Posts Tagged ‘William Easterly’

Carol Graham on William Easterly on migration

Tuesday, March 17th, 2015

Carol Graham, a Brookings Senior Fellow, and Professor at the University of Maryland School of Public Policy, reviews William Easterly’s The Tyranny of Experts (Basic Books, 2015).

Here is her take on Easterly’s views on the connection between migration and economic development (pp. 96-97 of the review article):

[Easterly] makes the case that the focus of development policy on nations rather than individuals has kept millions of people trapped in poverty. The tyranny of experts has focused on Zambia and Bolivia, for example …, rather than on Zambians and Bolivians. …. Zambians … have lower levels of per capita income than they did fifty years ago. Yet if they had had the flexibility of out-migration when their copper industry collapsed, as West Virginia did when its coal mining industry collapsed, the population of Zambia would be much smaller today. As a result, real wages would, at the least, not have been compressed and poverty would not have increased as much as it did. While not reversing the already high poverty rates in West Virginia, out-migration kept it from getting poorer. ….

I am very sympathetic to this argument. There are two unresolved problems, though. The first is that we still live in a world where nation-states matter and the political constraints to free labor movement across international borders remain insurmountable ….

The second is that there is selection bias in terms of who has the wherewithal to pick up and leave. My own work and that of my former students, based on intent to migrate data from Latin America, shows that respondents who intend to migrate in the next year are, on average, wealthier and more educated than the average, but also less satisfied with their lives and more critical of their economic situations. ….

I am left wondering what Zambia or Bolivia would look like if all of those with the most wherewithal just picked up and left. I agree with many others that more open borders would do more to reduce poverty than can ever be achieved via foreign aid; the big issue of course is whether such a proposal would ever be politically feasible. In addition, I do not think that we have a good answer to the question of what these places would look like if all of those with the ability to exercise their rights to exit did so ….

Carol Graham, “A Review of William Easterly’s The Tyranny of Experts: Economists, Dictators, and the Forgotten Rights of the Poor“, Journal of Economic Literature 53:1 (March 2015), pp. 92-101.

There is much more in the full review. I was unable to locate an ungated link, but here is a paragraph, from page 100, that caught my attention:

Easterly issues a justified strong critique of the World Bank and other international agencies for turning a blind eye to the issue of democracy and individual rights for strategic or self-serving reasons. The amount of foreign aid that has gone to nefarious regimes, cycled through the World Bank, in the Cold War and now the War on Terror, is indeed astounding. The problem, of course, is that with the current governance structure of the international financial institutions and even worse the UN, it is virtually impossible for these institutions to address governance issues explicitly. That problem is part and parcel of what Easterly identifies as the tyranny of experts, but he does not provide us with a way out. [Emphasis added.]

A little-known fact is the two main international financial institutions (IMF and World Bank) are part of the United Nations system, just as the UNDP, UNIDO, UNICEF, WHO and other agencies are. Regional development banks (such as the IDB and ADB) have no connection with the UN, however.

Bill Easterly is back

Saturday, January 25th, 2014

Bill Easterly ceased blogging long ago, and also stopped writing newspaper columns. He now returns, with a spirited op-ed written for the Financial Times. In it, he takes aim at Bill Gates who, in a recent interview with The Economist, praised the efforts of wealthy donors and foreign aid to reduce poverty around the world. Mr Easterly, in contrast, believes “The contribution made by philanthropists and politicians should not be overplayed.”

Mr Gates is right that the world’s rich should do more to support public health programmes that work. He is right, too, to decry the time wasted arguing over whether aid works. But the reason he gives – that the argument should concentrate on how to make aid work better – is the wrong one. Aid spending is a drop in the ocean of the budgets of the governments that give it and the economies of the countries that receive it. Whether it works scarcely matters for development.

The obsession with international aid is a rich-world vanity that exaggerates the importance of western elites. It is comforting to imagine that benevolent leaders advised by wise experts could make the poor world rich. But this is a condescending fantasy.

The progress that Mr Gates celebrates is the work of entrepreneurs, inventors, traders, investors, activists – not to mention ordinary people of commitment and ingenuity striving for a better life. Davos Man may not be ready to acknowledge that he does not hold the fate of humanity in his gilded hands. But that need not stop the rest of us.

William Easterly, “Western vanities that do little to help the world’s poor“, Financial Times, 25 January 2014.

Bill Easterly’s latest book is The Tyranny of Experts: Economists, Dictators, and the Forgotten Rights of the Poor (Basic Books, 2014). It is available now as a Kindle Edition and will be available in hardcover from March 4th.

