Collaborative Development

One of your colleagues who attended Nestle's conference on Creating-Shared Value last week would like to share some thoughts with those of you who were interested, but did not manage to attend. Please read Ankit's notes that are now posted to Moodle. The conference seems to have proposed a new notion of "collaborative development", based on strong partnerships between the government, the private sector and the non-profit sector.

The shape and form of these partnerships should be the matter of further experimentation. We still know very little about what partnerships (if any) work, under what circumstances and for how long... Here is a vivid example from Haiti on how difficult it is to engender these relationships from scratch.

Conspiracy theories and development

A recent talk this week at the LSE on climate change denial and conspiracy theories by Stephan Lewandowsky has had me thinking about conspiracy theories more generally. The speaker made a rather striking claim that 'the capitalist individualist economy' encourages this kind of thinking, a claim which I find (without any evidence) to be absurd. I've never heard more conspiracy theories than I did in Egypt, and today in the NYT this article reports on the phenomenon in Pakistan. Are these kinds of widespread (mis)beliefs the result of analytical illiteracy, poor journalism, authoritarian government, or something else? Are they damaging economically or politically? Is this a reasonable topic for more research?

Coming soon ... Enhanced Bailout ..?

The recent global financial crisis and related euro/Greek crisis have proven a goldmine for thinking about high discount rate behaviour, moral hazard, time inconsistency and the importance of credibility for policy effectiveness. Now comes Obama's pledge to end bank bailouts 'once and for all.' Whether or not this is a good idea, is it a credible threat? Can the U.S. government pull it off? Could the EU pull it off? If it becomes U.S. law personally I actually think it might be a fairly strong and reasonably credible threat (hence all the banks' jitters at the thought!), at least over the medium term, but perhaps I am naively confident of my own government (question: what is required for credibility: that in fact they will hold steady, or that people simply believe they will hold steady...). What about the UK and EU? Would similar threats be credible from them? How does the heterogeneous credibility shape the international financial and economic landscape?

Endogenous political power

Why do some groups of people, and some countries, have more political power than others? Is the relative wealth of the more powerful a consequence, or a cause, of that power? Should we take relative political weight to be an exogenous factor when analyzing policy? Is there a difference between the micro cases and the macro, the short run and the long run? The recent global financial crisis and immediate euro-zone crisis provide an interesting real-life and up-close view of changing balances in political and economic power that may persist (or not!) for some time, long after these immediate events have faded from memory. An op-ed in the Financial Times today provides one interpretation of those shifting seats of power. Only time will tell if the writer is correct ...

Measuring progress and human well being

The GDP is by far the most common measure of economic well-being, and there are many good reasons for this. But as we have discussed this year, it also has a number of shortcomings. An article in this week's New York Times Sunday Magazine examines some of these criticisms (excerpt: “The main barrier to getting progress has been that statistical agencies around the world are run by economists and statisticians...”) and discusses a few interesting alternatives, including a new database on 'The State of the USA' coming online soon.

Doing charity is more difficult than we think...

In 2004, the end of the WTO's Multi-Fibre Agreement flooded world markets with Chinese textiles. This accelerated the decline of the textile industry across the African continent, posing great challenges to countries that were becoming fairly competitive in the export of garments like Madagascar, Lesotho and Kenya (at least in the short-run!). A couple of years later, a well-intentioned charity is heavily criticized for trying to do the same. This is the latest installment in the debate about aid in the developing world.

While careful economic analysis could have saved Sadler some grief, the interesting part was that this whole story unfolded very quickly under the scrutiny of many. Sadler's attempt to ship used t-shirts to Africa drew the ire of economists, bloggers and aid experts. Faced with such scrutiny and criticism, he backed down, suspended his efforts and decided to harness the power of networks and social media to save face and re-invent his charity. What then, he asked, should he be doing to help Africa? Let's keep an eye out to see how this story ends.

Coming soon to an auditorium near you

Next week will bring to LSE two heavyweights in their respective fields who have been dubbed the profits of doom. Nouriel Roubini was one of the few economists to warn about the impending financial crisis while Bill Easterly never misses an opportunity to tell us how the aid industry can doom development if it continues on its current path.

While Bill shares some of Angus Deaton's concerns about the merits of experiments, his scientific and methodological approach to development economics and policy is actually not that different from that of Duflo et al. He refutes top-down policy-making arguing instead for decentralized experimentation to find out what really works in development. And yet conformity rents are pretty low in the scholarly profession (why?) so if asked, I bet he would not see it this way....

His nemesis will stop by later in the month as well. Busy times!