The Necessity of Economic Diversity

Welcome to the fray Bell Curve! : - )

Obviously, establishing causality here is nearly impossible since we can't set up controlled experiments with countries in giant laboratories or something. To be super technical I should be clear that the logical flip side of my argument is that Democracy is a sufficient condition for complex economies (note the difference in structure). What's more, these arguments are logically interchangeable since I can't establish causality. Either way, they strongly suggest that the US occupation forces encourage as wide a range of economic development outside of the oil sector as possible.

What I do claim to have is a reasonable explanation of the observed reality. An explanation more or less consistent with our (informal and non-rigorous) data (Alaska excepted) and one that has yet to be fully refuted by clear evidence that highly concentrated economies are observed with stable democracies.

Oil producers are a big part of the correlation I think we would observe if we did a serious examination of economics and democracy. But many countries in subsaharan Africa have similar problems, they just have less cash lying around.

The problem with citing Alaska as an example is that if there were a coup d'etat in Alaska to take over the distribution of the oil checks, the US federal government would step in. That completely changes the incentive structure - despite the presence of lots of oil.

All I said was that complex economies are necessary condition... I never said they were the only necessary condition. Nor was I primarily interested in making an argument about how Iraq got messed up in the first place. Rather, I was trying to suggest a rationally justified policy in Iraq that gets beyond the "Democracy from the barrel of gun" policy we seem to have now. To paraphrase Powell, "We broke it and now we own it." So what do we do now? My argument about the necessity of economic diversity strongly suggests that we emphasize long term economic development outside the oil sector.

I don't see any obvious policy implications in the historical/colonial explanations for how Iraq got this way. Where does a detailed recitation of the past 50 years of Iraqi history tell us when the median age in Iraq is 19 and 40% of the population is under 14?

OK, so I ask both Law Talking Guy and Bell Curve: If you think my rationale is flawed, what alternative policies do you suggest?