Quote of the Day

"It’s easier to make a reporter into an economist than an economist into a reporter."
-American mechanical engineer Frederick W. Taylor

Assorted Kemal Dervis

"Perspectives on the United Nations and Development," A discussion with Kemal Dervis, Administrator of the United Nations Development Programme.

Kemal Dervis: Turkey: Return from the Brink, Attempt at Systemic Change and Structural Reform

OED Conference on Effectiveness of Policies and Reforms - Closing Remarks

Learning from Clients - Focus on ECA and MENA

Contribution of Human and Social Development to Poverty Reduction

Business UNusual: Facilitating United Nations Reforms through Partnerships

General equilibrium models for development policy

A general equilibrium analysis of foreign exchange shortages in a developing economy

The foreign exchange gap, growth and industrial strategy in Turkey : 1973-1983

A Better Globalization: Legitimacy, Governance, and Reform

Kemal Dervis: The Development Challenge Five Years After the Millennium Summit

Development and Democratic Governance: Some Key Issues

Econ Talks

Diane Coyle on the Soulful Science

Rogoff Sees Asia Central Banks Raising Interest Rates

Almunia Says IMF Shares View That Euro Is `Overvalued'


Asian Outlook and Prospects for Industries
Speakers: Ifzal Ali, Chief Economist, Asian Development Bank; Mark Killion, CFA, Managing Director, World Industry Services, Global Insight;
Moderator: Stuart Mackintosh, International Roundtable Chair/Executive Director, The Group of Thirty
Ifzal Ali discusses Asian economic development and the impact of global financial markets, the effects of U.S. credit crunch, whether rising food and energy prices will fan inflationary flames across the region, and how policymakers should deal with rising inflation and a slowdown in global growth. Mark Killion follows with a discussion of the changing prospects for industry activity, spending and profits, and more. He shows which sectors are the likely winners and losers in Asia and compares those to the rest of the world.

The Conscience of a Liberal


Dealing Fairly with Developing Country Debt

The Logic of Life

Roberto Unger on Free Trade Reimagined

Urban Colossus: Why is New York America`s Largest City?

The Credit Crunch and the U.S. Economy
Speakers: Steven Rattner
Beginning with the subprime meltdown last summer, U.S. markets and the economy have been thrown into turmoil. Liquidity and default fears have created the worst conditions in financial markets in many years. These adverse developments have spilled over in the "real" economy, raised the specter of recession and worse. Steven Rattner is Managing Principal of Quadrangle Group LLC, a private investment firm with more than $6 billion of assets under management. Quadrangle invests in media and communications companies through separate private and public investment strategies and across all asset classes through its asset management business. Quadrangle has offices in New York, London and Silicon Valley and will be opening an office later this year in Hong Kong.

Inspired by Xavier Sala-i-Martin

Columbia Econ Skit Party


Related;
Nominations now open – The World’s Most Eccentric Living Economist

Random Economist- M. Ali Khan

M. Ali Khan from John Hopkins;

I continue to pursue interests in economic interaction, as formalized in general equilibrium theory: models with a representative agent, as well as those with a finite number and a continuum. In particular, those situations in which an individual agent is "numerically negligible" but is nevertheless influenced by actions, or summary statistics of actions, of all other agents in the game, and where individual and social outcomes are uncertain.

Questions of risk and uncertainty have led me to models of asset-pricing, again with an arbitrary index set of assets. In collaboration with Professor Yeneng Sun, I am exploring questions having to do with arbitrage and with the distinction between systematic and idiosyncratic risk. We hope that this work in financial economics will also lead to applications in other applied fields such as cost-benefit analysis for economic development.

I see issues in development economics alongside those in methodology and the history of ideas. Interests in population, education and the environment have led me to consider the robustness of disciplinary boundaries, and more broadly, to the relationship between economic development and cultural change. Which subsumes the question of how markets handle, or fail to handle, basic issues of resource allocation; and has also led me to the Scottish Enlightenment, and to the "economics of the eighteenth century."

