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

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

by Ray Fisman, Edward Miguel
 

See All Formats & Editions

Meet the economic gangster. He's the United Nations diplomat who double-parks his Mercedes on New York City streets at rush hour because the cops can't touch him--he has diplomatic immunity. He's the Chinese smuggler who dodges tariffs by magically transforming frozen chickens into frozen turkeys. The dictator, the warlord, the unscrupulous bureaucrat who bilks the

Overview

Meet the economic gangster. He's the United Nations diplomat who double-parks his Mercedes on New York City streets at rush hour because the cops can't touch him--he has diplomatic immunity. He's the Chinese smuggler who dodges tariffs by magically transforming frozen chickens into frozen turkeys. The dictator, the warlord, the unscrupulous bureaucrat who bilks the developing world of billions in aid. The calculating crook who views stealing and murder as just another part of his business strategy. And, in the wrong set of circumstances, he might just be you.

In Economic Gangsters, Raymond Fisman and Edward Miguel take readers into the secretive, chaotic, and brutal worlds inhabited by these lawless and violent thugs. Join these two sleuthing economists as they follow the foreign aid money trail into the grasping hands of corrupt governments and shady underworld characters. Spend time with ingenious black marketeers as they game the international system. Follow the steep rise and fall of stock prices of companies with unseemly connections to Indonesia's former dictator. See for yourself what rainfall has to do with witch killings in Tanzania--and more.

Fisman and Miguel use economics to get inside the heads of these "gangsters," and propose solutions that can make a difference to the world's poor--including cash infusions to defuse violence in times of drought, and steering the World Bank away from aid programs most susceptible to corruption.

In a new postscript, the authors look at how economists might use new tools to better understand, and fight back against, corruption and violence in the aftermath of the 2008 financial crisis. Take an entertaining walk on the dark side of global economic development with Economic Gangsters.

Editorial Reviews

Publishers Weekly
Starred Review.

In this surprisingly spry read, authors and economics professors Fisman and Miguel tackle economic development issues in Africa, Asia and Latin America, beginning with the question: after decades of independence and billions in foreign aid, why are so many developing countries still mired in poverty? A big reason, they contend, is corruption. Looking at specific examples, Fisman and Miguel examine various methods and motives of corruption, how agencies counteract it, and what it means with regard to human nature and the fate of nations. Fascinating insights abound: the high correlation between UN diplomats' parking violations and corruption in the home country; the successful public shaming techniques used by Bogata's Mayor Antanas Mockus to reduce criminality; the drastic reduction in road building corruption resulting from Indonesia's simple statement that projects would be audited. Ultimately, Fisman and Miguel conclude that there's not enough verifiable, reproducible results to say whether poverty is intractable and corruption inevitable, or whether poor countries remain poor because they haven't received enough quality aid. Instead, they argue forcefully for more blind trials in economics research to evaluate various development approaches. This thorough, thoughtful guide to global corruption is an engaging, disarmingly upbeat read for fans of Freakonomics and Malcolm Gladwell.
Copyright © Reed Business Information, a division of Reed Elsevier Inc. All rights reserved.

Library Journal

Economists Fisman and Miguel address the role of corruption and violence in impoverishing nations such as Kenya and Chad. They avoid academic jargon and write for a general audience in explaining how economists study the problem of pervasive endemic poverty. They relate specifically (indicative of their light approach) how, by studying the pattern of UN diplomatic parking violations in New York City, economists have estimated corruption in various countries. For example, diplomats from countries like Sweden and Canada had no violations while those from Chad and Sudan were egregious offenders. Fisman and Miguel look at violence as both a cause and an effect of poverty. They show that conflict risk in Africa increases from roughly 20 to 30 percent in drought years. To alleviate poverty best, they recommend experimentation with different policies such as crop insurance to find those methods that are effective in assisting the poor without enhancing conditions conducive to corruption and violence. Reminiscent of other lighter looks at economics, e.g., Steven D. Levitt and Stephen J. Dubner's Freakonomics and Tim Harford's The Undercover Economist, this book makes developmental economics both entertaining and accessible to a broad audience and is recommended to both public and academic libraries.
—Lawrence Maxted

