Archive for the ‘Growth and development’ Category

The Future Economy with Joel Mokyr

August 11, 2022

Allison Schrager of city-journal has a superb interview/podcast with Prof Joel Mokyr.

Allison Schrager: Welcome to Risk Talking, a new economics podcast. You may wonder, “There’s a lot of economic podcasts, why do we need another one?” Well, this one takes a slightly different tack. We take the biggest economic questions of the day, we talk to the most interesting minds of the field, and to be honest, this is what economists do. I feel like I am always trying to get answers to these questions, and I have these fabulous conversations with all these very smart economists I’m lucky enough to have access to, and I always thought it would be great if everyone could listen in. For the first episode, I could think of no one better to speak to than Joel Mokyr, mainly because I’ve been a huge fan since I was in undergrad and just really enjoyed reading his research on economic history. He is the most prescient economic historian that you will ever meet, mainly because he understands how technology changes economies in really profound ways. And his insights about what happened in the Industrial Revolution offer a lot of lessons for the changes we have today.

Three hundred years is merely a blip in the history of humanity, let alone the history of the world. But since the 18th century, mankind has experienced a staggering revolution. Technological innovations have transformed the way we live, delivering immense gains in life expectancy, freeing us from back-breaking labor, and generating innovations that change our way of life, unleashing prosperity that has no precedent in world history.

What sparked this revolution? Scientists, philosophers, and politicians have long sought to answer this question, but Joel Mokyr’s work takes an economic approach examining the intellectual roots of the industrial revolution with rigor and originality. Joel is an economic historian and professor at Northwestern University, where he has taught for nearly 50 years. He’s written extensively on the relationship between ideas and innovation in his books, which include The Gifts of Athena: Historical Origins of the Knowledge Economy and The Enlightened Economy: An Economic History of Britain from 1700 to 1850. Most recently, he wrote A Culture of Growth: The Origins of the Modern Economy in which he makes the case that enlightenment culture spurred the industrial revolution. Joel and I discussed a wide range of topics: What drives economic growth, what system of government best encourages innovation, whether the intellectual environment is becoming less open to new ideas, and the future of work in an increasingly virtual world. A conversation with Joel is an education, and I’m excited to share his thoughts with you.

What drove economic growth?

Allison Schrager: Let’s jump right in with what may be one of the most controversial question in economic history, which is, humans made some progress and dawdled along for a long time, but then starting a couple 100 years ago, we experienced these huge, huge unprecedented gains in productivity and living standards, and they’ve sustained themselves for hundreds of years. So, why did industrialization happen? What spark drove this, and why did it happen where it did?

Joel Mokyr: That is the $64 million question, of course, so I’ll give you my take on it, and other people will probably differ. You’re right. Much of human history is not a history of long-term progress and economic growth. And there’s some debate as to whether there was no growth at all, as some people have argued, or whether the growth was absolutely minimal and infinitesimal. But even very low rates of growth, if you compound them over thousands of years, they will result in some increase in living standards. I would say by 1700, most people in the world, at least the world that’s documented, which would be Asia and Europe, probably were living at a higher living standard than people did during the Roman empire, but not by a huge amount.

And so, something happened in the 18th century that changed all that, and the real question is, what was it? I’ll give you my take on it, and people can debate it. You said the question was controversial, so will my answer be, but I don’t care. Here is the point. Economic growth and economic progress is not driven by the masses. It is not driven by the population at large. It is driven by a small minority of people who economists refer to in their funny language as upper-tail people, meaning if you think of the world following some kind of bell-shaped or normal distribution, it’s the elite, it’s the people who are educated—not necessarily intellectuals. They could be engineers, they could be mechanics, they could be applied mathematicians.

They don’t have to be philosophers, but they have to be people who are really good in what they’re doing, and I think those are the people who are driving economic progress. I’m not just thinking James Watt and five people. It’s not that simple. But I would say, if you look at the top 2 percent or 3 percent of the population anywhere, those are the people that are driving economic growth. And that’s still the case. I mean, in the United States, much of the technological progress they’ve been experiencing has been driven by a fairly small number of people. Some of them are Caltech geeks, and some of them are just really good people who are coming up with novel ideas, but basically that’s what it is about.

