Self Discovery in Togo- Not binding?

Self-discovery refers to the process of identifying industries with potential but as of yet unrealized comparative advantage. Private entrepreneurs may be reluctant to accept the risks involved in developing new products or industries if they fear that others will quickly imitate their activity and eliminate the profits necessary to offset the initial investments and risks. Historical export data from the country in question, as well as in other countries at similar income levels, can be used to infer likely opportunities for export diversification and growth (Klinger and Lederman 2006, Hausmann et al. 2005, Hausmann and Klinger 2006, and Klinger and Lederman 2006). This literature uses the concept of revealed comparative advantage (RCA) over time, e.g. changes in export composition between different periods, to assess the dynamism of a country’s exports. Exports of particular commodities can also be assessed in terms of their growth potential, by examining the income levels of other countries that export this and similar products. That is, products typically exported by high-income countries are assumed to be more beneficial for generating growth than products typically exported by low-income countries.

The turnover in exports suggests that self-discovery is not a binding constraint to growth in Togo. About 20 percent of Togo’s exports comprising 31 product groups at the 3-digit SITC level have emerged only since 2000, suggesting that some innovation is taking place. Exports of this group have increased 14.5 percent between 1992-96 and 2002-06. The “implied income” associated with this export basket, when looking at other countries exporting the same products, was 30 percent above that of the traditional exports of Togo.

-Togo - Reviving the traditional sectors and preparing for the future : an export-led growth strategy - country economic memorandum

Top Power Books to Read

Here's the full list

The Joys of Stats

Top 100 Thinkers

The List from FP

Assorted

Battered but Not Beaten

The world health report - Health systems financing: the path to universal coverage

The Bulletin series: Health systems financing

Does efficient corruption pay?

WHO: 20 to 40 percent of money spent on health wasted, more funds needed to be wasted

Leadership is like dieting

She puts it this way: leadership is about "providing solutions to common problems or offering ideas about how to accomplish collective purposes, or mobilizing the energies of others to follow these courses of action." I'd describe this as creating the focal point for an organization in a multiple equilibrium game. Others might reach for the word "vision", although so many visions have proven mirages that one is suspicious of the word.

India Microcredit Faces Collapse From Defaults

The Instability of Moderation

Interest Bearing Notes November 2010

Why do policy makers care about this graph so much right now?

The Budget Deficit isn't a Math Problem

I once had a dream that I would come to Washington, DC and share my great ideas with the wise men and women in Congress. "Eureka!" they would reply. "Here is a Good Idea!" Time has solved that idealistic illusion. Congress knows the math. They can appreciate the many ways that 1 + 1 =/= 14,750,200,000,000 (the current U.S. GDP). If it were just a math problem, legislators would have solved it years ago. No, the addiction to a budget deficits is a Rules Problem. To solve it, the nation has to change the rules.

The Economist’s Human Potential Event

Follow the Gary Becker Decision Tree

Intelligence Economic Smarts

Winning the Lottery

Jobs at World Bank

Senior Governance Specialist, Leadership for Development Program
Closing Date 29-Nov-2010
Language Requirements English [Essential]; French [Essential]; Spanish [Essential]

Senior Public Sector Specialist
Closing Date 20-Dec-2010

Private Sector Development Off.
Closing Date 20-Dec-2010

Book Recommendations

Books that have influenced the Austrian Economist;


“Notes on Democracy” By H L Mencken: Wonderfully written. I have never enjoyed anything in the recent past than Mencken’s elitist views. I wonder why I never read him before. He has a deep contempt for the unthinking masses, which I happen to share. He writes, (on the common man): “A politician by instinct and a statesman by divine right, he has never heard of “The Republic” or “Leviathan.” A Feinschmecker of pornography, he is unaware of Freud.”

“How to Develop a Super Power Memory” by Harry Lorayne: I read it when I was 17 and just out of school. I owe my near-photographic memory to this book, among many others. It helped me realize that our mind has several powers which we don’t even know of.