From the Publisher
"[S]mart and eminently readable . . . [F]isman and Miguel try to do for global poverty what [Steven] Levitt did for domestic economic issues. For example, they look at the way 'witches' are killed in Tanzania whenever rainfalls fail and food is scarce; it turns out that families try to save food by executing less-productive elderly women as witches."—Nicholas Kristof, NYTimes.com's On the Ground blog

"Columbia's Ray Fisman and Berkeley's Ted Miguel are two of the most creative and interesting economists I know. Each is driven to better understand just what keeps poor countries in poverty, and they are willing to try some pretty amazing research strategies to figure it out. They have traveled far and wide—both geographically and intellectually—and in their beautifully written book Economic Gangsters, they shine a well-honed statistical spotlight on the twin evils of corruption and violence. The book is a dead-set page turner, and there's nothing more fun than feeling like you are next to them as they travel the world in search of the scoundrels responsible for so much suffering."—Justin Wolfers, Freakonomics blog

"[Fisman and Miguel] avoid academic jargon and write for a general audience in explaining how economists study the problem of pervasive endemic poverty. . . . Reminiscent of other lighter looks at economics, e.g., Steven D. Levitt and Stephen J. Dubner's Freakonomics and Tim Harford's The Undercover Economist, this book makes developmental economics both entertaining and accessible to a broad audience."—Library Journal

"Like many a good television sleuth (think Jessica Fletcher or Ellery Queen), [Fisman] is also an author, even if there the similarity ends. He has written Economic Gangsters and in it he and co-author Edward Miguel trace the steps oft eh corrupt using not DNA or forensic science but data and statistics. Theirs is a treatment to the truism that when you are looking for clues, follow the money. The book gives half a dozen examples of how data can be used to find corrupt behaviour, particularly in developing countries."—Parminder Bahra, The Times (of London)

"In this surprisingly spry read, authors and economics professors Fisman and Miguel tackle economic development issues in Africa, Asia, and Latin America, beginning with the question: after decades of independence and billions in foreign aid, why are so many developing countries still mired in poverty? . . . This thorough, thoughtful guide to global corruption is an engaging, disarmingly upbeat read for fans of Freakonomics and Malcolm Gladwell."—PublishersWeekly.com (starred review)

"In their new book Economic Gangsters, authors Raymond Fisman and Edward Miguel try to understand what motivates people to break the law, the consequences of their actions and the implications for prevention. Their effort stands out among many others for their cool-headed application of economic cost-benefit analysis to this shady human behavior."—Shanghai Daily

"Raymond Fisman and Edward Miguel, two young rising stars of economics, apply the Freakonomics approach to the problems of development in their new book Economic Gangsters. It's a superbly crafted set of essays that raise the bar for clear, accessible pop-economics writing, and offers an excellent overview of recent research into the corruption, violence, and poverty that have long bedeviled the developing world."—Bradford Plumer, The National

"Freakonomics for the Third World. . . . So far this is sounding very much like Steven Levitt's and Stephen Dubner's Freakonomics: looking for an interesting data set with which to test a certain hypothesis, and indeed the basic approach is similar. The ambition, however, is rather grander."—Tim Worstall, The Daily Telegraph

"This book deserves wide readership. Some readers will come for the clever title and the cover's provocative silhouette of a machine-gun-wielding gangster. More, hopefully, will be drawn to the book by reviews like this one and the authors' important message. Economic Gangsters is topical and lively, as its cover suggests, but it is also deadly serious and deeply engrossing. Fisman and Miguel study perhaps the most important question of our day—why some countries grow and prosper while others are trapped in self-reinforcing cycles of violence, corruption, and poverty."—Choice

