Category Archives: Development

Autocracy and Technology

Alex Tabarrock

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And don’t think that the data being collected by autocracies is limited to Facebook posts or Twitter comments. The most important data they will collect in the future is biometric information, which can be used to identify individuals through their unique physical and biological attributes. Fingerprints, photographs and DNA testing are all familiar biometric data types today. Indeed, future visitors to repressive countries might be surprised to find that airport security requires not just a customs form and passport check, but also a voice scan. In the future, software for voice and facial recognition will surpass all the current biometric tests in terms of accuracy and ease of use.

 

An Economics Masterpiece You Should Be Reading Now: Justin Yifu Lin’s “The Quest for Prosperity”

My reading list is overflowing, but it looks like Clive Clook’s recommendation has to go on the top of the Development Economics list. Are you ready for “new structuralism”?

The most valuable new book I’ve read this year is Justin Yifu Lin’s “The Quest for Prosperity.” George Akerlof, a Nobel laureate in economics and a man not given to reckless overstatement, calls it “a masterpiece.” I’d say that’s right.

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Lin … was an observer and participant in China’s economic miracle. From 2008 until earlier this year, he was the World Bank’s chief economist. Today he’s back in China, at Peking University.

Lin’s book is intellectually ambitious. He sets out to survey the modern history of economic development and distill a practical formula for growing out of poverty. It’s a serious undertaking: Lin isn’t trying to be another pop economics sensation. But “The Quest for Prosperity” is lightly written and accessible. It weaves in pertinent stories and observations, drawing especially from his travels with the World Bank. He leavens the economics skillfully.

Two Schools

Essentially, he proposes a middle way between two contending schools: structuralism, which emphasizes barriers to development that government intervention is needed to overcome, and the neoclassical approach, which stresses market forces and frowns on industrial planning. He calls his hybrid “new structuralism,” suggesting a closer affinity with the first. (That branding is a bit misleading, but I can see that the alternative — new neoclassicism — doesn’t roll off the tongue.)

(…) 

China’s Success

Structural transformation, of course, is exactly what China has achieved. Elsewhere Lin has acknowledged that China needs further policy reforms and that all is not well. Yet the country’s success of the past several decades is indisputable — and this is no Soviet-style industrialization mirage. Russian factories sold their output to captive markets. Nobody with a choice ever bought a Soviet-made car or television. China’s outward-looking producers are world-class. I’m typing this on a best-of-breed Apple Inc. laptop, manufactured in China.

As I argued in my last column, China is a capitalist country. But how did it get that way?

Lin’s answer draws on both development paradigms. He sees a vital role for government in overcoming barriers to development. But interventions, he argues, must respect compelling market realities. Of these, the most important is international comparative advantage. Poor countries have lots of cheap labor. For them, capital-intensive heavy industry isn’t the way to go.

For today’s developing countries, Lin says, the global economy is the indispensable setting, and looking outward is the sine qua non of rapid development. On the input side, that’s because of the opportunity it affords for technologically driven catch-up growth. On the output side, it’s because the world is a market for exports. On this view, “export pessimism,” the idea that poor countries couldn’t prosper through international trade, was one of the biggest mistakes of the import- substitution school. Globalization is the poor’s best friend.

Currently $15.37 on Kindle.

Why 2012 was the best year ever: Never in the history of the world has there been less hunger, less disease and more prosperity

Steven Pinker’s 2011 book has gather a lot of attention: The Better Angels of Our Nature. Recently I listened to his October 2012 talk at the Commonwealth Club.

Prof. Pinker learned a lot about human progress in the course of the research for the book. The Spectator December 2012 issue has a leading article by Pinker that summarizes a few of those progress vectors. I thought it might be a good antidote to the dismal stories that dominate the media. Pinker begins with this:

It may not feel like it, but 2012 has been the greatest year in the history of the world. That sounds like an extravagant claim, but it is borne out by evidence. Never has there been less hunger, less disease or more prosperity. The West remains in the economic doldrums, but most developing countries are charging ahead, and people are being lifted out of poverty at the fastest rate ever recorded. The death toll inflicted by war and natural disasters is also mercifully low. We are living in a golden age.