For the Young Economist- Technique is Secondary

Glenn Loury on Peter Diamond;

Peter was an inspiration and role model for me during my student years at MIT. My encounters with him -- in the classroom and in his office -- left an indelible impression. I recall going over to the Dewey Library shortly after arriving in Cambridge, in the summer of 1972, and digging out Peter's doctoral dissertation. This was a mistake! Peter's reputation as a powerful theorist had been noted by my undergraduate teachers at Northwestern. I wanted to see how this reputed superstar had gotten his start. Just how good could it be, I wondered? I had no idea! What I discovered was an elegant, profound and exquisitely argued axiomatic treatment of the general problem of representing consumption preferences over an infinite time horizon, extending results obtained by his undergraduate teacher and the future Nobel Laureate, Tjallings Koopmans.

I prided myself on being a budding mathematician in those years. Yet, Peter's effortless mastery in that dissertation of the relevant techniques from topology and functional analysis, and his successful application of those methods to a problem of fundamental importance in economic theory -- all accomplished by age 23, younger than I was at the moment I held his thesis binder in my hands! – was simply stunning. This set what seem to me then, and still seems so now, to be an unapproachable standard. I was depressed for weeks thereafter!

Even more depressing was what I discovered as I got to know Peter better over the course of my first two years in the program: that mathematical technique was not even his strongest suit! An unerring sense of what constitute the foundational theoretical questions in economic science, and a rare creative gift of being able to imagine just the right formal framework in the context of which such questions can be posed and answered with generality -- this, I came to understand, is what Peter Diamond was really good at.

And so, I learned from him in those years what turned out to be the most important lesson of my graduate educational experience -- that, in the doing of economic theory and relative to the behavioral significance of the issue under investigation, technique is always a matter of secondary importance -- neither necessary nor sufficient for the production of lasting insights.

IMF Advice to Solomon Islands on Growth

Still the standard advice is more structural reforms;

The authorities’ acknowledge that further progress on the agenda of structural reform is needed to strengthen medium-term growth prospects. They intend to build on the steps taken to commercialize operations in stateowned enterprises; improve competitiveness, including the deregulation of telecommunications; and reduce the cost of doing business through revision of the legal framework.

In view of the adverse impact of the global economic downturn, the key objective of the authorities’ economic reform program is to establish a basis for resuming solid growth and reducing external vulnerability in a low-inflation environment, while advancing poverty alleviation efforts. To this end, the program seeks to strengthen the fiscal position, enhance monetary policy operations, and safeguard the domestic financial sector. By laying a strong macroeconomic foundation, the program is also expected to help catalyze additional donor support for the country.

Fiscal discipline will continue to serve as the main anchor for macroeconomic stability. Efforts will focus on rebuilding cash reserves mainly by strengthening revenue collection and prioritizing expenditure. Adopting a fiscal responsibility law and devising a proper resource tax regime would help enhance budget discipline, improve revenue transparency, and ensure a sustainable fiscal path.

“The current monetary stance is broadly appropriate, and sufficiently accommodative to support economic recovery. The program seeks to strengthen the operational framework of monetary policy and introduce new policy instruments to help banks manage liquidity, ensuring long-term price stability.

Binding Constraints for Growth in Solomon Islands

Interesting report on regenerating growth in Solomon Islands-

The report warns that examples of rapid and sustained economic growth globally are rare. The Pacific Island Countries face particular disadvantages, due to their small size and large distance to major markets. Solomon Islands may face especially severe constraints, as its scattered population reduces access to infrastructure and increases the costs of transport.

"Solomon Islands faces economic challenges, but growth prospects are reasonable if Solomon Islands plays to its existing advantages and capabilities," said Doug Porter, who led the study.

The report states that prospects for economic development in Solomon Islands will be significantly improved if four key potential sources of growth are prioritized. These areas include:

-Increasing productivity in agricultural production, on which most Solomon Islanders will continue to rely
-Ensuring that major natural resource industries - including mining and tourism – are well regulated, so that benefits flow to Solomon Islanders
-Increasing labor mobility, with Solomon Islanders having increased opportunities to acquire skills and incomes from work in Australian, New Zealand and other overseas economies.
-Improving the administration of aid, with more predictable flows of resources and capacity, with mutual accountability for results.
According to the report, economic growth is likely to be concentrated in urban centers, areas of high agricultural production, and areas with natural resource potential.