"This is sparkling stuff, and the story is enjoyably retold in Fisman and Miguel's slim new volume, Economic Gangsters. I recommend the book wholeheartedly; it is engaging and confidently written, and it describes research of genuine interest. . . . Economic Gangsters tackles two big 'institutional' problems of development economics—corruption and violence—through a series of vignettes based on research studying the value of political connections, smuggling between China and Hong Kong, the links between rainfall and civil war, witch killings in Africa, and rebuilding Vietnam after 'the American War.'"—Tim Harford, Reason
"Analyses of crime and corruption tend, not surprisingly, to be long on description and short on empirical analysis. Statistics on amounts embezzled or number of people killed in a genocide lack precision, where they exist at all. [Economic Gangsters] sets out the clever use of the rare reliable statistics that are available to shed light on particular episodes of corruption or violence, and in particular on whether it is possible to design policies which change the incentives of those behaving in undesirable ways. . . . All in all, this is a very readable book which makes a fascinating contribution to the renaissance of careful empirical microeconomics applied to development."—Diane Coyle, The Business Economist

"Fisman and Miguel have turned out another economics tome, written in a friendly and engaging way, yet this one reeks of practicality."—Sacramento Book Review

"Many readers, including me, will applaud Economic Gangsters for its goal, style, method, and overarching message. . . . Its style is friendly and colloquial, inviting undergraduates and general readers to reconsider big questions about development and foreign aid."—Robert Klitgaard, Economic Development and Cultural Change

Reason
This is sparkling stuff, and the story is enjoyably retold in Fisman and Miguel's slim new volume, Economic Gangsters. I recommend the book wholeheartedly; it is engaging and confidently written, and it describes research of genuine interest. . . . Economic Gangsters tackles two big 'institutional' problems of development economics—corruption and violence—through a series of vignettes based on research studying the value of political connections, smuggling between China and Hong Kong, the links between rainfall and civil war, witch killings in Africa, and rebuilding Vietnam after 'the American War.'
— Tim Harford
Choice
This book deserves wide readership. Some readers will come for the clever title and the cover's provocative silhouette of a machine-gun-wielding gangster. More, hopefully, will be drawn to the book by reviews like this one and the authors' important message. Economic Gangsters is topical and lively, as its cover suggests, but it is also deadly serious and deeply engrossing. Fisman and Miguel study perhaps the most important question of our day—why some countries grow and prosper while others are trapped in self-reinforcing cycles of violence, corruption, and poverty.
The Daily Telegraph
Freakonomics for the Third World. . . . So far this is sounding very much like Steven Levitt's and Stephen Dubner's Freakonomics: looking for an interesting data set with which to test a certain hypothesis, and indeed the basic approach is similar. The ambition, however, is rather grander.
— Tim Worstall
Sacramento Book Review
Fisman and Miguel have turned out another economics tome, written in a friendly and engaging way, yet this one reeks of practicality.
The National
Raymond Fisman and Edward Miguel, two young rising stars of economics, apply the Freakonomics approach to the problems of development in their new book Economic Gangsters. It's a superbly crafted set of essays that raise the bar for clear, accessible pop-economics writing, and offers an excellent overview of recent research into the corruption, violence, and poverty that have long bedeviled the developing world.
— Bradford Plumer
Shanghai Daily
In their new book Economic Gangsters, authors Raymond Fisman and Edward Miguel try to understand what motivates people to break the law, the consequences of their actions and the implications for prevention. Their effort stands out among many others for their cool-headed application of economic cost-benefit analysis to this shady human behavior.
Freakonomics blog
Columbia's Ray Fisman and Berkeley's Ted Miguel are two of the most creative and interesting economists I know. Each is driven to better understand just what keeps poor countries in poverty, and they are willing to try some pretty amazing research strategies to figure it out. They have traveled far and wide—both geographically and intellectually—and in their beautifully written book Economic Gangsters, they shine a well-honed statistical spotlight on the twin evils of corruption and violence. The book is a dead-set page turner, and there's nothing more fun than feeling like you are next to them as they travel the world in search of the scoundrels responsible for so much suffering.
— Justin Wolfers
The Business Economist
Analyses of crime and corruption tend, not surprisingly, to be long on description and short on empirical analysis. Statistics on amounts embezzled or number of people killed in a genocide lack precision, where they exist at all. [Economic Gangsters] sets out the clever use of the rare reliable statistics that are available to shed light on particular episodes of corruption or violence, and in particular on whether it is possible to design policies which change the incentives of those behaving in undesirable ways. . . . All in all, this is a very readable book which makes a fascinating contribution to the renaissance of careful empirical microeconomics applied to development.
— Diane Coyle
The Times (of London)
Like many a good television sleuth (think Jessica Fletcher or Ellery Queen), [Fisman] is also an author, even if there the similarity ends. He has written Economic Gangsters and in it he and co-author Edward Miguel trace the steps oft eh corrupt using not DNA or forensic science but data and statistics. Theirs is a treatment to the truism that when you are looking for clues, follow the money. The book gives half a dozen examples of how data can be used to find corrupt behaviour, particularly in developing countries.
— Parminder Bahra
NYTimes.com's On the Ground blog
[S]mart and eminently readable . . . [F]isman and Miguel try to do for global poverty what [Steven] Levitt did for domestic economic issues. For example, they look at the way 'witches' are killed in Tanzania whenever rainfalls fail and food is scarce; it turns out that families try to save food by executing less-productive elderly women as witches.
— Nicholas Kristof

