Naked Economics by Wheelan, Charles (spanish books to read .txt) 📕

other end of that continuum. He believes that the whole development aid process is broken. His views are best encapsulated by an old joke about the failed development strategies that have gone in and out of favor over the past half century:

A peasant discovers that many of his chickens are dying, so he seeks advice from a priest. The priest recommends that the peasant say prayers for his chickens, but the chickens continue to die. The priest then recommends music for the chicken coop, but the deaths continue unabated. Pondering again, the priest recommends repainting the chicken coop in bright colors. Finally, all the chickens die. “What a shame,” the priest tells the peasant, “I had so many more good ideas.”35

Easterly should know. He spent decades working at the World Bank, where he was the guy trying to save the dying chickens. He argues in The White Man’s Burden and other works that traditional aid projects are inflexible and ineffective. The results are miserable, both at the micro level (aid agencies hand out mosquito nets that end up getting used as fishing nets or wedding veils) and at the macro level (we can’t show that what we’re doing is making countries better off). Instead, we focus on inputs—how generous are we?—which he compares to evaluating a Hollywood movie by the size of its budget.

Easterly says that traditional development aid has been a mistake—because we still haven’t figured out how to do it.36 He writes in the American Economic Review:

Economists are reasonably confident that some combination of free markets and good institutions has an excellent historical track record of achieving development (as opposed to, say, totalitarian control of the economy by kleptocrats). It is just that we don’t know how to get from here to there; which specific actions contribute to free markets and good institutions; how all the little pieces fit together. That is, we don’t know how to achieve development.37

Easterly doesn’t think we should give up trying to help people in poor countries. Instead, we should do small, context-sensitive projects with measurable benefits. He writes, “[Aid] could seek to create more opportunities for poor individuals, rather than try to transform poor societies.”

To be fair, the primary stumbling block to development in poor countries is not bad advice from rich countries. The best ideas for economic growth are quite simple, yet, as this chapter has pointed out, there are plenty of leaders in the developing world doing the economic equivalent of smoking, eating cheeseburgers, and driving without their seat belts. A study done by the Harvard Center for International Development of global growth patterns between 1965 and 1990 found that most of the difference between the huge success of East Asia and the relatively poor performance of South Asia, sub-Saharan Africa, and Latin America can be explained by government policy. In that respect, foreign aid presents the same kind of challenges as any other welfare policy. Poor countries, like poor people, often have very bad habits. Providing support can prolong behavior that needs to be changed. One study came to the unsurprising conclusion that foreign aid has a positive effect on growth when good policies are already in place, and has little impact on growth when they are not. The authors recommended that aid be predicated on good policy, which would make the aid more effective and provide an incentive for governments to implement better policies.38 (Similar criteria have been proposed for relieving the debts of heavily indebted poor countries.) Of course, turning our backs on the neediest cases (and denying bailouts to countries in crisis) is easier in theory than it is in practice. In 2005, the World Bank published a document that might qualify as bureaucratic introspection—Economic Growth in the 1990s: Learning from a Decade of Reform. Policymakers were a lot more confident that they knew how to fix the world in 1990 than they are today. Harvard development economist Dani Rodrik describes the tone of the report, which seems to incorporate William Easterly’s skepticism without abandoning Jeffrey Sach’s resolve: “There are no confident assertions here of what works and what doesn’t—and no blueprints for policymakers to adopt. The emphasis is on the need for humility, for policy diversity, for selective and modest reforms, and for experimentation.”39

Last, much of the world is poor because the rich countries have not tried very hard to make it otherwise. I realize that pointing out the failure of development aid and then arguing for more of it is like Yogi Berra criticizing a restaurant for having bad food and small portions. Still, things become better when there is an overwhelming political will to make them better. That is bigger than economics.

Epilogue

Life in 2050: Seven Questions

Economics can help us to understand and improve an imperfect world. In the end, though, it is just a set of tools. We must decide how to use them. Economics does not foreordain the future any more than the laws of physics made it inevitable that we would explore the moon. Physics made it possible; humans chose to do it—in large part by devoting resources that might have been spent elsewhere. John F. Kennedy did not alter the laws of physics when he declared that the United States would put a man on the moon; he merely set a goal that required good science to get there. Economics is no different. If we are to make the best use of these tools, we ought to think about where we are trying to go. We must decide what our priorities are, what trade-offs we are willing to make, what outcomes we are or are not willing to accept. To paraphrase economic historian and Nobel laureate Robert Fogel, we must first define the “good life” before economics can help us get there. Here are seven questions worth pondering about life in 2050, not for the sake of predicting the future, but because the decisions that