And so, what changed is our ability to generate better technology. And in doing so, we owe a lot to a fairly small elite who underwent major cultural and social changes in the previous centuries. And that’s what I try to outline in my book, A Culture of Growth. And A Culture of Growth isn’t really about culture as we generally define it. I don’t particularly spend a lot of time worrying about things like religion or popular culture, or things like that. I look at the people who are driving the economic growth, and that’s all way down from Newton and Galileo to a bunch of engineers that very few people have ever heard of. But these are the people who built the machinery and came up with the fundamental ideas that made economic growth possible. And you can see that starting to happen in the late 17th, early 18th century, and it’s closely associated with what we typically call the Enlightenment.

But it’s important to realize that the Enlightenment was about many things. It was about the state, it was about philosophy, it was about human freedom, and justice, and all kind of things. And I’m just cutting out a small slice of that huge pie, which is about economics. And I call that the industrial enlightenment, and it really is about how to achieve material progress. And material progress isn’t all progress, and people were also interested in establishing more human rights and a civil society and the social contract, and I’m all for that, but that’s not what economics are about. They are about economic growth, and when you say economic growth, in this period you’re talking first and foremost about technology. You’re talking about machinery, you’re talking about ideas, you’re talking about all kind of contraptions that make life in some way better.

And it’s not just about the steam engine or the mule or anything like that, it’s about ideas that try to manipulate nature in a way that benefits humans. And so, I’ll give you one example—it’s not machinery, but it is very critical. It’s vaccination against smallpox, which is very much on people’s minds these days, right? But this is an 18th-century idea. This English country doctor, Edward Jenner, basically came up with this idea. It’s not a machine in any way, but it is a pathbreaking, I would say a radical idea, of how to use what we know about nature to improve human life. And that’s what economic growth in the end is all about. Now, it’s not all human life, it’s material things. It’s how not to get sick, how to get more to eat, how to have better clothing, better housing, to heat your place, to be warmer in the winter and cooler in the summer.

It’s about all these things that define our material comfort and our material wellbeing. It doesn’t necessarily create a better society, and I would have never argued that. I’m not even sure what a better society really is, but even if I knew that, I would say it’s not obvious that society in the 20th century, which after all produced Stalin and Hitler, is necessarily a better place than it was in the 18th century. I mean, that would be an absolutely absurd statement, but what is clear is that life in the 20th century anywhere on this globe is better than it was in the 18th century, in the narrow and somewhat limited material sense that economists are interested in.

Mokyr discusses China, why productivity stats underestimate productivity..

There is No Such Thing as Development Economics

August 5, 2022

Alex Tabbarok post in MR blog:

I used to think there was such a thing as development economics. There are still richer and poorer countries, of course, but is there a “development economics,” a special type of economics for poor countries? I don’t think so. Maybe there once was. In the twentieth century, divergence in per-capita GDP increased big time and it was a burning question why poor countries weren’t on the same development path as the developed nations. Starting around 1990-2000, however, we have seen convergence. Most countries are now on the same path. Poorer countries and richer countries are becoming more alike, sometimes for good and sometimes for bad. I tweeted the following news headline recently:


Notice the commentary on NYC infrastructure but also the man bites dog angle. In Pakistan people on social media are apparently sharing videos of flooding in the New York subway to complain about the poor state of infrastructure in Pakistan!

My own anecdote fit the pattern. This week I am in Delhi and due to a series of unfortunate supply chain shocks at my house-build in the US, for the first time in 3 weeks I have running hot water and reliable internet access!  Not only that but although India has sadly fallen for the paper straw nonsense the top hotels remain free from flow constrictors so the water gushes out of the shower with elan just as God intended. Civilization is  truly moving back east.


Is Education Neglected in Natural Resources-Rich Countries? An Intergenerational Approach in Africa

August 2, 2022

Jean-Marc B. Atsebi, Rasmané Ouedraogo and Regina S. Séri in this paper:

The literature on the effects of natural resources on education is mixed and inconclusive. In this paper, we adopt an innovative approach by exploring the effects of mineral discoveries and productions on intergenerational educational mobility (IM), linking parents to the children education levels for more than 14 million individuals across 28 African countries and 2,890 districts.

We find that mineral discoveries and productions positively affect educational IM for primary education in Africa for individuals exposed to the mineral sites and living in districts with discoveries. Specifically, the probability of upward primary IM increases by 2.7 percentage points (pp.) following mineral discoveries and 6.7 pp. following mineral productions. Downward primary IM decreases by 1.2 pp. following both mineral discoveries and productions.

These positive effects are increasing for individuals born later after discoveries and productions, for males, and individuals living in the urban area. However, no significant effects are found for secondary and tertiary educational IM. Finally, we explore the income and returns to education channels through which mineral discoveries and productions affect educational IM.