My interests in theory and epistemology are complemented by those in mathematics, where I am working with methods of nonstandard analysis (Loeb spaces), nonsmooth analysis and optimization (Mordukhovich-Ioffe cones), and stochastic processes (law of large numbers with a continuum of random variables).

Parenting and Economists

Watch Simpsons with your Kids- Bryan Caplan's

Teach your 7 year old how to think Mathematically - Mankiw's

Related;
The Birth of Parentonomics: A Guest Post

Econ Talks

Former Treasury Secretary Robert Rubin talks with Bloomberg's Al Hunt about the turmoil in the financial markets and the need for more government steps to help homeowners facing the loss of their houses.

Advancements in Contemporary Islamic Finance: from practice to scholarship
Usman Ahmed, Citigroup CEO of Global Islamic Banking, and Shaykh Nizam Yaquby, an Islamic Sharia scholar

Munger on Subsidies and Externalities

Meet the economist- Timothy F. Geithner

Profile of NY Fed President in FT- a little bit overdone;

Mr Geithner is one of the most powerful economic officials in the world. Yet he still looks more like the gifted young aide of 1997 than an omnipotent central banker. This is partly his youthful appearance - only 46 years old in any event, he looks 10 years younger. But it is also his style, which manages to be casual and driven at the same time.

When he took the stage with Jean-Claude Trichet, president of the European Central Bank, in Davos this year, the visual contrast could not have been greater. Mr Trichet sat bolt upright in a crisp suit, polished shoes and chic tie. Mr Geithner was hunched in his chair, jigging his knee - with a pair of dirty walking boots sticking out of his suit.

People have made the error of mistaking his easy manner for a lack of confidence or steel. In reality, although he is widely described as nice, Mr Geithner can be forceful. "Everyone tends to underestimate him," says a former colleague. "If he was a bigger person physically, people might say he was president material, since he has that aura of power. But because he is slight and he looks young, people underestimate him."

Unusually among senior US officials, Mr Geithner has extensive international experience. He spent much of his childhood in Asia and Africa, where his father was a development expert with the Ford Foundation, completing his high school in Bangkok, Thailand. He studied at Dartmouth and Johns Hopkins before joining Kissinger Associates in 1985 as an Asia expert. He married young to Carole Sonnenfeld, a college sweetheart, and has two children, Elise and Benjamin.

Surprisingly little is known about his private life - Mr Geithner prefers to keep it private - but he is a keen tennis player and an enthusiastic, if inexpert, skier.

Mr Geithner joined the Treasury in 1988 and spent time as assistant attache at the US embassy in Tokyo - witnessing the onset of a decade of stagnation in Japan - before joining Mr Summers's international team under Robert Rubin, Treasury secretary. He rose rapidly, playing a big part in shaping the US response to the Asian crisis.

"He is very bright, independently minded, thoughtful, and has an unusual sense of public service - he is a very easy person to get along with," says Mr Rubin. "He is practical, worldly in the sense that he has a feel for things - for the psychology of markets, the politics of what he is doing - and a good sense of humour." For a high-flying public official, Mr Geithner has remarkably few enemies.

He thinks in probabilistic terms - worrying about "fat tail risks" of adverse possible outcomes even in good times. Long before the credit crisis broke, he led an effort to strengthen the infrastructure underlying the over-the-counter derivative market. But he did not spot how rusty the Fed's liquidity support tools had become, or the vulnerability of the banks to the credit woes, until the crisis erupted, and in the past months has been forced to improvise repeatedly to find ways of pumping cash into frozen parts of the financial system. Recently the Fed has innovated at a remarkable pace. Still, most analysts believe it did too little to contain money market strains in the early months of the crisis.

Peers see Mr Geithner as pragmatic - someone who focuses on what can be achieved and will not let the best be the enemy of the good. Some contrast this with other central bankers, such as Mervyn King, Bank of England governor, who stick more firmly to first principles.