Product Details

ISBN-13:
9781400834792
Publisher:
Princeton University Press
Publication date:
01/04/2010
Sold by:
Barnes & Noble
Format:
NOOK Book
Pages:
264
Sales rank:
1,077,372
File size:
609 KB

Read an Excerpt

ECONOMIC GANGSTERS

Corruption, Violence, and the Poverty of Nations
By Raymond Fisman Edward Miguel

PRINCETON UNIVERSITY PRESS

Copyright © 2008 Princeton University Press
All right reserved.

ISBN: 978-0-691-13454-3


Chapter One

Fighting for Economic Development

In the summer of 2004, world-renowned Kenyan novelist Ngugi Wa Thiong'o returned to his homeland after twenty-two years in exile. He flew to Nairobi to launch his new novel, Wizard of the Crow, his first in over a decade. Ngugi's earlier works-a dozen or so novels and collections of stories, which he began publishing just after Kenyan independence in 1963-had been wildly successful, not only in Kenya but throughout the world. Through his carefully wrought characters and achingly familiar plots of loss and suffering, Ngugi captured the bewildering contradictions left behind in the wake of European colonialism.

Ngugi had lived those contradictions and drew inspiration from his experiences, which were shared by so many of his fellow Kenyans. Ngugi had grown up during the 1950s, when Kenya had been rocked by the Mau Mau rebellion against its British colonizers. He had witnessed the murder of his brother, who had died along with thousands of other Kenyans in opposing the British. And he had celebrated with his countrymen as they watched the British imperial machinery retreat in 1963 at the birth of the Kenyan nation. He had also suffered at the hands of the second free Kenyan government-for despite the country's turn to self-rule and hopes for a bright future, Ngugi had been forced to flee Kenya in the 1980s following years of persecution and imprisonment for his sharp criticism of the post-independence regime.

Novels like A Grain of Wheat, published in 1967, just four years after Jomo Kenyatta became independent Kenya's first president, provided a window into the hopes and frustrations that came with the dismantling of the Western empires-dreams of economic prosperity measured against tales of corruption seeded throughout the new government. A Grain of Wheat is a fable about the early, tumultuous years of a free Kenya, and captures the unwavering hope for a bright future coupled with the fear of what the British legacy of corruption and violence might bring. "Would independence bring the land into African hands? And would that make a difference to the small man in the village?" asks Ngugi through the novel's main character, Gikonyo.

In the 1950s and 1960s, that same question echoed in the minds of the citizens of newly independent countries from Kenya and Sierra Leone to Indonesia and Pakistan. What would the future hold? Would freedom bring jobs, peace, and wealth? The sentiment that drove these concerns would help make Ngugi's novels international sensations; they've been translated into more than thirty languages and are considered classics of African literature. For Ngugi himself, the post-independence years spent in exile had brought professional acclaim and prosperity. He had taught at New York University as the Erich Maria Remarque Professor of Languages and is now a professor at the University of California at Irvine, where he directs the Center for Writing and Translation. And he returned to Kenya in 2004 not with bitterness about the past but with optimism for the future. "I come back with an open mind, an open heart and open arms. I have come to touch base. I have come to learn," he told the crowds of well-wishers upon landing in Nairobi.