Rise and Fall of Empires in the Industrial Era: A Story of Shifting Comparative Advantages

August 1, 2022

Roberto Bonfatti & Kerem Coşar in this new NBER paper:

The last two centuries witnessed the rise and fall of empires.

We construct a model which rationalises this in terms of the changing trade gains from empires. In the model, empires are arrangements that reduce trade cost between an industrial metropole and the agricultural periphery.

During early industrialisation, the value of such bilateral trade increases, and so does the value of empires. As industrialisation diffuses, and as manufactures become more differentiated, trade becomes more multilateral and intra-industry, reducing the value of empires.

Our results are consistent with long-term changes in income distribution and trade patterns, and with previous historical arguments.

The return of macroeconomic imbalances in Africa: adapting to life on the edge

July 25, 2022

IMF African Department Director Abebe Aemro Selassie in this speech discusses the outlook for Africa. The macro outlook is again on the edge.

First, imbalances are back and this creates a very difficult situation for policymakers in the region, with more uncertainty, more social tensions, and ever-decreasing policy space to respond.

Second, we have to rethink traditional policy prescriptions to meet the imbalances we are facing. And this is something we must not be afraid to do. Many economic targets and anchors of the past now seem unrealistic and obsolete. Thinking through these issues will help countries living on the edge to undertake much-needed reforms and eventually move away from it.

And finally, despite the difficult path ahead—marked by constraints, imbalances, and growing challenges—I remain deeply optimistic about the region’s prospects. I returned to my country in 1992 as a would-be technocrat at a similarly difficult time for the region. And if anybody had said to me then that Accra, Kampala, and Addis would 30 years on look anything like what they do today, I would have thought they were under the influence of more than just a cup of strong Ethiopian coffee. And of course, the changes as I said go well beyond just the shiny new buildings that we see in these cities: there has been fundamental development progress that has shifted the opportunity set of a generation. I have no doubt that, from this stronger foundation, progress over the next 30 years will be more remarkable still. But only if, as the generation of policy makers from the 1990s did, we take the necessary bold decisions.

Acquisitions, Management, and Efficiency in Rwanda’s Coffee Industry

July 13, 2022

Rocco Macchiavello & Ameet Morjaria in this NBER paper study Rwanda’s coffee market:

The promise of linked historical census data

July 6, 2022

US Census has released individual records for 1950 census.

In NBER Reporter, Katherine Eriksson describes the vast research possibilities this new resource has created. She has dug up individual records of her family!

Individual records from the 1950 US Census were publicly released on April 1, 2022. Economic historians had been waiting for this day for 10 years. This data source, like the individual-level data from earlier censuses, makes it possible to locate the information reported by a specific person.

I found the records for my grandparents along with those for my mother, who was born in December 1949. They lived in rural Lincoln County, Kentucky. My grandfather, Bernard Camenisch, born in Kentucky to a Swiss father, worked 92 hours the previous week as a dairy farmer. A decade earlier, in the 1940 Census, he was living with his father, also a farmer; he worked 60 hours the week prior to answering that census survey. My grandmother Dorothy was a “sample line respondent,” and so answered questions asked to only one in five individuals.


Profile of Melissa Dell: Pioneers new ways of unmasking legacies of the past

June 23, 2022

IMF’s Finance and Development Jun-2022 edition profiles Melissa Dell of Harvard University:

Scholars have long wondered why some places prosper, while others do not. How do societies climb the development ladder to greater prosperity? What is the secret sauce of economic success? Why is GDP per capita in South Korea so much higher today than it is in Cambodia, which had a similar standard of living in 1960?

Questions like that have inspired sweeping, almost epic books that span centuries and continents, like Guns, Germs, and Steel, by Jared Diamond, which looks at environmental factors, and Why Nations Fail, by Daron Acemoglu and James A. Robinson, which focuses on the role of institutions. 

These questions fascinated Dell, but she wanted to follow a different path. She took a microscope to the subject, looking not at the diverging fortunes of continents and nations but of neighboring towns and villages.

“To be able to really delve into things, it helps to have that kind of local perspective,” Dell says in an interview with F&D. “By focusing on the micro level, you can get a lot more detail and granularity about what’s going on.”

One of Dell’s big contributions to the literature of development economics—and the advantage of her micro approach—has been to identify what she calls channels of persistence. 


