Economist Daron Acemoglu Is Kryptonite To Clear Thought
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Canaletto Return Of The Bucentoro

The ruins of the slums of Venice, a mere 417 years after La Serrata

Some celebrated thinkers are so dumb that even when they are more or less right in their politics, they drive the thinking man crazy with their amazing ability to come up with stupid examples for what ought to be easy positions to validate. MIT economist Daron Acemoglu is making himself the Malcolm Gladwell of the 2010s, with a nearly infallible nose for sniffing out the worst possible argument and then putting it forward triumphantly.

Here's the beginning of a recent article inspired by Acemoglu that was the most emailed NYT article last week:

The Self-Destruction of the 1 Percent


Published: October 13, 2012
IN the early 14th century, Venice was one of the richest cities in Europe. At the heart of its economy was the colleganza, a basic form of joint-stock company created to finance a single trade expedition. The brilliance of the colleganza was that it opened the economy to new entrants, allowing risk-taking entrepreneurs to share in the financial upside with the established businessmen who financed their merchant voyages.
Venice’s elites were the chief beneficiaries. Like all open economies, theirs was turbulent. Today, we think of social mobility as a good thing. But if you are on top, mobility also means competition. In 1315, when the Venetian city-state was at the height of its economic powers, the upper class acted to lock in its privileges, putting a formal stop to social mobility with the publication of the Libro d’Oro, or Book of Gold, an official register of the nobility. If you weren’t on it, you couldn’t join the ruling oligarchy.
The political shift, which had begun nearly two decades earlier, was so striking a change that the Venetians gave it a name: La Serrata, or the closure. It wasn’t long before the political Serrata became an economic one, too. Under the control of the oligarchs, Venice gradually cut off commercial opportunities for new entrants. Eventually, the colleganza was banned. The reigning elites were acting in their immediate self-interest, but in the longer term, La Serrata was the beginning of the end for them, and for Venetian prosperity more generally.
By 1500, Venice’s population was smaller than it had been in 1330. In the 17th and 18th centuries, as the rest of Europe grew, the city continued to shrink.
The story of Venice’s rise and fall is told by the scholars Daron Acemoglu and James A. Robinson, in their book “Why Nations Fail: The Origins of Power, Prosperity, and Poverty,” as an illustration of their thesis that what separates successful states from failed ones is whether their governing institutions are inclusive or extractive. Extractive states are controlled by ruling elites whose objective is to extract as much wealth as they can from the rest of society.
Inclusive states give everyone access to economic opportunity; often, greater inclusiveness creates more prosperity, which creates an incentive for ever greater inclusiveness.
The history of the United States can be read as one such virtuous circle. But as the story of Venice shows, virtuous circles can be broken.

This example offers a powerful historical lesson, especially if you are completely unaware that, even after 1315, Venice survived as a rich and independent state for another 482 years. (It took the Republic of France, under General N. Bonaparte, to overthrow Venice in 1797.) After all, who has ever heard of such post-1315 Venetians as Titian, Tiepolo, Tintoretto Veronese, Canaletto, Palladio, Aldus Manutius, Monteverdi, Vivaldi, Casanova, or Da Ponte?

In 1802, five years after Napoleon's coup, Wordsworth wrote:

On the Extinction of the Venetian Republic

ONCE did she hold the gorgeous East in fee; And was the safeguard of the West: the worth Of Venice did not fall below her birth, Venice, the eldest Child of Liberty. She was a maiden City, bright and free; No guile seduced, no force could violate; And, when she took unto herself a mate, She must espouse the everlasting Sea. And what if she had seen those glories fade, Those titles vanish, and that strength decay; Yet shall some tribute of regret be paid When her long life hath reach'd its final day: Men are we, and must grieve when even the Shade Of that which once was great is pass'd away.

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