Mr Geithner tends to "smell" his way through situations, a senior central banker says. He attributes this to his background as a Treasury official rather than a high-flying economist or banker - something he shares with Mr Trichet. "The key thing about people such as Trichet or Geithner is that they have come from treasuries - they know how politics and power works," the central banker says.

Mr Geithner is not an intellectual force in the way Mr Summers, Mr Bernanke or Mr King - all professional economists - are. But he understands the issues. "He is incredibly sharp and asks penetrating questions," says Mohamed El-Erian, co-chief executive of Pimco, who got to know him in the Asian crisis. "His approach allows him to identify the key issues quickly and get to the roots of a solution."

For someone who has never worked in the private financial sector, he has a subtle sense of markets' psychology. Yet Mr Summers says labelling him simply a pragmatist sells him short: "I would say he was very much an activist and an internationalist - and these were high principles." Friends say Mr Geithner's experience dealing with crises in emerging markets and Japan, and his coolness under pressure, equip him to handle the current crisis. The US must hope so. As one former colleague points out, there is a big difference between this crisis and those of the 1990s.

"When the crises erupted in Asia there was always the US and the International Monetary Fund there to ride to the rescue," he says. "But this time there is no cavalry." Mr Geithner and his colleagues will have to save themselves.

The debate on race continues

If Obama Wasn’t Black Before, He Sure Is Now
John McWhorter and Glen Loury on Blogging Heads talks about Obama's speech on race and its implications.

Related;
After the Speech

A Thinking Man's Speech-Peggy Noonan

Most significantly, Mr. Obama asserted that race in America has become a generational story. The original sin of slavery is a fact, but the progress we have lived through the past 50 years means each generation experiences race differently. Older blacks, like Mr. Wright, remember Jim Crow and were left misshapen by it. Some rose anyway, some did not; of the latter, a "legacy of defeat" went on to misshape another generation. The result: destructive anger that is at times "exploited by politicians" and that can keep African-Americans "from squarely facing our own complicity in our condition." But "a similar anger exists within segments of the white community." He speaks of working- and middle-class whites whose "experience is the immigrant experience," who started with nothing. "As far as they're concerned, no one handed them anything, they've built it from scratch." "So when they are told to bus their children to a school across town," when they hear of someone receiving preferences they never received, and "when they're told their fears about crime in urban neighborhoods are somehow prejudiced," they feel anger too.

Obama's speech- Thomas Sowell

Someone once said that a con man's job is not to convince skeptics but to enable people to continue to believe what they already want to believe.

Accordingly, Obama's Philadelphia speech — a theatrical masterpiece — will probably reassure most Democrats and some other Obama supporters. They will undoubtedly say that we should now "move on," even though many Democrats have still not yet moved on from George W. Bush's 2000 election victory.

Like the Soviet show trials during their 1930s purges, Obama's speech was not supposed to convince critics but to reassure supporters and fellow-travelers, in order to keep the "useful idiots" useful.

Best-selling author Shelby Steele's recent book on Barack Obama ("A Bound Man") has valuable insights into both the man and the circumstances facing many other blacks — especially those who were never part of the black ghetto culture but who feel a need to identify with it for either personal, political or financial reasons.

Like religious converts who become more Catholic than the Pope, such people often become blacker-than-thou. For whatever reason, Barack Obama chose a black extremist church decades ago — even though there was no shortage of very different churches, both black and white — in Chicago.

Some say that he was trying to earn credibility on the ghetto streets, to facilitate his work as a community activist or for his political career. We may never know why.

But now that Barack Obama is running for a presidential nomination, he is doing so on a radically different basis, as a post-racial candidate uniquely prepared to bring us all together.

Yet the past continues to follow him, despite his attempts to bury it and the mainstream media's attempts to ignore it or apologize for it.

Shelby Steele depicts Barack Obama as a man without real convictions, "an iconic figure who neglected to become himself."

