rise and fall of athens

With my recent completion of Lords of the Sea: The Epic Story of the Athenian Navy and the Birth of Democracy, I have come to a point of rest in my gradual survey of 5th and 4th century Athens, which has taken me from Thucydides to Aeschylus to Xenophon to Plato to Plutarch all the way up to present day. What follows is my tentative encapsulation of the rise and fall of Athens in the 5th and 4th centuries, respectively. I am planning to write a cogent narrative of the rise and fall that integrates the a) tremendous works of drama and comedy and the b) philosophical disputes on the nature of the polis that echoed in the works of Plato and Aristotle and later on in the work of Karl Popper. (I am most sympathetic to the views of the playwrights and Popper.)

Filed under: World

countries become what they make

César Hidalgo argues, “…in the long run, the income of countries is determined by the variety and sophistication of the products they make, rather than by the traded value of their exports.” In The Dynamics of Economic Complexity and the Product Space over a 42 year period, Hidalgo applies network science techniques to 42 years of trade data in order to better understand the impact of a country’s product space (e.g., oil, pears, chemical, cars) on future income growth and movement into new product markets.

Filed under: Economic Policy

sandel’s ‘moral’ tribalism

I greatly enjoyed the first two-thirds of Michael Sandel’s new book, Justice: A Reader, which only made the final third more disappointing. Sandel begins his book with a long and fruitful discussion of philosophical thought, ranging from Rousseau to Nozick to Rawls, with compelling thought experiments and concise explanations of the different schools of thought. In the end, Sandel argues that each school falls short, in part due to neglecting the moral legitimacy of communal bonds, such as family, ethnicity, and nation, which, he argues, are not contractual, voluntary decisions made by the individual, but inescapable moral obligations that do not depend on individual consent.

Filed under: Philosophy

livestock versus gold on $2 a day

Last March, the Monitor Group published Emerging Markets, Emerging Models, an analysis of the opportunities and challenges to apply market-based models to better serve the world’s poor as suppliers and customers. I have discussed the failure of supply-side aid economics in the past, and the Monitor Group’s findings illustrate the danger of assuming that your outside opinion of a low-income group’s needs matches their wants.

“We want gold on credit. Everyone in our village does,” Monitor Focus Group, Andhra Pradesh, India

Filed under: World

development is local

The World Bank is slowly publishing a series of books on the subject of “Moving Out of Poverty;” while the subject isn’t novel, the incredibly rich data set that underpins the series certainly is. The World Bank study included 60,000 interviews in 15 countries, with the purpose of explaining how and why households move out (and in to) poverty. I am working through the online samples while waiting for the price to come down on “Moving Out of Poverty, Volume 2: Success from the Bottom Up,” by Deepa Narayan, Lant Pritchett, and Soumya Kapoor. For a rundown of the book, check out Duncan Green’s post from last year.

The breadth and depth of the data set powers some startling factoids.

Filed under: General Welfare, World

development without aid in Somaliland

In “Peace-Building without External Assistance: Lessons from Somaliland,” Nicholas Eubank explores the second-order effects of state-directed foreign aid on political and economic development. Because foreign aid has worked its way into nearly ever corner of sub-Saharan Africa, there are few controls available to estimate these effects. Eubank isolates one such control in Somaliland, which has remained untouched due to the international community’s decision to make the state ineligible for aid after its unapproved secession from Somalia in 1991.

Eubank posits that because the Somaliland government did not benefit from aid revenues, it had greater incentive to reconcile with the local commercial interests, which, in turn, had a vested interest in peace and stability that served the country well. Somaliland indeed appears to have taken major steps forward since its decimation by civil war, rebuilding cities and towns, and increasing schooling and commercial activity. A UNDP/World Bank survey finds that Somaliland has significantly higher average income than Somalia proper, a reversal of the prewar distribution, with superior health statistics as well.

Filed under: General Welfare, World

help haitians (and haiti) through immigration

In the past, I have covered Lant Pritchett’s wonderful book on immigration, “Let Their People Come: Breaking the Gridlock on Global Labor Mobility.” In those posts, I addressed the morality, the positive development implications, and the benefits to host nations of increasing work visas. The tragedy in Haiti has pushed the question to the forefront, thanks in no small part to the work of folks like Michael Clemens (whose article includes many of the numbers included below).

Visa expansion is competing for airtime with debt forgiveness and disaster relief, and it’s worthwhile to restate the human value of greater immigration. As Michael Clemens and many others have reported, 50% of Haitians wanted to leave Haiti before the disaster. Last year, following an earlier natural disaster, the US refused to grant temporary protected status to Haitian immigrants and proceeded with deportation hearings. Thankfully, the US has granted TPS to immigrants in the wake of the latest disaster.

