What federalism for the Middle East?

As unexpectedly as the recent turmoil in South Korea, in a few days the rebel forces have toppled the Assad regime in Syria, and Damascus has fallen, after 50 years of authoritarian control and more than a decade of Civil War. Institutional systems evolve in a non-linear way, especially in times of geo-political changes.

The forces that opposed the Assad regime are heterogeneous across religious and ethnic lines. The rebel leaders have promised moderation and stability. If they fulfill this promise, they may be a positive influence for the Israeli-Palestinian conflict. We know the alternative: ethnic fragmentation, chaos, poverty and humiliation of minority groups. The possibility of a multi-ethnic democracy (with secular federations and confederations) in the Middle East will have to face enormous obstacles, the first one skepticism and the accusation of lack of realism. But this should be the benchmark: democratic institutions that treat every citizen with the same dignity and promote diverse cultures.

A new book and the re-edition of an old book show exactly this way for Palestine-Israel.

The Israeli historian Shlomo Sand, in “Israel-Palestine: Federation or Apartheid”, tells the story of those thinkers and writers, both Jewish and Arab, that have promoted the idea of one binational federal state from the river to the sea. The idea is as old as the Sionist movement, and was considered by the United Nations but rejected in favor of the failed two-state solution, which has tried to consolidate an imposible and undesirable ethnic separation. It is an old idea that has recently re-emerged as the logical benchmark with which to oppose the current reality of one state that practices ethnic discrimination. The author is also skeptical about the practical implementation of the idea in the short run, but admits that this should be the horizon of local and international democratic forces.

The two state solution of the Oslo accords is not feasible with the presence of more than 700.000 settlers in the West Bank. Seven million Jews and seven million Arabs share a small piece of land. The only human and just horizon is reconciliation, and institutional sharing, like in South Africa and Northern Ireland. Two aceptable alternatives would be a confederation of two states with freedom of movement (like in the European Union) after the existence of two states is consolidated, or one state with equal rights but no recognition of national rights. But the two pre-existing states would be too unequal and would spend resources on exclusive ethnic identities instead of a shared destiny. On the other extreme, not recognising the existence of two different national cultures with the right to recognition and reparation after a painful history, would be naive. A federal binational state would protect the equal rights of individuals, but would also constitutionally preserve the cultural and national rights of the two peoples, independently of the demographic game of majorities and minorities.

The 2024 reedition of "The Question of Palestine" written by the late Edward Said, with a new preface and an article he wrote on the one-state solution before his death in 2003, presents the arguments for the one state federal and binational solution, from a Palestinian perspective. Said distinguishes between the right to self-determination and the right to create an exclusive ethnocracy. Two peoples can self-determine by sharing a land and respecting each other, as we share many of the international capitals of the world. The original book was written in 1979, but the arguments are very similar to the ones proposed by Shlomo Sand. They are the same arguments that in the past were used by Hannah Arendt, Tony Judt, and that today are stated by an increasing list of corageous groups and individuals. These are the principles that should guide the efforts to build peace and justice in the whole region and in the world.

It's the workers, stupid! (but not only)

1. The facts are: Donald Trump will be President of the US for the second time, after winning the electoral vote and this time also the popular vote, although by a narrow majority. The risk for democracy, human rights and the economy is enormous. A similar number of voters have opted for him than the last time, but the Democrats have obtained under Kamala Harris less votes than under Joe Biden in 2020. The memory of recent inflation, anti-incumbency bias after the cost of living crisis, and the rhetoric of populism have been stronger than appeals to common sense. To people like me, academics with a PhD, this is an aberration. We knew that things were bad, but when we woke up on Wednesday November 6th in Europe, things were around 5% worse than we expected when we went to bed the night before. When I say we, I should include The Economist, the economists, Nate Silver and most commentators in Western media.

2. People as diverse as Economics Nobel prize winner Daron Acemoglu and Senator Bernie Sanders blame the Democratic Party for not having an agenda that is pro-worker enough, in spite of the Biden administration being the most pro-worker of the last 50 years. Asked about this on CNN, Sanders said that Biden's agenda was great, but that much more needs to be done. Others (Nancy Pelosi) blame Biden for not withdrawing earlier from the race. I've also read comments saying that Harris took the vote of women for granted, or that Democrats did not pay enough attention to the immigration issue, but paid too much attention to identity issues (these two points sometimes raised by the same people, like Fareed Zacharia, somehow paradoxically). It is impossible, of course, to prove that by following one or several of these recipes, the Democrats would have won. History only happens once and it is impossible to run pure experiments with it. The fact is that Trump (probably, a worse Trump than the first time) won, and a majority of voters has rejected the opinion of economists, scientists or celebrities.

