Wednesday, November 25, 2009

What institutions explain the peacefulness of societies?

I don’t think many people would dispute the idea that the observance of common rules plays an important role in making it possible for individuals to live together peacefully in society. Even if I were to quote something written by Friedrich Hayek that emphasizes the importance of that idea, I doubt whether that would provoke many people to dispute it. (For some suitable quotes from Hayek, see: Are the institutions of the “good society” the same as those of the “great society”? )

However, in this instance accepting the logic of a proposition is only one step along the road to understanding its practical significance. It might be useful to know to what extent the peacefulness of societies can be attributed to various factors associated with observance of common rules – factors such as political stability, the quality of legal institutions, civil liberties, and strong social networks and relationships. I report below an attempt to assess the relative importance of these factors using regression analysis.

The measure of the peacefulness of societies used in the analysis is the Legatum Institute’s safety and security sub-index (LSS), which is a component of its Prosperity Index. Indicators covered in the LSS include standard measures of violence such as homicides and assault, refugees and displace persons, flight by professionals (brain drain), civil war and ethnic violence, survey information relating to incidence of theft and perceptions of whether people feel safe walking alone at night. (I compared the LSS and the Global Peace Index here.)

The measure of political stability is the World Bank’s political stability and absence of violence index which captures perceptions of the likelihood of governments being overthrown by unconstitutional or violent means.

The measure of the quality of legal institutions is the World Bank’s rule of law index. This index captures perceptions about contract enforcement, property rights, the police and the courts, as well as the likelihood of crime and violence. The appropriateness of this index for current purposes is discussed here.

The measure of civil liberties is the Freedom House civil liberties index. This index covers freedom of expression and belief, associational and organizational rights, rule of law and personal autonomy.

The measure of social networks and relationships is the Legatum Institute’s social capital sub-index (LSC), which is a component of its Prosperity Index. The coverage of the LSC includes perceptions relating to reliability of others, importance of friends, trustworthiness of others and membership of various types of community organizations.

To enable the estimated contribution of the explanatory variables to be compared more readily all indexes have been converted to the same form as the Legatum indexes i.e. with highest value equal to one and the lowest value equal to zero. Estimated coefficients (with standard errors in brackets) are as follows:

• Intercept:                              0.06 (0.03)
• Political stability:                 0.46 (0.06)
• Quality of legal institutions: 0.42 (0.06)
• Civil liberties:                     -0.02 (0.05)
• Social capital:                     -0.01 (0.04)          Adj. R squared = 0.82

The results confirm that political stability and quality of legal institutions play an important role in explaining the peacefulness of societies. They suggest that civil liberties and social capital do not play a significant independent role in this context, but it is possible that these factors may contribute positively to political stability and the quality of legal institutions.

A chart showing how well political stability and quality of legal institutions predict the peacefulness of societies is shown below.

It is apparent from the chart that actual peacefulness is never much greater than predicted peacefulness. This means that political instability and poor quality legal institutions virtually guarantee that a society will not be peaceful.

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