Bill Easterly on Peter Singer's new book

Two weeks ago, I suggested that Peter Singer erred by suggesting that “economic development is impeded more by a lack of appropriate motivation than a lack of appropriate knowledge and incentives.” I predicted that he’d be due some grief from Bill Easterly. Such is the power of Trade Diversion that that has now come to pass in the pages of the Wall Street Journal:

Suppose you see a small child drowning in a pond. If you save him you will ruin your expensive suit. Do you save him? Of course you do. Now think about the world’s extremely poor children who are going to die unless you give enough to a charity designed to help them, such as Unicef or Oxfam. Do you save them? Not often enough. In “The Life You Can Save,” Peter Singer argues that the two situations are ethically equivalent. Such immediacy is compassionate and inspirational — you want to give more after reading Mr. Singer.

Unfortunately, there are several differences between these two situations. The most important is that you know exactly what to do to save the child, whereas it is not at all clear that you (or anyone else) knows exactly what to do to save the lives of poor children or how to get them out of extreme poverty. Another difference is that you are the one acting directly to save the drowning child, whereas there are multiple intermediaries between you and the poor child — an international charity, an official aid agency, a government, a local aid worker.

The full review goes into more details, but Easterly’s argument is simply that Singer doesn’t address these two problems adequately to compellingly show that greater giving is a moral obligation akin to saving a drowning child.

Who's a trade lobbyist?

Bombardini and Trebbi: “The data show that sectors characterized by a higher degree of competition (more substitutable products and a lower concentration of production) tend to lobby more together (through a sector-wide trade association), while sectors with higher concentration and more differentiated products lobby more individually.”

Deaton: "Instruments of Development"

This big paper by Angus Deaton on “instruments of development” is really good. In short,

  • Lots of people are using instruments that are unlikely to satisfy the exogeneity assumption required for identification.
  • Randomized controlled trials are not nearly as informative as we think, and when we push trial results to be more informative, we’re back in the world of instruments and econometrics.
  • Economic theory needs to make a lot of progress too – in most cases, we need theory to do decent empirics.

More competition

Welcome ECIPE (Razeen Sally, Fredrik Erixon, et al.) to the trade blogosphere.

I apologize for the lack of activity at Trade Diversion recently. Posting should increase after my midterm exams next week.

Negative assessments of the US dollar

Francisco Rodriguez:

Everyone is investing in the dollar because they believe it will hold its value. As investors flee to the dollar, the US can print more greenbacks and maintain its value precisely because of this belief. Effectively, it is paying off previous investors (who see their trust in the currency’s stability confirmed) through the willingness of new investors to buy in. This is eerily reminiscent of what Mr. Charles Ponzi did in 1903, and ever since he first tried it, it has never turned out well.

Multilateralizing Regionalism (with a z)

A behemoth of a book was released by the WTO today – Multilateralizing Regionalism: Challenges for the Global Trading System, edited by Richard Baldwin and Patrick Low, contains the papers and comments from 2007’s WTO conference on Multilateralising Regionalism. Multilateralizing Regionalism should not be confused with Multilateralising Regionalism by Richard Baldwin and Philip Thornton.