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NRO’s domestic-policy blog, by Reihan Salam.

William Easterly on Wishful Thinking



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I had the great pleasure of reading William Easterly’s review of Ha-Joon Chang’s Bad Samaritans, an often frustrating anti-trade jeremiad. Part of Easterly’s broader argument is that we’re all subject to confirmation bias, i.e., to seeing the evidence that we want to see. This is true of pro-market enthusiasts like myself and, I’m guessing, most readers of National Review as well as pro-intervention enthusiasts like Chang.

I was particularly amused by the following passage, in which Easterly teases apart one of Chang’s central arguments against the much-maligned Washington Consensus:

His main piece of evidence for the superiority of heterodox policies, which he repeats over and over throughout the book, is that developing countries grew during the “heterodox” period of the 1960s and 1970s “on average, at double the rate” they have since the 1980s, when “neo liberal” free trade policies became orthodoxy. The big question is, what year should we pick as the breaking point between the protectionist era and the free-trade era? It is easy to manipulate breakpoints to confirm your beliefs.

Chang picks 1980 as the big turning point, allowing him to calculate a 3 percent average per capita growth in developing countries between 1960 and 1979, with 1.7 percent average growth in the same countries from 1980 to 2002.[2] But Chang elsewhere suggests that the change in policy occurred around 1983. The developing countries, he writes, were “first pushed by the IMF and the World Bank” to liberalize trade “in the aftermath of the Third World debt crisis of 1982.” But if we take 1983 as the breaking point, the change in growth rates is less dramatic: 2.6 percent between 1960 and 1982 as compared to 1.8 percent between 1983 and 2002. (There was a big recession in 1980–1982, so it’s a little suspicious that Chang includes this bad time in the free-market period even though he says the policy change wasn’t until 1983.)

Another classic way to check before-and-after claims is to find some new data. We now have data up through 2008. If we include this most recent data and use Chang’s own policy breaking point of 1983, there is virtually no change: growth in developing countries was 2.6 percent between 1960 and 1982 and 2.7 percent between 1983 and 2008. Chang’s key piece of evidence goes up in smoke once we correct for confirmation bias.

The essay, which appears in the latest issue of The New York Review of Books, is a pleasure to read. Their version is gated, but you can find a preview at this link.



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