"However benefits can be shared throughout the country if efforts are made to connect rural populations to urban markets, and carefully target investment in services and infrastructure where economic activity and population are concentrated," said Doug Porter.

Related:
Solomon Islands Sources of Growth
Key Findings Summary

EXCEL Tip of the Day

Summing with error terms:

If you use the normal SUM formula, you will get #N/A. To find out the total of the values, you have to use the SUMIF formula =SUMIF(B2:B10,"<>#N/A"), assuming that the range is from B2 to B10

Assorted Reports

2010 Human Development Report

Land, Environment and Climate Change; Challenges, responses and Tools

Urban Land Markets:Economic Concepts and Tools for engaging in Africa

State of the World Population 2010: from conflict and crisis to renewal: generations of change

Measuring the Information Society

Information Economy Report 2010: ICTs, Enterprises and Poverty Alleviation

Economic Diversification in Africa: A Review of Selected Countries

World Economic Outlook : Recovery, Risk and Rebalancing October 2010

Trends in Sustainable Development – Small Island Developing States 2010-2011

2010 World Social Science report

eAtlas of the Millennium Development Goals

Financial Access Report 2010: the state of financial inclusion through the crisis

Charting the progress of the millennium development goals in the Arab Region: a statistical portrait

2010 Global Education Digest

Trade and Development Report 2010: Employment, globalization and development

World Trade Report 2010: Trade in natural resources


Global Employment Trends for Youth 2010

World Investment Report 2010:Investing in a low-carbon economy

Land Inventory in Botswana: Processes and Lessons

Philippines - Study on agribusiness, infrastructure, and logistics for growth in Mindanao : policy note

Poland - Public land and property asset management in Warsaw : strategic opportunities

Afghanistan - Scoping strategic options for development of the Kabul River Basin : a multisectoral decision support system approach

China - Concessionary financing programs for the water and sanitation sector : policy note

Effective discipline with adequate autonomy : the direction for further reform of China's SOE dividend policy

Syrian Arab Republic - Electricity sector strategy note

Niger - Towards an integrated and sustainable pension system

Solomon Islands growth prospects : constraints and policy priorities

Vietnam development report 2010 : modern institutions

Cambodia - Sustaining rapid growth in a challenging environment : country economic memorandum

Tunisia - Development policy review : towards innovation-driven growth


Education, training, and labor market outcomes for youth in Indonesia

Pakistan - City development strategy for Peshawar

Serbia - Right-sizing the government wage bill

Malaysia economic monitor : repositioning for growth

Peru - Rethinking private sector participation in infrastructure

South Africa - Enhancing the effectiveness of government in promoting mcro, small and medium enterprise

Strengthening Caribbean pensions : improving equity and sustainability

Kosovo - Youth in jeopardy : being young, unemployed, and poor in Kosovo - a report on youth employment in Kosovo

Armenia - Public financial management reform priorities

Book Recommendation- Growth and Natural Resource exploitation

Scarcity and Frontiers-How Economies Have Developed Through Natural Resource Exploitation
Edward B. Barbier, University of Wyoming

Throughout much of history, a critical driving force behind global economic development has been the response of society to the scarcity of key natural resources. Increasing scarcity raises the cost of exploiting existing natural resources and creates incentives in all economies to innovate and conserve more of these resources. However, economies have also responded to increasing scarcity by obtaining and developing more of these resources. Since the agricultural transition over 12,000 years ago, this exploitation of new 'frontiers' has often proved to be a pivotal human response to natural resource scarcity. This book provides a fascinating account of the contribution that natural resource exploitation has made to economic development in key eras of world history. This not only fills an important gap in the literature on economic history but also shows how we can draw lessons from these past epochs for attaining sustainable economic development in the world today.

iSimulate

Some cool new stuff from the World Bank.


iSimulate is a platform for performing collaborative economic simulations across the Internet.

