do with its geography. It's almost like a survival of the fittest.
Kurtis: I think he said, states make war and war makes states, right?
Nathan: Yeah, exactly. There, it's like, while the trait is actually better governance, better states, states that could survive. Yeah, so I think that would be one example that's probably true and it's not, like comparative advantage, is not immediately obvious.
Kurtis: I like it. You didn't take that long for that one. I’m genuinely impressed. I’m told from the story I read of Paul Samuelson, he took a long time to answer.
Nathan: Oh, okay. I didn't know that was an option. I could come back to you tomorrow.
Kurtis: I wanted to ask you about a couple co-authors and colleagues of yours. Again, you wrote that famous paper on the slave trade and mistrust in Africa with Leonard. Leonard is as I said, he's coming on the podcast in the next few months. I wanted to ask you, what should I ask Leonard?
Nathan: I would ask him if he's willing to talk about his history, to tell his story about how he got from Benin to now, he's a tenured professor at Princeton, actually. It's an amazing story. He was a political refugee, hid out for a while, and then was a refugee in Canada, did his research very quickly. I think his PhD was done in a number of years. It's a pretty remarkable story. He's a really amazing person as well.
The other thing is, ask him about the African School of Economics. He's very passionate about that, and it's an amazing endeavor, and he's an extremely ambitious guy who wants to give back to the continent. If it was me, I’d be wanting to hear all those stories.
Kurtis: The ASC isn't just in Benin anymore, right? It's in multiple countries now. I believe he has multiple campuses.
Nathan: Yeah. I spoke with him a few weeks ago. I didn't get the full details, but yeah, that's the plan actually, is to have these other campuses and courses offered and it goes four or five different places around Africa. Yeah, it's very impressive. Students have been graduating and getting serious jobs. I think it's really going to increase diversity within the economic discipline, which is fantastic. It's going to increase the number of people doing development, but also, working in other fields that are from Africa, which is hugely important, because I think actually, knowing something about these regions that we're studying is hugely important. People who are born and raised there are for sure, in the best position to know. It's just really amazing.
Kurtis: Another colleague of yours is Melissa Dell. Obviously, you both care about history. She's got these two great papers. She's got many great papers, but these two in particular, one of the famous one of the long run impacts of the Mita, the forced labor mines in Peru. One on the effects of Dutch colonial sugar plantations in Java. Just a brief summary of the paper, so you don't have to, she comes to two different conclusions in the paper. In Peru, those areas in the Mita, forced labor system are poorer and less well-educated today. Whereas in Java, the areas with sugar plantations are actually more prosperous today.
She pretty much says that she thinks the reason for this disparity, this difference, has to do with the underlying industrial structure of mining versus sugar. Mining was just purely extractive, where sugar required local processing and linkages and infrastructure. My question is, do you think this same story plays out in various places in Africa? There's mining, there's plantation farming. Has a similar story played out?
Nathan: Yeah. I guess, a similar story in the sense that the answer is not always straightforward and not always obvious. I think, in the literature, a lot of people have toyed around with the question, was colonialism good or bad for Africa? That's a little bit in the spirit of the research that she's doing. I think her research is showing that, just exactly as you described, that while it depends on exactly the types of activities, which were implemented, or were undertaken.
I think the same thing is the case within Africa. The other thing I would say is, I think it's probably the case that the same activities in different countries might have different effects as well, or the same activities undertaken by different colonizers, or different foreign entities, could have different effects as well. That's one of the lessons, which I take from her body of research. Each paper does a really good job of saying, what's the effect of this historical episode I’m looking at? She always nails it.
Then, taken as a whole, one thing I think is nice is an overly simplistic story does not emerge. Within Africa, for example, diamond mining would be an example. The same endowment, the same type of mining, I would imagine it's going to have very different effects in Sierra Leone versus South Africa. Just because the underlying institutions are different, the amount of law and order, these sorts of things. I think for lots of these things, the point is there's just a huge amount of heterogeneity that depends on a lot of the underlying context. All our regressions, we always assume that the coefficients aren't indexed by anything. Beta is just beta.
I think in reality, for lots of these things, it depends, in really important ways, on the details of a particular setting. I’m sure that's the case for Africa, which is a huge continent and has a lot of heterogeneity within it.
