Doug Irwin provides a nice account of the historical links between exchange rate and trade policy here.
Category: World Economy
One of the most important economics books aimed at wider audiences to emerge in the last few years is Poor Economics by Abhijit Banerjee and Esther Duflo. Banerjee and Duflo are two of the leading economists of their generation and are particularly associated with the use of randomised controlled trials in development economics. However, this book is broader in its scope and tackles a wide range of issues in the economics of poverty, development economics and the economics of the family. The book has ten chapters and two major sections, one dealing with individual behaviour among the poor and the second dealing with the role of institutions. Like the best popular economics works, each chapter deals with very big issues backed with the recent literature but presented in a punchy and readable fashion. It is a cracking read. The first section deals with nutrition, public health interventions, education interventions and fertility. The second section looks at insurance for the poor, microcredit, savings and entrepeneurship. Chapter 10 sets their argument in the overall context of development debates raging between people like Sachs and Easterly.
The book pushes strongly for the continued development of experimental approaches to economic development that attempt to find workable solutions that large-scale philantrophic and government funding initiatives could be aimed toward. It is important reading for anyone working in microeconometrics and development economics broadly defined and also would be great reading for anyone in Ireland working around the area of foreign aid policy. I open up this thread for anyone who wants to debate aspects of the book or the surrounding issues. From an irisheconomy perspective, it is worth thinking about how the ideas in the book might influence how the Irish government directs the overseas aid budget.
Jeff Sachs weighs in on the corporate tax rate question in a Financial Times op-ed.
The report of the US Financial Crisis Inquiry Commission was released last week to controversy and criticism. The report contains a wealth of information and is interesting reading even for those whose interest is mainly in our own financial crisis. Much of the story has been about the partisan squabbling since the report’s release, with the Commission failing to agree on the final product. Republican commissioners issued two separate dissents to the “majority” report (see here for the dissent of Hennessy et al.). This just underlines how politicised the narrative of the crisis has become. Strangely enough, though, I find the duelling perspectives actually add a useful analytical edge – otherwise lacking – to the report. (Update: See here for an interesting discussion at the NYT.)
Anger at our government is probably too raw to have a much of a productive debate until after the election. But to draw the proper institutional and policy reform lessons, it will be useful to similarly consider the competing extremes of the “rotten institutions” and “blameless bubble” explanations for the crisis, and to explore where the truth lies.
Some short extracts follow after the break to give a flavour of both the majority report and the dissent.
This is a very useful primer on interwar protectionism by the leading historian of US trade policy. (I had never heard of ‘Smoot Smites Smut’, which is worth the price of admission alone.) Although Doug could have usefully mentioned that the biggest costs of protectionism then were geopolitical, and those ended up being fairly catastrophic.
Economists sometimes assume that the right way to talk about protectionism is to moralize. I prefer analyzing the causes of protectionism: it may be a very bad idea, but sometimes, in democracies, it becomes inevitable. Doug, in a manner reminiscent of Adam Posen, argues that expansionary monetary policies in the US are a good way of keeping the protectionist wolf at bay there right now. The same logic applies to Europe as well.