Avinash Dixit: an economist with a sense of humour

For the uninitiated this Mumbai born economist teaches at Princeton University and every year is a leading contender for the Nobel. His earlier work was on International trade but now has focused on the most controversial topic- How does development happen.

To be honest, I never read his work. Thanks to RBI, which invited him this year for the Second P. R. Brahmananda Memorial Lecture where he gave a wonderful speech on Institutions and Development. He has an amazing sense of humor. See this for a sample:

During my visits to many government offices to get various documents and permissions to travel, entry to almost any office required me to give an authorization signature from C. D. Deshmukh to the chaprasi guarding the door. Mr. Deshmukh had been the Governor of the Reserve Bank and Union Finance Minister, and in one of these capacities, his signature appeared on the ten-rupee note. I am sure this practice continues even now in many government offices. The denomination of the required note has surely risen many times, and the chaprasis are probably now called the Site Security Officers.

It deserves a LOL!! 🙂The speech is a highly rated one and has some super ideas and instances on property rights and institutions. He covers areas like contract enforcement and looks at both informal and formal mechanisms of contract enforcement. I can go on and cover his speech but what I wish to cover is something slightly different. So please read it.

I just did some research and discovered a write-up on the economist in HT Mint from where I got to know of a speech he had given in World Bank which got me interested as it says what I have been wondering all along- which path should one take for development?

The speech is here and is a must read for all the people wanting to understand most of the recent the perspectives on “What drives development” in just 29 pages of humor and wit. Let me begin with where he ends to interest the reader:

Faced with all these contradictions and shifts, I can identify only one consistently valid policy prescription. It is the quality Napoleon valued most in his generals, namely luck. Researchers want to identify causes, and practitioners want to know what they can choose and change; therefore both sides may have neglected the important role that luck has played in many countries’ development successes or failures. Easterly (2001, chapter 10) is rare among economists in giving luck a substantial role and discussing it in considerable detail.

He presents a challenge to the dev eco people:

I am deliberately going to be provocative and critical, but will try to be evenhandedly so. I hope that my remarks will give everyone some incentive to think further and harder. I also hope to help scholarly researchers better see their own work in the context of the bigger picture, and help practitioners better appreciate the difficulties of drawing implications for action from an ongoing process of academic exchange

.…….Even within these confines, the literature is huge, and I cannot hope to include even a substantial fraction of it in the space and time available. However, those left out should be relieved, not upset: the policy recipes that emerge from this iterature are almost invariably unsatisfactory, so being omitted from the list and the implied criticism, however friendly and constructive, may perhaps be regarded as a good thing.

He adds that development literature falls short as:

1. Some of the work finds that development success depends upon historic or geographic preconditions that most countries may not have. So all one can do is curse itself.

2. A wide amount of literature is available on what leads to development from very well-known/well-endowed economists but each policy prescription has a contrasting view from equally well-known/well-endowed economists.

3. As and when countries grow, its model is studied and prescribed. It was Japan first, then East Asian Tigers, now Brics. What is next?

4. The prescriptions (he calls them recipes) that look good in theory fall short when practiced, e.g. build institutions, build democracy etc. How to build them?

He uses a lot of humour. He calls the recipes as:

1. Irish recipe or the infeasible ones: For instance research shows that what matters is which kind of colonialism the country was under. Those under British learnt English, had common law system and thus had better capital markets. So what can be done? In AD’s words:

Interpreted literally as recipes or policy recommendations, these require a less developed country to use plate tectonics to move itself to a more favorable location, or to turn the clock back and invite British colonizers, of course cleaning up the local disease environment and getting rid of mineral resources beforehand.

2. Dr. Dolittle Recipes: Those that have contradictions. For instance what works- Democracy or Authoritarianism? Formal or Informal governance institutions? Comprehensive and rapid or sequential and gradual reforms? AD points out many a popularly cited literature to show that there are contradictions everywhere.

Finally you are confused and he also asks the question which I often ask: If I were a minister/policy maker where do I begin?

Suppose you are the Minister for the Economy in an authoritarian regime. You read the writings of Rodrik and others about the virtues of democracy, and are thrilled by the thought of having this “meta-institution” that harnesses “local knowledge” in your country. What do you do? Of course, if you are the Minister for the Army in a democracy and are convinced by the pro-authoritarianism arguments, your may find it a little bit easier to implement your favored institutional reform!

However, the Napoleon Prescription (explained above) takes the cake.

Read this final humour piece where he is looking at importance of property rights and cites from De Soto’s famous book:

As I strolled through rice fields [in Bali], I had no idea where the property boundaries were. But the dogs knew. Every time I crossed from one farm to another, a different dog barked. Those Indonesian dogs may have been ignorant of the formal law, but they were positive about which assets their masters controlled.” So officials who wanted to set up a formal property system could “by traveling their citystreets and countryside and listening to the barking dogs, … gradually work upward.

In the end he offers a different recipe for development, which looks at a schematic table that lists all the causes and effects of various policy measures along with prior probabilities of the event happening. However, it is just a concept and needs to be expanded. I need to look at other papers of his/others who have worked out his schema.

Highly Recommended!!

10 Responses to “Avinash Dixit: an economist with a sense of humour”

  1. Raghu Rajan’s solution for Failed States « Mostly Economics Says:

    […] year; for his work on International trade, I have reviewed his thoughts on the development subject here) are some famous ones.  Raghu Rajan (who focuses on financial markets)  has also been working on […]

  2. Financial Stability and Institutions « Mostly Economics Says:

    […] of the literature flow w.r.t. development. (For an alternate view read Avinash Dixit’s views on development […]

  3. Growth and Development- what have we learnt? « Mostly Economics Says:

    […] Charles Kenny says we haven’t learnt anything in the last 60 years and much of the literature is the same as it was in 1960s Reminds me of Avinash Dixit. […]

  4. Second Best Institutions « Mostly Economics Says:

    […] whenever I read on development economics, this and this comes to my […]

  5. Why CAPM was named CAPM? « Mostly Economics Says:

    […] has a super sense of humor as well (though Avinash Dixit takes the cake when it comes to […]

  6. Manish Kayal Says:

    Hello Amol,

    It was fun reading the post but unfortunately the link to the speech that he gave on “What drives development” is not working. Can you please help.

    Click to access Recipes.pdf


    Manish Kayal.

  7. Amol Agrawal Says:

    Thanks Manish for pionting the missing link. I have updated the post. You can find the paper here http://papers.ssrn.com/sol3/papers.cfm?abstract_id=922985

  8. Growth and kitchen recipes « Mostly Economics Says:

    […] say technology, Levine would say finance etc. So much so , Avinash Dixit has called all these as recpies for growth. The question still remains: What drives […]

  9. Sanfter Tourismus Says:

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