Francisco Rodríguez has a skeptic’s brief on growth regressions, noting that endogeneity, proxy/measurement, and robustness problems abound. He’s also critical of linearity assumption.
Rodríguez suggests two avenues for potentially more fruitful investigation: growth diagnostics and non-parametric regression.
Jagdish Bhagwati savages the Obama administration-to-be on trade policy.
[C]ustomers in China had ordered wastepaper from Dryden’s company, but when it arrived, they declined it. Bales and bales of abandoned cardboard and newsprint were sitting at Chinese ports as prices — which were high from July until October — dropped precipitously.
American exports of recyclable material used by the Chinese to make boxes to ship exports to the US and Europe are declining steeply, says NPR.
HT: Sabrina.
Robert Staiger & Alan Sykes on the the theoretical relationship between exchange rate policy and international trade:
[I]t is often asserted that China’s currency policies have real effects that are equivalent to an export subsidy. In fact, however, if prices are flexible the effect of exchange rate intervention parallels that of a uniform import tariff and export subsidy, which will have no real effect on trade, an implication of Lerner’s symmetry theorem. With sticky prices, the real effects of exchange rate intervention and the translation of that intervention into trade-policy equivalents depend critically on how traded goods and services are priced.
William Easterly warns that the global crisis may have long-lasting, damaging effects through scholarly and policy choices:
[T]he risk of a backlash against individual freedom is far more dangerous than the direct damage to poor countries caused by a global recession, falling commodity prices, or shrinking capital flows. We’re already seeing this dangerous trend in Latin America…
A spreading fire of statism would find plenty of kindling already stacked in the Middle East, the former Soviet Union, Africa, and Asia. And there are many Western “development” experts who would eagerly fan the flames with their woolly, paternalistic thinking.
To Jeffrey Sachs, perhaps the foremost of these experts, the crash is an opportunity to gain support for the hopelessly utopian Millennium Development Goals of reducing poverty, achieving gender equality, and improving the general state of the planet through a centrally planned, government-led Big Push…
[A]fter a long and scary Great Depression, democratic capitalism did survive. And the U.S. economy returned to exactly the same long-run trend path it was on before the Depression.
We also know that, for another important part of the world, democratic capitalism did not hold up so well. In many ways, that failure stemmed from a misguided overreaction on the part of a new, influential field of economics that was highly skeptical of capitalism, was deeply traumatized by economic calamity, and considered much of the world “underdeveloped.” Born in the aftermath of the Depression, “development economics” grew on a foundation of bizarre misconceptions and dangerous assumptions…
First, seeing Depression-style unemployment in every part of the world led these economists to assume that poor countries simply had too many people who were literally producing nothing… Second, these thinkers lost faith in bottom-up economic development that was “spontaneous, as in the classical capitalist pattern” (as a later history put it), preferring instead development “consciously achieved through state planning.”… Third, these economists grew to believe that the most important factor in reducing poverty was the amount of money invested in the tools to do so. After all, if there were simply too many people, they reasoned, the binding constraint on growth must be the lack of physical equipment… Fourth, the collapse of international trade during the Depression made development economists skeptical about trade as an engine of growth.
Watching an old West Wing episode, I encountered this odd line from Jed Bartlet (played by Martin Sheen), the Nobel laureate and President in Aaron Sorkin’s popular series:
When I was 26, I wrote a paper supporting the deregulation of Far East trade barriers. Nearly got thrown out of the London School of Economics. I was young and stupid, and trying to make some noise.
Does “deregulation of trade barriers” mean liberalisation? When would that have been so unpopular? And has anyone ever been “thrown out” of a department for research activities?
What are the best and worst appearances by international economics in popular entertainment?
Watching an old West Wing episode, I encountered this odd line from Jed Bartlet (played by Martin Sheen), the Nobel laureate and President in Aaron Sorkin’s popular series:
When I was 26, I wrote a paper supporting the deregulation of Far East trade barriers. Nearly got thrown out of the London School of Economics. I was young and stupid, and trying to make some noise.
Does “deregulation of trade barriers” mean liberalisation? When would that have been so unpopular? And has anyone ever been “thrown out” of a department for research activities?
What are the best and worst appearances by international economics in popular entertainment?
This directory probably isn’t a bad place to kill some free time.
US trade policymaking looks downright harmonious compared to the parliamentary riots in Korea.
Bill Easterly’s White Man’s Burden will become a video documentary directed by Douglas Busby, due out in 2010. Easterly on the title and his epiphany.
Trade Diversion 