"From Poverty to Prosperity"
December 22, 2009, 04:31 PM
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Arnold Kling and Nick Schulz have a new book, From Poverty to Prosperity, which David Brooks writes about in his NYT column:
The success of an economy depends on its ability to invent and embrace new protocols. Kling and Schulz use North’s phrase �adaptive efficiency,� but they are really talking about how quickly a society can be infected by new ideas. ...
There's a distinction between how fast a society can adopt new ideas and how fast it can invent new ideas. For example, Mexico's standard of living has improved in recent years because there are now 109,000 people in Mexico working for Wal-Mart. But, how many Wal-Mart-scale ideas have spread from Mexico to the U.S. in recent years? Outside of cuisine, I can think of "human directionals" (those poor bastards standing on the side of the road obnoxiously wiggling big arrows) but that's about it.

Brooks goes on in a Gladwellian vein:

But they are still economists, with worldviews that are still excessively individualistic and rationalistic. Kling and Schulz do not do a good job of explaining how innovation emerges. They list some banal character traits — charisma, passion — that entrepreneurs supposedly possess. To get a complete view of where the debate is headed, I’d read �From Poverty to Prosperity,� and then I’d read Richard Ogle’s 2007 book, �Smart World,� one of the most underappreciated books of the decade. Ogle applies the theory of networks and the philosophy of the extended mind (you have to read it) to show how real world innovation emerges from social clusters.
"Banal character traits" — has Brooks ever worked in an entrepreneurial company? In 1981, Apple employee Bud Tribble coined the term Reality Distortion Field to describe the impact of Steve Jobs on the people around him, getting them to accomplish the implausible. It's now 28 years later, and we can see the repeated impact of Jobs' charisma, passion, and bluster. Charismatic Reality Distortion is real.

On the other hand, taboos are a huge drag on innovation. It's like heliocentrism in post-Galileo Italian science — if you aren't supposed to mention that the Earth goes around the sun, well, it's pretty hard to get anything else right..

Economic change is fomenting intellectual change. When the economy was about stuff, economics resembled physics. When it’s about ideas, economics comes to resemble psychology.
That of course leads to the question whether the best quantified idea in psychology, IQ, will ever become admissible in economics.

If I had a magic wish that would radically improve the quality of public policy discourse in the U.S., it would be that African-Americans, Jews, and white gentiles all had average IQs of 100. It wouldn't matter for the popularity of good social science if the Asians were a little above average and the Hispanics a little below average. If Jews and blacks were, on average, average, then David Brooks would be applying insights from IQ research in his columns every couple of weeks.