ADePT
ADePT was developed to automate and standardize the production of analytical reports. ADePT uses the micro-level data from various types of surveys, such as Household Budget Surveys, Demographic and Health Surveys, Labor Force surveys and others to produce rich sets of tables and graphs for a particular area of economic research.

PovcalNet
PovcalNet is an interactive computational tool that allows you to replicate the calculations made by the World Bank's researchers in estimating the extent of absolute poverty in the world

What's Job Generating Growth

Economic Prospects for Middle East, North Africa and Afghanistan and Pakistan (MENAP).

The report recommended that policymakers in MENAP’s oil importers focus on the following priorities:
• Raising growth to generate employment. During the past two decades, per capita growth among the oil importers has been substantially lower than in other emerging markets, mirroring a weak trade performance (see Chart 2). Faced with already high unemployment—an average of 11 percent in 2008—the challenge for the oil importers will be to raise growth to provide employment for a working age population that is growing faster than in almost all other regions. To absorb the currently unemployed and new labor market entrants over the next decade (and assuming that the ratio of jobs created to economic growth remains constant), annual growth would need to reach 6½ percent.

• Enhancing competitiveness. MENAP oil importers—many of which face burdensome regulatory systems, weak institutions, and a dominating public sector—have much to accomplish to become competitive relative to other more dynamic economies. Sound macroeconomic policies—in particular, fiscal consolidation—will help support competitiveness, but governments will also need to make greater efforts to improve the business climate.

• Fostering trade. The region’s trading patterns remain oriented mainly toward Europe, and there has been relatively little change in the product mix. Although there has been some diversification of trade links, the region has benefited relatively little from the expansion of Asian and Latin American powerhouses—which contribute close to half of global GDP growth, but account for only about 9 percent of the region’s total exports.

New Blogs on Development

Added a few new blog finds to the feeds;

Chandan Sapkota's blog;

I am interested in development economics, economic growth, and economic policy. Apart from blogging, I also write op-eds focusing on economic growth and public policy pertinent to the Nepali economy

Development Horizons from Lawrence Haddad

Economics, my dear Watson- recommended, reasonably good blog.

El Salavador's Eternal Binding Constraints

Perhaps the most telling indicator that El Salvador is not constrained by a lack of savings is that a dramatic boost in remittances has not been converted into investment. This suggests that the country invests little, not because it cannot mobilize resources (though savings are low) but because it cannot find productive investments.

IMF latest review of El Salvardor economy;

Over the longer term, further strengthening the economy’s growth prospects and reducing poverty, while safeguarding fiscal sustainability, requires a comprehensive strategy, including measures to raise revenues, structural reforms aimed at enhancing the business climate, and higher private investment...

The authorities’ strategy for 2011, which includes strengthening tax administration to increase revenues as well as reforming energy subsidies, will create space for high-priority social spending and public investment while lowering the fiscal deficit to 3.5 percent of GDP.

“Beyond 2011, timely enactment of a fiscal pact, which includes measures to raise revenue on a durable basis, and continued adherence to expenditure targets in the authorities’ program will be critical to sustain fiscal consolidation, placing the debt-to-GDP ratio on a firm downward path.

“Continued commitment to the dollarization regime has been the cornerstone of macroeconomic and financial stability. While the Salvadoran banking system is liquid and well-capitalized, it would benefit from further reforms aimed at enhancing its resilience. Approving the Financial Sector Supervision and Regulation Law, bolstering the corporate governance of banks, and upgrading the bank resolution framework will be key to this objective. Limiting the fiscal risks associated with the provision of credit by public banks will also be necessary,” Mr. Shinohara said.