3. What can be done? Everybody seems to have an answer. I don't. I would like to believe that by avoiding the bad populism (there is a good populism), reducing the volume of identity politics and of culture wars, and addressing cost of living and real wages issues with both pre-distribution and re-distribution, Trumpism and related national-populisms will be defeated. But that's what Biden was trying to do...

4. As political scientist Larry Bartels argues, the supply side of politics also matters. Progressive organizations have to fight against a formidable enemy. But is has been defeated before, in Poland, England, Spain, also in the US in 2020. Appealing to the prejudices of alienated voters is not a solution in the long run, and is not even a progressive solution in the short run. We need to sophisticate our instruments to make our narratives, based on science and common sense, winning ones (now they are not). Workers need high capacity governments at all levels to fight climate change at the same time that prosperity is created and shared. This is possible, there are many examples. But it is not easy.

Acemoglu and us

For the last two decades, Daron Acemoglu, together with his co-authors Johnson and Robinson (and their critics) have been a constant source of inspiration for all those economists (like me) interested in the role of institutions in the economy, and in the interaction between economics, politics and history. They have been a recurrent presence in my lectures, my research and my blogging (for example, here and here). Now that I am temporarily on leave from academia, I missed talking about these last winners of the Economics Nobel Prize with my students this week.

Acemoglu and his co-authors have improved the terms of trade-off between finding very precise answers to small problems and finding imprecise answers to big questions. This is important and difficult. The challenges of our time are big, and will not be satisfactorily addressed by adding precise answers to very small problems. However, the research techniques of social sciences are very well developed for the small, but not the big questions. Acemoglu and his co-authors have mobilized a great deal of the arsenal of modern social sciences (causal econometrics, modern theory, case studies) to address big issues such as the challenges of democracy, inequality or technological change and how they interact. Because this is inherently difficult, they have received serious methodological criticisms, to which in some cases they have respectfully responded (for example, to the issues raised by David Albouy on their work, cited in the academic essay that justifies the awarding of the Nobel Prize, about the impact of settler mortality in the colonies as an instrument for the quality of institutions and contemporary economic outcomes). Recent research has raised serious methodological issues not only about the work of Acemoglu et al. on the deep historical causes of prosperity, but also on work they inspired about historical persistence by tens of researchers.

Their theoretical work on the difficulties of commitment in politics was followed by impressive (but, as mentioned, open to criticism) empirical work on the determinants of institutional change and the impact of (inclusive or extractive) political and economic institutions on prosperity in academic articles and later in the best-selling book “Why Nations Fail” (written by Acemoglu and Robinson, two of the three laureates). They contributed to improving the reputation of the book format among economists, also with “The Narrow Corridor” and more recently with “Power and Progress” –this one, by Acemoglu and Johnson, the best of the books in my view but not mentioned in the academic essay that justified the Nobel Prize decision. All these books have long bibliographic essays at the end, which are an amazing tool for teaching and research. They have also contributed to improving the prestige of multidisciplinary work on economics, politics and history.

After reading their books, I also learned about the importance of reading good academic book reviews. Probably the best book review I have ever read is the one by W. Bentley MacLeod on Why Nations Fail. And another very good one is the review by Avinash Dixit of The Narrow Corridor (you can find them through Google Scholar). Bentley MacLeod suggests that organizational economics and social choice would be good complements of Why Nations Fail. He casts doubt on the implications of the correlation between prosperity and the protection of individual property rights. Perhaps for poor societies, it is not optimal or possible to strongly protect individual property rights (for example, because insurance markets are not well developed). If they don’t have good property rights institutions it is perhaps not because they are making a mistake, but because they are doing what is appropriate for their level of development. Political scientist Yuen Yuen Ang has raised similar doubts about the institutions that are necessary for prosperity, suggesting that corruption is perfectly compatible with the development of market economies (although not desirable). Avinash Dixit suggests that the split between government and civil society in “The Narrow Corridor” (where Acemoglu and Robinson argue that the key to posperity is a government checked by civil society) is too simplistic, and that it is the divisions in politics and society and their interaction that drive social change. Dixit says that “if rifts in society do not exist, they can be created or exaggerated… leaders cultivate hatred to mobilize their people into conflict” (mentioning Trump and Modi as examples, although there are many more).