Senator Obama has been at his best as an icon, able with his command of words to meet other people's psychic needs, including a need to dispel white guilt by supporting his candidacy.

But President of the United States, in a time of national danger, under a looming threat of nuclear terrorism? No.

The Obama Bargain-SHELBY STEELE

The novelty of Barack Obama is more his cross-racial appeal than his talent. Jesse Jackson displayed considerable political talent in his presidential runs back in the 1980s. But there was a distinct limit to his white support. Mr. Obama's broad appeal to whites makes him the first plausible black presidential candidate in American history. And it was Mr. Obama's genius to understand this. Though he likes to claim that his race was a liability to be overcome, he also surely knew that his race could give him just the edge he needed -- an edge that would never be available to a white, not even a white woman.

How to turn one's blackness to advantage?

The answer is that one "bargains." Bargaining is a mask that blacks can wear in the American mainstream, one that enables them to put whites at their ease. This mask diffuses the anxiety that goes along with being white in a multiracial society. Bargainers make the subliminal promise to whites not to shame them with America's history of racism, on the condition that they will not hold the bargainer's race against him. And whites love this bargain -- and feel affection for the bargainer -- because it gives them racial innocence in a society where whites live under constant threat of being stigmatized as racist. So the bargainer presents himself as an opportunity for whites to experience racial innocence...

But bargainers have an Achilles heel. They succeed as conduits of white innocence only as long as they are largely invisible as complex human beings. They hope to become icons that can be identified with rather than seen, and their individual complexity gets in the way of this. So bargainers are always laboring to stay invisible. (We don't know the real politics or convictions of Tiger Woods or Michael Jordan or Oprah Winfrey, bargainers all.) Mr. Obama has said of himself, "I serve as a blank screen on which people of vastly different political stripes project their own views . . ." And so, human visibility is Mr. Obama's Achilles heel. If we see the real man, his contradictions and bents of character, he will be ruined as an icon, as a "blank screen."

Thus, nothing could be more dangerous to Mr. Obama's political aspirations than the revelation that he, the son of a white woman, sat Sunday after Sunday -- for 20 years -- in an Afrocentric, black nationalist church in which his own mother, not to mention other whites, could never feel comfortable. His pastor, Rev. Jeremiah Wright, is a challenger who goes far past Al Sharpton and Jesse Jackson in his anti-American outrage ("God damn America").

How does one "transcend" race in this church? The fact is that Barack Obama has fellow-traveled with a hate-filled, anti-American black nationalism all his adult life, failing to stand and challenge an ideology that would have no place for his own mother. And what portent of presidential judgment is it to have exposed his two daughters for their entire lives to what is, at the very least, a subtext of anti-white vitriol?

What could he have been thinking? Of course he wasn't thinking. He was driven by insecurity, by a need to "be black" despite his biracial background. And so fellow-traveling with a little race hatred seemed a small price to pay for a more secure racial identity. And anyway, wasn't this hatred more rhetorical than real?

But now the floodlight of a presidential campaign has trained on this usually hidden corner of contemporary black life: a mindless indulgence in a rhetorical anti-Americanism as a way of bonding and of asserting one's blackness. Yet Jeremiah Wright, splashed across America's television screens, has shown us that there is no real difference between rhetorical hatred and real hatred.

No matter his ultimate political fate, there is already enough pathos in Barack Obama to make him a cautionary tale. His public persona thrives on a manipulation of whites (bargaining), and his private sense of racial identity demands both self-betrayal and duplicity. His is the story of a man who flew so high, yet neglected to become himself.

