Archive for the ‘Growth and development’ Category

Ayn Rand vs. Elinor Ostrom: The Fight for the Future of Social Media

March 22, 2023

Pia Malaney in this interesting INET article says the fight for social media can be seen from Rand vs Ostrom lenses.

How did social media transition from decentralised platforms to centralised ones?

Elon Musk’s recent takeover of Twitter paralleled, in some sense, the 2016 earthquake when Donald Trump unexpectedly took over the Oval Office. In both cases, a populist billionaire put an existing entity with millions of members under radically new management. Unsurprisingly, whereas alarmed Americans had signaled a desire to escape to Canada in 2016, alarmed tweeters in the fall of 2022 signaled their trepidation by announcing their intention to move as well. But the most commonly threatened exit was to a structure of which few had ever heard: Mastodon.

Mastodon is but one of many new social media sites, alongside Post, Steemit, Planetary, or the Dorsey-funded Nostr, that are drawing attention in the face of Musk’s inscrutable decision-making with respect to the banning of journalists, the firing of personnel, and algorithmic changes. Many of these new sites focus specifically on shifting away from the centralized architecture of today’s tech behemoths like Twitter and Facebook.

It can be difficult to remember that a mere quarter century ago, the very social networks that have now demonstrated the terrible pitfalls of the social media revolution known as Web 2.0, were the objects of fanfare and genuine idealism. Facebook set out to “Connect the World,” while Google sought to make available all human knowledge for everyone at no cost. The latter went so far as to embrace the unofficial slogan of “Don’t be Evil.” In the spring of 2018, it was finally deliberately removed and retired from the preface to Google’s code of conduct when the obvious absurdity of the statement coming from an enormous hierarchical corporate leviathan made it more of an embarrassment than an asset.

These social media sites are perhaps the best example of the destruction of the idealism that characterized the development of the internet in the late 1960s. A time of flourishing countercultures, there was a belief, captured effectively in Richard Brautigan’s poem, “All watched over by machines of loving grace,” that we were entering a technological utopia, where machines would protect humans, and “mammals and computers (would) live together in mutually programming harmony like pure water touching clear sky.”

Rand vs Ostrom?

In the end, the issue with social networks comes back precisely to the question of scaling. At a technical level, decentralized networks have the advantage of being more robust; when faced with attacks that destroy some nodes, other nodes, and links can be decoupled, limiting damage.

At an ideological level, they attempt to break from the capitalist, profit-driven models that lie at the heart of many of the current problems of social media. But the economics of the platforms cannot get around the fundamental issue of the economies of scale. Each of the links in a network cost something to run. While these costs can be distributed among users or a non-profit structure can be created to raise resources to support networks, it will require very creative architecture to push back against the inherent tendency towards a monopolistic structure.

Nonetheless, the contrasting ideologies at play in this tech sector mirror, to a surprising extent, the conflicting ideologies in economics between the most extreme, Ayn Randian version of libertarianism and its reflection in the neoliberal economic models of the Chicago School and the more heterodox, community-oriented approach of Ostrom. It is possible, and perhaps likely, that what we are watching is the nth iteration of a cycle that we seem powerless to exit.

In this view, Ayn Rand might represent the thesis that the power of atomized market selfishness is sufficient and optimal for converting greed into a catalyst for pro-social greatness through the counterintuitive genius of the market’s invisible hand. By contrast, Elinor Ostrom represents the antithesis, as market failures due to monopoly, public goods, principal-agent problems, regulatory capture, etc. pile up until they torture the honest market argument into a form where it is almost no longer recognizable or easily defensible. What we are missing now is a synthesis into a harmonized model combining the insights of two existing schools.



