Loomnie

From a BusinessDay Nigeria column:

[O]ur trade policy has remained very inconsistent many years after independence. Recent reforms – particularly the NEEDS – have however tried to considerably minimize the unpredictability of the trade policy regime by establishing a schedule to fully adopt the Economic Community of West African States (ECOWAS) common external tariff (CET) by 1 January 2008, and respect obligations under multilateral trading systems. However, according to Afeikhena Jerome in a 2005 paper titled” Institutional Framework and the Process of Trade Policy Making in Africa: The Case of Nigeria”, “trade policy formulation and implementation in Nigeria, even though conditioned by the global context, is dominated by governmental and inter-governmental agencies whose responsibilities overlap and between which coordination is deficient. There is no identifiable source or structure of research and analytical support for trade policy making in Nigeria”.

Reminds me of a meeting I had in 2008 with a high-ranking official at the Nigerian ministry of trade. I asked whether I could get a copy of the country’s trade policy document. He said there was no document like that, and there hadn’t been one in a while.

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.

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.

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.

I have just added a roll of the allafrica.com feed on trade news to the blog. It is directly below Recent Comments, at the right hand side. I am also currently reading the book The Least Developed Countries and World Trade, a Swedish International Development Agency (Sida) publication. The study was prepared by Stefan de Vylder. I will let you know what I think of it.