But even in the face of the enthusiasm, hope, and joy that greeted his return-a visit that came not long after Kenya's longtime dictator Daniel arap Moi, his longtime persecutor, had stepped down to make way for a democratically elected government-Ngugi was brutally assaulted in his rented Nairobi apartment, beaten, his face burned with cigarettes; his wife, Njeeri, was raped. Many interpreted the attack as payback from the earlier regime for Ngugi's outspoken criticism of Kenyan politicians and politics, and served as yet another reminder of the despair and unfulfilled aspirations of Kenya's people. The parallels were made even more poignant by the widespread political violence in Kenya in early 2008.

This isn't the way it was supposed to be.

* * *

Over the past four decades, we've witnessed some of the greatest economic miracles in human history. In 1963, an average person in South Korea or Kenya earned only a few hundred dollars a year. Most eked out a living as peasant farmers. Back then, it wasn't so clear where you'd lay your bets if you had to guess which country would be rich at the end of the millennium. Both countries were recovering from the devastating armed conflicts that had accompanied decolonization. South Korea had already boosted its literacy rates by the early 1960s, but Kenya had much greater natural resource wealth to exploit, including some of the world's richest soil for growing coffee, cotton, and tea.

After decades of first manufacturing textiles, then refining steel, and finally producing high-end consumer goods and advanced electronics, South Korea pulled off an economic leapfrog that today puts it among the world's wealthy nations. South Korean citizens now enjoy a standard of living rivaling the Japanese, their former colonizers, and that of many European nations. But the average Kenyan is no better off today than he was in 1963.

What went wrong? In looking back over four decades of history, what can we learn of why South Korea-and Malaysia and Thailand and now China-began to close the income gap with Europe and North America, while Bangladesh, Pakistan, Central America, and most of sub-Saharan Africa remain mired in extreme poverty?

This is the puzzle that gets the two of us out of bed and into the office each morning, and solving it is the ultimate purpose of the research that we'll share with you. This book isn't about finding the singular explanation for why poor countries are poor. You should probably be suspicious of anyone selling you a grand unified theory of poverty (or anything else). Human societies are far too complicated for that.

But neither do we subscribe to the view that no one can make progress on such a vexing problem. Many hard lessons have been learned since 1963. The experiences of newly independent Kenyans-the fruits of their hard labor lost to corruption or destroyed by violence-foreshadow the twin evils of corruption and violence that have been so central to Kenya's modern economic experience as to be inseparable from it. As we'll see, Kenya's story is far from unique: from the post-colonial plundering in Indonesia to the bloody civil wars of Central America and Africa, the destructive power of corruption and violence is clear for all to see.

The Lives and Times of Economic Gangsters

Al Capone is remembered as a gangster and a brutal, cold-blooded killer. It is perhaps less widely known that Capone was also an accountant for a Baltimore construction firm before joining and eventually leading Chicago's North Side Gang. We don't normally associate the relatively humble and perhaps humdrum vocation of bookkeeping with mob icons like Capone. There are no scenes of Al Pacino struggling to balance the books or poring over financial statements in the films Scarface or The Godfather. But Capone's training as an accountant was instrumental in helping him organize a vast criminal business empire. The emphasis was on business-it's just that Capone's business happened to be in prostitution, gambling, racketeering, and selling booze during Prohibition, illicit trades where disputes were settled with machine guns rather than lawyers.

According to biographer Robert Schoenberg, Capone was "a businessman of crime [with] lucid, rational, and discoverable reasons for his actions." He is the quintessential economic gangster: a violent and lawless criminal who wrought havoc on 1920s Chicago, but did so in a rational, calculating way. A cold-blooded killer, yes, but violence was simply a tool Capone used to keep the money rolling in.