William Easterly (born 1957) is Professor of Economics at New York University and Co-Director of NYU’s Development Research Institute. He worked at the World Bank from 1985 until he was asked (“encouraged”) to leave, following the 2001  publication of his book, The Elusive Quest For Growth: Economists’ Adventures and Misadventures in the Tropics.

choosing the next World Bank president

Sunday, April 15th, 2012

Tomorrow – Monday, March 16th – the World Bank board will name the next World Bank president. Two candidates – Jeffrey Sachs and José Antonio Ocampo – have withdrawn, leaving Nigeria’s finance minister, Ngozi Okonjo-Iweala to compete for the post with the official US candidate, Jim Yong Kim. This is twice as many candidates as usual, but no-one doubts that the US candidate will win the job, because of an unwritten agreement that the US always backs Europe’s candidate to head the IMF, and Europe in turn backs the US candidate for the World Bank.

To lift your spirits, TdJ encourages you to read the recent ‘non-candidacy’ statement of former World Bank economist Bill Easterly.

I am gratified by the widespread support that my non-nomination for World Bank president has received. My quest to help end poverty has led me to the ends of the Earth. My accomplishments speak for themselves, having successfully offended every official or interest group in any way connected to the World Bank, even the head of maintenance.  ….

I would not lead the World Bank by perpetuating the technocratic illusion that development is something “we” do to “them.” I would not ignore the rights of “them.” If the New York Times should happen to report on the front page that a World Bank-financed project torched the homes and crops of Ugandan farmers, I would not stonewall the investigation for the next 165 days, 4 hours, 37 minutes, and 20 seconds up to now.

William Easterly, “How I Would Not Lead the World Bank“, Foreign Policy, 5 March 2012.

For details on the excruciatingly slow response of the World Bank to “complaints from two communities in Uganda who lost their land in forced evictions to make way for forestry plantations”, click here.

Bill Easterly (born 1957) teaches economics at NYU. From 1985 he worked for 16 years as economist and Senior Adviser at the World Bank. He was asked to leave following publication, on July 4th, 2001, of the conclusions of his new book, The Elusive Quest for Growth, as an op-ed in the Financial Times. The official reason for his dismissal was that he published a newspaper article with prior approval. In a new preface for the 2002 paperback edition of the book, Easterly wrote:

[M]any readers have asked if my statement in the original prologue that “my employer … the World Bank … encourages gadflies like me to exercise intellectual freedom” was really accurate. Well almost. It should be modified slightly to “the World Bank … encourages gadflies like me to find another job.”

William Easterly, preface to the 2002 paperback edition of The Elusive Quest for Growth: Economists’ Adventures and Misadventures in the Tropics (MIT Press, Cambridge, 2001).

lest we forget

Tuesday, July 5th, 2011

Arnold Kling reminds us that this is how NYU economist Bill Easterly declared independence:

Unfortunately, with some exceptions, multilateral and bilateral agencies had incentives to continue lending even when recipient government actions destroyed any hope of economic growth. Sometimes donors and multilaterals gave aid and loans only because the function of donors and multilateral agencies is to give aid and loans. Sometimes aid lenders gave loans to enable old aid loans to be repaid. Sometimes donors gave aid because the recipient countries were political allies of the donor countries. Recipient governments promised the multilateral agencies that this time they would reform, like alcoholics promising never to drink again.

William Easterly, “The failure of development“, Financial Times, 4 July 2001.

It was for writing this, that he was fired from the World Bank.

‘failed state’ as a failed concept

Monday, January 18th, 2010

One can only speculate about the political motives for inventing an incoherent concept like “state failure.” It gave Western states (most notably the US superpower) much more flexibility to intervene where they wanted to (for other reasons): you don’t have to respect state sovereignty if there is no state. After the end of the Cold War, there was less hesitation to intervene because of the disappearance of the threat of Soviet retaliation. “State failure” was even more useful as justification for the US to operate with a free hand internationally in the “War on Terror” after 9/11.

These political motives are perfectly understandable, but they don’t justify shoddy analysis using such an undefinable concept.

It’s time to declare “failed state” a “failed concept.”

William Easterly and Laura Freschi, “Top 5 reasons why ‘Failed state’ is a failed concept”, Aid Watch, 13 January 2010.

NYU economist William Easterly is co-editor (with Jessica Cohen) of What works in development: Thinking Big and Thinking Small (Brookings, 2009).

GrowthGate?

Friday, December 11th, 2009

Despite Climategate, even a superficial reading seems to indicate that there is enough evidence for effects of man-made activity on the climate.

Surprisingly, there is a lot less evidence for effects of man-made activity on something that actually is completely man-made: the rate of economic growth in each country.

I had this frustrating thought as I was reading an important new paper, “Determinants of Economic Growth: Will Data Tell?”

The paper gives a conclusive and resounding answer to the question in the title: no.

William Easterly, “Why there’s no “GrowthGate:” Frustration vs. Chicanery in Explaining Growth”, Aid Watch, 10 December 2009.

