What should World Bank development economists do?

by on May 19, 2010 at 6:08 pm in Economics | Permalink

World Bank development economists, most of all.  I'm giving a talk on this topic tomorrow at the World Bank (South Asia division) and I thought I would solicit your advice and opinions.  If you could reallocate the effort of economists within the World Bank, what would you propose?  More big picture study?  More RCTs?  Should they spend more time refuting the simple fallacies of the economically illiterate?  Or should they invest in a stronger capacity for technical economics?  Should they offer more concrete advice on how to write incentive-compatible contracts for projects?  Should they calculate theories of the net bias in remaining World Bank institutions (too many contracts?) and act to counter those biases?  Or should they more or less give up on the idea of development and spend their time promoting the idea of freer immigration, as Michael Clemens does?

Sarcastic answers are welcome too.

What should World Bank economists do?

1 Rob May 19, 2010 at 6:31 pm

“I’m giving a talk on this topic tomorrow at the World Bank”

Nothing like waiting for the last minute to prepare…

2 Brett May 19, 2010 at 6:49 pm

If you could reallocate the effort of economists within the World Bank, what would you propose?

Tell them to focus on making profits for the national investors in the World Bank first, and then use the resulting massive changes in patterns of investment as an object lesson to scold various countries with on their poor investment potential.*

*I’m half-kidding, if you didn’t realize it.

3 E. Barandiaran May 19, 2010 at 7:07 pm

Many years ago a Chilean business organization invited a very well known Harvard professor that at the time was holding a high government position to speak at its annual conference on the state of the economy. He was paid U$S20,000 to give two lectures, one to a large audience and the other to small group of people from the largest companies and banks. I attended both because I was the organization’s economic adviser.
In his first lecture he talked about the U.S. fiscal deficit and its implications for the world economy (he suggested that the Chilean government could issue inflation-adjusted bonds without knowing that in Chile most transactions were in UF, an index for inflation adjustment introduced in the 1960s). More interesting, in the second lecture the Harvard professor didn’t know what to say because by that time he had realized that most of us had a good background in economics. He surprised all of us by saying that he preferred to learn about the Chilean economy rather than lecturing us about the world economy. So he questioned us about what was going on in Chile. His questions were very interesting.

4 Comment May 19, 2010 at 7:24 pm

If it is interested in promoting development, the World Bank should diversify its ranks, hire professionals OTHER than economists, or somehow cross-train the economists they already have (good luck with that!)

5 John Linarelli May 19, 2010 at 7:32 pm

They could be spending more time and effort examining the public choice aspects of some of the rule of law assistance and institution building projects going on in developing countries and in countries trying to emerge from conflict. This is good for the descriptive and the empirical. For the normative, they need to be more sensitive to the rights and justice issues associated with their work. In other words, economists, with their particular way of understanding welfare as a good, should not be the only folks involved.

6 jk May 19, 2010 at 7:48 pm

They should come to your talk

7 Yancey Ward May 19, 2010 at 8:00 pm

Welcoming sarcastic answers takes all the fun out of it. You are a clever man, Tyler Cowen.

8 red. May 19, 2010 at 8:06 pm

They should expend a great deal more effort in supporting country teams and host governments to think about the potential sources of and strategies for durable competitive advantage. They should be to developing countries what Bain Consulting once was to firms. Most (not all) of the work that they do now is mostly worse than useless — and they know it.

9 DanC May 19, 2010 at 8:17 pm

Buy a large helicopter, fly over a poor country, dump money from helicopter, go home. You will do more good and less damage.

10 Mattyoung May 19, 2010 at 8:34 pm

Study and invest in the transportation markets of the nations under their care. One can hardly go wrong if one makes it cheaper to ship stuff around.

11 Quaker May 19, 2010 at 8:52 pm

They should collect high-quality, higher frequency data.

Despite popular perception, we currently don’t have an accurate idea of what the Indian age distribution is, nor do we really have a good grasp on what the country’s income distribution looks like. Get good data, then do good economics.

12 red. May 19, 2010 at 8:59 pm

“Development’s too gradual and subtle to be fixed in a lifetime.”

A dozen developing countries have grown at over 7% per year for at least 25 years, implying a quintupling of per capita income in half a developing-country-lifetime. These countries quite different from each other in size, resources, “culture” and so forth. What they had in common was macroeconomic stability and a conscious, active, dynamic strategy for development. Bank economists under-emphasize the latter.

13 Bill May 19, 2010 at 9:23 pm

I am sure that both you and the development economists are familiar with international tax, and with ways that multinationals declare their profits offshore (outside of the developed country) so they do not pay corporate income or other taxes.

So, my question is, what should we do to help foreign countries collect the taxes that would otherwise be owed them so that they can pay for the infrastructure in that country, rather than impoverish their country in paying for infrastucture that benefits a MNC.

14 adam miller May 19, 2010 at 9:53 pm

Why doesn’t the World Bank get competent people installed as the head of poorly run countries? Letting Bill Gates run any country in Africa for five years would greatly improve it. He understands the issues, has more money that a lot of countries, and can get world leaders on the phone.

