Saturday, July 5, 2014

Allen, 2012, The Institutional Revolution: Measurement and the Economic Emergence of the Modern World (Economic history)

Douglas Allen is an economic historian, and I think the most interesting work in economics has always come from this side of the discipline, rather than the number-crunching descendants of Paul Samuelson’s mathematical economics who have taken over the discipline and turned it to the service of corporations and banks (see Nasar, Grand Pursuit).  The central theme of this book is that greater precision in measurement permitted management. Before this, hostage capital was the only way to ensure trust. He provides examples from the navy (prizes and the execution of admirals), the army (purchasing commissions), the aristocracy (country seats and dueling), lighthouses, private roads, tax farming, the courts, law and police.  In short, the evolution of the whole of the modern public sector can be attributed to the gradual increase in degrees of certainty in oversight and measurement of performance.  The significance of this insight is that “modern” methods of oversight and management depend on accurate information, and this is not always available. In his conclusion, he provides examples of grain markets in Africa, which don’t function well because of great uncertainty.  The same could be argued for many fields of public service in many parts of the world.  I don’t think I see a role for dueling and purchase of commissions, but I can certainly see the benefits of hostage capital to ensure good behaviour of public service. Pensions are one structure that could be more widely deployed to ensure good behaviour by senior leaders, public servants, particularly violent specialists like police and military (as they were in Sierra Leone after 2001). 
David Last, 13 May 2012

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