The pathological cruelty of gangsters like Capone makes them particularly repellant-they're guilty of crimes of calculation, never passion-but also the source of endless fascination. Yet their narrow self-interest, driven by money and power, makes them more understandable to economists, not less. It's not that we economists do not realize how important emotions can be in governing behavior (we are in fact people too). But the side to human behavior that economists choose to study is embodied in the species Homo economicus, or Economic man-a rational, self-serving being whose actions and choices are based on logical decisions, not rash impulses. If the criminal mind, like Capone's, really is very close to the self-serving ideal in our models, then economic analysis can be a useful tool in figuring out how to combat corruption and other forms of lawbreaking.

There's good reason to believe that the characters that populate this book-from the despotic warlords of sub-Saharan Africa to the smugglers of the South China Sea-do indeed obey the logical laws of economics. To understand why, it's useful to think about what keeps you from cheating a little on your taxes, or slipping out of a restaurant without paying the bill. It's in part a fear of the legal consequences if you get caught. But the punishment of tax cheats is rare and usually light, and you could stiff a waiter his tip without risking any legal penalties (although you may not be welcome back at that particular restaurant). Yet most people still do the right thing most of the time. Probably more than fines or jail time, what constrains us from breaking the law is the fact that it just isn't right. We're constrained by conscience.

But antisocial personalities like Capone were blessed with relatively few such encumbrances. So if anyone is going to behave in their narrowest self-interest-by cheating on taxes or restaurant bills, or even killing off business rivals to earn a few dollars more-we would expect it to be a criminal character unconstrained by scruples, what we call the "economic gangster." And as we'll see, there's a bit of economic gangster in each of us. When placed in desperate circumstances all people are reduced to the rational calculus of survival, with conscience a forgone luxury.

The goal of this book, and the research it's based on, is to understand the havoc wrought by the corruption and violence of the world's economic gangsters, and to place their impacts on economic development in sharper relief. (To appreciate the problem, imagine what life would be like under Mayor Capone of Chicago or even President Capone. Unfortunately, many people in the developing world don't need to use their imaginations to grasp what it means to be ruled by thuggish bandits.)

While we certainly don't have all the answers, in our research odyssey to make sense of corruption and violence over the past decade, we have uncovered some amazing facts-and surprising solutions.

We are researchers and professors in development economics at U.S. academic institutions (Ray at the Columbia Business School and Ted at the University of California, Berkeley). But our research forces us out of the ivory tower to get a closer look at the real world. Our economic detective work has taken us from remote Kenyan villages to the floor of the Indonesian stock exchange for new angles on the sources of global poverty. Unexpected answers about corruption and violence are found in the most unlikely of places: in tales of smuggled Chinese chickens, diplomatic parking tickets in Manhattan, and even Tanzanian witch-hunts.

This book brings together the lessons we've learned by marrying economic analysis with the insights gained in our expeditions through the rural back roads and glittery new skyscrapers of the developing world. We hope these lessons can, in some small way, help Kenyans and the rest of the developing world finally realize the economic aspirations they hold for themselves and their children.

It's not an overstatement to say that the question that we confront-how best to fight global poverty-is of epochal importance. The well-being of most human beings is at stake. Recent World Bank calculations estimate that a billion people live on less than one dollar a day, while half the world's population-about three billion-gets by on a daily income of less than two dollars.

How do people survive on so little? The answer is brutally simple: not well. Hunger plagues daily life for hundreds of millions, and health care is scarce or nonexistent. In war-torn Chad, Niger, and Sierra Leone, adult literacy rates still hover under 30 percent, and children have a better chance of dying before age one than they have of graduating from high school.

Global poverty matters a lot even to those Americans (and other privileged citizens of the Western world) who generally have little regard for what goes on beyond their own borders-even if they aren't conscious of it. As we'll see repeatedly throughout this book, we're all stuck with one another on this planet. Poverty breeds desperation and discontent: we wake up daily to headlines of terrorist threats, environmental degradation, and other global ills that find their origins in Middle Eastern slums and the rainforest clear-cuts scarring the Congo River basin. Tackling the problem of global poverty is an imperative for the entire world, both rich and poor.

Hope For a New Generation?

