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Development Economics and Method: A Quarter Century of ABCDE

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[Opening Remarks at the ABCDE 2014, Washington, D.C.]

Introduction

It gives me great pleasure to welcome all of you to the Annual Bank Conference on Development Economics (ABCDE) 2014.

The first time I attended an ABCDE was when Stanley Fischer used to do my job. A letter arrived, quite unexpectedly, in my Delhi mailbox inviting me to attend the ABCDE in Washington. The World Bank would cover all my expenses and, not just that, I was not given any specific task, like that of writing a paper or commenting on one. Several members of the eminences grises of the profession were at the conference and I remember feeling rather tongue tied. So, taking advantage of the fact that I did not have a specific brief, I hardly spoke during the two days. I later figured that if you measured the World Bank’s expenditure on different participants in terms of the amount spent for each word uttered, I was the most highly-paid person at that conference.

I made up for that a little in 1992, when Larry Summers was the Chief Economist, and I was invited once again from Delhi, this time to comment on Paul Romer’s paper (Romer, 1993). And I will make up for this today, since the Bank did not have to spend on my travel and I do intend to say a few things.

Too Small to Regulate – A Blog

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Informal industries and markets, with many small producers and suppliers, are generally more difficult to regulate than their organized counterparts, dominated by larger corporations. 

Adulteration of food, for instance, is more common in small, informal outlets than when sold by large, branded firms. It was part of the lore in South Asia that milk bought from small, informal cattle owners would be adulterated with water (which on charitable days may be viewed as traditional technology for converting 4%-fat milk to 2%). A recent study in Barisal District of Bangladesh  found that while small percentages of milk samples had different kinds of adulteration, when it came to added water, 100% of the samples had it. 

Playing with and Understanding Purchasing Power Parities

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A fascinating feature of purchasing power parity (PPP) is more people hold an opinion on it than know what it means. This was in ample display last week, when the Global Office of the International Comparison Program (ICP), hosted by the World Bank, announced the latest PPP data for the world, pertaining to 2011. 

Putting aside complexities, PPPs may be viewed as an estimate what one US dollar can buy in different countries. In case a dollar in Ghana can buy three times what it can buy in the United States, then a person who earns 1,000 dollars each month in Ghana is said to earn 3,000 in terms of ‘PPP-adjusted dollars’. 

Global Economic Outlook in One Thousand Words

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[All numbers cited in this essay are from the World Bank’s latest Global Economic Prospects. The analysis is mine.]

The economic prospect for the world in 2014 is best described as uneventful. It is a strange world we live in that this is the good news. After six years of turmoil marked by financial crises and long stretches of recession in several countries, it is indeed heartening that we are headed for uneventful times with a slow pick-up in global growth.

The world in 2013 grew by 2.4%. We are forecasting a growth of 3.2% in 2014. This is the point forecast. There is a lot that is happening around it, with some countries expected to make a strong recovery, some weak, and some actually slowing. And for each country there are bands of possibilities around their respective point forecasts.

Shared Prosperity, Poverty Mitigation and the Art of Reasoning

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The growth v. inequality debate attracts such widespread participation because, at entry level, it makes such minimal demands on the human intellect. But the debate can be conducted at many levels, leading us into some intricate and indeed treacherous terrain. The newly-declared goals of the World Bank Group—to end extreme poverty in the world by 2030 and to promote shared prosperity in all societies—take the Bank into this disputed terrain and compel it to join in this important policy debate. I have just published a paper to elaborate on the meaning of these goals, examine their strengths and weaknesses, and to initiate a discussion of what kinds of policies these goals push us towards.

Samoa Diary

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A discomfiting feature of going to places off the beaten track is the surprise shown by the natives themselves. I recall traveling to Dushanbe from Moscow by Somon Airways; the flight attendant--a young Tajik woman--on learning that I am an Indian living in Washington, looked puzzled and asked, enunciating each word, "Why, may I ask you, are you going to Tajikistan?" The slight sense of alarm caused by the query hinting at faulty decision making on my part was heightened by Aristomene Varoudakis, a gifted economist and one of my advisers at the World Bank, pronouncing, ten minutes into the flight: "So far, so good." Those words, meant to be comforting, were disquieting in their suggestion that this was a journey in which ten minutes without a mishap deserved a toast.