To listen to politicians is to be given the opposite impression — of a dangerous, cruel world where things are bad and getting worse. This, in a way, is the politicians’ job: to highlight problems and to try their best to offer solutions. But the great advances of mankind come about not from statesmen, but from ordinary people. Governments across the world appear stuck in what Michael Lind, on page 30, describes as an era of ‘turboparalysis’ — all motion, no progress. But outside government, progress has been nothing short of spectacular.

Take global poverty. In 1990, the UN announced Millennium Development Goals, the first of which was to halve the number of people in extreme poverty by 2015. It emerged this year that the target was met in 2008. Yet the achievement did not merit an official announcement, presumably because it was not achieved by any government scheme but by the pace of global capitalism. Buying cheap plastic toys made in China really is helping to make poverty history. And global inequality? This, too, is lower now than any point in modern times. Globalisation means the world’s not just getting richer, but fairer too.

The doom-mongers will tell you that we cannot sustain worldwide economic growth without ruining our environment. But while the rich world’s economies grew by 6 per cent over the last seven years, fossil fuel consumption in those countries fell by 4 per cent. This remarkable (and, again, unreported) achievement has nothing to do with green taxes or wind-farms. It is down to consumer demand for more efficient cars and factories.

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Check it out – I guarantee you’ll feel more cheerful. 

MIT’s Poverty Action Lab: devising cost-effective development interventions

Development economist William Easterly has demonstrated convincingly that most “foreign aid” is ineffective, and often is worse than doing nothing (increasing corruption and dependence). E.g., see Africa’s Poverty Trap and Foreign aid vs. growth: Robert Lucas and William Easterly.

But there are effective interventions – so how do we discover how cost-effective various ideas are? That is the mission of J-PAL at MIT, created by French economist Esther Duflo. J-PAL is applying randomized controlled trials (RCT) as a key input to their cost-effectiveness methodology.

For an example, the above graphic summarizes the results of their Teacher Attendance & Incentives program. I like this example because it illustrates that some of the most effective ideas are simple and cheap. In this case, providing a basic digital camera to each village school

(…) Esther Duflo, a French economics professor at MIT, wondered whether there was anything that could be done about absentee teachers in rural India, which is a large problem for remote schoolhouses with a single teacher. Duflo and her colleague Rema Hanna took a sample of 120 schools in Rajasthan, chose 60 at random, and sent cameras to teachers in the chosen schools. The cameras had tamper-proof date and time stamps, and the teachers were asked to get a pupil to photograph the teacher with the class at the beginning and the end of each school day.

It was a simple idea, and it worked. Teacher absenteeism plummeted, as measured by random audits, and the class test scores improved markedly.

 FT has an interesting profile of Dr. Duflo (if you don’t mind reading what they had for lunch).

The importance of being urban

Don't miss the latest from Ryan Avent at the Economist Free Exchange:

WHILE Europe's austerity-minded governments and inflation-averse central bank must take much of the credit for the euro area's current economic problems, the crisis has been fanned by failures of regulatory reform and integration that have made adjustment much harder than it needs to be. Those failures also operated prior to the crisis, contributing to growth in imbalances, and without much more in the way of structural reform they will continue to be an economic albatross when the crisis is finally put to rest.

This week's Free exchange column looks at an underappreciated way in which regulatory burdens and incomplete integration have prevented the euro area from taking full advantage of the size of its market and growing richer: by constraining the growth of its cities:

Although America and the euro zone have similar total populations, America’s 50 largest metropolitan areas are home to 164m people, compared with just 102m in the euro area. This striking disparity has big consequences.

Differences in metropolitan populations may help explain gaps in productivity and incomes. Western Europe’s per-person GDP is 72% of America’s, on a purchasing-power-parity basis. A recent study by the McKinsey Global Institute, the consultancy’s research arm, reckons that some three-quarters of this gap can be chalked up to Europe’s relatively diminutive cities. More Americans than Europeans live in big cities: there is a particular divergence in the size each region’s “middleweight” cities, those that teem just a little less than the likes of New York and Paris (see chart). And the premium earned by Americans in large cities relative to those in the countryside is larger than that earned by urban Europeans.