Global High-Resolution Estimates of the United Nations Human Development Index Using Satellite Imagery and Machine-learning

March 20, 2023
Luke Sherman, Jonathan Proctor, Hannah Druckenmiller, Heriberto Tapia & Solomon M. Hsiang in this new NBER paper used satellite images to provide a clearer picture of HDI at local levels:

From Stagnation to Modern Growth in England

March 13, 2023

Guillaume Vandenbroucke of St Louis Fed in this economic synopsis discusses modern economic growth in England:

Modern economic growth—the sustained increase of real gross domestic product (real GDP) per capita—is a relatively recent phenomenon in world history. But what led an economy to transition from stagnation to modern growth? Population and land availability contributed to the shift, but in what ways? 

In this essay, I describe the “pre-modern growth period” of England’s history and its transition to modern growth. I document population and GDP trends surrounding the Black Death pandemic of the early 14th century and the role of technological progress, specifically in agriculture.

The Malthusian theory could, potentially, explain the transition from stagnation to modern growth, as displayed in Figures 1-3. But if one accepts this theory, instead of being exactly offset by the reduction of land per person (Figure 1), technological progress in agriculture would’ve had to have been fast enough to overcome this reduction. Such an explanation raises the following two questions: Where did the new technology come from? And why the continued emphasis on agriculture? A better theory must account for the declining importance of agriculture and the rising role of industry in modern economies. 

One such theory is as follows:

First, industrialization and the advent of machines (capital) make land less important in production. Second, ideas, scientific discoveries, and technological innovations are often embodied in new machines, and so capital is the vector through which technology affects the economy. Third, unlike land, machines can be built; and, therefore, when population increases, capital per person can remain constant or increase while land per person decreases. This eliminates the negative effect of land per person in the Malthusian theory. In sum, as England industrialized, it became possible for both population and GDP per capita to increase faster (Figures 2 and 3).

Evolution of Indian cities, land use restrictions, charter cities and more

March 3, 2023

Shruti Rajagopalan in her latest podcast talks to Alain Bertaud who has written this book “Order Without Design: How Markets Shape Cities.”

In this episode, Shruti speaks with Alain Bertaud about how Indian cities have evolved, utilities pricing, land use restrictions such as floor area ratio and floor space index, slums, charter cities, urbanization in Africa and much more. Bertaud is an urbanist, distinguished visiting scholar at the Mercatus Center at George Mason University, and senior research scholar at New York University’s Marron Institute of Urban Management. From 1980 to 1999, he was the principal urban planner at the World Bank. His book about urban planning is titled “Order Without Design: How Markets Shape Cities.”

Understanding India’s Regional Economic Diversity

February 17, 2023

Shruti Rajagopalan does a podcast with Poornima Dore of Tata Trusts who has written this recent book: Regional Economic Diversity: Lessons from an Emergent India.

In this episode, Shruti speaks with Poornima Dore about using regions rather than states as the unit of analysis, the importance of the construction sector, diversification, balanced regional development planning and much more. Dore is the director of analytics, insights and impact at Tata Trusts. She teaches at some of India’s premier management and technical institutes and is also an active musician. Her research covers macro-regional growth, smart cities and local economy insights. She co-authored “Regional Economic Diversity: Lessons from an Emergent India,” a comprehensive study at the National Sample Survey regional level that quantifies regional output and talks about what kind of diversification can help India.

One needs to break down geographical unit of analysis as much as possible to get a sense of Indian economy:

RAJAGOPALAN: In India, for all policy matters, we usually use the state as the unit of analysis or the unit of policymaking. But in India, even states are too large. Can you just walk us through what is left uncaptured when we think about the state as a unit and don’t delve deeper into specific regions within each state?

DORE: I also realized that if we take a step back, a lot of the narrative for many of these things is a country narrative. How are we doing in terms of GDP? Where are we on our SDG goals? How are we performing when it comes to COP? There is this large country-level narrative, not just in India, but even globally. Whether it’s a comparison or whether it’s even stand-alone, we talk country. And at best, as you said, we go to state. In India, we’re talking about Maharashtra. We are showcasing Andhra Pradesh or Telangana at Davos.

