If consumers begin to be fearful and conserve the government takes action to overcome this mental condition. How? Expand credit. If consumers then become to euphoric and spend to much the government takes action to overcome this mental condition. How? Restrict credit. Consumers spend very little time in the middle.

Mathematics should be left to explain the physical world, not psychosis.

From a comment on Felix Simon’s post on how economic journalists deal with academic economics publications.

Reuters: Nigeria’s Senate approved a 4.608 trillion naira budget proposal for 2010 on Thursday, up from an initial 4.079 trillion naira spending plan proposed by the presidency.

The budget assumes an average oil price of $67 per barrel and oil production of 2.35 million barrels per day. It also pegs the exchange rate at 150 naira to a dollar and economic growth of 5.47 percent.

“The 2010 budget is based on government’s determination to stimulate the economy out of the recent global economic crisis through targeted fiscal interventions,” the bill said. (continue reading…)

Reuters: The bank expects economic expansion of 4.6 percent in 2011 and estimates the region grew by between 1.0 and 1.1 percent in 2009, said Andrew Burns, the bank’s manager of global macro economic trends.

Our hunch is that its place [culture in development] has already shifted since we wrote Seeing Culture Everywhere. On the one hand, there is China and David Brooks. On the other, there is a new trend in “development thinking” around the World Bank and elsewhere (like Narayan. Pritchett and Kapoor’s Moving out of Poverty and Jessica Cohen and William Easterly’s What Works in Development) that seem to abandon the term altogether and focus on micro-scale interventions – rightly, we believe.

That is from Joana Breidenbach and Nyiri Pal, guest bloggers at Savage Minds. Read the whole post here.

From the ASA blog, by Keith Hart: For Marcel Mauss, the years 1920-25 were packed and fruitful. His political party and the Left in general had a real shot at winning power in France and did so in 1924. Two-thirds of his occasional political pieces (Écrits politiques) were written in this period. He was able to relaunch his group’s journal, Année sociologique, by the period’s end, contributing to it his most famous essay, on The Gift. He suffered some reverses at this time, including a serious illness, but remained optimistic for both political and intellectual regeneration on a social scale that was increasingly international in scope.

He began serious work on a book dealing with the main political currents of the day, nationalism and socialism. His interest in the American “potlatch” was expanded by the publication of Malinowski’s Argonauts of the Western Pacific in 1922, confirming his belief that competitive gift-exchange was endemic in Melanesia and Polynesia, as well as elsewhere. And the Institut d’ethnologie was formed in 1925 with Rivet, Lévy-Bruhl and Mauss himself in charge.

In the late 1920s, things began to unravel on all fronts. Mauss’s personal standing as a savant grew inexorably; but his party suffered political reverses, its newspaper and journal folded, the cooperative movement foundered and the Année sociologique could not continue. Mussolini’s appropriation of the “nationalization of socialism” must have raised doubts about Mauss’s own political programme. His closest friend, Henri Hubert, died in 1927, compounding Mauss’s loss of family and colleagues during the war.

The years 1920-25 stand apart for the energy and fulfillment they brought. Mauss himself kept a sort of Chinese wall between his academic and political interests; so it is not so surprising that the two have been kept apart, especially in the Anglophone world, where his political writings are virtually unknown. He allowed himself one public attempt to bridge them, the concluding chapter of The Gift. Even so, the essay itself does not provide an effective intellectual link between the two compartments of Mauss’s life. Read in full.

The first in a series of posts on the financial crisis by economic anthrologist Keith Hart, at the ASA Globalog. The series will engage:

long-run historical questions like what this crisis is, with the news as it unfolds in real time and with issues that matter practically to people who don’t have to be reminded that “It’s the economy, stupid!”

Read it in full here.

It is ‘the study of how to get rich without knowing how’.

What must we do to end world poverty? At last, an answer: OK, that’s too good to be true. There has been a search for sixty years for the right answer. Now most economists confess ignorance how to raise the rate of economic growth — how to progress more rapidly towards development and the end of poverty.

