Al's talk Friday had me worried, especially when he asked for a "white board." I reminded him that this was not to be an academic lecture; he told me not to worry, and indeed, there was no need for concern.
Al spoke eloquently and persuasively about two broad themes (see event page When Capital Earns a 20% Real Return, What is Left for Labor? A Glimpse into Latin American Reality for photos and transcripts). First, on how the high returns that capital demands in order to be active in Latin America (20 percent plus) may be squeezing the returns to the less mobile factor of production, labor. He also spoke about the push back we are seeing, especially in Latin America, on what we might call conventional neo-classic economic policy -- John Williamson's Washington Consensus (John was a discussant at Friday’s event).
These themes are related. Al's main point was that bad policies (protectionism, weak property rights, red tape) make capital demand high rates of return, and that leaves less for everyone else. The Washington Consensus has come in for a lot of bashing since John first coined the term in 1987. But just maybe it's not the Washington Consensus that is the problem. Maybe it's that countries have not taken the messages of the Consensus sufficiently seriously.
After the event one participant approached me to say, "Dennis, you really need to do more of this -- bringing the great names in development economics to CGD, and just letting them talk." It was a treat to listen to Al and to be reminded that good and clear economic thinking still has a place in Washington's world of political correctness and policy compromise.
Where're the new generation of economic policy gurus?
Related;
Trade policy and the real exchange rate : some theoretical and practical applications for developing countries
Q&A with Arnold Harberger
Microeconomics - by Arnold C. Harberger
Selected Bibliography for Arnold C. Harberger
A Vision of the Growth Process
Applications of Economic Theory (Macroeconomic problems of developing countries)
Harberger, A., "The search for relevance in economics"
Letter to a Younger Generation
Abstract: This paper has the purpose of transmitting to the younger generation of economists some insights and judgments that seem to have been bypassed or overlooked as the literature of the economics profession has evolved. In the main, the paper tries to explain what is The right place within economics to employ particular sets of assumptions or methods. Where is the use of the representative consumer appropriate, and where not? What is the natural range of application for overlapping generation models? When is it appropriate to treat the capital flow to (or from) a country as infinitely elastic with respect to the interest rate? These and other questions will be pursued, with the objective of alerting the younger generations to important decisions they have to make as they strive to keep economic science robust, relevant and helpful in improving the economic life of real-world populations
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