Under-appreciated Economists

In his best-selling memoir, The Age of Turbulence (Penguin Press, 2007), Alan Greenspan singled out David J. Stockton, head researcher at the Fed since 2000. “He never sought nor received the press that Fed governors get, but when the governors gave speeches, it was his forecast of the U.S. economy that Fed watchers were getting. We governors learned to see him as the indispensable, behind-the-scenes staffer”(p. 250).

via Teaching Economist

Skills required to be an economist in International Development Agencies

Interesting article by A.W. Coats, The Role of Economists in Government and International Agencies: A Fresh Look at the Field;

Limitations of space obviously preclude a comprehensive account of economists’ work in international agencies and I shall therefore concentrate on some of the revealing and perceptive observations in the extended Report of Discussion at a Washington conference on this subject in 1983 (Coats 1986). For example in an initial statement by George Baldwin, a senior and highly experienced World Bank official, he commented (among other things) on the differences between international agency work and academia. In the latter sphere, he said,

there is a premium on independent originality . . . One tries to ‘make a name for oneself’ to a degree totally alien to a bureaucratic environment . . . where there is a premium on being a good team member . . . one who works effectively with non-economists, one who does not awe others with brilliance but who is nevertheless persuasive and flexible in reaching policy positions or project judgements. . . . The publish or perish imperative of academic life is very real and a maker or breaker of academic careers. It counts for very little in the World Bank. . . . In academic life there are opposing pulls in the direction of research and teaching. Each tends to be the opportunity costs of the other . . . [whereas] in the Bank, another pull replaces it . . . the need to decide whether to go for promotion into a managerial job or to remain ‘an economist’. This is not a daily pressure on Bank economists as the research/teaching is for academic economists; but it confronts many of the good economists at some point in their bank careers. (ibid., pp. 116- 7; sentence order modified).

Another important desideratum for a Bank economist that does not apply in academia

is the premium on achieving ‘closure’, i.e. on making up one’s mind and placing one’s bets’ about what ought to be done, is a proposed project a sound one? . . . [Unfortunately] situations are seldom crystal clear, the evidence is never enough, and the time for giving the Bank’s advice always has deadlines. Bank economists have to move in much closer to government decisions than academic economists normally do. (ibid.)

Communication skills are important for any economist, but they differ according to the type of institution: there is a premium on using jargon-free language that can be understood by senior policy makers in governments, language that is specific enough to leave government leaders room for manoeuvre in choosing policy options. The oral skills required are . . . those of the good bureaucrat who must participate in meetings to achieve consensus, and of the good diplomat who must win and hold the confidence of the host government officials during field missions. (ibid., p. 117).

I have cited Baldwin’s remarks at length because he opened the discussion and his views were endorsed by the other conferees. His observations on the data problems encountered in field missions abroad were also perceptive.

Another, and final example, of the skills required by a successful international economist was provided by Stephen Morris, a long-time senior economist in OECD, who emphasized the importance of the economist’s ‘selling job’, or persuasion:

At a rough guess, from the middle grades up, an economist working in an international organization spends only half of the time using professional skills to decide upon the right answer to a problem, the other half will be devoted to trying to find the best way to persuade people that it is the right answer. And as the individual rises in the hierarchy, the art of persuasion becomes steadily more important. Economists’ training does not necessarily fit them well for this selling job. Good academic writing . . . is too long and pedantic for the busy policy maker.

Econometrics is even worse. Historical or country examples are likely to be much more telling. Numbers should be used sparingly, tables should be kept small, charts should tell a story. Intellectual qualms and professional conscience must, at least on occasions, be overruled so as to permit oversimplification in order to advance what is hopefully a good cause. Anyone who is not prepared to spend a good deal of their working life drafting, redrafting, and reredrafting - and then trying to sell the product to national officials - should not make a career in an international organization. (in Coats 1986, p 103).

Morris warns of the dangers in an international organization of relying exclusively upon career economists (though he himself actually worked in OECD for twenty seven years!):

Working for a long time at two or three removes from actual decision making, people working in international organizations can easily get out of touch with political reality and become over impressed by their own supposed omniscience. At the same time, because they do not have the power of a national government behind them, and can never be sure what real influence they have, they can become overly sensitive, defensive, or defensively aggressive

. (ibid., p. 110)

To Economists at World Bank, IMF and UN, please feel free to share your thoughts in the comments. Does the following comment of Easterly still apply?

