Dani Rodrik's weblog

A tale of two books

It’s been a strangely prolific week publishing-wise. Literally within a few days of each other, I held in my hands two new books with my name on it.

As you might gather from their cover, they couldn’t be more different.

The first is a book that lays out my ideas on globalization and its future, in what I hope is an accessible form. It took a long time to write, and an even longer time to develop. It won’t be available in the bookstores until February.

The second, written with my wife Pinar Dogan, is in Turkish and covers the most important political trial in Turkey in at least five decades, which has just opened. It is based on our blog on the topic, and was written within weeks. Amazingly, the publisher had it in bookstores within 10 days of receiving the final manuscript. (Not to be outdone, Norton, my American publisher, tells me that if necessary they can get a book from finished manuscript to bookstores in 6 days!)

The Globalization Paradox is a book on economic policy and on economic ideas. It is, in a sense, my life’s work.

Balyoz is a legal and political exposé. It details a brazen effort to frame nearly 200 officers for crimes they have not committed. It documents the roles that groups within the judiciary, police, media, intelligentsia, the national science and technological institute, and (last but not least), the AKP government have played in creating what can best be called an “alternative reality.” (Balyoz means “sledgehammer” in Turkish; it refers to the code name of the fictional coup plot on which the book is based.) This is a book I never thought I would (have to) write.

Both books aim to inject a dose of common sense and reality – the first to our narrative on globalization, the second to Turkey’s increasingly authoritarian politics.

Now at a bookstore in France

you can buy this to read while you enjoy your coffee and croissant...

The Economist evaluates the randomized evaluators

One of the bon mots I remember from The Economist, from the days when I used to read it, is their definition of a radical: "someone we disagree with." Well, by that standard, I am less and less of a radical with almost every issue of the magazine.

The magazine's latest Economics Focus column reports on the Brookings development conference that I had to miss, but to which I contributed a paper. Their bottom line on the contribution (and limitations) of randomized field experiments follows the arguments in my paper fairly closely--down to the example of anti-malaria bed nets that I used in my paper to illustrate the problems of extending results in one specific setting (Western Kenya) to others.

The article quotes Abhijit Banerjee, who says

"the quality of the evidence that informs much of the macro-growth debates is significantly worse than the quality of the data that bears on many of the micro-policy questions”. He adds: “The beauty of randomised evaluations is that the results are what they are.” In other words, they provide hard evidence, resting on a solid empirical base.

The trouble is that the moment you take the experiment from Western Kenya and want to use it to inform policy in another setting, you need to make all kind of additional, not rigorously tested assumptions (about how similar or dissimilar the settings are and how these affect the likely outcomes).  By the time the evidence is used, it has become as "soft" as many other kinds of evidence that development economists traditionally rely on.

(And before someone writes to ask how I know about this article if I do not read The Economist, the reason is that I was asked by the author to check on a quote prior to publication. Plus, I regularly Google myself of course...)

A book review from down under

"One Economics, Many Recipes is a collection of nine essays by Dani Rodrik that has something to annoy almost everyone," starts Declan Trott's review of my book.

As he explains, following a summary of the main recommendations of the book:

This is a self-confessedly modest program. Yet it contradicts everyone currently making a noise on the subject: assorted protesters such as Joseph Stiglitz and Ha-Joon Chang (because it does not demonise the IMF, World Bank, and WTO); heterodox economists such as Erik Reinert (because it asserts the value of neoclassical theory); neoclassical economists at the IMF, World Bank and WTO (because it advocates industrial policy and deprecates both the old Washington Consensus and the new ‘augmented’ version); Jeffery Sachs and Bono (because it denies the importance of poverty traps and barely mentions foreign aid); and William Easterly and Greg Clark (because it offers, if not a one-size-fits-all solution, at least some concrete advice on how to engineer growth).

I am afraid Trott has got it exactly right.

Solow et al. make my weekend

Princeton University Press has gathered some pretty nifty endorsements for my forthcoming book, and I cannot resist gloating about them. (Frank--you know who you are--just skip this post...) Here are some extracts:

Robert M. Solow:  “Maybe Tolstoy was right about happy and unhappy families, but the same rule of thumb does not apply to developing economies. The success stories are not all alike. There is no practical, universal formula for rapid economic growth. That is Dani Rodrik’s central argument, and he develops it forcefully and convincingly with many examples. Best of all, he insists that the need for policies tailored to local circumstances is exactly what basic economic theory suggests. He may not be right about every single thing, but I think he is right about that.”

George Akerlof: "One Economics, Many Recipes does for economic development what Julia Child did for French cooking. Julia Child taught would-be cooks how to be excellent chefs. Dani Rodrik teaches economists and policy planners how to construct successful, sustainable development programs. He teaches and preaches the subtle correct practice of development economics.” 

