Dear IMF,

Dear IMF,

Some university professors at US Ivy league universities often appear very critical of the IMF approach to diagnosing and reviewing country economic prospects- that Article IV style analysis of economies’ they say are very flawed. Growth diagnostics suggested by Rodrik is more realistic they say. Is this allegation justified?

Best regards,

Marshall Jevons


Related;
Rodrik on Economic Freedom;

"He is more favorable to us than I'd expected, but does criticize us for overselling the case,

El Salvador is a prime example of the "build-it-and-they-will-come" fallacy: all you need to do is to get the basics right, and then markets will do the rest.

This criticism may have some merit. I do tend to believe that if a group of people (e.g., a nation state) gets the institutions and policies consistent with some notion of economic freedom, then that group of people will grow and prosper economically. I don't believe this is a "day follows night" kind of thing however, and freely admit that some countries could do well for a time without a lot of economic freedom and some with a lot of economic freedom could do poorly. There are long and variable lags and other things matter.

But having said that I see El Salvador differently. First, I see a nation with a history of low economic freedom and political stability with little credibility in the eyes of domestic and foreign investors. It has only recently begun to stabilize and improve its economic institutions. I would not expect it to grow quickly immediately. These things take time. I would predict things to improve only after some degree of credibility is earned. In El Salvador's case, this could take a long time.

Second, maybe El S will never grow for some reason. Maybe the culture is messed up. Maybe the climate is a killer. Maybe God hates them. I don't know. Maybe El S will defy my world view that economic freedom leads to growth and prosperity. I doubt it (see the first point) but it could happen. Does this invalidate the general model? Sure a lot of examples like El Salvadors would force us to question the general model, but there are very few exceptions to the general rule that economic freedom and growth/prosperity are related