• Quote of the week •
“The internet and the blogosphere can make it seem like a person has learned a lot in a very short time, and hence has a right to broadcast his opinion about assorted subjects. He does have a right and that right must be preserved; but that doesn’t mean he is wise to exercise it.”
- Adam Garfinkle, Political Writing: A Guide to the Essentials [p. 161] h/t World Bank Blog
• Blog highlights •
Facilitating Good Governance – The Africa Power and Politics research consortium (APPP) voice a demand for an alternative to the ‘good governance’ paradigm. ‘The basic message’ of the consortium is two-fold: 1. Development practitioners should stop pretending that US/Europe-style ‘good governance’ is a prerequisite for economic development elsewhere; and 2. Economic development in Africa require change (not just commodity booms), and that this change requires suitably incentivised elites to resolve collective action problems (see the Elites Production and Poverty programme). APPP also take time to buttress the current ‘best-fit’/’working with the political grain’ mantra. Most interestingly, “whilst ‘working with the grain’ was necessary, it was not sufficient to fully explain the cases we found of effective action”. Examples of ‘practical hybrids’ for effective developmental institutions provided by the APPP are different from those advocated by traditional ‘good governance’ thinking. There are surely many recommendations which can be drawn out from this research, but among them the salience of policy aimed at a facilitating role as well as opening space for solution innovation.
Defining the middle-class – Economists are often trying to explain growth and development in terms of the rise and role of the middle-class. This article from the CGD, shows he various shifting definitions of a middle-class as used by some prominent economists, as well as some of the reasons for this (although data-mining is not mentioned among them). Contemporary interest in the middle class comes from assertions that they are “more likely to save and invest in the future (in education and directly productive activities), more likely to support market-friendly economic policies, and more likely to insist on accountable, competent and clean government”. All quite interesting, but also a good example of why economics is a horribly crude tool sometimes, especially clear in light of the excellent 3-episode documentary by Turner prize-winning artist Grayson Perry on the nature of taste and class.
Dads and Development – policies that reallocate money within the household should be cognisant of the role of dads to avoid current inherent prejudices toward re-directing allocations to mums. New (RCT) evidence on conditional cash transfers in Burkina Faso, found no differential impact on child health between depending on whether cash was given to dads or mums. Policy and practitioners might be undervaluing or not measuring well what Dads do spend money on. Experiments in Ghana and Sri Lanka, found men invest more in their businesses, which then show high returns to capital and results in increases in household income. “So the money mothers might spend on their kids in the short-term might be crowding out in some cases higher household incomes and resources in the longer terms”. As an extension of these examples, “the focus on intra-household allocation neglects total household income”. A recent DFID-funded systematic review carried out by RAND concludes that “it is not yet clear that [targeting women]… will lead to better outcomes for family well-being than the same transfer to a man. For wider reading on this topic see the new-ish book from IDS: Men and Development: Politicizing Masculinities
Urban Tipping Points – The research project run out of the University of Manchester has identified four ‘conventional wisdoms’ (not always based on much evidence) on the causes of urban violence: poverty; ‘youth bulges’ (demographic, rather than waistlines); political exclusion and gender-based insecurity. The project has tested these in four very dissimilar cities – Nairobi (Kenya), Dili (Timor-Leste), Santiago (Chile) and Patna (India). Nairobi, the research revealed multiple forms of violence (landlord-tenant, sexual, criminal) mapped around violence ‘hotspots’. This has allowed community leaders to use this information, for example by improving street lighting and providing housing for police to make the area safe. In Dili, a key cause of post-independence violence in 2006 was the ‘institutional multiplicity’ of overlapping authorities and security systems (police v burgeoning private security groups v martial arts associations) often engages in ‘turf wars’. Patna is seen by many as somewhat of a success story but the research found that “violence has not gone away, merely changed its nature (decline in organized crime, but overall crime rates have increased, including violence against women) and geography (now much more confined to the slums)”. They also found that “the police seem to have ‘violence filters’ acting promptly to resolve disputes over water and sanitation, where caste tensions might spill over into the wider city, but largely ignoring more containable land disputes.” In Santiago, the main finding was that violence persists in poor, middle income and upper income areas, but in very different forms. Initial recommendations were made for each of the case studies. “Overall, the project found that politics and power, much more than poverty, are a driver of violence; that ‘youth bulges’ only become a problem when politicians start recruiting young men as foot-soldiers; that political exclusion is less related to violence than elites stirring up violence and that gender-based insecurity is universal, with clear links between it and more public forms of violence.”
Property Rights – Mark Koyama summarises economic historian Greg Clark’s argument that private property was secure in medieval England on the basis that “Medieval farmland was an asset with little price risk” (p 158). The implication being that disruption (insecurity) would impact price. And on the basis of low taxes in medieval England – “if we were to score medieval England using the criteria typically applied by the International Monetary Fund and the World Bank to evaluate the strength of economic incentives, it would rank much higher than all modern high-income economies—including modern England’ (p 147)” There is common feeling among many economic historians that property rights were secure in late medieval and early modern England, and that some property rights actually became less secure after the Glorious Revolution. Bob Allen also summarises “Growth was also promoted by Parliament’s power to take people’s property against their wishes” [See here, here and here]. Mark Koyama discusses further arriving at the suggestion that “given initial allocations of rights and the extremely high transactions costs associated with feudal land law, a reconfiguration of property rights was necessary for economic growth to begin.”