While all of that is very important, the fact is that each of our states itself are so huge, and by virtue of our population size and population density, there is just so much happening within each state that we are in danger of missing the wood for the trees when we are talking at that level of aggregation. What I have increasingly found in the course of the book, in the course of travel, is that each of these states is like a collection of subregions. That’s one of the arguments I try to make through the book, is that we need to look at regions that are contiguous, that are similar in nature, and often that is happening at a substate level.

That level of granularity, at least, is going to be important whether we are thinking about it as business leaders or investors or development practitioners or government, because that unit has so much happening. For example, one of the things that I tried to do was to look at output or value-added, regional value-added, and most of our metrics stop at states. We have state-level GDP that we’ve been reporting for so many years. In recent times, some amount of district GDP numbers have started coming up, but we don’t capture it for all states and at that same frequency.

If I have to say something at a substate level, I actually had to construct an indicator of regional value-added and then compare. The hypothesis was this: that probably we are going to find that at a state level, we have increased in terms of our output in absolute terms, but in relative terms, probably the narrative is similar. If you go at the regional level, the relative narrative has changed so much.

There are some regions that, say, in 2004 or ’05 were not in the top 10 at all, and suddenly, for example, southern Gujarat is at No. 2 now. There is that variation that gets masked when we are talking at state level. Part of the effort of the book was to uncover some of this and unpack it, so that we are all talking a little more about the region and thinking about it more, both from a policy or a decision-making standpoint.

The entire podcast is full of insights. Look forward to reading the book soon.

Thanks Shruti for the amazing podcasts and introducing us to very different sets of schoalrs and researchers.

Slavery and the British Industrial Revolution

February 14, 2023

Stephan Heblich, Stephen Redding and Hans-Joachim Voth in this article on one of the burning questions on industrial revolution: Was industrial revolution driven by slavery?

To what extent the wealth derived from slavery contributed to Europe’s economic growth has been a hotly debated question for more than two centuries. Most economists studying the question have looked at national aggregates. This column examines geographically disaggregated data on the impact that slavery wealth had on Britain’s industrial development. The authors find that slaveholding areas were less agricultural, closer to cotton mills, and had more property wealth. Not only did the slave trade affect the geography of economic development after 1750, it also accelerated Britain’s Industrial Revolution.

Full paper is here

Sweet equality: Sugar, property rights, and land distribution in colonial Java

February 10, 2023

Pim de Zwart and Phylicia Soekhradj on sugar production in colonial Java:

The production of a cash crop like sugar is widely expected to increase social inequality, particularly in a colonial context. This column analyses Java, Indonesia, where the reverse was true. Using detailed data across 368 districts in colonial Java, the authors find that sugar production in the 19th and early 20th centuries stimulated the expansion and persistence of communal landholding, which resulted in property being more equally distributed. The authors stress the importance of local property-rights institutions in determining – and hence, understanding – the effects of export production on socioeconomic outcomes.

Economic and Financial Sanctions: Evolution, Consequences, and Challenges

February 7, 2023

The latest issue of Journal of Economic Perspectives (Vol. 37 No. 1 Winter 2023) is out. It has two papers on sanctions, one on economic sanctions and other on financial sanctions.

T. Clifton Morgan, Constantinos Syropoulos and Yoto V. Yotov trace history of economic sanctions since WW-II:

Marco Cipriani, Linda S. Goldberg and Gabriele La Spada on financial sanctions:

Both should be very interesting reads.. 

More Roads or Public Transit? Insights from Measuring City-Center Accessibility

January 23, 2023

Lucas J. Conwell, Fabian Eckert & Ahmed Mushfiq Mobarak in the new NBER paper research whether the cities should have more cars/roads or more public transit :

The political origin of financial market dislocations: How an amusement park developer’s illiquidity turned into a credit market crisis

January 13, 2023

Burçin Kısacıkoğlu and Sang Seok Lee in this voxeu article narrate this interesting history from Korea:

