The Past Speaks

Over at Works in Progress, economic historian Mark Koyama has published a thoughtful essay that draws on the historical research on state capacity to explain why Western nations, particularly the United States, have handled the pandemic less effectively than many East Asian countries.

State capacity refers to the ability of the state to enact and enforce its policies. It is often broken down into two components: fiscal capacity – the state’s ability to raise revenue via taxation without mass evasion – and administrative or legal capacity – the ability to create and enforce its rules. Fiscal capacity matters because a state needs revenue in order to operate. Administrative or legal capacity matters because it is what allows states to actually operationalize their policy goals. While the analogy is not perfect, in a meaningful sense state capacity can be thought of as a form of capital: it requires investment to build, and it can easily deteriorate and corrode.

Koyama shows that while the US is a rich country, its level of state capacity is somewhat lower than what one would predict just by looking at GDP per capita alone and that this weak state capacity helps to explain why the death toll in the US is so appallingly high.

I like Koyama use of the concept of state capacity as it cuts through the standard nostrums of both the political right and the political left and uses historical and comparative data to help us to think about the capacity of governments to competently deliver public goods.

Works in Progress has recently published a couple of good pieces by researchers that use the concept of state capacity to understand current events (see here and here).