Quote on Unemployment

We cannot admit that unemployment is a natural consequence of the ideal that economists revere as 'higher productivity' -Alain de Botton

Related Podcast;
de Botton on the Pleasures and Sorrows of Work

At one point in book lovely parallel between an Edward Hopper painting and a woman at work writing a marketing study. Hopper really tried to force the eye to notice a lot of that--the industrial life, the unseen, quiet moments of daily existence, not cathedrals or great landmarks. Lots of pictures of paintings of corners of things. Help us see some of the things we are looking at. Hopper classic example. Can't be an American today in many situations without that word "Hopperesque" coming to mind. Be it the late-night motel, the bar, the diner, whatever, we'll be in the footsteps of this great painter. Art is putting post-it notes on parts of the world going, Notice this. Your book is a tourist guide to some of the aspects of modern work.

Technologies Drive Growth, Rules Drive Development

A summary of comments by Paul Romer on development and growth at USAID conference-

Initially, he was first asked to speak about Aid Effectiveness but he wanted to talk about effective comparative to what. He thinks we should still be realistically ambitious and part of that is to look at best successes – China and development of US, including the expansion of the US frontier.

In his view, the key element regarding China’s development as well as the history of US lies in the concept of norms and rules. (He chooses not to use the words governance and institutions as they sometimes have certain connotations).

First, he outlined the difference between the sharing of ideas versus objects. Ideas are non rival compared to objects which are finite. Objects are finite - the more people around the fewer objects for each. However with ideas, the more people, the more ideas are developed. So the non rivalry of ideas and the power that comes from sharing amongst each other is inherent in successes of globalization, urbanization, and communication networks. The discovery and sharing of ideas helps countries that were behind, to catch up economically and developmentally.

He then linked ideas with the development of rules and used the example of Mauritius where a change of rules helped with rapid expansion of economic growth. If you can change rules, technology transfer can be done more quickly which supports economic growth. China has experienced that same dynamic – a change in rules led to special zones, foreign investment, increased expertise, a dramatic increase in manufacturing and rapid increase in economic growth and income. He posits that the puzzle of development needs to be framed around persistent stagnation – growth isn’t surprising, but stagnation is. Why do inefficient rules and ideas persist, limiting growth?

Then, he discussed formal versus informal rules, whereby formal rules are enforced through laws and informal ones are cultural, decentralized, and socially based. Informal laws are flexible and can lead to multiple equilibriums – what your norms are of right and wrong are based on what you see around you. All kinds of rules are enforced by informal norms. Norms can be functional at one point that become dysfunctional later – for example, norms regarding sharing versus norms of individual responsibility and work. But norms are very hard to change. So the answer to why rules can be so wildly inefficient for so long, although could sometimes change, has to do with the stability of norms.

Economists are much too ready to assume rules that are once and done – establish laws and then you’re done. But rules might need to change over time. Need new rules based on new technologies. Another driver of change is scale – rules and social norms that were designed for a small group of people and with scale you now need formal rules and then enforcement. So need to think about “metarules” – what are the rules for when you need to change the rules.

Norms are socially determined, as well as based on persuasion and the educational system. Efficient rules depend on the technologies, patterns of interaction, and distribution of norms in a population. Substitution between formal and informal rules depends on the norms that exist in different parts of the world – so formal rules aren’t always universal. Dynamics of informal rules and norms can trap groups making the shift to new rules and processes difficult. You see this in the business world where large corporations often can’t be as flexible as a startup – they are stuck with older norms that are harder to shift.

Executive action can change norms – i.e. the anticorruption commission created in Hong Kong, which was coupled by anticorruption campaign. It undermined corruption as an accepted norm. But how do you translate this to other contexts?

One way is to focus upon start ups and new norms. The notion of a start up is an important metarule – new initiatives have a chance to set up fresh and good norms. You can create a new set of norms among people who share your concepts, create a model and then acculturate the newer people to follow these standards, thus expanding the norms and rules outward.
This theory is behind his assertion that new Charter Cities can be an important development tool. Romer feels it would be possible to create hundreds of cities that are set up with new norms, special zones where new rules can be implemented, so you can recreate what happened in the US when it was developing and expanding its frontier. That situation, the new US cities attracted outsiders through opportunities and services. One can replicate this success by creating a competition of new cities, such as having hundreds of Dubais, where there would be competition for better living standards. The timing is ripe for this method as the world continues to urbanize currently – once the world’s population stabilizes and people stop moving into new cities, this start up concept will no longer be possible. So we need to look at meta rules beyond just voting, but start ups and other ways to affect norms which impact economic growth and development.

