Book Podcast of the Day

Why Cities Rock

Triumph of the City: How Our Greatest Invention Makes Us Richer, Smarter, Greener, Healthier and Happier. By Edward Glaeser.

All You Need is a Nudge

Book Recommendation

In an essay in his just-published Natural Experiments of History, Jared Diamond puts the question the way you want it to be asked – comparatively. He examines the histories of Haiti and the Dominican Republic, the two halves of the island of Hispaniola, the first place Columbus stopped in the New World. Natural Experiments is an exemplary book, short and graceful, conveying a broad swathe of the most interesting work going on today around the world in departments of economics, political science and anthropology, under the heading of comparative political economy. The story of Haiti is especially compelling.

- David Warsh

Jared Diamond's Natural Experiments of History- podcast

Contents:
* Prologue: Natural Experiments of History
Jared Diamond and James A. Robinson

1. Controlled Comparison and Polynesian Cultural Evolution
Patrick V. Kirch
2. Exploding Wests: Boom and Bust in Nineteenth-Century Settler Societies
James Belich
3. Politics, Banking, and Economic Development: Evidence from New World Economies
Stephen Haber
4. Intra-Island and Inter-Island Comparisons
Jared Diamond
5. Shackled to the Past: The Causes and Consequences of Africa's Slave Trades
Nathan Nunn
6. Colonial Land Tenure, Electoral Competition, and Public Goods in India
Abhijit Banerjee and Lakshmi Iyer
7. From Ancien Régime to Capitalism: The Spread of the French Revolution as a Natural Experiment, Daron Acemoglu, Davide Cantoni, Simon Johnson, and James A. Robinson
* Afterword: Using Comparative Methods in Studies of Human History
Jared Diamond and James A. Robinson

Is World Bank a pyramid scheme?

The Colbert Report	Mon - Thurs 11:30pm / 10:30c
Dambisa Moyo
comedycentral.com
Colbert Report Full Episodes Political Humor NASA Name Contest

Lunch with the FT: Dambisa Moyo;

And, as the historian Niall Ferguson (a contributing editor to the FT), notes in a foreword to Moyo’s book, she is venturing into a debate that has to date been colonised by white men – be they rock stars such as Bono, politicians such as Tony Blair or the academics Jeffrey Sachs and Bill Easterly...

Her book contains a damning assessment of the failures of 60 years of western development programmes, but also focuses on an alternative path. This blends micro-finance and changes to property laws with a grasp of the immense opportunity and freedom that shifting global trade patterns, Chinese investment in infrastructure and bond markets could represent for Africa.

“There has been more private capital coming into Africa; more African countries have been issuing bonds. There are the Chinese ... Africa has turned a corner. Now it’s about closing the deal,” she insists with characteristic optimism and a slice of Parma ham, delivered as an amuse-gueule between courses....

And what of the World Bank, where Moyo once worked for two years, and the International Monetary Fund? Do they and other donors not deserve some credit for helping lay the foundations in some countries of recent growth? Yes, they do, she says, in terms of the reforms they have promoted but they have not been aggressive enough about phasing out aid.

This might sound high-handed from someone who lives comfortably in London. But Moyo is not arrogant. She counts herself exceptionally lucky. When she was growing up as a young girl in Zambia her aspiration was to become a flight attendant. She never dreamed she would win the scholarships that took her to Harvard and Oxford, and then to Goldman Sachs. She mostly thanks her parents, who were among the first graduates at university in the Zambian capital Lusaka. They left Africa in search of further education in the early 1970s, when communications were rudimentary and leaving was a journey into the unknown. But when they could they hurried back to help build a future for their country.

Governance is worsening in Africa? Do we need more aid?

Mauritania junta's promise of democracy in doubt

Rent-seeking Consultants?

Ashraf Ghani, the Alexander Hamilton of Afghanistan, blames World Bank for neglecting higher education in Afghanistan (emphasis added);

In Afghanistan in 2002, World Bank and UN officials insisted that the government should not invest in higher education and moreover should invest very little in secondary and vocational education despite the fact that Afghanistan had seen its professional class decimated by war, disease, and flight. Citing the focus of the millennium development goals (MDGs) on primary education, they considered higher education and vocational training a luxury that Afghanistan could ill afford. But without trained doctors, teachers, engineers, and managers, it was not clear at the time whether Afghanistan could get back on its feet. Five years later, the fact that the country’s operating budget is overshadowed by the cost for technical assistance (TA) to make up for the “poor capacity” of the government testifies to the debilitating expense of failures to invest in the training of professional staff, future leaders and administrators.

