A more articulate economist formulates perfectly my most unpopular development argument

From the wonderful, recently updated book by Paul Seabright, via Greg Mankiw via Peter Gordon:

Politicians are in charge of the modern economy in much the same way as a sailor is in charge of a small boat in a storm. The consequences of their losing control completely may be catastrophic (as civil war and hyperinflation in parts of the former Soviet empire have recently reminded us), but even while they keep afloat, their influence over the course of events is tiny in comparison with that of the storm around them. We who are their passengers may focus our hopes and fears upon them, and express profound gratitude toward them if we reach harbor safely, but that is chiefly because it seems pointless to thank the storm. (p. 25)

I think Greg is thinking mainly of politicians' responsibility for recession or expansion, but Paul's point was more general -- nobody is really in charge but the economy (usually) works anyway.

In another classic passage from the first chapter titled “nobody’s in charge”, Paul describes buying a shirt and then wonders how it would happen if somebody had to be in charge of providing shirts:

The United Nations would hold conferences on ways to enhance international cooperation in shirt-making…committees of bishops and pop stars would periodically remind us that a shirt on one’s back is a human right. The humanitarian organizations Couturiers sans Frontieres would airlift supplies to sartorially challenged regions of the world…the columns of newspapers would resound with arguments over priorities and needs. In the cacophony I wonder whether I would still have been able to buy my shirt. (p. 18)

We have this terrible tradition in development of leader-worship, in which leaders get credit for any economic success that happens on their watch, and we think development can only happen through the intentional designs of the leaders (advised by us all-knowing development experts). This blog has vainly tried to protest this is all wrong-headed. I'm glad Paul is there to say it better than I can -- read his book!

Economics tells countries to specialize…including specializing in economics

One of the most venerable and I think most powerful wealth-creating ideas in economics is the package of comparative advantage, gains from specialization, and gains from trade. As we all know, different countries just do different things well: the Swiss give us chocolates, the Germans give us beer, the French give us wine, and the British give us…um…they give us … um…um… Oh wait, the British were the ones who gave us the ideas of comparative advantage & gains from specialization & trade in the first place!

These thoughts were prompted by a Greg Mankiw blog that advised potential Econ Ph.D.  students where to go to school based on rankings of economics departments. One of the rankings was global, which allowed you to see where in the world are the best economics departments. I knew of course that the US does well in Economics Graduate Programs (we are only good at two things, the other being Hollywood movies, so please don’t begrudge us this). The UK itself is a bit shrunken from its former Economics self but still does well, but I was struck particularly how well Canada and Australia do (see picture). Hence, almost 90 percent of the best economics departments in the world are in just four places, all of which were settled by the British if they are not actually British.

Adam Smith’s descendants cast a long shadow….