Does the creation of smaller states lead to higher economic growth? Evidence from state reorganization in India

June 20, 2022

Vikash Vaibhav and K. V. Ramaswamy in this IGIDR paper analyse whether creation of Chattisgarh, Uttarakhand and Jharkhand led to higher economic growth in the three states:

In the largest territorial reorganization since the 1950s, when the modern state boundaries were demarcated, the Indian union government carved out three new states from three large north Indian states in November 2000. This was accompanied by discussions along political and sociological lines. But the debates along economic lines were muted, owing to a lack of data. Equipped with three and a half decades-long macro panel data, we investigate whether the event had an impact on the per capita income. For comparison, we construct five separate counterfactuals using techniques such as synthetic control and elastic net regularization.

The three erstwhile ‘combined’ states do not show any evidence of extraordinary growth. We further investigate the six states separately to see if the ‘new’ states grew at the expense of their ‘parent’ states. The state of Uttarakhand shows ‘extraordinary’ growth in the post-reorganization period. Two other smaller states (Bihar and Chhattisgarh) did grow faster than their counterfactual, but do not qualify for the statistical significance test. Three other states (Jharkhand, Madhya Pradesh, and Uttar Pradesh) also do not show a significant change in their growth path. Overall, we find that the creation of smaller sub-national administrative units may not be a panacea for their economic problems.

While economics is a useful and a very important lens, we need to look at political dimensions too. Did creation of new states lead to better administration?

About 200 years ago, the world started getting rich. Why?

June 3, 2022

Dylan Matthews of interviewed Jared Rubin and Mark Koyama over the big question: Why the world started getting rich about 200 years ago:

The big question is what drove this transformation. Historians, economists, and anthropologists have proposed a long list of explanations for why human life suddenly changed starting in 18th-century England, from geographic effects to forms of government to intellectual property rules to fluctuations in average wages.

For a long time, there was no one book that could explain, compare, and evaluate these theories for non-experts. That’s changed: How the World Became Rich, by Chapman University’s Jared Rubin and George Mason University’s Mark Koyama, provides a comprehensive look at what, exactly, changed when sustained economic growth began, what factors help explain its beginning, and which theories do the best job of making sense of the new stage of life that humans have been experiencing for a couple brief centuries.

I interviewed Rubin and Koyama via email; a transcript, lightly edited for length and clarity, follows.


Handbook | Impact Evaluation in International Development : Theory, Methods and Practice

June 2, 2022
A new World Bank Handbook by Paul Glewwe and Petra Todd:

Impact evaluations are studies that attempt to measure the causal impact of a project, program, or policy on one or more outcomes. This book provides a comprehensive exposition of how to conduct impact evaluations.
Part I provides an overview of impact evaluations and comprises five chapters which are accessible to readers who have few or none of the technical (statistical and econometric) skills that are needed to conduct impact evaluations.
Parts II and III make use of statistical and econometric methods and are at a level similar to a graduate-student course but written to make them accessible to the ambitious reader whose skills are not at that level. Part II presents, in Chapters 6-10, a comprehensive discussion of the use of randomized controlled trials (RCTs) to conduct impact evaluations, including a general discussion of the ethical issues involved in conducting impact evaluations.
Part III presents the main nonexperimental methods that are used to implement impact evaluations when RCTs are not feasible or not recommended for other reasons. Chapters 11 and 12 present regression methods, including difference-in-differences estimation. Matching methods are described in Chapter 13, after which regression discontinuity methods are covered in Chapter 14. Instrumental variable methods, including the estimation of local average treatment effects (LATE), are discussed in detail in Chapter 15. Chapters 16 and 17 cover more advanced topics: quantile treatment effects and control function methods, respectively.
Part IV then considers more practical issues when conducting impact evaluations, including designing questionnaires (Chapter 18), data collection methods and survey management (Chapters 19 and 20), and disseminating results to policymakers (Chapter 21). Finally,
Part V addresses two topics in impact evaluation: qualitative methods for conducting impact evaluations (Chapter 22), and cost-benefit and cost-effectiveness analysis (Chapter 23).

Creative Destruction? Impact of E-Commerce on the Retail Sector

May 31, 2022

Sudheer Chava, Alexander Oettl, Manpreet Singh & Linghang Zeng in this NBER paper look at impact of online retail on traditional retail. Is there Schumpeterian creative destruction?

How do communication costs affect the production of new ideas and inventions? Case of Uniform Penny Post in 1840

May 30, 2022

W. Walker Hanlon, Stephan Heblich, Ferdinando Monte & Martin B. Schmitz in this new NBER paper study how lower communication costs leads to development of new ideas:

Economic Planning in India: Did We Throw the Baby Out with the Bathwater?