Judges and the Environment – Rio+20 missed an opportunity emphasise role of court in promoting environmental sustainability. The world congress on justice, governance and law for environmental sustainability ran aside Rio+20 built upon the widespread acknowledgement of an international “common law” of the environment and greatly expanded awareness of environmental issues among the judiciary, and the development of specialist courts and tribunals in many countries. A recent study identified over 360 specialist environmental courts or tribunals in forty-two countries. A 2002 judicial taskforce has also developed a programme of work to improve understanding and practice of environmental issues among judges across the world, some training events being co-hosted by the Commonwealth Magistrates and Judges Association. Despite disappointment at the draft Rio+20 ‘common vision’, a declaration in support of the crucial role of the judiciary as well as public auditors, is likely to role this agenda forward.
City-States - It’s Mark Koyama again who draws attention to the old (see Weber, Pirenne, and Hicks) discussion of the catalytic role of city-states in beginning the long road to modern economic growth. More recently De Long and Shleifer (1993) argued that merchant city-states promoted policies to protect property rights and markets while imposing lower taxes (than princely states). “But historians have found that cities like Florence actually imposed much higher taxes than feudal states did (see Epstein 1991, Epstein 1993, or Epstein 2000)”. A new paper by David Stasavage attempts to test this with reference to systematic evidence of European city-states. “He finds that autonomous city-states overall didn’t grow faster than other cities. Interestingly, new city-states which had been independent for less than 200 years did grow faster. After more than 200 years of independence, growth in these independent cities slowed and they grew more slowly than did ordinary cities… Stasavage interprets this finding in terms of a model of oligarchies proposed by Acemoglu (2008)”. Koyama finally reflects on the role of external warfare in pushing-up taxes and other extractive policies as an additional break on city-state advantage.
Unknown fiscal effects – The current economic slump has spurred lively debate about fiscal policy, stimulus and austerity. What stands out is just how much different economist disagree about both the theory and evidence surrounding this. Recent work seeks to mend this embarrassing rift in the profession. Mertens and Ravn (2012) argue that much of the disagreement can be traced to differences in approached to identifying structural shocks which inevitability involve automatic or systematic discretionary policy responses. The example here goes like this – lower taxes stimulate economic activity AND tax revenues depending on the level of economic activity THEREFORE tax revenues decline when activity declines AND policymakers may choose to cut tax rates in recessions. Consequently, reverse causality is a very serious issue. Various disaggregation’s need to be made – between endogenous and exogenous components of tax revenues, between short-run and long-run effect; and most interestingly between personal income taxes and corporate income taxes. For tax policy this study indicates that increases in corporate taxes may not generate much tax revenue but will lower aggregate activity. Increases in personal income taxes can generate tax revenues but will lower employment, private consumption and investment.
Was colonialism good for growth? – 47% of average global development levels today are attributable to Europeans according to one illustrative exercise in the large body of literature claiming that European settlement outside of Europe shaped institutional, educational, technological, cultural, and economic outcomes. Bill Easterly and Ross Levine add to the conventional view and draw attention to the role of human capital in shaping ‘the European effect’.
War, what is it good for? – Relatively little with regard to explaining political centralisation in both Africa and early modern England according to Acemoglu and Robinson. A popular historical argument best made by Charles Tilly in Coercion, Capital and the European State, is that intense inter-state war in Europe necessitated political centralisation which itself promotes development, hence “states made war and war made states”. Studies focused on Africa, such as Jeffrey Herbst’s book States and Power in Africa, highlights low population density and low inter-state war as a reason for the lack of powerful centralised states. Acemoglu and Robinson reject both these two hypotheses. Looking to early modern England, Robinson and Pincus show that inter-state warfare does not provide a very good explanatory variable in this traditional case either.
•Hungry for more? •
- Does better government pay lead to better government workers?
- The Manifesto for Economic Sense outlines Paul Krugman and Richard Layard’s (of LSE) critique of the austerity-first strategy currently pursued by European Zone leaders.
- What are the world’s “biggest” currencies? (The British pound ranks only fifth).
- Why eating globally, not only locally, is the way to save the planet.
- One Laptop Per Child is not improving reading or math. But, are we learning enough from these evaluations? – “Given the lack of rigorous evidence to inform decisions … educational technology [ICT for Education] is in some ways the real faith-based initiative”
- Duncan Green highlights the work of Oxfam’s Chukua Hatua Project in Tanzania to share six practical examples of ‘Evolutionary theories of change’.
- List of prominent development blogs
•Videos of the Week•
For anyone wanting to know more about the Higgs Boson or Physics more broadly, check out the excellent videos at minutephysics – Higgs explained in this video.
•Maps of the Week•
Source: The Economist
Source: The Guardian