Tuesday 28 December 2010

Happy New Year: Economic Optimism

Economic optimists have a tough time against doomsayers and pessimists in the battle for public opinion and newspaper headlines, despite the wealth of statistics on their side. Their message just isn't that attention-grabbing or entertaining - even I strongly prefer 'The Walking Dead' over Teletubby-type shows (if they made Teletubbies for adults, which they don't, which kind of proves my point) (!!). So, I was happy to see this NYT article on the topic of oil supplies and energy prices, which provides a nice counter-balance to the latest malthusian pronouncements from Paul Krugman. Happy New Year everyone!

Saturday 25 December 2010

Treasure troves of new data

Here are two interesting projects that allow us to significantly improve our ability to measure important economic and social phenomena. The first, provides us with a way to calculate daily inflation rates for several countries by piecing together billions of prices from online retailers.While this is for now mostly confined to developed countries, the project is rapidly expanding to the developing world, where official inflation data tend to be less reliable.
The second is a hot off the press tool developed by Google to mine digitized text for word usage. Taking advantage of Google's massive efforts to digitize over 15 million books, researchers created a user-friendly tool that counts how frequently strings of up to 5 words appear in books in different languages (German, Spanish, American English, British English, etc). This is a good start and reveals some interesting patterns. We look forward to future iterations of this product, especially once it starts including searches through other forms of mass media, which are perhaps even more norm and culture-defining than books.
Happy Holidays!

Thursday 23 December 2010

Happy Holidays!

Here is a lovely story (despite being an obituary!) for the holidays.

Wednesday 22 December 2010

land, property rights and development

Last term we discussed several mechanisms through which property rights were related to both growth and the environment; among these, Graciela Chichilinsky pointed out that if a country has very poor property rights, natural resources (like land) look like open access resources and create an illusion of a comparative advantage in that resource. If the country opens to trade, then, the resource will be over-exploited (well, to be fair, the resource might have been over exploited before trade as well, but that situation would get worse). We also reviewed the Ostrom-related literature on (often informal) common property resource management and the ambiguous consequences of privatisation. Finally, we can't forget all the Engerman/Sokolof and Acemoglu-related literature on the relationship between the widespread existence of family farms, as opposed to plantation agriculture, the resulting income distributions and power structures in society, and the institutions that subsequently evolved over time.

It is a good idea to keep all these theories in mind when reading this story in the New York Times today about the ongoing 'land grab' taking place around the world, and often in Africa, these days. Even in Wisconsin the price of farm land is rising -- but how might the consequences of soaring farmland prices in Wisconsin differ from the outcome of the same increased demand for land in Africa? And why? It is not obvious at all, but the literature we reviewed last term should help us develop more nuanced and complex interpretations than are reflected by the journalists. What are the policy implications?

Tuesday 7 December 2010

China, human capital, and global economic growth

Astonishing new results from Chinese student test scores are being reported in the US newspapers (well, in the NY Times) as something of a 'competitive threat' to future economic prosperity. But is this really a 'bad' thing for Americans that all these exceptionally smart young people are about to join the world economy? Remember again Jones and Romer - they might have to revise their estimates of the global impact of Chinese assimilation even higher now. Plus there may be a further multiplier effect - think of all the extra human capital that will be generated by the (now, hopefully) increased efforts to improve education of all these countries trying to keep up. That increase could arguably be said to be 'caused' by China as well. And, the return to the human capital that a country does have, high or low, will be augmented by the extra stock of knowledge. As a gizmo lover myself, the prospects boggle the mind!

All this potential makes the low educational achievements of many very poor countries all the more tragic, considering what might have been ... next term hopefully we will learn about concrete strategies to help poorer countries harness this amazing source of growth and prosperity.


Sunday 5 December 2010

The Cost of Fads in Development Practice: lessons lost

Here is a classic example of the lumpiness of development policies. In a competitive landscape, as product placement becomes increasingly difficult, development projects are often fully endorsed, or fully rejected, leaving little space to learn about their true potential. As microfinance hits the doldrums, the knee jerk reaction may be to dismiss it, as yet another fad gone bust. However, in the words of Ralph Waldo Emerson "Bad times have scientific value. These are occasions a good learner would not miss."
In that spirit, a new debate has emerged to discuss the relative merits of microfinance, reminding the development world that just like any development product, microfinance will require different periods of experimentation, fine-tuning, reshaping and perhaps even re-branding as we learn about its real potential. This could mean changing the groups microfinance targets, combining microcredit with different products, or developing new features that can minimize the probability of defaults. It seems like the problem microfinance came to solve has not gone away. We just need to keep experimenting with a different mix of tools until it does.
We will discuss this in more detail in Lent Term with a class on Credit in the Developing World but in the meantime, here is some food for thought!

Gates Foundation and aid

In the spirit of the last post, here is another article in today's NYT about the development of a new class of vaccines specifically developed for poor countries, both in terms of the diseases targeted and the costs involved.

Thursday 2 December 2010

development optimist or pessimist?

I confess to being a fairly exuberant development optimist. Not because I think we really know the secret to growth, but because I'm not sure that that matters. Heretical! perhaps. Of course we should keep trying to implement the best policies possible and keep trying to learn what works and what doesn't. In the meantime, the world just keeps on getting better and better in many dimensions that are critically important. I also believe that the key to solving some of the problems that are not getting better, like global warming, is the advance of incomes and technology, which is happening, with some hiccups and a number of caveats. You can focus exclusively on the exceptions and the caveats, or you can keep the 'big picture' always in the back of your mind - to help with the (happier) latter strategy, fellow DV409 student Michael Homes sent me this video that helps put everything into perspective.