On 28 September 2022, Gangwon province’s newly elected conservative governor, Kim Jin-tae, unexpectedly declared that he would not honour the local government’s guarantee on the A1-rated (the highest rating) asset-backed commercial paper (ABCP) of Gangwon Jungdo Development Corp (GJC), the developer of the Legoland Korea amusement park located in the same province. There was no indication prior to the announcement or since then that the local government was under financial pressure: the missed payment was not due to budgetary reasons. It is understood that the new governor refused to make the payment due to political/ideological considerations as Legoland Korea was associated with the previous liberal governor (Nam 2022, Park 2022). Indeed, the 205 billion won (around $144 million) that was owed by GJC was a minor item for the local government and it was not being asked to pay back the entire amount (Park 2022). GJC missed the payment on 29 September and the default was declared on its asset-backed commercial paper on 5 October.

Explainer on Pakistan’s economic crisis

January 13, 2023

I explain Pakistan’s economic crisis in moneycontrol. The economy has faced many such crises in the recent past but this one is much more intense and worrisome.

There was a time Pakistan was growing faster than India from 1960s to 1980s and has slipped ever since. Pakistan’s polity has ignored calls for economic reform for a long time. They have just lived off aid and financial assistance hoping for things to continue forever. The easy monye has stopped creating multifold problems.


International trade in the time of climate crisis

December 14, 2022

Ankai Xu and José-Antonio Monteiro in this voxeu aricle discuss a new WTO report which argues that greater trade openness can help alleviate climate risks:

Climate change is having a profound impact on people’s lives around the world. This column summarises analysis from a recent WTO report on the complex relationship between climate change and international trade. It shows that countries with greater trade openness tend to be less vulnerable to climate shocks. In addition, although international trade generates greenhouse gas emissions, it can also help accelerate the transition to a low-carbon economy. Ultimately, international cooperation on climate-related policies will be a key ingredient to limiting climate change in the future

Industrial Clusters in the Long Run: Evidence from Million-Rouble Plants in China

December 14, 2022

Stephan Heblich, Marlon Seror, Hao Xu & Yanos Zylberberg in this nber research study the manufacturing plants comstructed during alliance between the U.S.S.R. and China in 1950s:

Turn From ‘Public Finance’ to ‘Public Economics’

October 25, 2022

Steven Medema of Duke University in this paper traces how the narrower field of Public Finance was broadened to becom Public Economics:

In a paper delivered at the December 1955 meeting of the Econometric Society, Paul Samuelson noted that though economists had done “work of high quality and great quantity in the field of taxation,” the theory of public expenditure had been “relatively neglected” (1958, 332). Anglo-American treatments of the subject, which in the late 19th century began to take the form of the self-contained treatise, typically opened with a brief, almost obligatory statement of the proper functions of the state before launching into their extensive disquisitions on sundry aspects of taxation, public debt and, eventually, fiscal policy. The operative point here is that these roles assigned to the state were asserted, and typically briefly, rather than demonstrated, even if the tasks ascribed—e.g., national defense, a system of justice, public works—resonate with modern theoretical sensibilities.

The last third of the twentieth century, though, saw a significant structural change in this pattern. While the analysis of taxation and other financing issues did not disappear (and, in the case of taxation, continue to expand in scope), the cursory treatment of the functions of the state slowly gave way to deeper and more systematic inquiries.

Indeed, by the mid-1980s the ‘public expenditure theory’ lacuna lamented by Samuelson had largely been filled with the theories of public goods, externalities, marginal-cost cum peak-load pricing.

This paper documents and attempts to explain this transformation, locating its origins in Richard Musgrave’s normative theory of the public household and the adoption by subsequent thinkers of new developments in welfare theory, which was seen to offer a theoretically sophisticated a vision of the state’s role as a response to the problem of market failure.


Building a New Scotland: A stronger economy with independence

October 18, 2022

The Scottish Government is proposing that an independence referendum is held on 19 October 2023.