The two books have in common that they try to fit a common model to a big diversity of case studies over time and space, which is risky.

More than their specific ideas, the value of Acemoglu and his co-authors is to have raised the status of multidisciplinary work on institutions and the notion that power and social conflict are as important today as they were in the times of Marx. The idea that inclusive political institutions correlate with inclusive economic institutions and good economic outcomes is today challenged by the unstopped growth of China. Also, today the most economically prosperous country in the world (the US) looks into the abyss of political democratic collapse. The review of Bentley MacLeod has a graph summarizing the different impact of historical shocks on different nations depending on whether their institutions were inclusive or extractive. According to this, the different impact of the contact with America for inclusive England and extractive Spain would result into more prosperity for the British today. For all their great institutions, although the Brits still have a higher income per capita than us, Spain is growing more, lots of Brits come to party or to retire to Spain, and we didn’t make the stupid mistake of leaving the EU.

The notion of a “treatment” can hardly be transplanted from the medical sciences to economics or politics. The inherent difficulty of engineering prosperity results from the fact that human society is a complex system that is constantly changing over time. Institutions, culture, geography and technology co-evolve.

The book reviewers also point out the need for more research on local and international politics, and they question the nation as the relevant unit of analysis: can we compare China, the US or India to the small nations of the Pacific?

Acemoglu (the most famous of the three laureates) today is not the same as he was 25 years ago. Today, he has stronger opinions in favor of redistribution and government intervention. I would argue that he has become more progressive over time. His last book is a call to guide technological change in an egalitarian way through public intervention.

Acemoglu, Johnson and Robinson surely deserve the Nobel Prize –but perhaps they should share it with their critics and their book reviewers.

The very productive short life of Frank Ramsey

Frank Ramsey was a Cambridge academic that lived for only 27 years and died in the early weeks of 1930. I just finished reading his biography, written by philosopher Cheryl Misak (Frank Ramsey. A Sheer Excess of Powers, Oxford University Press), and published in 2020. It is a very detailed and well written book, covering both his life and his work (including short invited contributions by specialized scholars, for example Robin Boadway and Partha Dasgupta in economics).

I was attracted to it because I’ve been teaching Ramsey pricing in Economics Masters’ courses for a long time, and using it in my research on regulation. Ramsey had an incredible short life, in the last years of which he made important contributions to philosophy, mathematics and economics. He also had time to get married, have a lover and lots of friends, two children, and friendly (and also critically) interact with some of the best minds of his time, including Ludwig Wittgenstein and Bertrand Russell.

He was a socialist (although not interested in the Marxist dogma) and also an atheist. His brother, to whom he was very close, became a progressive Archbishop of Canterbury in the Anglican Church. He was also an optimist and a pragmatist interested in how rigorous knowledge could help build a better world.

In economics, he closely interacted in Cambridge with Keynes, Sraffa and Pigou, the brightest minds on macroeconomics, Marxist economics and microeconomics then and probably of the whole XXth century.

The piece of Ramsey that I’ve been teaching over the years is Ramsey pricing, the translation to utilities’ regulation of Ramsey taxation. This is an application of the theory of the second best, which says that when there are constraints in the use of instruments (not all the tools that we would wish are available), the policies may be very different from the ones that we should implement when there are no such constraints. In the case of Ramsey pricing, if subsidies to cover for firms’ losses are not available through undistortive taxes, then prices above marginal cost are necessary, in a way that those services with lower demand elasticity should have higher prices, if the objective is to minimize inefficiency.

In Economics, Ramsey also contributed to the theory of saving in a dynamic setting and to the concept of probability (in dialogue with Keynes). His theory of saving was later expanded by David Cass (my teacher in Florence in the last years of his career) and Koopmans, in the Ramsey, Cass, Koopmans model.