Second, many readers have asked if my statement in the original prologue that “my employer ...the World Bank... encourages gadflies like me to exercise intellectual freedom" was really accurate. Well almost. It should be modified slightly to "the World Bank ..encourages gadflies like me to find another job."

Related;
Economists in Government by A. W. Coats

Classical Economists and Economic Policy (Debates in economic history)
by A.W. Coats

The Society of Government Economists

Which is for you: MPA, MPA/ID, or PhD?

Why Visiting Economists Fail
Dudley Seers

Economists in Government: An International Comparative Study-A. W. Coats
-book review

The Place of the Economist in Government
Robert Hall

Random Course

Q: Economists love to analyze markets for goods that are illegal (e.g., drugs, prostitution, etc.). One study showed that the own-price elasticity of the demand for powder cocaine (in absolute value) is 1.2, while the comparable elasticity for marijuana is 0.6. You have probably observed that the federal and state governments punish cocaine suppliers and dealers more severely than they punish marijuana dealers. Give TWO possible (if unlikely) explanations that relate back to demand analysis for this difference in policy.

Introduction to Political Economy: Microeconomics- Charles Moul

Textbooks; Mankiw's Principles of Microeconomics and Landsburg's The Armchair Economist

Course rating: (4 out 10 stars)


*Answer to the above question here.

Blind economists

Massimo Morelli

James Gwartney

Yet their productivity will put all of us to shame.

Related; James Gwartney talk at Cato

Edward Lazear on the economy

Lazear Sees U.S. Economy, Job Growth by Summer 2008

Edward Lazear, the Bush administration's chief economic adviser, spoke yesterday with Bloomberg's Tom Keene from Washington about the impact of higher commodity prices on U.S. growth, President George W. Bush's energy policies and the outlook for the economy.

Related;

Bush Would Like a Stronger Dollar

Stiglitz interview on the real cost of Iraq War

The economist Joseph Stiglitz on what the Iraq war has really cost (podcast will not be available for long- so download now)

Related;
The Three Trillion Dollar War: The True Cost of the Iraq Conflict
by Joseph E. Stiglitz , Linda J. Bilmes

Iraq’s 100-Year Mortgage

March 19 marks the fifth anniversary of the U.S. invasion of Iraq. The American death toll—nearly 4,000 soldiers in Iraq and almost 500 in Afghanistan—is well known. Much less attention has been paid to the enormous number of troops who have survived and returned home with serious injuries. Here, the numbers are truly staggering. More than 70,000 have been wounded in combat, injured in accidents, or airlifted out of the region for emergency medical care. More than a third of the 750,000 troops discharged from the military so far have required treatment at medical facilities, including at least 100,000 with mental health conditions and 52,000 with post-traumatic stress disorder. According to a recent U.S. Army estimate, as many as 20 percent of returning soldiers have suffered mild brain injuries, such as concussions. More than 20,000 troops have survived amputations, severe burns, or head, spinal, and other serious injuries.

These numbers are largely due to the extraordinary advances in battlefield medicine in recent years. Far more soldiers are surviving even grievous injuries than in previous conflicts. The ratio of wounded in combat to killed in Iraq is 7 to 1; in Vietnam, it was 2.6 to 1, and in World War II, 2 to 1. If all injuries are included, such as those from road accidents or debilitating illnesses, Iraq has produced 15 wounded for every single fatality. This higher survival rate is, of course, welcome news, but it leaves the United States with a legacy of providing medical care and paying disability benefits to an enormous number of veterans and their dependents for many decades to come. During the past six years, more than 1.6 million troops have been deployed to Iraq and Afghanistan. Even in the most optimistic scenario, assuming that the majority of U.S. troops are withdrawn by the end of 2009, the cost of providing for Iraq War veterans will match what we have spent waging the war: approximately $500 billion. If U.S. forces remain deployed at a higher level, the cost of caring for veterans will eventually exceed $700 billion.