The government is trying to inform its ctizens about Scotland’s future before a referendum takes place. The govt has put together a series of papers, titled ‘Building a New Scotland’:

  • Paper 1: Independence in the modern world. Wealthier, happier, fairer: why not Scotland?
  • Paper 2: Renewing democracy through independence
  • Paper 3: A stronger economy with independence

in Paper 3:

We will use the full powers of independence to build an inclusive, fair, wellbeing economy that works for everyone in Scotland. The proposals in Building a New Scotland: A stronger economy with independence are designed to allow you to:

    • have lower energy prices and security of supply by increasing and diversifying our electricity-generating capacity, making better, greener use of Scotland’s abundant natural energy resources
    • have a better, fairer working life, including improved access to flexible working, greater job security through strengthened workplace rights and, if you are a young person, the same minimum wage as everybody else
    • escape a UK economic model that concentrates wealth in London and the South East of England, while producing inequality, low investment, and low productivity
    • regain your European citizenship and the right to study, work and live across the European Union
    • benefit directly from investments from the Building a New Scotland Fund, with an investment of up to £20 billion in major infrastructure only possible with independence. This would be designed to give Scotland the best start as an independent country, including investment in more energy-efficient homes, greener transport, better digital and mobile connectivity, and more affordable housing
    • keep using the pound sterling, until the time is right to move to a Scottish pound
      • retain free movement across these islands, including in the UK and Ireland
    • take part in new ways for communities to own and steer the economy, including through direct stakes in local developments
    • live in a country where decisions about how we use our assets, talents and resources reflect our values and democratic choices, allowing Scotland to develop the kind of inclusive, consensus-driven economic policies that serve other European countries so well.

Understanding the bitterness of Wassily Leontief: Postwar success and failures of input-output techniques

October 18, 2022

Vincent Carret of University of Lyon in this paper:

Although Leontief was and still is one of the most recognized names in economics, inextricably linked to the development of input-output techniques, he remained fiercely critical of other economists’ works and of the state of economic science during his whole life. To understand his bitterness, we go back to the root of the split between Leontief and the rest of the economics profession, through an examination of the debates that took place in the late 1940s. From his input-output model, conceived as an operational theory of economic interdependencies, Leontief drew a specific approach to economic policy and planning which had a lot of success with government agencies, explaining how he could durably sustain his split from the profession.


Why Pakistan needs a new charter of economics

October 3, 2022

muneeb sikandar in this article says before deciding reforming pakistan economy, we need a charter on pakistan’s economics.

Pakistan needs a charter of economics before a charter of the economy. Recently, there has been much debate on the need for all political parties to come together and formulate a charter of the economy for Pakistan. Proponents have argued that such a consensus is pivotal for the country to navigate its current crisis in order to bring forth a period of stability necessary to help Pakistan. But how would one go about formulating a charter of the economy? Perhaps a good first step could be to ensure all political parties have a common definition of economics.

Pakistan ought to follow the Chinese model of economic development. but which model of chinese development? He points to 4 definitions of economics.

Definition 1: Economics enables us to look at the grand political and economic changes in history and explain them using economic factors. In other words, it is a branch of historical materialism. Decisions driven by economic factors shape societies and make them change. In this case, we must discuss the classics and historical case studies of their application in countries.

Definition 2: According to Alfred Marshall’s definition, economics deals with our ordinary life and its objective is to improve that ordinary life, to make our incomes higher, allow us to have more free time, and make poverty disappear so that we can enjoy other activities that we like while having a satisfactory standard of living. Then, we should consider discussing classics and historical case studies of their application in countries but perhaps not as carefully as under the first definition.

Definition 3: Economics helps us in allocating scarce resources among alternative ends. Then we need to discuss only selected classic texts and historical case studies of their application in countries.

Definition 4: Economics is just what businesses and finances do now. Then perhaps we should not bother with classic texts and historical case studies of their application in countries.

Goes on to explain each of the definitions and how they apply to China and Pakistan.

