Archive for June 8th, 2010

I certainly do not intend to provide the answer to this question in a blog post. But via NPR’s Planet Money blog, it does seem to be on many people’s minds. Type in “Why is” to google:


The Planet Money team has had some very interesting stories on poverty in Haiti, and most recently they did a podcast on why India has such poverty:

In India, there are a handful of billionaires, and 400 million people without electricity

India’s GDP growth has been around a staggering 8% per year for the better part of the last decade, and yet so many people are still destitute, not having felt the effects of that growth. Growth has helped some a great deal and others not at all. A standard interpretation, given in the podcast by economist Kaushik Basu is that there is a natural propensity for increasing inequality to accompany growth. Market forces encourage growth, but have nothing to say about equality, and that is where the government has a role to play. The debate ensues over whether inequality is something we should live with or try to soften through market intervention.

The story left out some important aspects of the discussion that should not be forgotten. First are Amartya Sen’s warnings about obsession over the national income indicators. He writes in Development as Freedom that:

The most important thematic deficiency of traditional development economics is its concentration on national product, aggregate income, and total supply of particular goods rather than on “entitlements” of people and the “capabilities” these entitlements generate.

While the traditional indicators are not useless, Sen argues that development should focus on what people can or cannot do, such as “whether they can live long, escape avoidable morbidity, be well nourished, be able to read and write and communicate, take part in literary and scientific proofs, and so forth.” The promotion of these entitlements should be the goal of development economics in that it allows for an authentic human flourishing. This can lead to a very different type of discussion surrounding the policy recommendations for a developing country.

Another economist, Howard J Wiarda, wrote an article “Toward a Nonethnocentric Theory of Development: Alternative Conceptions from the Third World” which argued that development theories are socially and historically contingent. Having emerged in the West, these theories have a Western bias that can be harmful to the Third World, by undermining traditional institutions such as extended family/clan linkages, religious movements, and historical authority relations. It seems that we are largely forgetting these aspects of economic development that will make practitioners more sensitive to the possible tradeoffs of Western-oriented development and traditional institutions.

The last theorist I want to mention is Andre Gundre Frank, who reminds development practitioners that history is important in “The Development of Underdevelopment.”

We cannot hope to formulate adequate development theory and policy for the majority of the world’s population who suffer from underdevelopment without first learning how their past economic and social history gave rise to their present underdevelopment

He challenges the commonplace claim, advocated by people like Jeffrey Sachs, that development occurs as a succession of stages up a ladder of economic growth. The world looks vastly different today than it did when the U.S. and the Europe developed, and indeed the current situation of uneven development can only be understood in a historical context. The underdeveloped state is not solely a product of internal obstacles in each country. For India, this would mean recognizing the significance of post-colonial influences and especially religious influences in the economic life.

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That’s not the headline for this inane WSJ article about an inane poll, but it should be. The headline is instead, “Are You Smarter Than a Fifth Grader? Self-identified liberals and Democrats do badly on questions of basic economics.”

Consider one of the economic propositions in the December 2008 poll: “Restrictions on housing development make housing less affordable.” People were asked if they: 1) strongly agree; 2) somewhat agree; 3) somewhat disagree; 4) strongly disagree; 5) are not sure…

The other questions were: 1) Mandatory licensing of professional services increases the prices of those services (unenlightened answer: disagree). 2) Overall, the standard of living is higher today than it was 30 years ago (unenlightened answer: disagree). 3) Rent control leads to housing shortages (unenlightened answer: disagree). 4) A company with the largest market share is a monopoly (unenlightened answer: agree). 5) Third World workers working for American companies overseas are being exploited (unenlightened answer: agree). 6) Free trade leads to unemployment (unenlightened answer: agree). 7) Minimum wage laws raise unemployment (unenlightened answer: disagree).

Here they are, best to worst, with an average number of incorrect responses from 0 to 8: Very conservative, 1.30; Libertarian, 1.38; Conservative, 1.67; Moderate, 3.67; Liberal, 4.69; Progressive/very liberal, 5.26.

It’s wholly unremarkable that respondents’ political beliefs, which are often determined, or at least mutually reinforced, by their economic beliefs, are correlated with these answers.

The only question/answer I can’t quibble with is 4, which is a matter of semantics. The rest are contentious questions, some even within the mainstream. Question 5, in particular, would receive an automatic “strongly agree” from anyone working even loosely within the Marxian framework (which, by implication, is unenlightened). Some readers of this blog will be disappointed that there wasn’t a question reading, “Deficits are bad (unenlightened answer: disagree)”. Apparently that question is too settled to make the cut in this poll.

In any event, I don’t really have much else to say about this, just that it made my eyes bleed. I’m just going to hit “publish” so I don’t have to think about this anymore. Mind. Numbing.

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