Yet the US could do significantly more good by taking the next step and opening its doors, even if on a temporary basis, to Haiti’s poor and huddled masses. Such a policy may even find broader support than TPS, which touched on the political nerve of protecting immigrants in the country illegally.

Filed under: Economic Policy, General Welfare

thinking small in development

Two years ago Brookings held an event, “What Works in Development? Thinking Big and Thinking Small,” which survives today as a source for excellent working papers from some of my favorite development economists. Today I read Abhijit Vinayak Banerjee’s Big Answers For Big Questions: The Illusions of Macroeconomics, and was struck by a passage seeking to explain the gap in Total Factor Productivity between the US and India:

At least a part of the answer to the TFP puzzle seems comes from massive misallocation of resources within the same economy, something that is not picked up by any of the macro aggregates that are used in growth accounting exercises. These misallocations are not the product of any one distortion but rather the cumulative effect of many, many individual distortions resulting from both government failures and market failures.

Filed under: 1

USAID needs outcome measures

The United States Agency for International Development (USAID) was established in 1961 with a mission of fomenting economic and social development through direct assistance. The State Department and USAID are currently operating off a strategic plan developed in 2007 for fiscal years 2007 through 2012. The plan presents seven strategic goals, including the promotion of economic growth and prosperity, with an emphasis on immediate, inclusive, and sustainable development.

Filed under: Economic Policy

why the welfare state needs foreign labor

Continuing on the Breaking the Gridlock kick, foreign labor opponents are keen to depict foreigners as a threat to the host nation’s economic self-interest. At their most beneficent, opponents argue against an influx of unskilled labor, which would hurt unskilled labor currently in the country. In theory, this argument is valid. As Lant Pritchett notes, however, evidence suggests the impact is marginal:

The evidence of the Mariel boatlift of a huge influx of workers into a single labor market (Miami) shows little impact on employment or wages (Card 1990). Even Borjas’s (1999) regression evidence that the labor movement of nationals is affected by the patterns of migration and hence the impact on the national labor market needs to be considered shows that only 4 percent of the decline in the real wage of high-school-educated workers can be attributed (and the cross-state regression evidence was apparently driven by the experience of California).

Given that national legislation involving a similarly “huge influx of workers” is politically impossible, the economic fate of low-skilled nationals will not be much affected by foreign labor for the foreseeable future. For those whose concerns stand unabated, Pritchett takes another tact:

The economists’ usual response to distributional arguments against efficient policies is “instruments to targets,” and for economists to resist migration on this ground while advocating free trade is intellectually inconsistent.

For fear of some anti-free traders remaining unimpressed, I would add that we also don’t allow distributional considerations to take precedence over more efficient technological innovations.  I don’t expect this counter-argument to impress anti-free traders in isolation, but free labor has the advantage over free trade in that the direct benefits accrue to those most in need; folks against an unskilled labor influx out of a concern for distributional effects would do well to consider Pritchett’s points in the previous post on the morality of labor mobility.

It would do the case for labor mobility a disservice, however, to simply argue that it wont harm national interests. I won’t waste kilobytes on the obvious benefits of allowing in more labor that firms want to pay to create products, but Pritchett does offer useful clarity on foreign labor as a way to address the problems facing aging industrial countries:

The populations of Germany, Japan, and Italy have already begun to shrink and, for Italy and Japan, are projected to be only 60 percent of their 2000 size by 2050. France and the United Kingdom will remain roughly the same size during the next fifty years. Among large industrial countries, only the United States is expected to continue to experience sizable population growth (these projections already assume some level of migration).
…
Current projections show support [to retiree] ratios falling in Germany from 4 to 2, and in the more dramatic cases of Italy and Japan they fall to about 1.5—only 1.5 workers for every retiree. The systems of social transfers in Europe can be sustained only with very high tax rates even at current support ratios and program design parameters (which include a combination of tax rates, ages, benefits, and so on). But if support ratios fall to anything like projected levels, then it is not clear that there are politically feasible combinations of design parameters that can make the systems solvent—either tax rates need to be too high or retirement benefits drastically curtailed.

This country-specific focus foretells of Pritchett’s final recommendations for bilateral labor agreements, which I’ll explore soon. More generally, it stirs a hope that the industrial nations will soon understand that it is in their economic interest to allow in young, tax-paying workers to correct their demographic imbalances.

Filed under: General Welfare, World, book byte