Historical anti-fascism and right-wing voting in Italy

September 28, 2022

Marco Lecci, Laura Panza, Eik Swee and Giulio Zanella in this voxeu post:

 In recent elections, voters in countries around the world have expressed support for right-wing political parties. Each of these countries has its own history of right-wing politics generally, and fascism specifically. This column examines the past and present of right-wing parties in Italy, and finds that the historical resistance to fascism dampened support for right-wing political parties decades later. Modern right-wing platforms have reduced appeal for voters with connections to an anti-fascist tradition that was violently repressed, owing to the intergenerational transmission of cultural attitudes that translate into political preferences.

Slavery and the British Industrial Revolution

September 12, 2022

Stephan Heblich, Stephen J. Redding & Hans-Joachim Voth track impact of slavery on industrial revolution in England0:

How the World Became Rich: The Historical Origins of Economic Growth

September 7, 2022

The question of what drives wealth of nations continues to inspire researchers for the possible answers.

Mark Koyoma and Jared Rubin have released a new book on history of economic growth. The new book updates all the literature and offer their take on what drives the growth. The authors have put up a website for the book and lots of other resources such as podcasts on the book and chapter slides.

Shruti Rajagopalan interviews the authors in her super podcast.

RAJAGOPALAN: One of the key things that I learned from the book is that the entire story is sustained economic growth. Every time you explain one of the countries that you’re looking at or one of the cases that you’re looking at, you talk about how different things start mattering. Yes, institutions matter, but so does geography, so does culture and so on. You guys are also doing this cross-country, cross-century comparison. I appreciate that there can’t be a single answer at the end of the book where you just write one sentence and say, “This is the reason. We’ve answered the question.”

What is a good way to think about this? Is it that it is the very contextual interaction between these factors that led to the growth in that particular case and point? Or is it that in those circumstances, the binding constraint was geography, or the binding constraint was culture, or the binding constraint was institutions?

MARK KOYAMA: That’s a deep question, Shruti, so a tricky one to answer. I think the quick answer is, both are plausible ways to read what we’re doing. The latter example where we go through these historical examples, we try and think which binding constraint here is plausible. For example, thinking about today, I’ve been told at least by development economists—some of whom are more skeptical about, say, institutions—they would say, even if you’re Botswana—Botswana is a relatively well-governed sub-Saharan African country, and it’s relatively high-income by sub-Saharan African standards, but it’s landlocked.

No matter how good Botswana’s institutions are, it’s always going to be more difficult for them to access, say, Chinese markets than it is for Vietnam to do so. For Botswana, maybe geography is a pretty binding constraint, but still not absolutely binding. They could still grow and do better, but they are constrained by their geography. I think it’s a perfectly respectable way to argue, to say, “Yes, in Botswana geography is a problem,” but say, “Venezuela or Argentina, it’s probably the political institutions which are the binding constraint.”

We go through, and we think that in the case of why didn’t the Dutch industrialize, the political institutions, they may have been overly oligarchic; that’s the criticism you could lay against them. But they were pretty good at restraining the power of the executive, the stakeholder, the equivalent of the king, and the Dutch Republic had almost no political power. They didn’t have the autocrats, the autocratic problem, let’s say, that China has or the Ottoman Empire had. I think it’s a perfectly respectful way to use our book and to think about these things.

Now, the first way of reading it was a bit different. That’s also a valid way to read the book because we definitely think that institutions interact with culture. That’s actually very much in line of [Joel] Mokyr’s work on the Republic of Letters. The book is called “A Culture of Growth,” but if you read that book and if you read our summary of it in “How the World Became Rich,” it’s actually institutions which underline it. There’s academic institutions like the Royal Society, there’s the framework of competitive states and there are things like the fact that there was a postal system that worked across Europe, which meant that people could communicate. There were academic journals.

Definitely, when we go through those factors, we almost always think that the interaction is where the interesting action is. It’s partly why we were dissatisfied with some earlier treatments of these questions because people would think, “Oh, it’s all institutions,” or “It’s not institutions, it’s all culture,” whereas clearly it has to be how these things come together. And that’s where a lot of the action is in terms of academic research, in particularly the intersection of culture and institutions.

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