Lessons from The Development Olympics


UPDATE noon 8/11/12: A devastating rebuttal to this post notes that if you limit the medal count to gold and change the indicator to the Human Development Index, there is no correlation. I have no idea what the point of this is. Researchers devote vast effort to the central question in economic development: "what determines Olympic medals?" The answer is income per capita and population, or in other words total GDP. The following table shows this story fits pretty well.

However, the outliers are interesting.

The big underachievers are (in order of underachievement) India, Mexico, Indonesia, Turkey, Saudi Arabia.

The big overachievers are Belarus, Ukraine, Kazakhstan,  Romania, Iran, , and Jamaica.

The lessons seem to be:

(1) World Bank national development strategies in key emerging markets have failed miserably in the Olympics sector.

(2) a history of Communism may not have been so awesome for development and liberty, but it's still amazing for Olympic medals.

(3) Islamist ideology is a mixed medal producer (Saudi Arabia no, Iran yes).

(4) if nothing else works, just run really fast.

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US election depends on whether voters believe output has a unit root

This is not my area, but there has been a long debate since forever on whether real GDP is "trend stationary" or "has a unit root." The Economist magazine discusses how this debate has unexpectedly erupted in the US Presidential campaign.

In the unlikely event you don't know what a unit root is, here's the Cliff Notes version:

Output is trend stationary if a downward movement is temporary, because it will be reversed until output again catches up to the previous trend.

Output has a unit root if a downward movement is permanent, and sets the "new normal" from which output starts growing again.

(This question also matters in developing countries of course, and it may even differ by level of development.)

Why does this matter in the US election?

If an incumbent inherits a large downward movement, then has an anemic recovery, is his performance below normal expectations? If he was stuck with a permanent downward movement, his "unit root" performance does not look so bad compared to the "trend stationarity" expectation that output should have regained the trend by now.

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