May 23, 2022

Ajay Chhibber of George Washington University in this IPPR paper says we need to revisit role of planning and Niti Aayog:

 India has a long and checkered history of planning with some success but many failures. Despite India’s federal structure India’s approach to planning has been top-down with the union government controlling many levers – financial and otherwise to determine the direction of the economy and social programs. India has tried 3 types of planning – “directed planning”, “indicative planning” and now just a “strategy but no planning”.  India needed to replace the Planning Commission but not give up on planning altogether. Just as the rest of the world was going back to a “new planning” surge to handle climate change and the desire to meet the SDGs, India abolished planning altogether. The successor to the planning commission – the Niti Aayog needs to get back to “new planning”, that is now being adopted by many countries with stronger leadership. A legitimised authorising environment and effective use to plan can help India achieve the SDGs by 2030 and become a prosperous country by 2047.

RBI’s Innovation Hub in Bengaluru: Will Bengaluru be a new financial centre in India?

April 6, 2022

RBI recently established its Innovation Hub in Bengaluru.

My new article in Financial Express discussing whether thus policy move help shape Bengaluru as a financial centre.

Discussion with Lant Pritchett: Where did development economics go wrong?

March 22, 2022

Shruti Rajgopalan has a conversation with Prof Lant Pritchett on the IdeasofIndia podcast.

In this episode, Shruti speaks with Lant Pritchett about economic convergence, academic skepticism about growth, flawed methodologies in development economics, the shortcomings of India’s educational system and much more. Pritchett is a development economist from Idaho. He is currently affiliated with Oxford’s Blavatnik School of Government as the research director of the RISE Programme, is the Research Director at LaMP (Labor Mobility Partnerships) and is a fellow at the London School of Economics. He previously worked with the World Bank from 1988 to 2007, living in Indonesia 1998-2000 and India 2004-2007. His publications span a wide range of development topics including economic growth, state capability, education, labor mobility and development assistance.

The earlier problem was how much to read. Now it is how much to hear!

Building a state one step at a time: Evidence from France

February 4, 2022

Cédric Chambru, Emeric Henry and Benjamin Marx in this research at voxeu look at how France was built step by step:

Currency Undervaluation and Comparative Advantage

January 31, 2022

Paul Bergin in the recent NBER paper discusses tradeoffs of currency undervaluation as a growth strategy:

New Zealand: Changing the Conversation on Well-Being

January 27, 2022

NZ is trying to change the conversation on well-being and make it part of its public finance.

Anna Jaquiery of IMF in this article explains the change:

In 2019, New Zealand’s Labor government, led by Prime Minister Jacinda Ardern, unveiled a budget aimed at tackling some of the long-term challenges the country faces in areas such as domestic violence, child poverty, and housing.

The so-called Wellbeing Budget 2019 set out to prioritize five key areas: mental health, child well-being, supporting the aspirations of the Māori and Pasifika populations, building a productive nation, and transforming the economy. It unveiled billions for mental health services and child poverty as well as record investment in measures to tackle family violence.

New Zealand, a nation of 5 million people, performs well in many measures of well-being relative to most other countries in the Organization for Economic Co-operation and Development. But it is also among the worst for family and sexual violence, and child poverty is also a challenge. In 2020, up to 210,500 children lived in poverty (18.4 percent), according to New Zealand’s statistics agency.

A fundamental aspect of the country’s well-being approach is the recognition that all aspects of what constitutes a good life must be considered holistically, whether it’s access to health care and education or a strong sense of connection to  one’s community.

“The good news is that the conversation has changed,” says Girol Karacaoglu, former chief economist at the New Zealand Treasury and now head of the School of Government at Victoria University of Wellington. He is also the author of the book Love You: Public Policy for Intergenerational Wellbeing.

“There’s a realization that we need to worry about other things than income. New Zealand has taken this very seriously, and Budget 2019 is a good example of that.” The budget acknowledged that health and the economy go hand in hand. Kirk Hope, chief executive of BusinessNZ, sees this as a positive step.

“A lot of the investment is going into the health system. We need to get good outcomes for those investments. Well-being is critical to business. You won’t have a very productive workforce without it.”

We obviously keep going in circles on this one. If you say policies are changing bigtime as they focus on well-being, common person’s response would be what were you doing all this while?

African history through the lens of economics

January 27, 2022

Nathan Nunn, Stelios Michalopoulos, Elias Papaioannou and Léonard Wantchékon in this voxeu article introduce a new online course on African eco history:


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