Economics and mathematics were both important in the work of Ramsey. Maths were a crucial tool to understand economic and social issues and to improve human living conditions. He was a mathematics professor because he was advised to choose this subject given his incredible skills, but he was as interested in economics and philosophy.

Ramsey’s ideas about utilitarianism and rationality were broader than what his work suggests, according to the author of the biography. His models reach conclusions from assumptions addressing important real life issues, to which a large literature has later contributed taking Ramsey as a reference.

He was an interdisciplinary genius as his strong links with Keynes, Wittgenstein, Russell, Pigou and Sraffa suggest. Not only they were important to him, but he was important to them. He was able to have a strong friendship with some if not all of them and at the same time criticize them intellectually.

Interdisciplinarity was not an excuse for Ramsey to lower the intellectual and scientific standards. In fact, in the case of Ramsey, it was a strategy to set them very high.

I strongly recommend this biography

Politicians and academics

After 22 uninterrupted years of teaching and research activity (which started after 7 years between my doctoral and my postdoctoral period), I have accepted a job (Secretary of Economic Affairs and European Funds) in the Catalan government as a result of the election of my socialist colleague Salvador Illa as President.

Politics is not something new to me, as I have been involved in it in an uninterrupted way since I was 16 years old and I was a councillor in Barcelona, my city, a long time ago, between 1991 and 1995, before going to Florence to study my PhD in Economics.

I guess that I will keep learning and thinking about how to build bridges between politics and the academia. There is a lot of ignorance on either side about what the other is doing.

Many politicians tend to believe that academics are in their ivory tower, living a relaxed life surrounded by books and curious students. Politicians that have been academics know better: Andreas Papandreou, an academic economist and the historic leader of the Greek socialist party, who had a very stressful political life, said that there was nothing harder than studying and working in academic life (he had a PhD in Economics from Harvard University).

Many academics tend to believe that politicians are selfish ignorants that could not have a private sector job. In fact, most politicians are hard working people motivated by the common good, and most of them are substantial individuals who could be good in other jobs, and actually have been good at other jobs. And yes, there are corrupt politicians (and corrupt academics).

But it’s true that there are many differences, and it is not easy to transition from one sphere to the other. I’ll do my best (again), aware that both worlds give you the chance to keep learning about the world and about oneself.

The social implications of the absence of free will

Robert Sapolsky is a professor of biology and neurology at Stanford University. In his recent book “Determined” (2023, Vintage), he presents a fascintating essay about the science of life without free will and its social (and legal) implications

He starts his analysis by rescuing the crazy argument that our Planet is supported by a giant turtle. Asked what supports the first turtle, proponents of the theory answered that it’s “turtles all the way down.” This is nonsense, but the expression is used by Sapolsky to basically argue that human decisions are “biology all the way down.” There are chemical and biological forces, produced by a combination of genes and the environment, that explain human decisions and behavior. There are no autonomous forces (no soul, no conscience, no free will) that are separated from the atoms that put together our bodies, including our brains, that explain why we do the things we do. As I once heard in a TV documentary, we are not that different from anthills, we are just “put together in a way that makes us look smarter.” Similarly, I read in the book (p. 386): “There is nothing but an empty, indifferent universe in which, occasionally, atoms come together temporarily to form things we each call Me.”

Of course, I lack the expertise to scientifically evaluate the claims in the book, but after reading it I am more persuaded than I already was before (and I tend to sympathize with materialistic interpretations of reality) that there is not much that we really choose, although we are brought to believe that we do.

As a good scientist, the author challenges himself by questioning whether his theory survives after taking into consideration the contributions of three successful branches of scientific knowledge: Chaos theory, Complex systems, and Quantum indeterminacy. Chaos theory shows that small changes somewhere can have dramatic implications at some distant point in time or space. Complex systems show that difficult to predict properties emerge from the interaction of a big quantity of elements that move following simple rules at the individual level (like in flocks of migrating birds). Quantum indeterminacy shows that at a subatomic level, there is a lot of randomness going on. But none of this contradicts -if anything, it reinforces (by looking at experimental and other evidence)- that human behavior is explained by the biological forces that, influenced by the social and material environment, acted one second before, one minute before… and all the way down.

