soapcase Posted September 17, 2012 Share Posted September 17, 2012 What are some of the big (and small) questions that loom over the field of development economics? Quote Link to comment Share on other sites More sharing options...
Insti Posted September 17, 2012 Share Posted September 17, 2012 "Why are some countries more developed than others?" is one that comes to mind Quote Link to comment Share on other sites More sharing options...
Walras Posted September 17, 2012 Share Posted September 17, 2012 1) How do you scale interventions up? 2) How to deal with corruption in institutions? 3) Do we need different interventions or work to help the poor who now live in middle income countries? When does our responsibility end? 4) Africa--with Climate change it's about to become pretty much all desert. There's also the tiny problem of civil war, and picking up the pieces left over afterwards (one interesting paper I saw analyzed what would happen if the US tightened it's gun exports, and bought up guns after civil wars from African countries to reduce the supply lying around. I also feel there has been a small shift in development economics from looking just at helping people with absolute poverty to analyzing how to improve people's stochastic poverty (how to help people have a lower chance of falling into poverty and higher chance of getting out). This requires a different method of even measuring poverty (much like people want to move away from the GDP) called "vulnerability". Thus far people have done a lot of research on risk sharing, and networks to see how people handle risk without formal financial institutions, and how things such as crop insurance, or more reliable GM seeds can help (albeit usually they don't seem popular). Quote Link to comment Share on other sites More sharing options...
Humanomics Posted September 17, 2012 Share Posted September 17, 2012 Bill Easterly Dambisa Moyo Paul Collier Ester Duflo Quote Link to comment Share on other sites More sharing options...
chateauheart Posted September 17, 2012 Share Posted September 17, 2012 Africa--with Climate change it's about to become pretty much all desert. :dejected: Quote Link to comment Share on other sites More sharing options...
OneArmedEcon Posted September 17, 2012 Share Posted September 17, 2012 There are basically two major branches of empirical research in development economics, both related to capital formation: microfinance and human capital. There is also inquiry into institutions that draw on insights from other social sciences. Quote Link to comment Share on other sites More sharing options...
Walras Posted September 17, 2012 Share Posted September 17, 2012 There are basically two major branches of empirical research in development economics, both related to capital formation: microfinance and human capital. There is also inquiry into institutions that draw on insights from other social sciences. I wouldn't break things down quite like that. I mean there are also a ton of people doing research on health intersect development economics (admittedly one could argue this is human capital, but generally people study it not for it's effect on people's production function but on the effect on overall utility), actual capital (e.g. transportation networks, FDI, nationalization etc.), and environmental intersect development topics (e.g. how to industrialize in an eco-friendly manner). Admittedly, microfinance has become so popular that you're right to classify it as it's own branch. I think at least 1/4 of recent publications seem to be about it, which in my opinion reflects a severe lack of imagination. I'd argue if you're looking for important unanswered questions they aren't about microfinance. There are a few good ones about microsaving and microinsurance (e.g. people are now bundling microloans with health insurance but it isn't working out that well for now), but I think the focus is shifting to networks (e.g. there is a cool paper on sending remittances, and I think even saving using cell phones) and institutions. Albeit, I haven't kept up with very well with the new health or environmental/development stuff. Quote Link to comment Share on other sites More sharing options...
OneArmedEcon Posted September 17, 2012 Share Posted September 17, 2012 I think you have to differentiate between "development economics" and "economics of developing countries" or perhaps "research into developing countries that involve a partnership with economists." Those are fuzzy, yet meaningful, distinctions. Development Economics is essentially an inquiry into why the "Great Divergence" occurred (i.e., when some countries escaped the Malthusian trap with the industrial revolution and others didn't) and which policy prescriptions in the 21st century can encourage convergence between the developing and developed world. The study of health economics in the developing world yields critically important research to various policy questions, but do not represent particularly interesting developmental economics questions (except as they relate to human capital formation). That is, that sort of research looks into how to effectively treat the symptoms of poverty, but doesn't contribute much to an understanding of how to cultivate a more robust economy. Similarly, climate change presents particularly acute challenges to developing countries, but those are essentially only stochastic shocks (highly significant and negative shocks, but they provide no real insight into how economies mature). That's not to dismiss the importance of this research, but questions in those domains do not truly represent development economics, but rather economics of developing countries. On the other hand, the empirical research into microfinance and human capital yield insights into how economies develop (i.e., capital formation), which by definition is development economics. New Institutional Economics research also offers some novel insights into the development economics, although some of it is not truly empirical inquiry and most of it is not solely in the domain of economics. Quote Link to comment Share on other sites More sharing options...