Robert H. Wade:  “Dani Rodrik is that rare beast, both fox and hedgehog: a first-rate economist who steeps himself in politics, technology, and history to come up with striking insights and overarching principles for generating economic growth. Scholars and ordinary readers alike will be swept along by the current of Rodrik’s good-natured erudition. One Economics, Many Recipes is a landmark in post-Washington Consensus thinking. 

Robert J. Shiller:  “Dani Rodrik’s One Economics, Many Recipes is a deep and important book about the relative success of nations. It considers the substance of economic policies over their superficial form. Highly successful countries have leaders who respect economic principles but keenly observe how their country differs from others and are flexible and creative in applying these principles to their own circumstances."

Paris Hilton: "One Economics, Many Recipes is a fascinating read. It is the perfect book to keep me in touch with the real world during my stay at the L.A. county jail. I cannot imagine doing without it."

OK, I made the last one up, but you get the idea. And no, I will not offer any rewards for pre-ordering the book on Amazon.

The blog is mightier than ... (II)

Readers of this blog will not be surprised by the views I express in my NYT op-ed today on guest workers, as I have written similar things here in the past couple of weeks. But you may be interested to know that the op-ed itself came about because of this blog: it was solicited by a NYT editor who read my entries, particularly this one.  It is good to see the print media catching up with the blogosphere...

UPDATE: George Borjas has a critique. He said in a previous post that those of us who favored the guest worker program are thinking too much like economists. I plead guilty.

YouNotSneaky NotSoQuick (ButSoGracious)

His words, not mine (well, I am paraphrasing). But I do appreciate his willingness to reconsider. We should all be so forthcoming.

The question at issue may seem technical, but it is of considerable policy importance. It is a standard result in public economics that the efficiency cost of a small tax or tariff is small, but rises rapidly (with the square of the tax or tariff).  A direct implication is that when tariff barriers are low--as they are currently  (average  tariffs in the U.S. are around 2 percent)--reducing them further does not create a whole lot of aggregate gains.  But the losses suffered by those producers or workers who are adversely affected do not get correspondingly smaller. A 10% reduction in wages or prices hurts as much, regardless of what the initial level of tariffs is.  Therefore, the ratio of distributional "costs" to net gains tends to rise as the remaining trade barriers get smaller.  This is where I think we are in trade.

It is of course a much different ball game with labor mobility, since the existing barriers are so high to begin with.

Specialization or diversification

One of my favorite stylized facts about development is contained in the graph below, which comes from  a paper by Imbs and Wacziarg. What it shows is that as countries grow out of poverty, their economies become less specialized and more diversified. This seems to be true both across countries, and within countries over time.

What's the big deal, you might say.  Well, it is a big deal if you have been brought up on the idea that the key to economic growth for poor countries lies in specialization according to comparative advantage. If that simple recipe were true, countries that are getting richer would be producing a narrower range of goods, not a broader range. It takes a lot of mental gymnastics to square this stylized fact with the standard comparative advantage arguments. A far simpler interpretation is that the key to growth is the acquisition of production capabilities in an increasing range of goods, in a way that is often in tension with what comparative advantage would dictate.  Here is a paper that tries to make these ideas more precise.

The Imbs and Wacziarg data show that countries do begin to specialize after some point (and hence the U-curve in the graphs), but that point comes relatively late in the development process, once Ireland's level of income is reached.

UPDATE:  Roberto Porzecanski's comment below provides an opportunity for clarification. Roberto says the Imbs-Wacziarg result is consistent with trade models, insofar as countries that are growing through capital-deepening may end up producing a broader menu of goods as a result. Yes, of course. But my concern is not whether this stylized fact is consistent with trade models (it certainly is), but whether it is consistent with a story about trade and trade policy being a causal driver of growth. If countries that are growing are those that are making use of comparative advantage while those that aren't are not, then you should see the growing group of countries becoming more specialized. The standard trade-based story is that accumulation and productivity change are the result of an increase in the economy-wide return to such activities, driven by comparative advantage (and therefore specialization). So you should see, at least over part of the lower-income range, a positive relationship between specialization and incomes.

"A student" asks whether non-homotheticity of demand can explain the I-W result.  I don't  quite follow, and I don't see how it could.

For more potential explanations, you should turn to the original Imbs-Wacziarg paper in the AER (2003).

The blog is mightier than ...

And just in case you were wondering who is behind the aforementioned trade deal between the White House and the Democrats ...

Amazon.com completes the product space

Thanks to Omar Z for the link. Someone out there has a sense of humor.