Public battles are such fun!

If you read this blog you’ve probably heard of Acemoglu, Johnson, and Robinson’s (AJR) work on development economics. You may even have read their magnum opus (minus Johnson), Why Nations Fail, and if you haven’t then I highly recommend it. They’ve also started a great blog to support the book.

But even better than that, they’ve started engaging in public battles with other major names in the field! The thesis of Why Nations Fail is that the prosperity of nations is largely determined by the quality of their institutions. Jared Diamond, of ‘Guns, Germs and Steel’ fame, wrote a largely positive review in the New York Review of Books but made sure to remind us of his own thesis. He spends plenty of time explaining how geography is the underlying determinant of the institutional composition of a nation, thus undermining the work of Acemoglu and Robinson.

They then had a scathing reply to the editor published, which rolls out arguments that they’ve rehearsed many times in their academic sparring with Jeff Sachs. Finally, there is the response from Diamond to their criticisms of his thesis. I won’t ruin it with quotes so click through and read the whole thing for yourself.

Poor migrants

Contrast this new government policy:

Poor migrants who speak little or no English are to be subject to stricter immigration laws… Immigration categories are to be changed in an effort to “reduce the number of unskilled migrants who find it difficult to get jobs and are more likely to get benefit payments”.

to this academic research:

The vast wage differences across countries are a sizeable economic distortion, and offer the possibility of large gains through international migration. From a development perspective, a key challenge is to increase the opportunities for poor, relatively less skilled, individuals to participate in migration.

Read more

Biofuels and food

Good article from the Economist on the impact of compulsory biofuel regulations on food prices.

We commented on this a while back.

Biofuel regulations are an undeniable “structural shock” which will lead to “structurally higher” food prices.  What do I mean?  The price of food relative to other things is likely to stay higher than it would have in the absence of biofuel regulations.

Now, I don’t think these regulations are the main driver of the recent price volatility – that would be droughts and economic conditions.  But we can expect the relative price of food products to stay above historical averages.

How far above is a different, and very difficult, question 😉

UpdateDiscussion on the issue at Anti-Dismal.

Aid vs development

Lant Pritchett comes out strongly in favour of aid agencies that promote economic development on Aid Watch:

There are many ways of providing assistance to people in poor countries that do little or nothing to produce development. While we might all whole-heartedly agree that de-worming is demonstrated to be cost-effective assistance, its impact on development is, at best, tiny.

[A]ddressing a series of important problems for well-being like vaccinations, schools for girls, HIV/AIDS prevention or malaria does not add up to a development agenda.

Development, as accelerated modernization… is the only demonstrated and sustained way to achieve the objectives of increased well-being.

This is particularly relevant in NZ now that Murray McCully wants to make NZAID promote development, rather than poverty elimination. Are his opponents just concerned about political manipulation of aid money, or do they really think that development is the wrong goal for an aid agency? Read more

Swine flu pandemic

The WHO has now declared the swine flu a global pandemic. There are 27,737 cases confirmed worldwide and the number is growing fast. However, only 141 deaths are confirmed, which gives the swine flu a mortality rate of 0.5%. Compared with the Spanish flu which killed about 10% of those infected it might be seen as a lot less severe.

However, focussing on the mortality rate would be misleading. If the swine flu were as infectious as the Spanish flu, but had a mortality rate of only 0.5%, it could still kill 6,500 New Zealanders or over 11 million people worldwide. That’s a LOT of people and really reinforces how important the spread of the disease is.

On the other hand, 18 million people die every year from poverty-related causes. Is the response to the pandemic proportionate to our response to global poverty? I guess my point is twofold: first, it’s important to put percentages and proportions in context to understand them but, secondly, once you’ve put them in proportion in throws into relief the lack of effort we put into similarly severe problems.