In highly skilled societies, bigger cities are associated with higher levels of productivity and income, the column explains. This seems to be due to the ways in which cities facilitate innovation in an age of rapidly increasing economic and technological complexity. Prosperity now requires lots of skilled individuals in reasonably close proximity to each other, to learn from and occasionally partner with as part of the process of coming up with and spreading new ideas. America appears to be better able than Europe to accomplish this across a wide range of places.

But why? The piece explains:

Regulatory barriers to growth may be to blame. Tight zoning rules limit housing supply and raise prices by driving a wedge between construction costs and market prices. This “regulatory tax” amounts to over 300% in the office markets in Frankfurt, Paris and Milan, according to a 2008 study by Paul Cheshire and Christian Hilber of the London School of Economics, but is just 50% in Manhattan and, in effect, zero in fast-growing places like Houston. Taxes that add to transaction costs also help explain low European mobility.

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Paul Romer on what happened in Honduras

The fragments leaking out of Honduras have been disturbing to say the least. The Transparency Committee has still not been formalized. So when the news of private development deal leaked the Committee wrote what is essentially a resignation letter. Paul has just emailed some details to Tyler Cowen

Paul sends me the following, which he describes as “a personal statement to the news media”:

Qn: Prof. Romer, are you still working with the government of Honduras on the creation of a RED – a Region Especial de Dessarrollo? Or on what some have called a model city?

Ans: I and the other people who were named to the Transparency Commission wrote a public letter to President Lobo stating that we have no ongoing role in the project. Personally, I have also resigned from the CORED advisory committee.

Qn: In the beginning, you were an active supporter of the RED project. What changed?

Ans: From recent newspaper reports, I learned that the Honduran agency responsible for public-private partnerships had signed an agreement about a RED with a private company. When I asked for information, I was told that I could not see this agreement.

This was a departure from the standards of transparency that the administration had led me to expect. It was also a departure from the role for the Transparency Commission outlined in the Constitutional Statute passed by the Honduran Congress.

Qn: How can it be that a member of the Transparency Commission could not see such an agreement? Under the process set out in the Constitutional Statute, doesn’t the Transparency Commission have to give an opinion about any proposed RED?

Ans: In December 2011, President Lobo signed a decree naming me and four other internationally respected individuals to the Transparency Commission. At the time, these appointments were reported in the international news media, in particular by the The Economist. However, the government never completed the process of publishing this decree in the Gazette. The administration’s current position is that because the decree was never published, the Transparency Commission does not exist in the eyes of the law and the five named members have no legal basis for reviewing any agreements.

Qn: Can the government create a RED if the Transparency Commission does not yet exist?

Ans: If the Transparency Commission does not yet exist, the administration can propose a RED directly to the Congress. The RED will then come into existence if the Congress passes an act describing its geographical boundaries. Passing an act that specifies boundaries may seem like a minor detail, but under the Constitutional Statute, it has important legal consequences.

Qn: Does the administration have to disclose the terms of any agreement that it signs with a company that will invest in or manage a RED? Does the company have to disclose the identities of its financial backers? Does the company have to disclose anything about its experience or qualifications?

Ans: The law states that the Transparency Commission must be given all the information needed to evaluate any proposed RED. If there is no Transparency Commission, the Congress is the only remaining protection. To make sure that it is comfortable with the identities of the investors and the governance structure that the investors have negotiated in their agreements, the Congress could insist on full disclosure before it votes a RED into existence. The Congress might also want to insist that it have a separate right to approve any agreement related to a proposed or existing RED that could place a financial burden on the Honduran government. This kind of burden could arise, for example, through an agreement that lets a private party bring a claim for damages against the government.

Qn: Do you know how the misunderstanding about the legal status of the Transparency Commission came about?

Ans: Various explanations have been offered, but I cannot be certain why the decree naming the members of the commission was never published in the Gazette. Nor can I be certain why the administration did not disclose its decision not to publish the decree.