In many parts of the world, the neglect of higher education has to led to poor-quality administration and spiraling TA bills. The price for TA amounts to roughly $ 20 billion per annum, with consultants often paid around $ 200, 000 a year. Nor is this technical assistance provided by Westers donors of high quality in many cases.

- "Fixing Failed States", Ashraf Ghani and Clare Lockhart, p. 142

For Discussion: Should we try to rate the output quality of consultants? Who should rate it and how should we do it?

A Challenge to Chris Blattman: Create a consulting agency that delivers quality consulting services in the development field to low-income countries for FREE.

How to Misuse Governance Indicators

The worldwide governance indicators and tautology : causally related separable concepts, indicators of a common cause, or both ?

Summary: Aggregate indexes of the quality of governance, covering large samples of countries, are widely used in research and in aid policy. Few studies examine the validity of these indexes, however. This paper partially fills this gap by examining empirically the dimensionality of the Worldwide Governance Indicators. The six indexes purportedly measure distinct concepts of control of corruption, rule of law, government effectiveness, regulatory quality, political stability, and voice and accountability. Using standard statistical techniques for testing measurement validity, the analysis concludes that the six indexes do not discriminate usefully among different aspects of governance. Rather, each of the indexes merely reflects perceptions of the quality of governance more broadly. An implication of the findings is that the Worldwide Governance Indicator indexes are frequently misused in research and policy applications, where it is commonly assumed that the indexes provide distinct measures of different aspects of the quality of governance. A further implication is that Transparency International's even more widely-known aggregate index similarly reflects perceptions not only of corruption, as intended, but of the quality of governance more broadly.

Econ Talks

India: The Emerging Giant
Featuring the author Arvind Panagariya, Jagdish Bhagwati Professor of Indian Political Economy, Columbia University with comments from Swaminathan Aiyar, Research Fellow, Cato Institute.

Botswana and Mauritius: African Success Stories

Development Econ Talks

Will China and India be Able to Sustain High Growth?

Commission on Growth and Development: Ideas Informing Actors

Equality of Opportunity in Latin America and the Carribean

The Political Economy of Inequality: Implications for Inclusive Growth

Increase in Food and Fuel Prices—Seminar on Macroeconomic Impact, and Policy Responses

Celebrity endorsements for World Bank

"By committing to help wild tigers, the World Bank is sounding its intention to be a global leader in biodiversity conservation. I commend this commitment and look forward to seeing it in action."

-Harrison Ford

What do the readers think? I've no comment- after all World Bank's motto is a World Free of Poverty.

Assorted

Urban congestion

China Quarterly Update, June 2008

A Simple Proposal to Make Exam Grading Easier

Mike Myers 'Love Guru' movie offends some Hindus

Barack Obama is a "choice architect" aiming to implement "libertarian paternalism

Chris Blattman's Links I Liked

Inside a 9/11 Mastermind’s Interrogation

Ten things for India to achieve its 2050 potential

In Turkey, Bitter Feud Has Roots in History

China’s One-Child Rule, Post-Earthquake

Pay For It: Radical Water Privatization for Poor Countries

Where Does the Money Go? Best and Worst Practices in Foreign Aid

Advice to impressionable young minds who want to change the world

Big Picture's LinkFest

The Perfect Siesta

Two Bubbles, Two Paths

A theory of military dictatorships

What Happens if We’re Wrong?;

The key word is “consequences.” I learned this lesson many years ago from studying Blaise Pascal, a French mathematical genius in the 17th century who spelled out the laws of probability more clearly than anyone before him. This was a thunderclap of an insight that, for the first time, gave humanity a systematic way of thinking about the future.

Pascal was both a gambler and a religious zealot. One day he asked himself how he would handle a bet on whether “God is or God is not.” Reason could not answer. But, he said, we can choose between acting as though God is or acting as though God is not.

Suppose we bet that God is, and we lead a life of virtue and abstinence, and then the day of reckoning comes and we discover that there is no God. Well, life was still tolerable even if less fun than we might have liked. Here, the consequences of being wrong would be acceptable to most people.

Suppose, however, we bet that God is not, and lead a life of lust and sin, and then it turns out that God is. Now being wrong has put us into big trouble.

