Escaped from Malthus?

26.10.2008

I recently wrote a review of Gregory Clark's A Farewell to Alms. A Brief Economic History of the World, Paul Collier's The Bottom Billion. Why the Poorest Countries Are Failing and What Can Be Done About It and Dani Rodrik's One Economics, Many Recipes. Globalization, Institutions and Economic Growth for De Academische Boekengids, the Dutch equivalent of The New York Review of Books and the London Review of Books.

Escaped from Malthus? was my original title. The industrial revolution allowed Western-Europe and later the U.S. and a number of other countries to escape from the Malthusian trap as Gregory Clark argues in A Farewell to Alms. Some developing countries are still caught in the Malthusian trap and my rhetorical question in the final paragraph is what will happen in the (post) industrialized countries when natural resources such as oil, gas and copper grow scarce. According to recent estimates by BP there is still 40 years of oil, 60 years of gas and 140 years of coal at current consumption rates. I actually find that disconcerting. Since the Industrial Revolution was built on the transition from organic to anorganic production methods, humanity may not have escaped from Malthus after all.

Recently the International Energy Agency reported that "output from the world’s oilfields is declining faster than previously thought".

Each of the three books approaches the problem of economic growth and economic inequality from a different angle. I liked the book by Dani Rodrik best. It is refreshingly unorthodox and exemplary both in translating economic theory into economic policy and in drawing theoretical lessons from economic policy experiments. I originally wanted to include Common Wealth by Jeffrey Sachs as well, but it didn't really fit in. Apart from that, while I admire his optimism and energy I find his book hopelessly unrealistic. I would have liked to have included The White Man's Burden by William Easterly as well, but it was published too long ago. I think it's very topical and wrongly criticized for being "anti" aid, although some of Easterly's more recent writings do give rise to that interpretation. He advocated a different kind of aid, or at least, that's how I read his book.

So here's for the supplementary material.

Dani Rodrik maintains an interesting blog with occasionally some good discussions.

You can find many (working) papers on the respective homepages of Dani Rodrik, Gregory Clark and Paul Collier.

In my review I am pretty critical of The Bottom Billion because it is so riddled with factual errors. It begins in the second sentence of the first chapter where Collier writes that "For forty years the development challenge has been a rich world of one billion people facing a poor world of five billion people". As I write in my review, the world population wasn't at 6 billion 40 years ago and it hasn't been constant either. The research on which the chapters and conclusions on the relationship between poverty and civil war are based, which Collier did when he was a researcher at the Worldbank, was severely criticized by an independent evaluation panel on conceptual and methodological grounds. The Bottom Billion is an important pamphlet. However I am surprised and concerned that many critics and readers appear to have missed the errors, of which there are many.

William Easterly, author of The White Man's Burden, has reviewed The Bottom Billion for The New York Review of Books. Easterly and Collier share the same goal, but are in opposite camps when it comes to how to achieve that goal. Like me Easterly is critical of the basis for Collier's call for military interventions.

Finance and Development, a quarterly journal published by the IMF, provides an excellent, popular overview of issues in development economics.

In a paper, published in the July 27, 2007 issue of Science, physicists Cesar Hidalgo and Albert-László Barabási and economists Bailey Klinger and Ricardo Hausmann adopt a complex network approach to map the product space and the economic relations between countries. It is a purely descriptive study and doesn't say how to move from a one product economy to an intricately connected multi-product economy. It does provide evidence for the view that an economy's wealth, connectedness and degree of diversification are related.

If you've been moved or angered by The Bottom Billion and want to DO something, have a look at the many projects at Global Giving and make a donation. The organisation is actually mentioned in William Easterly's The White Man's Burden as an example of aid that DOES make a difference, by bringing together supply and demand for funding.

There are other ways of contributing to economic growth in the developing world and the internet is emerging as a new channel for allocating money. MyC4 serves as some kind of an angel investor for small enterprises in Africa. Inspired by the work of Nobel laureate Mohammad Yunus it offers loans to small and medium sized businesses. Through their site anyone can make a loan to an African company and earn interest.

If my review has raised your interest in and enthusiasm for research into economic growth and development economics, which I hope, there are a number of other economists doing fascinating and highly relevant research:

Abhijit Banerjee and Esther Duflo who founded the Poverty Action Lab at MIT.

Angus Deaton Professor of International Affairs and Professor of Economics and International Affairs at the Woodrow Wilson School of Public and International Affairs and the Economics Department at Princeton University and President of the American Economic Association.

I should also mention Jagdish Bhagwati of Columbia University, his homepage is a bit basic, but do read some of his academic papers and articles in the popular press.

|

Tags: Economics