When we think about the costs of war, we tend to focus on the here and now. But in what is already the second-most expensive conflict in U.S. history, after World War II, the costs of Iraq will persist long after the last shot is fired. Benefits were still being paid to World War I veterans until January 2007, when the last veteran receiving compensation died, nearly 90 years after the war ended. The United States pays more than $12 billion each year in disability benefits to Vietnam veterans, a figure that continues to climb, 35 years after the U.S. pullout. If these past wars are any guide, Americans will undoubtedly be paying for Iraq for at least the next 50 years.

Meet the Economist- Ben Olken

A profile of Ben Olken;

Olken wonders whether economic devel­opment and the path to democratization are shaped more by broad historical forces or by the actions of specific leaders—be they demo­cratically elected prime ministers or thuggish authoritarians. With the assistance of his fre­quent research partner Ben Jones, an economist at Northwestern, Olken has challenged broadly held assumptions by publishing a pair of papers asking how heads of state affect economic out­comes and democracy.

In “Hit or Miss? The Effect of Assassinations on Institutions and War,” Olken and Jones looked at the effects of political assassination, using a strict empirical methodology that takes into account economic conditions at the time of the killing and what Olken calls a “novel data set” of assas­sination attempts, successful and unsuccessful, between 1875 and 2004.

Olken and Jones discovered that a country was “more likely to see democratization follow­ing the assassination of an autocratic leader,” but found no substantial “effect following assassinations—or assassination attempts—on democratic leaders.” They concluded that “on average, successful assassinations of autocrats produce sustained moves toward democracy.” The researchers also found that assassinations have no effect on the inauguration of wars, a result that “suggests that World War I might have begun regardless of whether or not the attempt on the life of Archduke Franz Ferdinand in 1914 had succeeded or failed.”

In “Do Leaders Matter? National Leadership and Growth since World War II,” Olken and Jones explored whether “individual political leaders make a difference in economic growth.” This is tricky business for the researcher because, as Olken explains, a country’s economic situa­tion can affect the election of a leader: when the economic outlook is good, for instance, presi­dents are more likely to be reelected. So Olken and Jones looked at 57 leaders who died in office from accidents or natural causes and “found big changes in growth when autocratic leaders die in office—both positive and negative,” but no sub­stantial change when democratic leaders died in office. “The results suggest,” they write, “that individual leaders can play crucial roles in shap­ing the growth of nations,” provided they are ruling with minimal or nonexistent checks and balances to their power (think Augusto Pinochet or Robert Mugabe).

A significant portion of Olken’s field research is conducted in Indonesia, a country for which he has much affection: he has previously lived there, speaks the language, and understands the country’s social mores.

So when he decided to test the validity of the much-debated “bowling alone” theory—Harvard political scientist Robert Putnam’s argument that television, among other “individualizing” cultural phenomena, has had a negative effect on the social fabric of the West—he found himself in Indonesia, a country not affected by many of the cultural externalities that compromise Putnam’s American-based study.

According to Olken’s research, in Indonesia, where TV coverage isn’t yet universal, one finds that “better signal reception, which is associ­ated with more time spent watching television and listening to radio, is associated with sub­stantially lower levels of participation in social activities and with lower self-reported measures of trust.” This, he notes, has had a deleterious effect on political and social par­ticipation: “The main results suggest that each additional channel of television reception is associated with 7 percent fewer social groups existing in the village, and with each adult in the village attending 12 per­cent fewer group meetings.” That would seem to confirm Putnam’s thesis. But the results were nuanced. Olken noted that “despite the impact on social capital, improved [TV] reception does not appear to affect village governance, at least as measured by discussions in village-level meetings.”