RISK management, then, should be a process of dealing with the consequences of being wrong. Sometimes, these consequences are minimal — encountering rain after leaving home without an umbrella, for example. But betting the ranch on the assumption that home prices can only go up should tell you the consequences would be much more than minimal if home prices started to fall.

Stolper-Samuelson for the real world

"Canada's managers are under-achievers"

Nixonland: One, Two, or Many Americas?

The IMF as a reserve manager

Why Is Oil So High? Pick a View

Nothing Sells Like Celebrity

What if Adam Smith was right about poverty?

Steven Pinker: The evolutionary man

There is a better way to stop bank failures

Did the Iraq War Cause High Oil Prices?

Bottom Billion - a myth?

Related;
An Ivory Tower Analysis of Real World Poverty

Another Band Aid?

World Bank Launches $1.2 Billion Fast-Track Facility for Food Crisis

Related;
Trust the development experts – all 7bn of them By William Easterly;

The report of the World Bank Growth Commission, led by Nobel laureate Michael Spence, was published last week. After two years of work by the commission of 21 world leaders and experts, an 11- member working group, 300 academic experts, 12 workshops, 13 consultations, and a budget of $4m, the experts’ answer to the question of how to attain high growth was roughly: we do not know, but trust experts to figure it out.

This conclusion is fleshed out with statements such as: “It is hard to know how the economy will respond to a policy, and the right answer in the present moment may not apply in the future.” Growth should be directed by markets, except when it should be directed by governments.

My students at New York University would have been happy to supply statements like these to the World Bank for a lot less than $4m.

Why should we care about the debacle of a World Bank report? Because this report represents the final collapse of the “development expert” paradigm that has governed the west’s approach to poor countries since the second world war. All this time, we have hoped a small group of elite thinkers can figure out how to raise the growth rate of a whole economy. If there was something for “development experts” to say about attaining high growth, this talented group would have said it.

The Secrets of Growth success

Zambia Economist has more on the Growth Commission report

Related;
Growth Economics (book Review)by Asaf Razin

There's no secret to development

The State of Post-Suharto Indonesia

Books to Pre-order

Economic Gangsters Corruption, Violence, and the Poverty of Nations

* Chapter 1: Fighting For Economic Development
* Chapter 2: Suharto, Inc.
* Chapter 3: The Smuggling Gap
* Chapter 4: Nature or Nurture? Understanding the Culture of Corruption
* Chapter 5: No Water, No Peace
* Chapter 6: Death by a Thousand Small Cuts
* Chapter 7: The Road Back From War
* Chapter 8: Learning to Fight Economic Gangsters

Related;
The link between Corruption and Dating Economics

A competitor for Dani Rodrik's program?

MSc in International Trade, Finance, and Development- from Barcelona

See the Director's Blog

Lecturers;
Hans-Joachim Voth / Antonio Ciccone / Alessandra Bonfiglioli / Jaume Ventura /
Fernando Broner /Kurt Schmidheiny / Ghazala Azmat / Paula Bustos /Xavier Sala-i-Martín/ Gino Gancia / Alberto Martin / Libertad González/Antoni Estevadeordal/Eduardo Levy Yeyati


Related;
Applied Econometrics for Masters Students

Another Rodrik review

A review of Rodrik's recent book from Australia;

The rest of the book suggests how such reforms might be designed and implemented. Rodrik pays by far the most attention to the ‘market failure’ branch of the tree, either because he thinks it is the most important, or has received too little attention elsewhere. It is generally accepted that if innovation is under-rewarded by the market, it is necessary to offer some extra inducement. This is the reasoning behind intellectual property and government-funded R&D. These are not always appropriate instruments for developing countries, however, since their problem is not so much expanding the frontier of new knowledge, but getting to that frontier by importing ideas and technology from elsewhere. This process is vulnerable to many kinds of market failure, so that it is hard for new industries to be established without some kind of government support. Industrial policy is not about ‘picking winners’ or comprehensive planning, but encouraging experiments with new types of economic activity. Many will fail, but even a few successes can amply repay the costs of failure. Developing countries still have plenty of room for this type of policy, although relaxing international rules on export subsidies would be helpful. The exact form of the intervention is not as important as the process: it is necessary to have a close enough relationship between government and business to identify promising opportunities and encourage entrepreneurs to take them up, but at the same time preserve enough independence to withdraw support from the failures so they do not become a permanent drain.