In the second half of the book, Sapolsky looks at the social (and legal) implications of the absence of free will. That these implications do not need to be pessimistic is concluded by analogy of how social thinking has evolved in our consideration of conditions such as Epilepsy, Schizophrenia, or Obesity. Back in time, those that suffered these conditions, or their relatives, were blamed in one way or another, until science clarified that there were biological (genes plus the environment) explanations for these conditions. As a result, although there is still much to improve, these persons are treated today with much more respect and compassion.

What about killers and horrible criminals? Should we treat them like we treat those that suffer from epilepsy? Basically yes, concludes the author (who also discusses the differences between atheists and believers, and the evolution of the death penalty in the US, his country). That does not imply that they should not be separated from society, in the same way that governments impose lockdowns or quarantines. The example is the prison system of Norway, probably the most advanced country in the world. In a wonderful page (379), Sapolsky combines a condemnation of white supremacism with praise for Scandinavian social democracy. The author of the massacre of the Utoya island, where dozens of young socialdemocrat activists were killed, is today learning political science in a three room living space, separated from society, where he has access to TV, computer, treadmill, kitchen and social and psychological support. Countries that are closer to the Norwegian system have better social and educational outcomes than countries that are closer to more punitive systems and that look more to the past than to the future.

The book concludes with a profoundly egalitarian message. There is little individual merit in those that “succeed.” Readers should not skip the footnotes (or the personal autobiographic references of the author). In page 391, a footnote reflects about the words of a successful Harvard student of humble origin that, in a graduation ceremony, paid tribute to his parents, who made great sacrifices so that he could study: “My talents are indistinguishable from their labors; they are one and the same”

Social democracy against the insurgent far right

France stopped the far right in the recent legislative elections. The only feasible government that can emerge from the resulting Parliament is a coalition of the united left and the centrists, and this coalition can only be built around the pro-European center-left. 

In the UK, the Labour Party led by Keir Starmer defeated the Conservative Party, after the party of Winston Churchill had become the party of Boris Johnson, coinciding with the madness of the Brexit referendum.

Starmer seeks to correct market failures and improve the welfare of workers. It also seems to have a meaningful interest in spreading power more evenly across the kingdom and in increasing again ties with Europe.

In Spain and Germany, there is a social democrat prime minister in a coalition government. Both Sanchez and Scholz are pillars of European integration and reliable partners of the European institutions. In the Scandinavian countries, social democrats remain strong, although they have been weakened and they also face threats from the far right. In Italy, the only alternative in the mid run to Meloni is the the center left of the Democratic Party.

In the European Union, a coalition form the center right to the greens, with the social democrats in the center, has left the far-right in any of its versions, out of the current majority. Therefore, a continuity of policies to fight climate change and to further integrate Europe must be expected. The strategy of those on the right (such as Manfred Weber) that wanted to move the balance to normalize part of the extremists, has failed.

Von der Leyen and Tusk are not social democrats. But they are very aware that the pro-European left, is a crucial part of the alliance that must keep Europe united in a world that faces enormous threats. Von der Leyen mentioned the federalist Manifesto of Ventotene, authored among others by the Italian Communist Altiero Spinelli, in her acceptance speech.

In the US, any alternative to Trumpism depends on the ability of the Democrats to build a strong coalition form the extreme left to the center-right, with credible leadership, in the name of democracy and reason.

Australia has a Labour Prime Minister. Chile, Brazil, and Colombia have leftist presidents with the support of the center-left, and all of them had to defeat dangerous far right populist politicians in their presidential elections.

It is true, the world has seen democracies captured by identitarian national populists like Modi, Orban, Erdogan or Netanyahu, but it has also seen how their opposition grows stronger and they can be defeated, as their peers have been defeated in Poland or in the UK.

The emerging social democratic leaders and parties are federalist, meaning a left where the organization of government (European integration, decentralization, administrative reform to make a better use of expert and dispersed knowledge), the organization of a multi-level democracy, is part of the egalitarian project, is a necessary condition of it.

It is not the same social democracy of the post second world war decades or of the 1980s in Spain. It is weaker but it is still central. It is impossible to defeat the insurgent far right without the modern social democratic parties. They have added to their doctrine the need for a green transition to fight climate change in a fair way. Our parties must be aware of their mistakes, but proud of their accomplishments, and work together to give hope to workers and middle classes.