Humanomics Posted September 17, 2012 Share Posted September 17, 2012 I think at least 1/4 of recent publications seem to be about [microfinance], which in my opinion reflects a severe lack of imagination. . . . . I think the focus is shifting to networks (e.g. there is a cool paper on sending remittances, and I think even saving using cell phones) and institutions. Albeit, I haven't kept up with very well with the new health or environmental/development stuff. Well put. I do not understand why after the success of Bill Easterly's work and Dulfo, Banerjee, etc taking the same vein, why people continue to feel capital frictions are what limit growth. I mean, basic Solow intuitions suggest not. Investment meets diminishing returns. It's incredible how the microfinance literature takes this "heartfelt people finally supplied un-met demand for capital" tack. Touching, I read Yunus' book too, but economically absurd. Portfolios of the Poor demonstrates just how fluid and efficient risk markets are at the bottom of the pyramid. I think the real impact from microfinance comes from the encouragement of entrepreneurship and collaboration among entrepreneurs, which gives you technological spillover -- growth comes from technology at the macro and micro level. Education and health programs take their own particular welfare arguments. The idea that they provide largely increasing enough returns to spawn exponential growth is just empirically not supported. That was Easterly's point in Elusive Quest for Growth, and again in White Man's Burden. To the degree we can help poor children maintain health and education by RCT testing programs etc, let's do that. Great. But we're not going to get cross sectional convergence from it. Universal primary education is the only one of the Millennium Development Goals which came close to being met, with no demonstrable large-elasticity affect on developing country growth. What did we get huge elasticities from? Technology spillover through FDI channels, worker migration, and good ol' fashioned copying what works (re: logistics networks, prod techniques, etc). The Industrial Revolution, and the several growth take-offs since in for instance China and India happened at the hands of starving, sick, and illiterate people who faced crappy governments --- governments vary by their margin of crappiness, not their degree of growth-inducing beneficence. People talk a lot about institutions and culture now. Distinguished as much of the literature is, these conversations quickly degrade, even in departmental seminar, into hints about one country or another having a shittty work ethic, and more-greedy politicians than first-world politicians. It's stupid, not to mention offensive and again empirically unsupported. Acemoglu finds institutions lean one way -- Rodrik "found" what public choice theorists had been saying for 60 years -- growth and markets are resilient to corruption. To me, it's so blindingly obvious that rents emerge at the micro and macro level from technology, that I'm surprised work on the emergence of technology in development, macro, growth, and other fields is so sparse. A couple more IO time series about the impact of IP rights on pharmaceutical R&D expenditure aren't going to cut it. Quote Link to comment Share on other sites More sharing options...
Walras Posted September 18, 2012 Share Posted September 18, 2012 Wow Humanomics that is probably the densest post in terms of the sheer amount of literature being cited directly or indirectly on TM. I think you have a number of points, but I should point out that I think you're cutting the institutional literature a bit short. I read Acemoglu's "Why nation's fail" (it gets awfully repetitive after the 1st 100 pages), but it's incredibly persuasive that inclusive political and social institutions are the key to achieving prolonged growth. Inclusive institutions means people have the opportunities for entrepreneurship (without being blocked by those in power collecting rents), and the incentives to innovate. Broken institutions funnel the best and brightest minds into jobs doing unproductive rent collecting (e.g. America's finance sector). Work on institutions is even work on technological process because the biggest blockers of technological progress, especially in many failing states is sometimes the government which may want the status quo maintained because it benefits those in power (e.g. political lobbying often prevents directly or indirectly competition from people with better technology that will cause creative destruction). Also, on the topic of neglected research, I think green revolution deserves far more attention. Yes, it's over, but it's the greatest success story in development in modern times--far eclipsing microfinance. The poorest of the poor are also increasingly found in rural regions, but the literature until recently has been too focused on growth as measured by GDP--the benefits of which go by and large to the rich. Instead of trying to recreate the industrial revolution, a better question is how to restart the green revolution in many parts of Africa that missed the boat last time. Quote Link to comment Share on other sites More sharing options...