To get out of this dead end, I would respond to this question with more questions.

First, who is “we”? It seems like whoever “we” are, “we” must have unconstrained power to implement “the answer”, so “we” sounds like authoritarian leaders (national autocrats or World Bank officials dictating conditions).

Second, are “we” going to allow poor people to choose their own paths? Of course not, because “we” already know the “right answer” for them.

So this question only makes sense in approach to development that is authoritarian and paternalistic, using Top Down Planning, which in fact has been the prevailing – but unsuccessful – approach to development for six decades.

The paradox of development economics is that Development does NOT require any one person (Expert, Leader, or Aid Official) to have a comprehensive understanding of how to achieve Development (sort of like how evolution managed to happen on its own before Darwin).

(I am drawing on a lecture I gave here at NYU.)

Why is it so hard to figure out how to raise growth? Nobel Laureate Friedrich Hayek once suggested a possible answer:

The growth of reason is based on existence of differences. . . . {between} individuals, possessing different knowledge and different views. [I]ts results cannot be predicted . . . . [W]e cannot know which views will assist this growth and which will not.

Growth is innovation, and you can’t know in advance how to do the innovative thing, or else it wouldn’t be an innovation. Development is BOTTOM-UP outcome of lots of unpredictable individual successes and failures.

But this is not a counsel of hopelessness; in fact, it means economists can still say lots of useful things. You want an environment that is favorable for “searchers:” the private and social entrepreneurs who figure out these innovations. You want to create as many opportunities as possible through comparative advantage, gains from trade, and gains from specialization. This means individual rights, property rights, and not too much interference with markets or free trade. Public goods like infrastructure, health, and education are necessary, but arise best in response to demand, not determined by bureaucratic supply. This means a democratically accountable government. Individual freedom and democracy also allows social entrepreneurs to flourish.

Institutions are necessary to make markets work, but institutions also evolve from the Bottom Up, with pro-market institutions arising from values like individualism, trust, and respect for others.

So the paradox of development economics is that it’s the study of how to get rich without knowing how. As Hayek put it:

It is because every individual knows so little and… because we rarely know which of us knows best that we trust the independent and competitive efforts of many to induce the emergence of what we shall want when we see it.

1. Is economics as a subject of study still attractive?

2. Is there a role for industrial policy in the developing world?

3. A collection of links to articles on What’s Wrong with Macroeconomics?

4. Financial crisis in Africa? Dr. Okonjo Iweala of the World Bank presents an analysis

5. Joseph Stiglitz on GDP fetishism

And, Bride-to-Be Throws Tantrum After Dress Disappears.

Maybe a fallout of the current global crisis is a kindler, gentler IMF. The Fund just published a staff position note titled Fiscal Policy in Sub-Saharan Africa in Response to the Impact of the Global Crisis

The executive summary:

The global financial crisis poses significant challenges to fiscal policies in Sub-Saharan African countries. Growth will weaken considerably as export prices and volumes, remittances, tourism, and capital flows decline. The fiscal effects of the crisis are likely to be large and to operate mainly via revenue losses, with commodity-related revenues particularly hard hit.

Countries will need to weigh their options for fiscal policy responses. Countries with output gaps and sustainable debt and financing options have scope to implement expansionary policies, by letting automatic stabilizers work, accommodating declines in commodity-related revenues, and in some cases implementing discretionary fiscal stimulus. The main focus of fiscal stimulus should be on the expenditure side, particularly infrastructure and social spending given pressing needs, as reducing tax rates may be inequitable and the scope for doing so is limited given low revenue ratios. Other countries will have to adjust, in a way that will not affect critical spending. Additional donor support would reduce the need for adjustment. In all cases, countries should give priority to expanding social safety nets as needed to cushion the impact of the crisis on the poor.

Hat-Tip to Dani Rodrik. His comments on the policy note are here.

The World Bank has just published the Global Economic Prosect for 2009. It is titled Commodity at the Crossroads.  The full document is available here.