Easterly study questions

Questions to ponder for Easterly:

1. P.T. Bauer, the development economist, wrote in 1993: "[Aid] promotes an unquestioning attitude. It disarms criticism, obscures realities, and prejudges results. Who could be against aid to the less fortunate? The term has enabled aid supporters to claim a monopoly of compassion and to dismiss critics as lacking in understanding and sympathy." Discuss this in the context of Easterly’s book, and his criticism of Jeff Sachs’ The End of Poverty.
2. Does Easterly believe there’s a grand plan for development? Give at least two examples from his last chapter that would be Easterly-like development strategies.
3. Would Easterly be surprised by the story of Kenyans converting mosquito netting to dresses as shown in class (see post below)? Why or why not?
4. Are there any causes of poverty besides oppression? (You may want to define oppression before you answer this.)

Links of the day

• Mosquito nets becoming dresses. What would Easterly say about this? Here he is.
• Relatedly, who's helped by these microchips? Why are they a better investment than mosquito nets?
• Starbucks responds.
• Robert Kaplan (who is, by the way, one of the best reporters on conflict in the world) writes about how it sucks to have bad neighbors. What would Collier say?
• Are we more prone to catastrophe because of globalization? And what if we are? Would that mean not to globalize?
• An interview with Alex Tabarrok. Question: Does democracy hold back Indian development?
  
• A too-hard final exam question.

Suggestions for students seeking careers in development

If you are considering a job in the development area, there are some fine recommendations by Alanna Shaikh. Most of you are doing some of these already, but I think even the most dedicated are missing one or two on this list.

Red and Moyo

Here are some of the things we used today in class:

• Starbucks' Red Card, and its criticism by Easterly.
• The video of Dambisa Moyo.
  I also suggested in class this interview of Moyo from the NYT.
• Here's the question I started class with: Are "scarcity" and "poverty" two sides of the same coin? Click the link for some thoughts.

Not mentioned in class but found today: Working World, a source for overseas job and study opportunities?

Unstable equilibrium

I mentioned this in class today but it bothered me I could not remember the whole quote. From an interview in Reason magazine in Dec. 1974:

From "An Interview with Milton Friedman," Nobel laureate economist

"There's a strong argument to be made that a free society is a fundamentally unstable equilibrium, in the language of the natural sciences....There's a great deal of basis for believing that a free society is fundamentally unstable--we may regret this but we've got to face up to the facts....How often and for how long have we had free societies? For short periods of time. There was an essentially free society in 5th-century Greece. Was it able to survive? It disappeared. Every other time when there's been a free society, it has tended to disappear."

Reason: It's paradoxical but...you are attributing to the collectivist intellectual a better feeling for the market.

Milton Friedman: Of course. But while there's a bigger market for Fords than there is for American Motors products, there is a market for the American Motors products. In the same way, there's a bigger market for collectivist ideology than there is for individualist ideology. The thing that really baffles me is that the fraction of intellectuals who are collectivists is, I think, even larger than would be justified by the market.

An alumna blogging overseas

Not directly related to this blog, but one of our former students, Laura Morris, is overseas with her husband who provides medical care to diplomatic staff. You can follow her at DiplomatDoc.

Jacqueline Novogratz on patient capitalism in Africa

Planners versus Searchers

An article from 2006 by Easterly can be a supplement to the first book chapter.

What are the Bretton Woods Institutions? (Bretton Woods Project)

This is the view of a group of skeptics, but provides a history.

Mexico outdone by a crook

So here's one example of how you can have the wrong institutions because you haven't built up enough coordination and trust.

The country’s Federal Competition Commission is looking into Mr. [Carlos] Slim’s companies. But the agency is outspent and outmanned by Mr. Slim. His companies “spend more on a single case than our entire annual budget,” said an official at the commission, who insisted on anonymity because he was not authorized to speak publicly about agency matters.

How would Rodrik view this?

Here, by the way, is that Acemoglu paper I talked about in class.

What's different about Botswana?