Humanomics Posted September 18, 2012 Share Posted September 18, 2012 (edited) I read Acemoglu's "Why nation's fail" (it gets awfully repetitive after the 1st 100 pages), but it's incredibly persuasive that inclusive political and social institutions are the key to achieving prolonged growth. I read it too. And believe me, nobody is happier that a critical mass of economists are taking non-pecuniary variables seriously in growth than me. But institutions don't do it. The main empirical support they have for their argument (which is not theirs -- the point on rent seeking is very, very old) is that the Glorious Revolution antedates the Industrial Revolution. True, but British government got more extractive after, not less -- as have modern bureaucratic states broadly become more extractive than aristocracies of old. That's not Ron Paul libertarianism talking -- that's the facts. The buying and selling of venal office continued well into the 19th century, for instance --- by that standard Tang China, c 9th century was more "inclusive" -- handing out office by competitive examination. As enforcement has cheapened ala North, States have gotten better at helping people enforce contracts. Sure. They've also gotten much much better at extracting and redistributing resources. If you hold constant the head-choppings, which were dramatic and seem representative, aristocratic societies were economically laissez-faire. They just didn't have the resources to tax and spend the way we do now. See for instance John Nye's (an actual economic historian -- something neither Acemoglu nor Johnson are) recent book War Wine and Taxes. The British government got something like five times bigger during the Industrial Revolution. And its balance of trade accounts show actually more protection than France, despite the rhetoric. Northian new institutionalism doesn't stand up because the absolute vast majority of contracts are enforced by ethical norms, not by the threat of force. See Claudia Williamson's recent regressions on this point. If you want to keep doing business with people, you don't call up your colleagues and read legal clauses at them when there's a problem. Enforcement is extraordinarily expensive. J.P. Morgan wouldn't lend to anyone he didn't trust. Taking the reality that enforcement is prohibitively expensive with a dose of Classic Coase, we start to understand that formal institutions have very little to do with promoting growth. Contracts just don't do it. Patent enforcement was weak to non-existant during the Ind Rev. See Mokyr's AEA on this. Police were weak to non-existant: policing was until well into the 19th century done by local groups of night-watchmen. Property crimes were rarely punished by anything other than good old fashioned beatings, just like they have been for 10,000 years. See Doug Allen's The Institutional Revolution. And anyway, large scale manufacturing didn't cause enrichment anywhere -- that was Marx's intuition, and it is empirically incorrect. During the Industrial Revolution, most gains were made by small marginal improvements in established instrustries and crafts, by what we'd call micro-invention -- not by shuttle looms and child labor. Even if the new institutionalists are right -- they have no theory of institutional emergence. So they have no theory, other than to assign yet-again another exogenous shock to growth models. It's not helpful. Institutions do seem to change when growth takes off. But most of these changes happen concomitant-to growth -- the bulk of them do not antedate it. So causation fails. Are instiuttions and growth correlated? Absolutely. But we're suffering a huge third-variable bias in our thinking. Work on institutions is even work on technological process because the biggest blockers of technological progress, especially in many failing states is sometimes the government which may want the status quo maintained because it benefits those in power (e.g. political lobbying often prevents directly or indirectly competition from people with better technology that will cause creative destruction). Absolutely. See Baumol's "Entrepreneurship: Productive, Unproductive, and Destructive." Doug Allen provides some figures in Institutional Revolution which give you an idea just how lucrative it was to seek rents over create anything before the Industrial Revolution. Petty gentry outpaced the income of even international merchants by magnitudes. It paid to steal. Big time. the literature until recently has been too focused on growth as measured by GDP--the benefits of which go by and large to the rich. Instead of trying to recreate the industrial revolution, a better question is how to restart the green revolution in many parts of Africa that missed the boat last time. This is incorrect on two counts -- the benefits of growth go primarily to the poor, not the rich. That is, unless you think the marginal yacht provides greater welfare, objectively and subjectively speaking, than the marginal heated room to someone whose grandparents were starving and sick. Give Fogel's The Escape From Hunger and Death a look to see just how far the poor have come relative to the rich. And Africa has not missed the Green Revolution. Earlier you said it's going to turn into a desert. That's false -- the band of temperate, arable land is actually moving south and north with global warming, creating new opportunities in Africa and Eastern Europe for large scale agriculture. There is in fact some concern among Marxists, notably David Harvey, that the wild-west capitalists who are currently running in and buying up all this land are becoming a new class of rentiers. And anyway, Rostow's stages of growth model has been shown to be wrong again and again. Spillovers create a world where no one need go through an agricultural revolution to get to industrial growth. Africa will quickly become the next workshop of the world whence incomes in China are prohibitively high -- and the Chinese will get rich on dog walking and management consulting like America is now. Edited September 19, 2012 by Humanomics Quote Link to comment Share on other sites More sharing options...