In his paper “The Simple Economics of Extortion,” co-written with Patrick Barron of the World Bank, Olken again traveled to Indonesia to study “if the way in which we think about pric­ing for firms also applies to corrupt officials.” In other words, do the crooked respond to market forces in the way a corporation would? To test this, Olken and Barron looked at the number of roadside checkpoints—which act, essentially, as illegal toll booths where the motorist is required to pay a bribe—in Aceh, a region on the north­western tip of Sumatra long engaged in a guerilla war with separatist rebels.

Related Video;
Field Experiments to Investigate Institutional Designs and Impact

Accessible and Inaccessible Economists

A friend from Columbia forwarded me the following email- he emailed to Professor Stiglitz for a clarification, and he got the following reply.

Thank you for your email to Professor Stiglitz. Because he receives so many emails, we regret we are unable to answer them all.

If you are a journalist, requesting an interview or comment, please email stiglitzpress@gmail.com

If you are inviting him to give a lecture, or attend a conference, we will answer you within 7-10 days.

If you want a paper he has written, please look on www.josephstiglitz.com

If you can't find it there, then please contact Jill Blackford at jb2632@columbia.edu

For information to reprint or excerpt something he has written, please contact Ms Blackford.

If you need Professor Stiglitz's mailing address or fax number, please look on his website.

If you want his bio or more information about him, please see www.josephstiglitz.com

'Economies evolve, and so, too, must economic policy'

Many of Minsky’s colleagues regarded his “financial-instability hypothesis,” which he first developed in the nineteen-sixties, as radical, if not crackpot. Today, with the subprime crisis seemingly on the verge of metamorphosing into a recession, references to it have become commonplace on financial Web sites and in the reports of Wall Street analysts. Minsky’s hypothesis is well worth revisiting. In trying to revive the economy, President Bush and the House have already agreed on the outlines of a “stimulus package,” but the first stage in curing any malady is making a correct diagnosis.

Minsky, who died in 1996, at the age of seventy-seven, earned a Ph.D. from Harvard and taught at Brown, Berkeley, and Washington University. He didn’t have anything against financial institutions—for many years, he served as a director of the Mark Twain Bank, in St. Louis—but he knew more about how they worked than most deskbound economists. There are basically five stages in Minsky’s model of the credit cycle: displacement, boom, euphoria, profit taking, and panic. A displacement occurs when investors get excited about something—an invention, such as the Internet, or a war, or an abrupt change of economic policy. The current cycle began in 2003, with the Fed chief Alan Greenspan’s decision to reduce short-term interest rates to one per cent, and an unexpected influx of foreign money, particularly Chinese money, into U.S. Treasury bonds. With the cost of borrowing—mortgage rates, in particular—at historic lows, a speculative real-estate boom quickly developed that was much bigger, in terms of over-all valuation, than the previous bubble in technology stocks.

As a boom leads to euphoria, Minsky said, banks and other commercial lenders extend credit to ever more dubious borrowers, often creating new financial instruments to do the job. During the nineteen-eighties, junk bonds played that role. More recently, it was the securitization of mortgages, which enabled banks to provide home loans without worrying if they would ever be repaid. (Investors who bought the newfangled securities would be left to deal with any defaults.) Then, at the top of the market (in this case, mid-2006), some smart traders start to cash in their profits.

The onset of panic is usually heralded by a dramatic effect: in July, two Bear Stearns hedge funds that had invested heavily in mortgage securities collapsed. Six months and four interest-rate cuts later, Ben Bernanke and his colleagues at the Fed are struggling to contain the bust. Despite last week’s rebound, the outlook remains grim. According to Dean Baker, the co-director of the Center for Economic and Policy Research, average house prices are falling nationwide at an annual rate of more than ten per cent, something not seen since before the Second World War. This means that American households are getting poorer at a rate of more than two trillion dollars a year.

-The Minsky Moment

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The Economist who swam from democracy to communism

Dani Rodrik thinks Justin Yifu Lin is good choice for World Bank's chief economist- one reason;

Fourth, Justin is a risk-taker. (How else can one interpret his defection to mainland China from Taiwan in 1979 by swimming across the strait?)

I've to believe if Rodrik says so.