Scott Beaulier draws a rather neat graph. ("SSA" is Sub-Saharan Africa.) The country has had GDP growth of 5.3% and 3.3% the last two years. A question we want to answer in class is, why? What's different about Botswana? Is there any way to generalize it? Beaulier points out that it's using lots of deficit spending. He calls it bad news. Why?

A special report on the new middle classes in emerging markets: Burgeoning bourgeoisie | The Economist

From The Economist:

THE crowd surges back and forth, hands above heads, mobile-phone cameras snapping one of Brazil’s best-known samba bands. It could be almost anywhere in Latin America’s largest city on a Saturday night. But this is Paraisopolis, one of São Paulo’s notorious crime-infested favelas (slums). Casas Bahia, the country’s largest retailer, is celebrating the opening there of its first ever store in a favela (pictured above). It is selling television sets and refrigerators in a place that, at first glance, has no running water or electricity.

Among the shacks, though, rise three-storey brick structures with satellite dishes on their tin roofs. In the new shop, Brazilians without bank accounts—plumbers, salesmen, maids—flock to buy on instalment credit. In a country with no credit histories, the system is cumbersome: the staff interview customers about their qualifications and get them to sign stacks of promissory notes, like post-dated cheques, before allowing them to take their purchases home. But it works, more or less. According to Maria, a cleaner, “Everything I have comes from Casas Bahia. Things are very expensive but the means of payment are better for people like us, without any money.” This is the emerging markets’ new middle class out shopping.

Question for class: Do you think Brazil is exceptional? How could the rest of the world learn from Brazil?

Protectionism

Protectionism entry by Jagdish Bhagwati. This addresses the externalities and distortions discussions in Rodrik, particularly Chapter 4.

See also this post on comparative advantage, and more on trade.

Coming soon - Capitalism 3.0

From Dani Rodrik in an Indian newspaper:

Capitalism has no equal when it comes to unleashing the collective economic energies of human societies. That is why all prosperous societies are capitalistic in the broad sense of the term: they are organized around private property and allow markets to play a large role in allocating resources and determining economic rewards. The catch is that neither property rights nor markets can function on their own. They require other social institutions to support them.

So property rights rely on courts and legal enforcement, and markets depend on regulators to rein in abuse and fix market failures. At the political level, capitalism requires compensation and transfer mechanisms to render its outcomes acceptable. As the current crisis has demonstrated yet again, capitalism needs stabilizing arrangements such as a lender of last resort and counter-cyclical fiscal policy. In other words, capitalism is not self-creating, self-sustaining, self-regulating, or self-stabilizing.

Do you agree with this? Give me your comments, please.

Easterly: Back to Basics

Easterly writes:

Until recently, there had been over two decades of economists flogging a dead horse called the Washington Consensus, which was an economic policy view summarized by John Williamson in 1980.

That consensus included guess what: deregulation, openness to trade, competitive markets and fiscal austerity. It was bad that these ideas had a "Washington" label attached, because the World Bank and IMF often forced such principles--and very specific reforms that they thought, often erroneously, followed from such principles--down the throats of poor country governments. Such coercion violates democratic rights of poor people, but it doesn't mean the original Consensus principles were bad in of themselves--they were mild assertions of mainstream economic ideas.

Read the whole thing; I will discuss in class on Thursday.

Rodrik paper: Washington confusion

This is a free copy of Rodrik's Journal of Economic Literature paper that you should read.

Stiglitz video

Williamson versus the Washington consensus? | Growth Commission Blog

John Williamson discusses how his brainchild, the Washington Consensus, is used by policymakers today.

New Easterly blog

Bill Easterly now has a blog called Aid Watch. I'll put it in the side index for future reference.

Rodrik video

One of our students, Mike Pederson, found a video with Rodrik discussing his book.

Trailers for a movie for Easterly's book

Intro

Introductory post: This post will launch a blog for ECONOMICS 350, Economics of Developing Countries, with Professor King Banaian. You will be invited to join this blog in class. Your work will appear in the comments to articles that I post.