Why does it matter? Suppose that poor countries in general grow slower than wealthy
countries. Since most poor countries are dictatorships and all wealthy countries are
democracies, we will conclude that economic growth is faster under democracies. But this
will be an invalid conclusion: the difference will be due to conditions under which these
regimes exist, not to anything they do. As another example, consider the possibility that
democracies are vulnerable to economic crises, while dictatorships survive them. Again, if
we were to just compare the growth rates observed under the two regimes, we would
conclude that democracies grow faster. And, again, this conclusion would be erroneous: we
will have observed this difference only because democracies died when they encountered
bad economic conditions and became dictatorships capable of surviving survived under
these conditions. Finally, consider the possibility that there is some factor which cannot be
observed systematically and which affects both the political regime and the rate of growth.
Enlightened leaders, for example, may opt for democracy and well manage the economy. If
we rely on comparisons of the observed cases, we will--yet again erroneously--conclude
that faster growth is due to democracy, rather than to the enlightened leadership.