donderdag 5 augustus 2010

Peter Leeson 'Development economics'

De notities van de lecture van Peter Leeson over Development Economics.

- Austrian Economics kan een waardevolle bijdrage leveren.
- Er wordt expliciet naar de Oostenrijkse school (vooral Hayek) verwezen, maar niet altijd.
- De meeste referenties naar Hayek komen uit Development Economics.
- Er worden verschillende inzichten van Hayek verwerkt, vooral die uit de CoL.

De feiten: meer dan de helft van de wereld is enorm arm.
- Heel veel ontwikkelingshulp is gefaald.
- Lezen: Easterley: Illusive quest for growth
- Eerst: directe hulp, dan 'nadruk op instituties' (maar verkeerde wijze omdat te benaderen)

3 belangrijke punten.
  1. Failure of central planning
  2. Primacy of private property
  3. Necessity of privately ordered social institutions
1. Failure of central planning
- The benign hypothesis
-- A. Donor Altruïsm (incentive assumption)
-- B. Recipient altruïsm (incentive assumption)
-- C. Direct, intended channel (information assumption)
=> The money process is not a black box: there happens stuff.
-- D. Exogeneity of recipient interests (combo assumption)
=> 'Recipient governments do not respond to incentives' => totally wrong.

- The destructive hypothesis (everything the other way around)
-- A. Donor self-interest: producer lobbying; donor competition => inefficiency
-- B. Recipient self-interest; rent apropriation => Institutional damage, public good erosion
-- C. Indirect, uninented consequence; dependency; moral hazard, institutional centralization => rent seeking, conflict; predation
-- D. Endogeneous recipient interests; alters mc/mb of 'bad' behavior => corruption

Predicted effect of aid: O or negatieve

=> Examining the evidence: it fails completely.

- Burnside and Dollar (AER, 2000)
=> Aid unnecssary or ineffective
- Alesina and Weder (AER, 2000)
=> Most aid to 'bad' policy regimes
- Easterly, Levine and Roodman (AER, 2004)
=> No effect even in good policy regimes
Brumm (2000), Ovaska (2003): negative effect
- Djankov et al. (JEG, 2008)
=> Aid 'curse' 3-5x, larger than resource curse
- Knack (2001), Svensson (2000); more aid = more corruption, rent seeking, worse bureaucracy, etc.

Private property as solution.
A. Adam Smith: incentives
=> Invisible hand vs visible hand; soft budget constraint => predation => lose residual claimancy => unproductive entrepreneurship

2. Mises/Hayek Information
=> Calculation argument; dispersed knowledge and info-carrying capacity of prices

What does PP require?
- Govt. not stealing from citizens
=> Constraints on public predation
- Citizens not stealing from citizens
=> Constraints on private predation

Govt that goes beyong this tends to depress wealth: incentive/info distortion? (Baumol JPE 1990, Murphy, Schleifer, and Vishny QJE 1991)

=> Public predation much greater threat to PP than private predation.
=> AJ (JPE, 2002)

Putting it all together.
- Central planning won't work. PP will. So how do we get PP?
=> "Grow your own"
- Imposition tends to work poorly.
=> Institutional stickiness
=> Spontaneous order; the only path to progress is an indigenous one
- Doesn't mean all indigenous institutions will work well.
- They won't; but theory of institutional 2nd (3rd, 4th, etc.)

Embracing anarchy in the developing world

- Implications for anarchy
=> Formal institutions; redundant or harmful
=> Getting away from 1st-best thinking
=> Somalia and how to annoy me

- Let 'm fail
=> The rarity of functional govt
=> Spontaneous order in an institutionally constrained world

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