Through the Hourglass

by David Warsh on November 12, 2007

From his title on, Dani Rodrik is at pains to identify himself as a neoclassical economist, bred in the bone. He writes, “If I often depart from the consensus that ‘mainstream economists’ have reached in matters of development policy, this has less to do with different modes of analysis than with different readings of the evidence and with different evaluations of the ‘political economy’ of developing nations.” Not to start an argument, if the book were about professional cooking, he might have called it One Chemistry, Many Recipes (and Plenty of Chefs). True, economics is not very much like chemistry, but the reason for Rodrik’s emphasis on the primacy of theory, I think, has less to do with the presence of economics’ many competitors in the development game – political scientists, sociologists, lawyers, business executives, savants of all sorts — than with what happened in mainstream economics itself in the twenty-five years since he began his career.
[click to continue…]

More Politics, Many Recipes

by Henry Farrell on November 12, 2007

A good way to start thinking about Dani Rodrik’s genuinely excellent new book is to contrast its statement of objectives with a programmatic statement from another new book on international economics, Roberto Unger’s _Free Trade Reimagined_.

First of all, Rodrik:

First, this book is strictly grounded in neo-classical economic analysis. At the core of neoclassical economics lies the following methodological predisposition: social phenomena can best be understood by considering them to be an aggregation of purposeful behavior by individuals – in their roles as consumer, producer, investor, politician, and so on – interacting with each other and acting under the constraints that their environment imposes. This I find to be not just a powerful discipline for organizing our thoughts on economic affairs, but the only sensible way of thinking about them. If I often depart from the consensus that “mainstream” economists have reached in matters of development policy, this has less to do with different modes of analysis than with different readings of the evidence and with different evaluations of the “political economy” of developing nations. The economics that the graduate student picks up in the seminar room – abstract as it is and riddled with a wide variety of market failures – admits an almost unlimited range of policy recommendations, depending on the specific assumptions the analyst is prepared to make … the tendency of many economists to offer advice based on simple rules of thumb, regardless of context (privatize this, liberalize that), is a derogation rather than a proper application of neoclassical economic principals

[click to continue…]

Dani Rodrik’s book opens with a discussion of the policy approach that dominated the development debate for much of the 1990s, and to some extent still does. The term ‘Washington consensus’ was coined by John Williamson of the IIE, to described the views of Washington-based institutions (IMF, World Bank and US Treasury in the 1980s, but escaped from its creator and came to encompass a program of dogmatic adherence to a revived version of 19th century economic orthodoxy, commonly referred to as neoliberalism.

[click to continue…]

Setting the Stage for Growth

by Mark Thoma on November 12, 2007

Dani Rodrik’s new book, <em>One Economics, Many Recipes: Globalization, Institutions, and Economic Growth</em> takes on a problem of fundamental importance, how to stimulate and sustain economic growth in underdeveloped countries and lift people out of poverty.

Past attempts to solve this problem can, for the most part, be identified with one of two polar extremes, solutions that involve pervasive and persistent government intervention, and solutions that rely upon extreme <em>laissez faire</em> market-oriented policies. Neither of these approaches has been very successful, and the book argues for a different approach that combines these extremes and allows market forces to operate in an environment shaped by government policy. Under this combination approach the government in partnership with the private sector uses industrial policy and institutional change to strategically kick-start, coordinate, and sustain economic activity.
[click to continue…]