Recently I read one of the most influential economists in the world, William Easterly’s book The Tyranny Of Experts (2014) and will share some important lessons from it. While much is well-established common sense at this date, such as that benevolent autocrats rarely exist and historical conditions matter for economic development, there are still less obvious points to absorb and learn about.
The book essentially argues that the Austrian-British economist Friedrich Hayek’s classic liberalism is preferred over the Swedish technocratic economist Gunnar Myrdal’s ideas. They both shared the Noble prize in economics in 1974, but the debate between them never took place in public, and perhaps if it had, some of the misguided remedies for poor countries could have been avoided. Easterly is unhesitatingly on Hayek’s side on the political-economic spectrum, although with a nuanced understanding of this complicated issue. Both markets and governments matter.
1. Individual economic and political rights are more important than national policies
There are not just cultural and social but also economic benefits from nationalism. For instance, as the likewise distinguished economist Dani Rodrik (which Easterly refers to in other regards) has emphasized, domestic markets are for a variety of reasons generally more well-functioning than international markets.
However, national policies as such have only a limited effect. Essentially, the wisest thing a government can do is to provide for public infrastructure and secure individual economic and political rights for its citizens. From there on the people, especially the more talented and industrious such, will create spontaneous solutions to local problems (a lesson from Adam Smith which commonly has been misunderstood as that the Scotsman cherished greed), and create wealth and prosperity for themselves and others.
An excellent example are the people from the Fujian province in eastern China, which have dominated the trade and investment ...
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