Archive for August 22nd, 2011

Comparing ECB to a highly agile coast-guard vessel

August 22, 2011

PIMCO’s Mohamed A. El-Erian provides a nice analogy to understand ECB’s woes.

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How private citizens saved New York’s public spaces?

August 22, 2011

City Journal is becoming one of the favorite websites for its continuous stream of good articles on urban eco and other public policy issues.

Laura Vanderkam in this article discusses how public parks were saved in NY by private citizens. How both Central and Bryant Park, once home to panhandlers, pushers, and punks, are now an urban oasis is a story worth telling. It was thanks to few individuals who took up the cause.

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Why aren’t all countries rich?

August 22, 2011

Jessie Romero of Richmomd Fed asks this question in this nice write-up on growth and development economics. Going to any developed economy does bring this question to your mind that why your country is not as prosperous. I am not sure whether people from developed who come to not-so developed feel the same.

Romero says the search for factors that lead to growth continue:

Why do some countries thrive while others fail? Economists have pondered that question since Adam Smith published An Inquiry into the Causes of the Wealth of Nations  in 1776, but there is still considerable debate about what poor 
countries should do to become rich and what rich countries should do to assist them. It is clear that sound legal, political,and economic institutions are essential to economic growth, but it is less clear how countries can acquire them — and how to feed and educate their citizens in the meantime.

The author goes on to discuss the resources curse and how instis can help escape the curse:

Institutions can help countries escape the resource curse. For instance, diamonds have made Botswana one of the richest countries in Africa. Its strong democratic government developed a productive relationship with the diamond company  De Beers, in contrast to the exploitative relationships that often exist when governments are weak or corrupt.

It then discusses institutions and geography and how instis rule. However, much of instis are determined by past and history. How can those countries grow now which has acquired poor instis?

The debate then moves to markets vs govt.push and how tide swung in 1980s from govt to markets. And gain it has swung towards government after the 2007 crisis:

Some economists and international organizations now advocate ideas that hearken back to those of the 1950s and 1960s. Citing the recent global financial crisis and subsequent  downturn, for example, the United Nations’ 2010 Least Developed Countries Report  advises against dependence on the market system and calls for a development strategy based on “country ownership, structural changes, capital accumulation, and the developmental State.”

There is some nice comparison of MDGs to central planning in 1950s:

What the MDGs have in common with central planning in the 1950s and 1960s and structural adjustment in the 1980s is the attempt to find a universal solution to an important problem. But development experts increasingly emphasize the importance of tailoring efforts to the needs and culture of individual countries, rather than aiming for “accelerated modernization via transplanted best practices,” as Pritchett, Andrews, and Woolcock call it. Nearly all economists would agree, for example, that property rights are essential to economic growth. But attempts to impose Western-style land titling programs in Africa and Cambodia have not been successful. That’s because institutions are idiosyncratic to the country where they develop, explains William Savedoff, a senior fellow at the Center for Global Development, a think tank in Washington, D.C. “Even  procurement  systems in Sweden and Norway are different.  They developed to respond to the particularities of their behavioral, linguistic, and political systems,” he says.

The focus is shifting to more micro action than just macro talks:

Accordingly, many are turning to projects at the micro rather than the macro level such as distributing water purification tablets or paying individual families to send their children to school. Healthier, better-educated people, it is hoped, will be able to participate in their own development.

Finally, the solutions to poverty are going to be more heterodox and country specific:

The solutions to poverty will be as heterogeneous as the causes; countries need both vaccines and property rights, and the complex links between people, communities, governments, and nations make it difficult to tease out cause and effect. But economists and policymakers on all sides of the debates continue to search for answers, motivated by the same thing: making life better for 2.6 billion people.

A superbly written essay covering many thoughts on development economics.


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