The same was true as I headed to Samoa. The flight was full of Samoans who could have walked out of a Paul Gauguin frieze, a few surfers and some missionaries. Jimmy Olazo and I from the World Bank did not fit into any of these categories and faced the inevitable interrogation on why we were going there. Samoa is indeed an unusual country to visit. It is impossibly small, with a population of less than 200,000. Its resources are meager, consisting of fish, some agricultural products and spectacular scenery. To an economist the viability of an economy like this is a conundrum. Where do you get the economies of scale from to produce your cars, hospitals, clothes? How much fish and tourism can you supply to the rest of the world to pay for these? Is it possible to help Samoans organize a steady flow of workers, skilled and unskilled, to other nations and rely on their remittances? How do you provide any insurance against the risks of natural disaster and calamity, a concern that, as I discovered over the next three days, dominated the lives of the Samoans? How do you conduct monetary policy in such an impossibly small nation?

India's Moral Churning -- Excerpts from August 16 Tata Lecture, Delhi

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Revised excerpts from the 16th JRD Tata lecture, delivered in New Delhi, 19 August 2013.

This is a difficult time for the Indian economy. Growth has slowed, with industry shrinking over the last two successive months, wholesale price inflation has risen to 5.8%, and the rupee has been losing value sharply. There is reason to be upset about this and to demand more from policy makers. Yet, as I argue in this lecture, this is not India's biggest problem. The nation's biggest challenge at this critical juncture is a moral and an ethical one. This, for India, is a moment of moral churning. Skullduggery and corruption, cutting across party lines, have been rampant, eating into the moral fabric of the nation, leaving ordinary people befuddled and in despair. This is breeding a corrosive cynicism, leading people to believe that maybe this is the only way to be, that petty corruption and harassment is simply the new normal, whereby we should complain when we are left out of the gravy train and merrily join in if and when we get a foothold on that train. Yes, the economy has not done well over the last year or two. But once we look beyond the proximate causes we will realize that one important factor for the economy not doing well is the corrosion of values like trust and trustworthiness and their concomitant, poor governance.

Through the smog, gently: Postcard from Malaysia

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PREAMBLE

My travels in Malaysia begin at the distant eastern edge of the country, in Sabah's capital, Kota Kinabalu, the strange name a reminder of the distance I have traveled from home. Meeting local folks, regional politicians, and masters of local arts and crafts, it quickly becomes evident that this ancient island, Borneo, symbolizes all the mysteries and romance of human movement through history. The people who seem settled here forever arrived one day after traveling great distances, braving the wilds and the seas. They were then the modern people who had come to an ancient land. They would soon be absorbed and become the natives in the eyes of the next wave of arrival and modern-day visitors like us.

Frederico, Vivian, Kup (a senior officer of the Ministry of Finance) and I are received at the airport at Kota Kinabalu by a charming young woman, Intan. She is tall and has a head-scarf carefully draped around her head covering her hair. Intan explains she is part Arab, part Chinese, and part Bajau, an ancient tribal people. She smiles and adds that she considers herself Bajau.

A Paean to Reason and Empathy

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The following blog post is an excerpt from my commencement address delivered at the Diploma Ceremony of Fordham University, held in New York on May 19, 2013

The first rule of reason is honesty. There are situations in life where kindness and concern for others make us hold back on certain kinds of speech. That is as it should be. Speech can hurt as much as physical violence. If the latter is wrong, so must be the former. But to ourselves, in our minds, we should practice the utmost honesty. Honesty in thought may be inconvenient but in the long-run it helps.

Consider what we are often told—that if there is a will, there is a way; with sufficient determination, we can achieve anything. But to believe in this you have to suspend reason. And my advice is don’t. There are things in life which through sufficient determination you can achieve; but there are also things which no matter how hard you try, you will never get. It is best to see this clearly and realistically and then make your own choices rationally. You will make better decisions.

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