POLS 373 Foundations of Comparative Politics Lecture: Why are Poor Countries Poor Lecture: Why are Poor Countries Poor? Rational Choice Perspective

2 The Rational Choice Perspective

3 Why are Poor Countries Poor? A starting assumption People don't choose to be poor… And a basic observation … and yet, there’s a lot of poverty in the world Rational Choice Perspective

4 Why are Poor Countries Poor? A Rational Conundrum … or Contradiction? If people don’t choose to be poor, then why are there so many poor people? Isn’t poverty a fundamentally irrational outcome for both the individual and society? Rational Choice Perspective

5 Why are Poor Countries Poor? Another Puzzling Observation The route to economic prosperity is not at all mysterious--that is, it is clear that countries, leaders, and people know, in a general sense, what is necessary to achieve national prosperity. In short, the road to prosperity is well known … … yet poor countries can’t seem to go in the “right” direction Rational Choice Perspective

6 Why are Poor Countries Poor? Basic Argument (Step No. 1) Poverty is the result of behavior and decisions made by people who, while acting in an individually intentional and rational manner, generate an unintended and socially irrational outcome at a collective level Rational Choice Perspective step no. 1

7 Why are Poor Countries Poor? Basic Argument (Step No. 2) When rational decisions made by individuals lead to collectively irrational outcomes, we need to identify… the _______________ or interests of individual decision makers, and … the _______________ they face with regard to their strategic environment step no. 2 Rational Choice Perspective preferences constraints

8 Why are Poor Countries Poor? Preferences and Constraints in Poor Societies What is the main interest or preference of (severely) poor people? ____________________ What are some constraints (or obstacles) that poor people face in poor countries? __________________________ __________________________ Rational Choice Perspective Survival Lack of capital, money, resources Lack of societal “safety net”

9 Why are Poor Countries Poor? Preferences and Constraints in Poor Societies Taking the specific preferences and constraints of (severely) poor people into consideration, gives us a fuller argument. Consider the following example, by Nancy Birdsall, president of the Center for Global Development:Center for Global Development “For good reasons, the poor and the less educated tend to have more children. As is to be expected in these poor households, spending per child on nutrition, health, and education declines with the number of children …”

10 Why are Poor Countries Poor? Preferences and Constraints in Poor Societies The practice of scattering plots: Economically and collectively inefficient, but individually rational Small Agricultural Plots in Vietnam Small agricultural plots in Vietnam. They may seem romantic, but small-plot farming is inefficient and labor intensive. Vietnam has 10.5 million household farms and as many as 75 million small agricultural plots of land. By contrast, New Mexico, which is roughly the same size as Vietnam, has only 15,000 farms in total. Rational Choice Perspective

11 Why are Poor Countries Poor? Basic Argument (Version No. 2) Poor countries are poor because they are unable to overcome the problem of creating the public or collective goods needed to make development on a national scale possible NOTE: This argument moves focus of analysis from “ordinary” individuals to political leaders and elite; the basic level of analysis, however, is still the individual Rational Choice Perspective

12 Why are Poor Countries Poor? Collective or Public Goods What is a public or collective good?  Basic Definition: Any good that, once created, is available to everyone, regardless of their individual contribution  Examples: National and domestic security; street lighting, clean air and clean environment. Certain infrastructural projects can also be considered collective goods: a national system of railroads and roads, a port system, a communications system and power grid, dams, an interstate highway system, and the like Rational Choice Perspective

13 Why are Poor Countries Poor? Collective or Public Goods: Questions General Question Why are collective goods relevant to the question of national poverty? [Let’s discuss this question] Related Questions If public goods--e.g., a strong infrastructure--are so important, what’s the problem? That is, why don’t poor countries just invest in public goods? Rational Choice Perspective Simple Answer: The Free Rider Problem

14 Why are Poor Countries Poor? Collective or Public Goods The “Free Rider” Problem Military service represents a good example of the free rider problem in practice: in a volunteer army, it is difficult to recruit individuals because most people prefer to free ride on the duty of others. After all, why should I risk death or injury, if someone else will do it for me? Rational Choice Perspective

15 Why are Poor Countries Poor? The Free Rider Problem: Basic Explanation Individuals will seek to free-ride on the efforts and contributions of others whenever they believe they can “consume” the public good without contributing to the costs of its formation This happens everywhere, but in poor societies, the free rider problem can be a particularly debilitating and pervasive issue Rational Choice Perspective Why?

16 Why are Poor Countries Poor? The Free Rider Problem in Poor Societies Preventing the free rider problem is especially difficult in societies where there is not a strong or effective state The logic here is simple: States are the preeminent public institution; as such, they alone have the capacity to secure contributions to the formation of public goods Rational Choice Perspective Conditions of severe poverty in Somalia cannot improve without a strong, centralized state capable of restoring order (a public good) and creating an infrastructure

17 Rational Choice Perspective Why are Poor Countries Poor? To Sum Up: Why Are Poor Countries Poor? Because they lack an effective state This is obviously a very simple, even simplistic way to sum up the rational choice argument, but it encapsulates a fundamental point

18 Why are Poor Countries Poor? A Caveat Is there a problem with the argument that poor countries are poor because they lack a strong and effective state? Rational Choice Perspective

19 Why are Poor Countries Poor? The State as the Problem, Not Solution To many observers, states are often the problem, not the solution. The reason is clear … Rational Choice Perspective CORRUPTION

20 Rational Choice Perspective Why are Poor Countries Poor? Rational Choice and Corruption In the rational choice framework, corruption is easily explained … Begin by identifying the key decision makers. Next, identify their _______________ or interests, and, third, identify the _______________ they face with regard to their strategic environment preferences constraints In general, once we do this, it become easy to see why those who control the state may face a severe disincentive to engage in socially beneficial goals— such as pursuing policies that promote national development

21 Why are Poor Countries Poor? Rational Choice and Corruption Key Point: Corruption is often rational It is rational because the political leader’s goal is to remain in political power Corruption is also rational when political leaders are generally unaccountable to the citizenry: this is particularly the case in non-democratic regimes Rational Choice Perspective

22 Why are Poor Countries Poor? Rational Choice and Corruption: Some Final Questions If corruption is rational, what’s the solution? How can national poverty be overcome? What are the best policy choices? Rational Choice Perspective