Kurtis: Looking at your research, how do you choose what you work on? Because it struck me as I was reading through your work, you did the history stuff. Okay, yes. History matters. History matters. Then you write about contracts, and then you write about food aid, and foreign aid, which we talked about. You've written about fair trade and tariffs and gender and missionaries.
Is there any order, or logic for what you select to tackle next? Or is it just more ad hoc and chaos? Give us a little – what’s the deal?
Nathan: Yeah, it's not too structured. I think the one thing I’m interested in is understanding the world around me. I guess, what questions I ask are influenced by just what questions come to mind. Early on, it was a lot of questions about economic development. That led me to think about Africa and why is Africa different. We talked about that fact. That led me to then think about history, because it just seemed clear to me that current development can be explained almost trivially by what happened the last 10, 20 years, which then that is a function of what happened 10 or 20 years earlier, and you can keep doing that and going back in time.
I think it's impossible to understand development today without history. Just lots of fair trade, food aid, these were just issues that are related to development, which I was interested in. Then the one thing I’ll say is actually now in this theme, about wanting to understand the world in general, now that I’ve lived in the US for 15 years, I find myself really drawn to thinking about why is the US the way it is. Lots of the questions that you posed earlier are things that I’m now thinking about toying around with data. The paper on the Tulsa Massacre is along those lines and just came out of my wanting to understand what explains the way the US is today.
I think, similar to Africa, history plays a big role. America has a particularly unique history and I think that explains a lot of it. Yeah, the short answer is just curiosity about what's going on around me.
Kurtis: You seem to encourage development economists to zoom out a bit from the overwhelming focus on RCTs and see that there's some other methods and disciplines that can also contribute to answering these very important questions. You obviously go deep into the historical literature and archives that we've talked about, but have also talked about anthropological, psychological, sociological literatures.
I wonder if you could talk about a few anthropologists, or sociologists, what have you that have been impactful, or informed your work and how?
Nathan: Yeah. I think, definitely, the biggest influence outside of the discipline on me, one depends, if you call James Robinson a non-economist, so which is one reason why I’m pausing. If you call on political scientists, then I think his research and just talking to him one-on-one, particularly when he was at Harvard before he moved to Chicago, had a huge influence on me. He reads extensively, anthropology, all the disciplines that you just listed.
That's a first. It depends, but many people just say he's an economist, which I would agree with.
Kurtis: Yeah, I’m one of them. Nathan, you need to give me other non-economists.
Nathan: Then also, Joe Henrich, who's at Harvard. Joseph Henrich. He has a great book recently called The Secret of Our Success, which does a really nice job of explaining why we have culture, why we have feelings, why we have traditions as human beings. According to him, that's actually the reason why we're the most successful animal in the world, and that's what makes humans different than other animals, including non-human primates.
Yeah, so he's great. Actually, him, James Robinson, and I co-taught a course on cultural evolution at Harvard a couple years ago now, four or five years ago. That was fantastic. I learned a huge amount from both of them. Another evolutionary anthropologist, Michael Muthukrishna, who's at London School of Economics, he has a number of really fantastic papers. I’ve learned a lot from reading his research as well.
Then, I’ll just mention one historian who I think is really great, African historian. This is Joseph Inikori. I think he's retired now. He's a historian who's a big-picture thinker. He has a really fantastic book about the importance of Africa for the British Industrial Revolution and how much of the industrial revolution is due to the three-corner trade. He was another guy that I very much enjoyed interacting with, particularly early in my career.
Kurtis: I should have asked you this earlier when we were talking about other disciplines, but what aspects of these other disciplines, anthropology, psychology, etc., are you most interested in bringing into economics? I’m talking about more specific mechanisms, or anthropological idiosyncrasies. You've written about bread prices and historical gender norms and other things. What are other mechanisms, or factors, from these disciplines that you're looking to bring into your future research?
Nathan: I think, just anthropology in general. If you start reading anthropology, and ethnographies, and research about Africa, the big thing that you hear about is kinship and family and social structures, age sets, these sorts of things. That's one thing in development economics I never heard about at all, until grad school, then reading these anthropological sources.
When you go on the ground and you start talking to people and you ask them about these things, they're hugely important, even today. I think that's one thing that anthropology can really contribute to development economics is actually describing, talking about, theorizing these things, which are so central to life in Africa or many developing countries. Because we have ancestry that from western Europe and, historically, you basically had a breakdown of clans, lineages, Western Europeans became very individualistic, we have a view and a worldview that's very different than the worldview of most developing countries. I think reading these ethnographies is hugely helpful. That's anthropology.