There is much more! Bill Easterly goes on to explain why “it has taken economists a lot of hard work to attain this level of sublime ignorance”, concluding “The only guilty ones might be those who continue to run growth econometrics today without acknowledging that our Three-Act Tragi-Comedy is so OVER.”

Derrill Watson, in a comment, cited three of Easterly’s own publications (1993, 1997, 2007) and accused him of belonging to the “guilty” group of GrowthGate researchers. In a brief response, Easterly explained that he was running regressions in LEVELS of per capita income; these – he alleges – are more reliable than GROWTH regressions. Easterly promises to provide us with further information on this distinction at a later date.

the poverty of international GDP estimates

Tuesday, December 8th, 2009

UPDATE: My suggested robustness check has been done! Two European researchers, from ICREA-Universitat Pompeu Fabra and the European Central Bank, ran tons of regressions, and report

the PWT 6.2 revision of the PWT 6.1 1960-96 data lead to substantial changes regarding the role of government, international trade, demography, and geography. Overall, our findings suggest that margins of error in the available income data are too large for empirical analysis that is agnostic about model specification.

Antonio Ciccone and Marek Jarocinski, “Determinants of Economic Growth: Will Data Tell?”, September 2009.

HT to Bill Easterly for the pointer.

Domestic prices differ from country to country. Services, especially, are much cheaper in poor countries compared to rich countries. Market exchange rates will thus understate the real GDP of a poor country relative to that of a rich country. Prices are the weights used to add up GDP, so GDP growth rates are also biased when prices differ from country to country. Successive versions of the Penn World Table (PWT), continuing work begun by Irving Kravis, Alan Heston, and Robert Summers (1978), adjust national GDP by measuring it with common international prices, known as purchasing power parity (PPP) prices.

Four economists from distinct institutions (three US universities and the IMF) in joint research examine PWT versions 6.1 and 6.2, “two seemingly minor revisions in the Penn World Table mark 6”, and find huge differences between the two sets of data. This raises doubts concerning the quality of the PWT data, so they urge researchers instead to use national accounts data – at least for comparative analysis of annual growth rates – even though they are not PPP-adjusted.

A puzzling feature is that data – especially for GDP growth but also for the level of GDP and the PPPs – for the same country at the same point in time change across successive versions of the PWT. A stark example of this relates to Equatorial Guinea’s growth rate. According to PWT (version 6.2), it was the second-fastest-growing country among 40 African countries during the two-and-a-half decades beginning in 1975. However, according to the previous version (PWT 6.1), Equatorial Guinea was the slowest-growing country. ….

The rationale for the PWT is to come up with GDP level and growth data that are at common international (the so-called PPP) prices so that the data are comparable across countries. The methodology, however, leads to the construction of GDP growth estimates that are based not on common international prices but on a mixture of international and domestic prices. In this case, it is not obvious that the data are comparable across countries.

Simon Johnson, Will Larson, Chris Papageorgiou and Arvind Subramanian, “Is newer better? The Penn World Table growth estimates”, VoxEU, 7 December 2009.

PWT version 6.3 is now up and running, no doubt with even more changes to PPP-adjusted GDP. Sadly, these data are used widely, and uncritically, to ‘explain’ why some countries grow faster than others. As a robustness check, it might be wise to run growth models on subsequent versions of the PWT. The makers of PWT from the very beginning attached warning labels to the data, but these warnings have largely been ignored. It is so much easier to run regressions than to do the hard work of examining with a critical eye the underlying data and, for that matter, to question the underlying theory – or absence thereof. On the latter, see my 7-part series on “economics as faith” beginning here.

institutions and economic growth

Tuesday, December 1st, 2009

MIT economist Daron Acemoglu argues that differences in institutions are the reason residents of countries like Canada and Japan enjoy incomes that are much higher than those in countries like North Korea or Ethiopia.

How do we know that institutions are so central to the wealth and poverty of nations? Start in Nogales, a city cut in half by the Mexican-American border fence. There is no difference in geography between the two halves of Nogales. The weather is the same. The winds are the same, as are the soils. The types of diseases prevalent in the area given its geography and climate are the same, as is the ethnic, cultural, and linguistic background of the residents. By logic, both sides of the city should be identical economically.

And yet they are far from the same.

On one side of the border fence, in Santa Cruz County, Arizona, the median household income is $30,000. A few feet away, it’s $10,000. On one side, most of the teenagers are in public high school, and the majority of the adults are high school graduates. On the other side, few of the residents have gone to high school, let alone college. Those in Arizona enjoy relatively good health and Medicare for those over sixty-five, not to mention an efficient road network, electricity, telephone service, and a dependable sewage and public-health system. None of those things are a given across the border. There, the roads are bad, the infant-mortality rate high, electricity and phone service expensive and spotty.

