A brief update to the previous post on the state of the economics discipline with respect to understanding the determinants of growth in the developing world: In The Journal of Economic Literature, James Rauch has a review of A.K. Dixit's "Lawlessness and Economics: Alternative Modes of Governance."
The article opens:
A consensus is building within the economics profession that good institutions are the key to long-run economic growth.
The reviewer quotes a number of very influential papers in the recent literature that argue this. Dixit's conclusion is as follows:
...neither empirical or theoretical research has yet advanced to the point of offering clear or confident policy recommendations for the process of institution-building or reform.
He's not alone. It's a bit of the mystery in the profession, economic growth. It cuts across ideologies and political orientations. The market-oriented recommendations called the "Washington Consensus" don't seem to have worked well, nor have other more interventionist approaches. Read the literature and you will see the same thing over and over again: We have learned a lot about what does not work. Isolated successes do not appear to generalize very well. The loose and fairly uncontroversial consensus that emerges: It is a mystery.
This does not lead to a recommendation of "doing nothing." Far from it. But neither does it warrant misrepresenting the current state of knowledge and morally browbeating those who debunk outlandish and unsupported claims.
You don't solve difficult problems by pounding your chest and pretending you already know the answers.
And when the public at large starts believing that we do know how to "fix poverty in Africa" if only developed nations had the will to do it, if only some demonized set of selfish policy-makers weren't so lazy and obstructionist--when a position that is "wishful thinking" at best becomes a club with which to pound away, without evidence or logic, at supposed opponents of inferior moral fiber--then maybe, just maybe, public attitudes impede the search for good and effective policy.
But enough on this silly movie. Next post will be on the Hurricane and its tragic aftermath.