Whatever the reasons for these decisions, the result was an important failure of transparency. The public perception, that the Transparency Commission was in operation, differed from the reality. This gave the wrong impression about the checks and balances that would be operating as the first RED came into existence.

From the very beginning, I made a commitment to the citizens of Honduras, to the members of the Honduran Congress, and to the many people around the world who wish Honduras well. I committed that I would work for their benefit and do so transparently. This means that at a time such as this I have to be willing to state to the public what I know to be true.

Paul also sends along these links (in Spanish):

http://www.elheraldo.hn/Otras-Secciones/Portada-Impresa/Romer-Hay-un-fracaso-importante-de-la-transparencia http://www.elheraldo.hn/Secciones-Principales/Al-Frente/Romer-Han-desviado-las-normas-de-transparencia-en-ciudades-modelo http://www.laprensa.hn/Secciones-Principales/Honduras/Apertura/Hubo-fallo-importante-en-la-transparencia-Paul-Romer#.UGBt_aT9FGg

India only: the $35 tablet computer

This sounds sensible on the surface – India packages up an Android tablet with optional mobile broadband. To accelerate widespread internet access. What’s not to like (aside from the probable subsidy)? Here’s Tyler Cowen:

Do you want a tablet but don’t have enough money to buy one of those high-end tablets available in the market today? Here’s some good news for you. There’s a new $35 tablet, the catch is, you can only get it in India.

The new Aakash UbiSlate 7Ci comes equipped with WiFi so you can connect to the internet but if you’re living in India, you can avail of the $64 upgrade and have yourself a cellular Internet package of $2/month for 2 GB of data which translates to roughly 25 emails, 25 websites, 2 minutes of streaming video, and 15 minutes of voice chat a day. It also features voice search, so it might help pacify your need for something similar to Apple’s Siri.

It features a 7.5-inch display, a front facing VGA camera, and a Cortex A8, 1Ghz Processor. According to reports, it’s as fast as an iPhone, so it can’t be too bad. It runs Android but the version hasn’t been specified yet.

The cheap tablet is part of the Indian government’s move to technologically mobilize the country. The first batch of the affordable tablets will hit universities around India sometime this month and via a “special offer”, DataWind, the carrier and maker of the tablet, will offer broadband for a monthly cost of US$1.78. And for those living in remote areas where electricity is sparse, they can get a solar charger for the Aakash UbiSlate 7Ci.

Here is more, and for the pointer I thank Mark Thorson.

Tyler quipped “Perfect for MRU” in his caption. Translation “Perfect for Marginal Revolution University“. Tyler and Alex Tabarrok are on their way to Korea for a MR session.

Norman Borlaug: “World Bank fear of green political pressure in Washington became the single biggest obstacle to feeding Africa”

While John Tierney wrote this piece in 2008, it is just as relevant in 2012. If this surprises you, then I recommend you also read Attention Whole Foods Shoppers by Robert Paarlberg.

I hope you will be persuaded to try to enlighten your “green” neighbors – that they are part of the problem, not the solution:

Farmers and consumers in poor countries are now paying the price for decisions made by well-fed Westerners, as reported by my colleagues Keith Bradsher and Andrew Martin in their front-page article on cutbacks in financing for agricultural research. They explain how the Green Revolution faltered after Western governments and agencies slashed funds for agricultural research, partly to shift money to other areas, like environmental projects, and partly because of opposition to high-yield agriculture from advocacy groups.

If you find it hard to imagine how anyone could be opposed to growing more food for poor people, read Gregg Easterbrook’s 1997 Atlantic Monthly article on Norman Borlaug, the agronomist whose achievements through the Green Revolution may have saved a billion lives. Mr. Easterbrook wrote:

The Ford and Rockefeller Foundations and the World Bank, once sponsors of his work, have recently given Borlaug the cold shoulder. Funding institutions have also cut support for the International Maize and Wheat Center — located in Mexico and known by its Spanish acronym, CIMMYT — where Borlaug helped to develop the high-yield, low-pesticide dwarf wheat upon which a substantial portion of the world’s population now depends for sustenance. And though Borlaug’s achievements are arguably the greatest that Ford or Rockefeller has ever funded, both foundations have retreated from the last effort of Borlaug’s long life: the attempt to bring high-yield agriculture to Africa.