15 Mark K. May 19, 2010 at 10:22 pm

I’ve been reading through the book “Bad Samaritans” by Ha-Joon Chang. Say what you’d like about this fellow’s viewpoint (I’d say a lot but this isn’t the time), if you read between the lines somewhat you can see a very different point of view that I think adds quite a lot to the discussion.

The basic premise of Mr. Chang’s book is that because most developing countries had tariffs and other forms of protectionism during the same period of time that they became industrialized world powers, then it must be that protectionism in its various guises is a good thing. Hence, developing countries should enact more protectionist policies.

All things equal, I find this line of reasoning absurd (bordering on the delusional) until you consider one thing: developing countries usually lack the respected legal and institutional systems of the West. Save and invest as much as one peasant might, they very much might be stuck in a zero-gain investment trap. Governments on the other hand tend to enforce contracts and access capital for their own enterprises.

I guess my line would be: if you have bad institutions, reform them first. If that doesn’t work, then you’re basically helping people who don’t want to be helped. Wait 50 years and try again.

16 Dhruv May 19, 2010 at 10:49 pm

Focus on the parallel economy.

In most developing countries (especially South Asia), parallel economy can easily constitute 50-70 % of overrall economy. Most influential economists are either Westerners or trained in the West and so they conveniently ignore the parallel economy.

17 Karthic Dixit May 19, 2010 at 11:11 pm

“Laissez Nous Faire.”

18 Gabe May 20, 2010 at 1:20 am

tell them to quit empowering tyrants. The World bank just gives loans to tyrant to keep them in power longer, in exchange they take out loans and buy crap from Bechtel or Halliburton and then subject the poor to higher taxes. It’s worse than loan sharking because they don’t even give the poor anything before they start hitting them up for “their share” of the debt…they just give more power to the tyrants who rule the poor.

19 Ryan May 20, 2010 at 4:08 am

1. Work more with area specialists (especially those who study non-economics)
2. Focus on building up domestic data gathering capabilities in poor countries

20 Andrew May 20, 2010 at 6:22 am

I have no idea what a World Bank does, but judging from these comments, my semi-sarcastic comment would be for them to…Bank.

21 Michael G Heller May 20, 2010 at 7:50 am

On a generous note… If the question is what should World Bank development economists do, I’d say, by way of introduction, that as a group they could pat themselves on their collective back for what they’ve achieved in state-of-the-art World Development Reports over the last two decades (it would be nice to give them the occasion to do so). In the aggregate averaged out since the late 1980s they produced the best work in development studies, both in terms of real-world policy relevance and readability, but also in terms of cutting-edge theoretical synthesis at the meso-level. The extensive work on economic governance stands out above all. I’m in Manila in the Philippines right now and I just wish I got the feeling more people here were paying attention to those Reports. You could then go on to suggest (or ask) how they might persuade more development economists to admit to reading these Reports and to assign them as reading to their students. Of course, the fact that a generation of WB development economists have been a beacon of light in an all-too-often dismal field does *not* mean to say there aren’t criticisms to make and improvements to suggest. One pet hate of my mine is the painful extremities they sometimes go to in order to give an appearance of consensus. The message could be clearer, and the positions stronger, if they were not so tortuously avoiding offence to prevailing influential and/or dominant interests whose opinions were tactfully sought during the preparation of a Report.

22 Alex May 20, 2010 at 9:02 am

They should all read the book, “The White Mans Burden” by William Easterly.

23 LIttle Mobutu May 20, 2010 at 10:06 am

Is there any interest in building another marble palace in the Belgian Congo? I’m down if you are.

24 AK May 20, 2010 at 10:30 am

We should live in a village.

We should spend more time conversing with people without economics degrees.

We should take writing classes.

25 David Zetland May 20, 2010 at 2:57 pm

tmw at May 19, 2010 8:10:58 PM stole my comment, even before I got here to say it 🙂

26 Talkingcat May 21, 2010 at 6:01 am

This is a fun topic! Wish I’d seen this the day before yesterday.

Personally I am not sure that we need more development economics in the normal sense- although better data would certainly be useful. The Bank itself has identified the direction things need to go- better ideas about how to strengthen public sector governance, better understanding of what institutions are and what if anything could be done to develop them, better understanding of what can be done to help countries reduce corruption.

Since there’s a lot of consensus that these are the most important things to understand, a lot of the questions are more practical. How could the Bank scale up the research? How could they make it more useful and practical- link it more to what practitioners are actually doing.

27 John Bennett May 22, 2010 at 8:15 pm

Look first at the countries which developed successfully–Japan, Taiwan, Korea, etc. Ask how they did it. See if the host government is willing and able to make that kind of commitment.
Focus your aid on those countries if you are serious about getting growth. Recognize that politically such a hard nosed approach is often impossible. I have served in countries with both types of governments and write with mixed feelings.

28 house sales March 4, 2011 at 7:37 am

I do agree with some suggestions and i think they should really go for that.

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