Listen to the discussion

Cyprus Economy Watch

IMF releases Article IV review of Cyprus;
Background. Economic conditions have stabilized, and the economy is projected to bottom out in 2010, giving way to a mild recovery in 2011 followed by stronger growth. However, global financial risks remain elevated and muted growth prospects in trading partners weigh on the outlook. The government has taken steps to stabilize the fiscal deficit, but further measures will be needed to reach the official deficit target for 2012 of 3 percent of GDP.

Challenges and staff views. The foremost policy challenge is to achieve the official fiscal consolidation targets so as to put debt ratios on a declining path and provide more space to guard against risks to the financial sector. Further old-age pension reform is also essential. Preserving financial sector stability through early detection of risks remains a top priority in light of the difficult economic and financial environment, and the supervision of cooperative credit societies needs to be strengthened as a matter of urgency. Structural reforms are needed to preserve competitiveness and enhance medium-term growth.

Authorities’ views. The government largely shared the staff’s assessment, while projecting growth to turn positive as soon as 2010 and being more confident that the fiscal targets can be met through general spending restraint and with less focus on the public payroll. The Central Bank of Cyprus (CBC) expressed confidence in the ability of banks to withstand pressures, and this is supported by stress test results. Moving to a single independent supervisor for all credit institutions—a much desirable objective—is not on the political
agenda, but strengthening the supervision of cooperative credit societies seems feasible.

How to Advance Liberty by Leonard Read

Statistical Literacy for MPs

Statistics Briefs from UK Parliament

Mankiw and Arnold's Freshmen Seminar

Mankiw's list;

The Worldly Philosophers, by Robert Heilbronr
Reinventing the Bazaar: A Natural History of Markets, by John McMillan
Thinking Strategically, by Avinash Dixit and Barry Nalebuff
Capitalism and Freedom, by Milton Friedman
Equality and Efficiency: The Big Tradeoff, by Arthur Okun
Nudge, by Richard Thaler and Cass Sunstein
How the Economy Works, by Roger E.A. Farmer
The Return of Depression Economics, by Paul Krugman
The Road to Serfdom, Friedrich Hayek
The Myth of the Rational Voter, by Bryan Caplan
The Big Questions, by Steven Landsburg

Arnold Kling's list;
1. Jerry Muller, The Mind and the Market.
2. Robert Frank The Economic Naturalist.
3. Carl Shapiro and Hal Varian, Information Rules.
4. Matt Ridley, The Rational Optimist.
5. Kevin Lang, Poverty and Discrimination.
6. Ed Leamer, Macroeconomic Patterns and Stories.
7. Burton Malkiel, A Random Walk Down Wall Street.
8. Tyler Cowen, The Age of the Infovore.

Another book on applied economic policy

Uganda's Economic Reforms -Insider Accounts

A Must Read Book

Picturing the Uncertain World: How to Understand, Communicate, and Control Uncertainty through Graphical Display
Howard Wainer

Related:
According to Diane Coyle;

This marvellous book by Howard Wainer, Picturing the Uncertain World: How to Understand, Communicate and Control Uncertainty through Graphical Display, is an absolute must for anyone who claims to be involved in the search for empirical evidence. It's a sequel to the same author's Graphic Discovery and also in the tradition of Edward Tufte's The Visual Display of Quantitative Information. All applied economists should have read carefully all three books and keep them close by for reference. So should all other researchers - social science, medicine, education - anybody who needs to navigate the shoals of carrying out robust empirical work and communicating it to others.

Picturing the Uncertain World : Summary
;

Three principles of effective display are mentioned that can be called “THREE COMMANDMENTS of effective data display of data”

1. Remind us that the data being displayed do contain some uncertainty , and then
2. Characterize the size of that uncertainty as as it pertains to the inferences we have in mind , and in so doing
3. help keep us from drawing incorrect conclusions through the lack of a full appreciation of the precision of our knowledge.