International economic development returns to the public eye in the United States every few years. Lately, renewed interest in Africa's plight in particular has been fueled by the star power of Angelina Jolie and U2's Bono, combined with devastating images of the HIV/AIDS epidemic and genocide in Darfur, Sudan. We hear pleas for debt relief and more generous international aid from America and Europe. Entrepreneurs like Bill Gates and Warren Buffett are spending tens of billions of their own dollars to fight malaria, treat AIDS, and educate Africans, to ultimately "make poverty history."

But we've been here before. Our generation had its LiveAid concerts and "We Are the World" albums following the horrific 1984 famine during the Ethiopian civil war-star power (there's Bono again) mixed with the iconic image of a starving child left to die on the dusty earth. Private charities and countries' foreign aid agencies have spent billions annually for decades now hoping to wipe out poverty. We've seen round after round of debt relief since the 1970s. But despite all this the average Kenyan is still no richer today than in 1963. Will things really be any different this time around?

Well-informed people hold widely divergent and passionate views on this fundamental question. You might think economists mainly spend their time engaged in emotionally inert conversations on the niceties of monetary policy or crunching numbers on next month's inflation (and this does describe what many economists do). Yet these otherwise mild-mannered, monotone academics have almost come to blows over the question of why foreign aid to developing countries seems to have failed so spectacularly.

Fundamentally, it boils down to whether rich countries have already provided too much money to help Kenya and others out of poverty-or not nearly enough. Leading academic researchers have lined up on both sides. The answer turns out to hinge critically on one's views of the role that corruption and violence play in the impoverishment of nations. Maybe corruption and violence are mainly just the symptoms of poverty. If this is the case, once rich-country donors finally send enough money to Kenya to jump-start economic growth, its citizens will no longer have to fight one another to survive. On the other hand, if most foreign aid is lost to the grabbing hands of corrupt officials or destroyed in civil strife, then how could aid dollars ever lift countries like Kenya out of poverty? More aid would just enrich an already corrupt elite, and could even make the twin problems of corruption and violence worse by giving people even more money to fight over.

(Continues...)



Excerpted from ECONOMIC GANGSTERS by Raymond Fisman Edward Miguel Copyright © 2008 by Princeton University Press. Excerpted by permission.
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
Excerpts are provided by Dial-A-Book Inc. solely for the personal use of visitors to this web site.

What People are Saying About This

Levitt
Economic Gangsters is a fascinating exploration of the dark side of economic development. Two of the world's most creative young economists use their remarkable talents for economic sleuthing to study violence, corruption, and poverty in the most unexpected ways. Subjected to their genius, seemingly inconsequential events (like New York City parking tickets and Suharto's catching a cold) become potent tools in understanding how the world really works. Rarely has a book on economics been this fun and this important.
Steven D. Levitt, coauthor of "Freakonomics"
Dan Ariely
Economic Gangsters reveals the important connections between poverty, crime, and corruption, helping us to see what a small and intertwined world we live in.
Dan Ariely, author of "Predictably Irrational"
Abhijit Banerjee
Those who love to pontificate, unconstrained by data, about the nature of human evil, will hate this book. It takes on corruption, murder, and civil wars, and shows us, step by step, how economic methods, creatively used, can help us find relevant data in unexpected places, data that makes it possible to offer rigorous (and sometimes surprising) answers to questions that, hitherto, had been consigned to the realm of pure speculation.
Abhijit Banerjee, director of the Abdul Latif Jameel Poverty Action Lab at the Massachusetts Institute of Technology
William Easterly
I already knew Fisman and Miguel were the best and the brightest in the new generation of development economists. Now I know they are great writers—and great detectives. They find ingenious ways to get inside the issues of corruption and violence that leave behind the tired analyses of the past. It's a lively tale that nobody concerned about world poverty or violence can afford to miss.
William Easterly, author of "The White Man's Burden"

Meet the Author

Raymond Fisman is the Lambert Family Professor of Social Enterprise and director of the Social Enterprise Program at Columbia Business School. He is a columnist for Slate. Edward Miguel is professor of economics and director of the Center of Evaluations for Global Action at the University of California, Berkeley.

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