The key difference is that those on the north side of the border enjoy law and order and dependable government services — they can go about their daily activities and jobs without fear for their life or safety or property rights. On the other side, the inhabitants have institutions that perpetuate crime, graft, and insecurity.

Daron Acemoglu, “What Makes a Nation Rich? One Economist’s Big Answer”, Esquire, 18 November 2009.

This reasoning is appealing. But institutionalists like Acemoglu, it seems to me, attempt to explain too much. The definition of ‘institutions’ tends to encompass everything – even schooling and health. The problem is that numerous variables vary by degree of development. Suppose, for example, that I believe that schooling is the key to development. Then, I might argue that income differences between Nogales, Arizona and Nogales, Mexico are due solely – or at least primarily – to differences in educational levels. We could test this hypothesis, by bringing the schooling of all residents of Nogales, Mexico, up to the levels of Nogales, Arizona. But such experiments are not feasible in the social sciences. We would like to explain one variable – per capita income – but we have a wealth of potential explanatory variables. In statistical terms, the model is ‘overdetermined’: there are more explanatory variables than there are unknowns, and the explanatory variables themselves are correlated.

Bill Easterly argues that the only honest answer to the question “What makes a nation rich?” is “We don’t know”. I agree.

Thanks to Paul Romer for the pointer.

health care as a human right

Tuesday, October 13th, 2009

NYU economist Bill Easterly has a column in today’s Financial Times that seems to reject the idea of universal health care, even for a country as wealthy as the US. I was not convinced.

The agonising US healthcare debate has taken on a new moral tone. President Barack Obama recently held a conference call with religious leaders in which he called healthcare “a core ethical and moral obligation”. Even Sarah Palin felt obliged to concede: “Each of us knows that we have an obligation to care for the old, the young and the sick.” ….

The pragmatic approach – directing public resources to where they have the most health benefits for a given cost – historically achieved far more than the moral approach.

In the US and other rich countries, a “right to health” is a claim on funds that has no natural limit, since any of us could get healthier with more care. We should learn from the international experience that this “right” skews public resources towards the most politically effective advocates, who will seldom be the neediest.

William Easterly, “Human rights are the wrong basis for healthcare”, Financial Times, 13 October 2009.

Easterly’s argument makes sense only if we interpret “right to health” as a right to any and all health care, regardless of cost. No universal programme – not even US Medicare for the elderly – provides unlimited care at any cost. If we interpret “right to health” as a “right to basic health care”, it is entirely consistent with Easterly’s preferred “pragmatic approach – directing public resources to where they have the most health benefits for a given cost”.

The definition of ‘basic health care’ will, of course, vary from country to country. Similarly, the right to “basic education” is typically restricted to primary school in poor countries, but may include high school or even post-secondary education in more affluent countries.

the elusive search for causes of growth

Tuesday, September 22nd, 2009

The success of the East Asian Gang of Four—and now China—has exerted an irresistible lure to researchers of growth. Academic economists who were used to studying whether a politically difficult tax reform might make Americans better off by an amount equivalent to 0.1 percent of US GDP rushed into a field of inquiry that promises to explain how to increase your income seventeen times over. Theoretical breakthroughs in the late 1980s by Paul Romer (now at Stanford) and by Nobel laureate Robert Lucas helped inspire a remarkable effort by economists to find in the empirical data which factors reliably lead to growth. Yet hundreds of research articles later, we wound up at a surprising end point: we don’t know. [my emphasis]

In 2003, Arnold Harberger, a free-market economist from the University of Chicago, observed that “there aren’t too many policies that we can say with certainty…affect growth.” A year later, a group of famous economists (including some on the liberal end of the spectrum like Paul Krugman and Joseph Stiglitz) produced something called the Barcelona Development Agenda that announced: “There is no single set of policies that can be guaranteed to ignite sustained growth.” And in 2007, the dean of growth research, Nobel laureate Robert Solow, said: “In real life it is very hard to move the permanent growth rate; and when it happens…the source can be a bit mysterious even after the fact.”

William Easterly, “The Anarchy of Success”, New York Review of Books 56:15 (8 October 2009).

NYU economist Bill Easterly is reviewing  The Drunkard’s Walk: How Randomness Rules Our Lives by Leonard Mlodinow (Pantheon, 2008; Penguin, 2009) and Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism (Random House, 2007; Bloomsbury, 2008) by Ha-Joon Chang. Mlodinow’s book offers a clue why so many writers continue to claim to have a prescription for economic growth: “Humans are suckers for finding patterns where none really exist, like seeing the shapes of lions and giraffes in the clouds.” Chang’s book is an example of this type of outlandish claim, namely “the success of such countries as the East Asian Gang of Four can be replicated by other countries”.

Bill Easterly blogs at Aid Watch.