Economic Gangsters: Corruption, Violence, and the Poverty of Nations

Susanne Karstedt admires a model of how to use data analysis and original research creatively

February 5, 2009

It is hard to think of a better time for a book with the title Economic Gangsters to hit the shelves. At the peak of the financial crisis, terms such as "greed", "morality" and "financial crimes" dominated public and political discourse. Obvious to everybody, "economic gangsters" had been at work in financial markets, which were now in need of a strong injection of morality after unrestrained market forces and immoral bankers had failed us utterly.

Notwithstanding the title of their book, economists Raymond Fisman and Edward Miguel try to convince their readers of exactly the opposite: that morality, crime and compliance with the law can best be explained by economic concepts and theories. In other words, we need to look out for economic men (and women) and economic interests when trying to explain an array of nasty behaviours ranging from corrupt exchanges and violent conflicts to minor infringements of the law such as parking violations. But arguably, 2008 was the worst moment to publish such a book. The financial crisis brought about the downfall of economic wizards, with one of its most powerful proponents, Alan Greenspan, publicly admitting to mistakes and failure, and it severely undermined the reputation of economists even in their own field of expertise.

Economic Gangsters is the latest example in a string of popular accounts of economics that offer to show how to make use of its insights in all realms of life. The best-selling Freakonomics: A Rogue Economist Explores the Hidden Side of Everything by Steven Levitt and Stephen Dubner gave this genre a promising start, and a number of what are in essence remakes have been published since then. In this genre, crime and punishment have been the most favoured topics to show off what the authors of Economic Gangsters call the "latest tools and tricks of the economic trade". Fisman and Miguel are, however, the first to make these their only topics. Furthermore, they are determined to develop new ways to prevent corruption and violence, which most often affect the world's poorest citizens, and to demonstrate "the potential that economic research has in helping to really make poverty history".

But setting aside the end of poverty for a moment, the real achievements of this book and its authors are ingenious research designs, innovative use of data and information, and making creative links between stock markets and corruption, rainfall and witch-hunts, and moral culture and parking violations.

A well-known concept in economics is that of "unintended consequences", implying that results are somewhat different - for better or worse - from what had been intended by the actors. This book is an unintended consequence, as the authors have written an amazing tool for the teaching of research methods.

They provide us with intriguing examples of intelligent research design and inventive use of data. All chapters are based on original research by the authors in places as diverse as Jakarta, African villages and New York City. Because they aim mainly at the interested layperson as their reader, their step-by step approach - starting from questions, looking for suitable data and finally arriving at conclusions - is a far better introduction than students are offered by textbooks. Each chapter is a demonstration of what intelligent research design and quantitative data can achieve, and together they will serve as appetisers for students who, far too often, have been trained to abhor such data.

For those who are not teaching social science methods, I have an Amazon-style recommendation. Readers who are interested in the subject matter of this book should also look for Jared Diamond's popular Guns, Germs, and Steel: A Short History of Everybody for the Last 13,000 Years, which offers a wider and multidisciplinary perspective on poverty and violence. Taken together, both books will fuel our imagination of pathways out of poverty, corruption and violent conflict. And who knows - improving the teaching of methods might be an important stepping stone along the way.

Economic Gangsters: Corruption, Violence, and the Poverty of Nations

By Raymond Fisman and Edward Miguel

Princeton University Press 250pp, £14.95

ISBN 9780691134543

Published 22 September 2008

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