Then from evolutionary anthropology, I think the big benefit there is that literature talks about and tries to understand where differences in culture come from and differences in behavioral traits. I think if you think of behavioral economics, what we tend to do is document ways in which we deviate from rationality and we're very far from saying, “Okay. How do those deviations vary across societies? In other words, how do our cultural traits vary across societies?” Then developing models to try and understand, well, why would they be different? Evolutionary anthropology is probably 30, 40 years ahead along those lines. They have some models and they have a number of tests and hypotheses and have done a lot more measurement to measure basically, cross-cultural variation.
That's just two examples. I think there's tons of insights, benefits that a grad student can get from reading outside of economics.
Kurtis: One of your colleagues at Harvard is a great institutional and political economist, Alberto Alesina, who you've co-authored with. He sadly passed away earlier this year.
What are some lessons you learned from him as an economist and I guess, more generally, as a person, any good Alesina stories?
Nathan: Yeah. A lot as a person. For anyone who's met him, he's an amazing, amazing individual. Super friendly. Extremely inclusive. Always wanted to talk to students, talk to new people at Harvard, even if you weren't a Harvard student, you're someone passing through, or visiting. Very passionate about political economy and wanting to push it forward as he would say, it's a real field just like any other. He was great in that dimension.
Then he was also just an extremely fun guy. One of the things I’ve learned from him is that research can and should be fun. Whether you're in a seminar or giving feedback on people's research, that there's a way to do it, such that it's enjoyable. Still serious and we learned a lot and we're focused, but there's no reason that it shouldn't be fun. Then more academically, the thing I’ve learned from him probably was to really focus on big picture questions and don't start to chase little questions, which are unimportant.
I think if you look at his research, it's broad, vast. He's writing on all different types of topics and writing with many different people, but all of his papers were tackling these big picture questions and I think that's why he obviously published very well and was very influential, and that's a big part of the reason.
Kurtis: Political economy is definitely a field now. That's good.
Nathan: That's good. That's his legacy.
Kurtis: Yeah. Well, that's a great way to end it. Nathan Nunn, thanks again for coming on the podcast and for the great discussion. Really appreciate it.
Nathan: Great. This is my pleasure and it was fantastic and lots of fun to chat. Thanks.
Mark: Thank you for listening to The Charter Cities Podcast. For more information about this episode and our guest, to subscribe to the show, or to connect with the Charter Cities Institute, please visit chartercitiesinstitute.org. Follow us on social media, @CCIdotCity on Twitter and Charter Cities Institute on Facebook. I’m your host, Mark Lutter and thank you for listening to The Charter Cities Podcast.
Links mentioned in today's episode:
Nunn (2020), “History as Evolution”
Albright, Feigenbaum, and Nunn (2020), “After The Burning: The Economic Effects of the 1921 Tulsa Race Massacre”
Haushofer and Shapiro (2016), “The Short-term Impact of Unconditional Cash Transfers to the Poor: Experimental Evidence from Kenya”
Banerjee, et al. (2020), “Effects of a Universal Basic Income during the pandemic”
Nunn and Qian (2014), “US Food Aid and Civil Conflict”
Mitrunen (2019), “War Reparations, Structural Change, and Intergenerational Mobility”
Clemens (2011), “Economics and Emigration: Trillion-Dollar Bills on the Sidewalk?”
Clemens and Pritchett (2016), “The New Economic Case for Migration Restrictions: An Assessment”
Rodrik (2004), “Industrial Policy for the Twenty-First Century”
Rodrik (2015), “Premature Deindustrialization”
Nunn and Wantchekon (2011), “The Slave Trade and the Origins of Mistrust in Africa”
Nunn (2008), “The Long-term Effects of Africa's Slave Trades”
Lowes, et al. (2017), “The Evolution of Culture and Institutions: Evidence From the Kuba Kingdom”
Fisman and Miguel (2007), “Corruption, Norms, and Legal Enforcement: Evidence from Diplomatic Parking Tickets”
Dell (2010), “The Persistent Effects of Peru's Mining Mita”
Dell and Olken (2020), “The Development Effects of the Extractive Colonial Economy: The Dutch Cultivation System in Java”