chateauheart Posted September 19, 2012 Share Posted September 19, 2012 The poorest of the poor are also increasingly found in rural regions, but the literature until recently has been too focused on growth as measured by GDP--the benefits of which go by and large to the rich. Sometimes when I skim through a paragraph that consists almost entirely of vague, broad statements, I'm not sure if there's actually a good argument in the paragraph or if it's all just unfounded conjectures and nice-sounding slogans strung up together with academic terminology to look like an argument. Almost always there's this one extremely ridiculous sentence or two that tips me off before the end. This was the one. Quote Link to comment Share on other sites More sharing options...
soapcase Posted September 24, 2012 Author Share Posted September 24, 2012 @Walrus: I found your post very helpful. Is there a literature review that is readily available on the topic of (a) how to deal with corruption in institutions and (b) how to measure vulnerability? Thank you for pointing me in the right direction. 1) How do you scale interventions up? 2) How to deal with corruption in institutions? 3) Do we need different interventions or work to help the poor who now live in middle income countries? When does our responsibility end? 4) Africa--with Climate change it's about to become pretty much all desert. There's also the tiny problem of civil war, and picking up the pieces left over afterwards (one interesting paper I saw analyzed what would happen if the US tightened it's gun exports, and bought up guns after civil wars from African countries to reduce the supply lying around. I also feel there has been a small shift in development economics from looking just at helping people with absolute poverty to analyzing how to improve people's stochastic poverty (how to help people have a lower chance of falling into poverty and higher chance of getting out). This requires a different method of even measuring poverty (much like people want to move away from the GDP) called "vulnerability". Thus far people have done a lot of research on risk sharing, and networks to see how people handle risk without formal financial institutions, and how things such as crop insurance, or more reliable GM seeds can help (albeit usually they don't seem popular). Quote Link to comment Share on other sites More sharing options...
Walras Posted September 24, 2012 Share Posted September 24, 2012 There's a ton written about corruption but I don't know any better than the next guy where to go for a good summary. I guess if you haven't read "Poor economics" read it (cover to cover) corruption is not the main focus through much of it, but it comes up, and it's a really good summary of what future Nobel Duflo/bannerjee have been doing for the last couple decades. About vulnerability I know Marcel Fafchamps, and Ethan Ligon have written extensively about it, and Xavier Sala-i-Martin also has some of the best work recent on insurance mechanisms. I'd also suggest (I wish I'd thought of this as an undergrad) to go look up the World Bank economic review and just read abstracts (whether you're interested in the topic or not) and if it interests you more, of course, but try not to read so deeply that it slows you down. Both my senior thesis and my NSF idea probably would have been better if I'd stopped trying to read papers from cover to cover and initially tried to cover as many abstracts as possible . P.S. I know I've already suggested more than any mortal can read while taking classes but here's a final suggestion: Research for development : a World Bank perspective on future directions for research, Vol. 1 of 1 which is a WB report on future research directions: (i) securing economic transformation (ii) broadening opportunities to participate in the benefits of, and contribute to, such transformation (iii) dealing with emerging risks at all levels (iv) assessing the results of development efforts, including external assistance. Quote Link to comment Share on other sites More sharing options...
old Posted September 26, 2012 Share Posted September 26, 2012 What are some of the big (and small) questions that loom over the field of development economics? Are you following the sop guidance written by the veteran member italos? Quote Link to comment Share on other sites More sharing options...
soapcase Posted September 30, 2012 Author Share Posted September 30, 2012 @Walrus: thanks man! (ps: a good survey of literature on corruption is a paper by olken and pande) @old: not following anyone's advice and this is definitely not for a SOP Quote Link to comment Share on other sites More sharing options...
Recommended Posts
Join the conversation
You can post now and register later. If you have an account, sign in now to post with your account.