July 9, 2013
More than twenty years ago three American economists Kevin Murphy, Andrei Shleifer, and Robert Vishny (1991) found the evidence that "countries with a higher proportion of engineering college majors grow faster; whereas countries with a higher proportion of law concentrators grow more slowly." Since then other researchers tested and confirmed their theory and findings.
Murphy, Shleifer, and Vishny argue that a country of lawyers direct talent towards rent seeking, when a country of engineers apply talent to entrepreneurship. Occupational choices depend on market institutions. Returns to ability and education determine occupational choice. Returns to scale in each sector of economy, market size, and compensation contracts also affect occupational choice. Many talented people become entrepreneurs when it is easy to do business and keep profits. Otherwise, talented people join law firms, government bureaucracy, and other rent-seeking institutions.
Does this explanation fit the case of Ukraine? Definitely, you see very few entrepreneurs in Ukraine. What do you see most of time? Lawyers, various government officials, and corrupt businessmen. Most lawyers make big bucks in raiding private property. Government officials take and extort bribes. Successful businessmen are also corrupt ones. They are not entrepreneurs. In Ukraine a successful businessman who uses his political connections to corner the market and raid someone's business is not entrepreneur. This businessman's success is not the result of market competition. His fortune is not the result of his alertness to some change in the economy. He is successful because he applies his talent to corruption. That's pretty much a current economic situation in Ukraine, the nation of many lawyers and very few engineers.