This is a self-confessedly modest program. Yet it contradicts everyone currently making a noise on the subject: assorted protesters such as Joseph Stiglitz and Ha-Joon Chang (because it does not demonise the IMF, World Bank, and WTO); heterodox economists such as Erik Reinert (because it asserts the value of neoclassical theory); neoclassical economists at the IMF, World Bank and WTO (because it advocates industrial policy and deprecates both the old Washington Consensus and the new ‘augmented’ version); Jeffery Sachs and Bono (because it denies the importance of poverty traps and barely mentions foreign aid); and William Easterly and Greg Clark (because it offers, if not a one-size-fits-all solution, at least some concrete advice on how to engineer growth).

It is no small achievement to disagree with so many luminaries and still receive back-cover endorsements from three Nobel laureates. He is very convincing arguing against the ‘laundry lists’ of comprehensive reforms that have been advocated by international institutions, whether the first generation of privatisation and liberalisation, or the more ambitious second generation focused on institution building. Trying to bring everything at once up to world's best practice is beyond the capability of even the best governments. But without detailed local knowledge, anything short of this can easily miss the most important problems in an economy, if it does not make things worse. The case against a generalised poverty trap is equally strong: spurts of growth lasting several years are relatively common, while sustained growth over decades is rare.

This very fact, however, points to a weakness, or gap, in the book. If lighting the fire is relatively easy compared to keeping it going, why spend so much time focusing on ignition techniques? For the long run, Rodrik's only specific advice is to actively diversify the industrial base, and build institutions of conflict management, which he links with democracy. There is a more general recommendation to use the time bought by growth accelerations to gradually implement more ambitious institutional reforms, but this is rather vague. Is this just the standard ‘laundry list’ implemented more slowly? Then what becomes of the ‘many recipes’? Or is the long run, from a policy point of view, just a series of short runs — life is one binding constraint after another? In this case, growth diagnostics offers no way to identify and fix constraints before they start to bind, which is what he seems to be recommending. How can you avoid Argentina's long decline, or Japan's stagnation, or the East Asian financial meltdown, except with hindsight? It is surely too much to expect answers to all of these questions — indeed, they only become relevant with short-run success — but they could have been faced more squarely.

Short-run success is, of course, not to be disparaged. It would be nice to have a reliable method of making poor countries rich, but failing that (which we have been), significantly raising the number of growth accelerations would be a great start. With this more limited goal in mind, Rodrik's advice seems sensible, although I am sceptical of his emphasis on ‘cost discovery’ as a justification for industry policy. He argues that those entrepreneurs who introduced garment manufacturing to Bangladesh and soccer balls to Pakistan were revealing new information about what was profitable in those countries, which could then be copied by others. This treats manufacturing as some exotic crop that will only grow under particular conditions of soil and climate, as if it was not equally likely that Pakistan would have ended up making shirts and Bangladesh balls. Rodrik's own summary of the evidence concludes that ‘managerial and labour turnover’ is the key mechanism by which innovations spread, which points to a ‘learning by doing’ or ‘human capital’ interpretation. He mentions these only briefly, which is strange, as he has argued elsewhere that the widely accepted economic case for government involvement in education is similar to the case for industry policy. I would go further and say that they are practically identical.

This is, however, splitting hairs. Specifying the exact market failure is far less important than recognising that a particular activity (in this case, innovation) is likely to be undersupplied by profit-seeking enterprise. First-best intervention is usually impractical, if not impossible, so there is no one-to-one mapping from diagnosis to policy. It is a great strength of the book that it does not offer such precise, pre-packaged answers, even in a country-specific form but, rather, hints as to the right questions to ask as part of an open-ended policy-making process.

Supposing that growth diagnostics is widely adopted (the World Bank has already shown interest), will it prove more successful than previous development fads? While it requires a great deal of intelligence, knowledge and judgment (or failing that, luck), expecting to get rich without these is surely a pipe dream. At least its inherent conservatism, with the emphasis on detailed local knowledge and targeted intervention, should minimise the potential for damage.

Memo to Self- Books to Read

The Practice of Economic Management: A Caribbean Perspective
by Courtney Blackman

African Development: Making Sense of the Issues and Actors
by Todd J. Moss

Singapore's Success : Engineering Economic Growth
by Henri Ghesquiere

Rents, Rent-seeking and Economic Development: Theory and Evidence in Asia
By Mushtaq H Khan and Jomo Kwame Sundaram

Flat World, Big Gaps: Economic Liberalization, Globalization and Inequality
by Jomo K.S. , Jacques Baudot