Arnold Kling  

The Disease it Purports to Cure

At First Glance: Bias in the M... You're All Winners...

William Easterly writes,

historically poverty has never been ended by central planners. It is only ended by "searchers", both economic and political, who explore solutions by trial and error, have a way to get feedback on the ones that work, and then expand the ones that work, all of this in an unplanned, spontaneous way.

Read the whole essay. I found out about it from Tim Worstall.

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The author at Biopolitical in a related article titled Self aid writes:
    William Easterly writes (found via Econlog): While the aid community planners were dithering about whether to increase foreign aid by a few tens of billions for all poor countries, the citizens of just two large poor countries – India and China – wer... [Tracked on January 30, 2006 4:14 PM]
The author at voluntaryXchange in a related article titled Clearheadedness On Development writes:
    Read William Easterly's speech to the Asian Development Bank. It doesn’t help the poverty trap story that 11 out of the 28 poorest countries in 1985 had NOT been in the poorest fifth back in 1950. They had gotten into [Tracked on January 31, 2006 12:06 PM]
COMMENTS (8 to date)
spencer writes:

I wonder why these studies never look at what happened in Japan and the Asian Tigers where government planning played a major role in the allocation of investment resources. Moreover, forein aid also made major contributions to the great economic miracle acheived in these countries.

These are the countries that actually have had a great success in moving from poverty to prosperity.

Studies like the one cited look at underdeveloped countries that have not made the breakthrough and conclude that aid does not help ...DUUUH..

I can reach the same conclusion by looking at Latin America and the Middle-East and demonstrate that capitalism does not work. But my conclusions would be no more valid that the cited study.

The success stories have come from a combination of good government and capitalism.

David Thomson writes:

Japan and the other Asian nations were somewhat successful in spite of their politicians getting in the way. They would have been better off if their cultures were more libertarian. In some respects, I am reminded of a runner forced to compete carrying a fifty pound weight on their back.

T.R. Elliott writes:

Interesting. Those darn slightly successful Japanese, Chinese, and Koreans, the ones who keep loaning us dollars so Americans can continue to borrow and consume: yup, they're pretty messed up, runners with 50 pounds sacks. And the whole time, taking on more weight from us 'cause we aren't able to carry our own. 'Cause we need to borrom from them.

Asians have problems. But Thomson's response is nonresponsive.

As far as this study, I find it horrific that the world has spent $2.3 trillion in 50 years on aid, yet haven't solved the problem. Then again, the world has spent $1 trillion on military expenditures last year and somehow, war keeps happening.

Go figure.

New Libertarian Slogan: Less Military Planning, More Military Searchers.

The truth: top-down/bottom-up. You need both. Small organizations do. Large organizations. The military does. Countries. The world. It's that simple. Libertarians say we just need black. Communists say we just need white.

Both are color blind.

liberty writes:

I would say "historically poverty has never been ended by central planners. It is only ended by... The Market"

>...spent $2.3 trillion in 50 years on aid, yet haven't solved the problem. Then again, the world has spent $1 trillion on military expenditures last year

And how much has it spended on poverty that actually only made things worse? At least the money America spent on military over the past 50 years (as well as the past one year) did something good.

War has never solved anything - except ending Fascism, Communism, etc etc

spencer writes:

liberty -- not that I disagree with you completely, but from an economic point of view military spending is just another form of welfare spending.

liberty writes:

>liberty -- not that I disagree with you completely, but from an economic point of view military spending is just another form of welfare spending.

Do you really see redistributive spending or public replacing private sector jobs (welfare, socialism) the same as a government job that arguably can't be done by the private sector and which has a major and hopefully limited purpose, be it congress,courts or military?

Libertarians tend to see government's role as simply the protection of basic rights: life, liberty, property and thats it - and provision of the institutions required, including courts, congress, police and military. So military, like police, are required and are not a socialist extension of the purpose of government, so I do not see having a military or paying this military as much at all like welfare. I see it as a function of limited government.

Do you see having police as similar to spending on welfare? If not, then what is the difference - that we spend more on military or that the military helps people overseas? If it is the latter, then is it more like foreign aid than welfare? If that is your argument then I would say that the difference is that aid props up the poor - like welfare - while military intervention plays the role of ridding the country of its socialist state and allowing it, hopefully, to become a free state like the US and a trading partner.

Robert Speirs writes:

The graph in that article appears almost identical with the graph comparing national income with average national IQ that I've seen a few places. Coincidence? I don't think so.

Mr. Econotarian writes:

Easterly admits that you can have economic growth despite having authoritarian, controlling governments like those of the Asian Tigers in the early days. The problem is that without democracy, you are taking a higher risk that you may end up with bad planning (a typical risk/reward tradeoff).

Moreover, the Tigers received much less aid than many sub-Saharan countries do today (Taiwan's aid was ~30% of foreign investment, many African countries have aid levels of ~50% of total GDP).

And the Tigers, though they did certainly manipulate the market through government investment in "champion corporations" and to a lesser extent through tariffs, the rest of the market was generally allowed to operate freely. In comparison, Niger today has tougher labor laws regarding hiring/firing on the books than the U.S. does (check out the "Doing Business In" website, it is insane!)

There is a big difference between government investment in education and companies, and high levels of economic regulation. And the truth is that there is a big difference between regulating trade and regulating your internal economy.

I think many of the Tigers would have grown faster without as many trade barriers. Clearly India has been badly hurt by regulations on importing computers, which now has been made easier, making call centers and software offshoring possible.

At the end of the day, if a country is growing, who are we, the outside world, to say they are doing something wrong? Hugo Chavez, go for it!

On the other hand, if a country remains poor for 50 years, maybe they should actually try true deregulation and democratization.

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