Ariel Rubinstein sat down for a video interview with me last week following a DEC lecture. A professor at Tel Aviv University as well as NYU, Rubinstein is an eminent game theorist and expert on the economic theory behind bargaining.
He spoke about how economic theory has gone through fundamental changes, in no small part due to growing interest in behavioral economics.
June 1 was Justin’s last day as World Bank Chief Economist and I wanted to share comments from several leading development thinkers and economists (including past Chief Economists) who knew him and appreciated the determination he brought to the position. Justin’s views were not in the mainstream at the World Bank, but through intellectual persistence, structural economics has re-emerged as a topic meriting debate and discussion among top development experts.
Enjoy the video and feel free to share your views about Justin’s legacy
When launching ‘Let’s Talk Development,’ we thought we would create a platform for encouraging open debate and exchanging serious ideas about economic development and poverty reduction. Looking back at almost two years of open exchanges and vigorous discussion on all sorts of issues, I think we have far surpassed our initial expectations. ‘Let’s Talk Development’ now has a wide and loyal readership and is among the most popular of the World Bank’s blogs.
In his hit My Valentine, former Beatle Sir Paul McCartney sings about a Moroccan vacation where foul weather meant he and his love could not enjoy the vacation and planned sightseeing they had envisioned. Sir Paul was frustrated, until his love said the weather mattered little and they should change their mindset and make the most of it. That advice inspired the opening lyrics of his tune -- What if it rained?/ We didn't care/ She said that someday soon/ The sun was gonna shine/ And she was right/ This love of mine,/ My Valentine -- and taught him a valuable lesson: Complaining about the missing ingredients necessary to achieve any goal is a waste. It is far better to focus on what is already available and make the most of things.
The quality of development projects depends in part on how well grounded project preparation is in knowledge about what works and what does not. Development practitioners need to be well informed if their projects are to have impact.
The World Bank’s in-house research department—the Development Research Group (DECRG)—is the main unit aiming to supply relevant research findings to Bank operations, as well as to external clients. It is not a large department, accounting for about 1% of the Bank’s administrative budget. But it produces the majority of the Bank’s research, and has a high profile internationally. Indeed, it is often ranked ahead of almost all universities and think tanks in development economics, measured by the quantity of research outputs, downloads and citations to research findings. For example, the highly-regarded and much-watched ranking done by the IDEAS project currently puts DECRG ahead of all but one university.
In analyzing returns to schooling and in evaluating educational policies, ‘soft skills’ – personality traits like conscientiousness, openness and diligence -- often get under-valued or neglected. This is in part because so much value is placed on standardized test scores in education systems. It’s also because soft skills that are valued in the labor market, in school, and in many other domains are considered too hard to quantify.
According to Nobel-winning economist Joseph Stiglitz, creating jobs amidst today’s low-demand, high-debt environment is a tall order. It will require viable structural employment policies, unemployment insurance for laid off people, and -- in the case of the US – facing up to the inevitable shift out of the manufacturing sector into services. Stiglitz, who delivered a DEC Lecture at the World Bank on September 26 on ‘The State of the Global Economy: An Agenda for Job Creation’, warned that far more is broken than the banking and financial systems in high income countries. He argues that a lack of aggregate demand is a huge problem that can only be fixed through smart public as well as private investment in education, infrastructure, and innovative technologies to protect the environment. He also described the current phenomenon whereby productivity in manufacturing is exceeding the rate of growth in demand in the sector, which means jobs on factory floors are being shed. In other words, technical change can induce large distributive consequences and lead to long term unemployment. Listen to my interview with him about what can be done to cure our current ills.
A quiet revolution is needed to help pull people out of poverty in many developing countries, since it will be well nigh impossible to replicate export-led success stories like we’ve seen in parts of Asia. Also, even though policies, politics, and corruption are knotty issues that often block progress, there is scope for tweaking institutions at the margins in ways that will improve the status of poor people. These were some of the takeaways I gleaned from the Development Economics lecture yesterday by Esther Duflo, MIT Economics Profession and co-founder of the JPAL Poverty Lab.
Duflo’s lecture was a refreshing mix of pragmatism and idealism. Clearly full of passion for her job and blessed with extraordinary energy, this young economist travels tirelessly to learn what’s happening at the coal face of development and she approaches her task with rigor as well as a sense of mission.
It's important to have an international forum where leading thinkers can exchange ideas about how to reduce poverty and how to promote growth in low income countries. I'm delighted that, since its inauguration 22 years ago, the Annual Bank Conference on Development Economics (ABCDE) has served this purpose by connecting leading thinkers, practitioners, and students. Now more than ever, we need active and constructive debate about job creation, reducing inequality, empowering women, and improving our approaches to human capital formation and training youth. TheDevelopment Economics Vice Presidency that I lead is enthusiastic in its continued support for this forum.
For people to benefit from development and escape poverty, they need to broaden their opportunities. That's why we chose 'Broadening Opportunities for Development' as our overall theme for this year's conference happening from May 30-June 1 in Paris.
It's important to have an international forum where leading thinkers can exchange ideas about how to reduce poverty and how to promote growth in low income countries. I'm delighted that, since its inauguration 22 years ago, the Annual Bank Conference on Development Economics (ABCDE) has served this purpose by connecting leading thinkers, practitioners, and students. Now more than ever, we need active and constructive debate about job creation, reducing inequality, empowering women, and improving our approaches to human capital formation and training youth. The Development Economics Vice Presidency that I lead is enthusiastic in its continued support for this forum.
China has been the fastest growing country in the world over the past two decades and as it gains economic clout, it is worthwhile to envision where the country is going and how it has gotten to where it is today.
In 1990, while China was home to 20 percent of the world’s population, it commanded a mere 1.6 percent of global GDP. Now it is the world’s second largest economy and produces 8.6 percent of global GDP (in 2009). Even after that extraordinary leap forward, the country still has the advantage of backwardness and it has the potential to have another 20 years of rapid transformation.
APEC and New Beginnings in Trade
The first Senior Officials’ Meeting (SOM I) of Asia-Pacific Economics Cooperation (APEC) concluded earlier this month in Washington D.C. The APEC 2011 agenda now swings into full action. The member economies in the region are looking for ways to reaffirm APEC’s reputation for innovative economic integration initiatives – and the means by which to stave off new hiccups in the region’s economic recovery. In particular, the new APEC Supply Chain Connectivity Initiative (SCI) holds real promise as a dynamic successor to APEC’s successful Trade Facilitation Action Plans, which resulted in significant trade cost reductions across the region.
As a testament to the dynamism and ambition behind the trade-related policy goals of APEC – the United States, as APEC 2011 Chair, and the World Bank are working with APEC to build a platform to expand trade through research, data, and capacity building – with direct participation of private sector firms. Fedex is with us in this new venture. Is this March madness – yet another attempt to forge alliances where goals are shared but sustaining momentum proves tough? Or is it a spring awakening that data, research, and direct partnerships with firms to build in this area provides the real anchor for taking action to assist developing countries tackle trade costs at their source? I suggest it is the latter.
We’ve read a good deal recently about the democratization of research. UNESCO’s Science Report 2010 showed a growth in the developing-country share of science research. As UNESCO Director General Irina Bokovo put it in her Foreword:
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| Photo: istockphoto.com |
“The distribution of research and development (R&D) efforts between North and South has changed with the emergence of new players in the global economy. A bipolar world in which science and technology (S&T) were dominated by the Triad made up of the European Union, Japan and the USA is gradually giving way to a multi-polar world, with an increasing number of public and private research hubs spreading across North and South.”
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| Photo: istockphoto.com |