Pressure from environmentalists was the chief reason for these cutbacks, Mr. Easterbrook reported:

[By]the 1980s finding fault with high-yield agriculture had become fashionable. Environmentalists began to tell the Ford and Rockefeller Foundations and Western governments that high-yield techniques would despoil the developing world. As Borlaug turned his attention to high-yield projects for Africa, where mass starvation still seemed a plausible threat, some green organizations became determined to stop him there. “The environmental community in the 1980s went crazy pressuring the donor countries and the big foundations not to support ideas like inorganic fertilizers for Africa,” says David Seckler, the director of the International Irrigation Management Institute.

Environmental lobbyists persuaded the Ford Foundation and the World Bank to back off from most African agriculture projects. The Rockefeller Foundation largely backed away too — though it might have in any case, because it was shifting toward an emphasis on biotechnological agricultural research. “World Bank fear of green political pressure in Washington became the single biggest obstacle to feeding Africa,” Borlaug says. The green parties of Western Europe persuaded most of their governments to stop supplying fertilizer to Africa; an exception was Norway, which has a large crown corporation that makes fertilizer and avidly promotes its use. Borlaug, once an honored presence at the Ford and Rockefeller Foundations, became, he says, “a tar baby to them politically, because all the ideas the greenies couldn’t stand were sticking to me.”

Dr. Borlaug didn’t disguise his anger in summarizing his feelings about greens to Mr. Easterbrook:

“Some of the environmental lobbyists of the Western nations are the salt of the earth, but many of them are elitists. They’ve never experienced the physical sensation of hunger. They do their lobbying from comfortable office suites in Washington or Brussels. If they lived just one month amid the misery of the developing world, as I have for fifty years, they’d be crying out for tractors and fertilizer and irrigation canals and be outraged that fashionable elitists back home were trying to deny them these things.”

(…)UPDATE: 

My colleague Andy Revkin notes parallels in financing for energy as well as agricultural research: short-sightedness seems to reign.

 Continue reading John Tierney.

Doubling Global Food Supply by Engineering Food for All

Regarding food supply and demand: in the next forty years the global demand for food will double. We are already utilizing 35% of the planet’s ice-free land area for agriculture, an area 60 times that of all cities and suburbs. The supply to balance that demand doubling needs to be achieved at affordable prices, on a per calorie basis, using less land, less water, less nitrogen runoff, less pesticide and a smaller carbon footprint.

In a new op-ed at the New York Times, Pennsylvania State University biology professor Nina V. Fedoroff explains how we can do this:

FOOD prices are at record highs and the ranks of the hungry are swelling once again. A warming climate is beginning to nibble at crop yields worldwide. The United Nations predicts that there will be one to three billion more people to feed by midcentury.

Yet even as the Obama administration says it wants to stimulate innovation by eliminating unnecessary regulations, the Environmental Protection Agency wants to require even more data on genetically modified crops, which have been improved using technology with great promise and a track record of safety. The process for approving these crops has become so costly and burdensome that it is choking off innovation.

Civilization depends on our expanding ability to produce food efficiently, which has markedly accelerated thanks to science and technology. The use of chemicals for fertilization and for pest and disease control, the induction of beneficial mutations in plants with chemicals or radiation to improve yields, and the mechanization of agriculture have all increased the amount of food that can be grown on each acre of land by as much as 10 times in the last 100 years.

These extraordinary increases must be doubled by 2050 if we are to continue to feed an expanding population. As people around the world become more affluent, they are demanding diets richer in animal protein, which will require ever more robust feed crop yields to sustain.

New molecular methods that add or modify genes can protect plants from diseases and pests and improve crops in ways that are both more environmentally benign and beyond the capability of older methods. This is because the gene modifications are crafted based on knowledge of what genes do, in contrast to the shotgun approach of traditional breeding or using chemicals or radiation to induce mutations. The results have been spectacular.

