Dani Rodrik Seminar

Update 1: The second half of the seminar is now available below. Those who prefer to read the posts in hard copy (or in a nicely formatted PDF) can download it “here”:http://www.henryfarrell.net/rodrik.pdf. Those who want to remix the text using LaTeX or similar, can download the .tex file “here”:http://www.henryfarrell.net/rodrik2.tex. John Holbo will probably be doing a prettier remix of the PDF sometime over the next few days.

Update 2: “David Warsh”:http://www.economicprincipals.com/issues/07.11.11.html supplements the post below with a very interesting analysis of what Rodrik’s arguments mean in the broader debates over economics and development.

Update 3: Kieran has done some LaTeX-fu on the PDF, providing a much nicer looking and more functional product – hence I’ve replaced the original file with his updated version.

Dani Rodrik’s new book, _One Economics, Many Recipes: Globalization, Institutions and Economic Growth_ ( “Powells”:http://www.powells.com/partner/29956/s?kw=rodrik%20one%20economics%20many%20recipes, “Amazon”:http://www.amazon.com/gp/product/0691129517?ie=UTF8&tag=henryfarrell-20&linkCode=as2&camp=1789&creative=9325&creativeASIN=0691129517 ) is a major contribution to debates on globalization, economic development and free trade. It brings together much of his existing work bringing together an important critique of the Washington Consensus with positive suggestions about how best to encourage economic growth, and how to build a global system of rules that can accommodate diverse national choices. We’re pleased and happy that both Dani and several other guests have agreed to participate in a new Crooked Timber seminar. This seminar will be published in two parts – the first today (featuring Henry Farrell, John Quiggin, Mark Thoma and David Warsh), the second tomorrow (featuring Daniel Davies, Dan Drezner, Jack Knight, Adam Przeworski, and Dani’s reply post). As with previous Crooked Timber seminars, it is published under a Creative Commons license (see below). Tomorrow, I will post a PDF of the entire seminar (plus a LaTeX file for anyone who wants to play around with it). If you have specific comments about the contributions, please post them in the relevant comments section for the specific post. For general technical glitches etc, post comments here.

The (non-CT regular) participants in the seminar are, in alphabetical order:

(1) Dan Drezner blogs at “http://www.danieldrezner.com/blog/”:http://www.danieldrezner.com/blog/. He is an Associate Professor at the Fletcher School of Law and Diplomacy, at Tufts University. He has written two academic books on international political economy (looking at sanctions and globalization), as well as a Council of Foreign Relations report and numerous articles. He possesses specific expertise on the intersection between celebrity culture and global politics.

(2) Jack Knight is Sidney W. Souers Professor of Government at Washington University in St. Louis. He is author of a widely cited book on institutional theory, _Institutions and Social Conflict_ as well as numerous articles. He has a new book co-authored with Jim Johnson on rational choice, pragmatism and deliberative democracy, which will be published next year.

(3) Adam Przeworski is Carroll and Milton Petrie Professor of European Studies and Professor of Politics at New York University. He is the author of several monographs and numerous articles on topics including social democracy, democratic transitions and economic development. This “interview”:http://politics.as.nyu.edu/docs/IO/2800/munck.pdf (previously discussed in “this”:https://crookedtimber.org/2006/03/05/przeworski-on-life-politics-and-motherhood/ CT post) gives a good overview of his life, politics, and academic work.

(4) Dani Rodrik blogs at “Dani Rodrik’s Weblog”:http://rodrik.typepad.com/. He is Professor of International Political Economy at the Kennedy School of Government of Harvard University, where he teaches on international development issues. He has written two books, copious numbers of academic articles and policy papers, and was recently awarded the inaugural Albert O. Hirschman Prize of the Social Science Research Council.

(5) Mark Thoma blogs at “Economist’s View”:http://economistsview.typepad.com/, which has quickly become established as one of the key forums for debate of economics and politics on the Internet (with occasional interjections by Paul Krugman and others). He is professor of economics at University of Oregon, where he has published numerous articles on aspects of macroeconomics theory.

(6) David Warsh is the editor of “Economic Principals”:http://www.economicprincipals.com/. He previously covered economics issues for _The Boston Globe_ and _Forbes Magazine_ for 25 years, and is the author of a widely acclaimed (and rightly so) intellectual history of the new growth theory in economics, _Knowledge and the Wealth of Nations_

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The main point of Rodrik’s book is that economics leaves a lot of slack for policy prescriptions. As I see it, this may be true for two distinct reasons. One is that economic knowledge is not sufficiently robust in general to indicate appropriate policies. Another is that it is inherently incomplete, specifically, that it cannot and does not consider all the factors that may matter in the particular situations to which policies are applied. Rodrik emphasizes the second reason but first I want to comment on the title.

To put it in a nutshell, is it “One Economics, Many Recipes” or “Many Economics, …”? In what sense do we have “one economics”? Economics is a science that derives conclusions about states of collectivities (“the economy” but also “the polity,” since the same methods are now applied to politics) from assumptions about preferences of individuals and the constraints they face. What unifies economics are the methods for making such inferences. The assumptions vary: they are at best disciplined by “stylized facts” and often at variance with more direct, psychological, evidence. Moreover, these assumptions often reflect ideological priors. One example that jumps to my mind is an article, published in a leading journal of political economy, that went like this: assume that tax revenues do not finance inputs into production, assume that they do not subsidize consumption, write a growth model, and — surprise — taxes are bad for growth! But almost the same year, another article, published in an equally reputable journal, assumed that public inputs are complementary to private ones and that tax revenues are used to finance public productive services, only to find that growth is maximized at a positive, indeed sizeable, tax rate. [click to continue…]

<em>One Economics, Many Recipes </em>elicited multiple reactions from this reader. As someone who’s had to review development books for a public audience over the past few years, I found Rodrik’s book to be well worth the read. As a political scientist, there were times when my wife asked me, “why are you yelling at the book?” [click to continue…]

In his new book Dani Rodrik argues that the primary question facing both scholars and policy makers in the area of economic development should be “how should the institutions of economic globalization be designed to provide maximal support for national development goals?” In the course of answering this question in a challenging and highly engaging way, he continually pushes the idea that “when it comes to industrial policy, specifying the process is more important than specifying the outcome.” Quite appropriately he acknowledges that despite all of our efforts there is still a great deal that we do not know about the relationship between political and economic institutions on the one hand and economic growth on the other. And thus Rodrik recommends that we employ processes of experimentation as a way of developing a better understanding of which institutions might best facilitate growth in different contexts. In this regard he suggests that democracy might serve as a metainstitution for structuring this type of experimentation.
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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.
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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

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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.

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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.
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