Friday, March 23, 2007

Good advice is scarce 

William Easterly's piece on Africa's receipt of lousy economic advice for half a century (WSJ subscriber's link) leads Mark Thoma (who reprints most of the piece so you can read there) to muse:
A couple of comments, or questions rather about his examples in support of the free market approach to development. He says "In the ensuing 50 years, there have been plenty more examples of poor countries which grew rapidly without much aid -- China and India ... being the most famous recent examples." Are these examples of free markets at work once government stepped aside, or are they cases where the state has provided substantial direction as the big push to get the ball rolling? Should we wonder why he doesn't mention countries where the strict free-market approach has failed and paved the way for populist alternatives?
No doubt such countries exist -- Russia post-Yeltsin (Gaidar?) comes immediately to mind -- but could you point to one that adopted the populist alternative and grew?

A slide show of Easterly's view is here. I recall a slide show Easterly used to have showing what was written about Ghana (glowing) versus S. Korea (unlikely to ever grow) in the late 1950s. It's not a stretch to say we have been fantastically wrong about what makes economies grow in the past; what we do not know yet is what we mean when we say 'free market policies'. Which ones work? Which should come first? I don't have an answer, but I am at present working on a book to show that the measurements we currently use to get that answer are woefully inaccurate. You'll probably see more of that here in the next six months.