For example, genetically modified crops containing an extra gene that confers resistance to certain insects require much less pesticide. This is good for the environment because toxic pesticides decrease the supply of food for birds and run off the land to poison rivers, lakes and oceans.

The rapid adoption of genetically modified herbicide-tolerant soybeans has made it easier for farmers to park their plows and forgo tilling for weed control. No-till farming is more sustainable and environmentally benign because it decreases soil erosion and shrinks agriculture’s carbon footprint.

In 2010, crops modified by molecular methods were grown in 29 countries on more than 360 million acres. Of the 15.4 million farmers growing these crops, 90 percent are poor, with small operations. The reason farmers turn to genetically modified crops is simple: yields increase and costs decrease.

Myths about the dire effects of genetically modified foods on health and the environment abound, but they have not held up to scientific scrutiny. And, although many concerns have been expressed about the potential for unexpected consequences, the unexpected effects that have been observed so far have been benign. Contamination by carcinogenic fungal toxins, for example, is as much as 90 percent lower in insect-resistant genetically modified corn than in nonmodified corn. This is because the fungi that make the toxins follow insects boring into the plants. No insect holes, no fungi, no toxins.

Yet today we have only a handful of genetically modified crops, primarily soybeans, corn, canola and cotton. All are commodity crops mainly used for feed or fiber and all were developed by big biotech companies. Only big companies can muster the money necessary to navigate the regulatory thicket woven by the government’s three oversight agencies: the E.P.A., the Department of Agriculture and the Food and Drug Administration.

Decades ago, when molecular approaches to plant improvement were relatively new, there was some rationale for a cautious approach.

But now the evidence is in. These crop modification methods are not dangerous. The European Union has spent more than $425 million studying the safety of genetically modified crops over the past 25 years. Its recent, lengthy report on the matter can be summarized in one sentence: Crop modification by molecular methods is no more dangerous than crop modification by other methods. Serious scientific bodies that have analyzed the issue, including the National Academy of Sciences and the British Royal Society, have come to the same conclusion.

It is time to relieve the regulatory burden slowing down the development of genetically modified crops. The three United States regulatory agencies need to develop a single set of requirements and focus solely on the hazards — if any — posed by new traits.

And above all, the government needs to stop regulating genetic modifications for which there is no scientifically credible evidence of harm.

Professor Fedoroff was president of the AAAS when she wrote this.

The evidence from developing countries already shows us that doubling of demand will include increased demand for meat (which requires more land and water than grain calories). So please tell me how we are going to achieve this revolution in agricultural productivity without utilizing all the available science and innovation? Must we continue hobbled like children in a sack rack?

Can marine fisheries and aquaculture meet fish demand from a growing human population in a changing climate?

These researchers conclude “Yes” to the captioned query:

Gorka Merinoa, Manuel Barangea, Julia L. Blanchardb, James Harlec, Robert Holmesa, Icarus Allena, Edward H. Allisond, Marie Caroline Badjeckd, Nicholas K. Dulvye, Jason Holtc, Simon Jenningsf, g, Christian Mullonh, Lynda D. Rodwelli

Essential fisheries management changes include switching feed from wild fish meal. Abstract:

Expansion in the world’s human population and economic development will increase future demand for fish products. As global fisheries yield is constrained by ecosystems productivity and management effectiveness, per capita fish consumption can only be maintained or increased if aquaculture makes an increasing contribution to the volume and stability of global fish supplies. Here, we use predictions of changes in global and regional climate (according to IPCC emissions scenario A1B), marine ecosystem and fisheries production estimates from high resolution regional models, human population size estimates from United Nations prospects, fishmeal and oil price estimations, and projections of the technological development in aquaculture feed technology, to investigate the feasibility of sustaining current and increased per capita fish consumption rates in 2050. We conclude that meeting current and larger consumption rates is feasible, despite a growing population and the impacts of climate change on potential fisheries production, but only if fish resources are managed sustainably and the animal feeds industry reduces its reliance on wild fish. Ineffective fisheries management and rising fishmeal prices driven by greater demand could, however, compromise future aquaculture production and the availability of fish products.

The article is unfortunately behind the bloody Elsevier paywall.