Adam Smith Award winner for 2013 announced

Just announced:

The Association of Private Enterprise Education (APEE) is proud to announce that the Adam Smith Award winner for 2013 will be William Easterly of New York University. APEE describes the award as follows:

"The Adam Smith Award is .. is given to recognize an individual who has made a sustained and lasting contribution to the perpetuation of the ideals of a free market economy as first laid out in Adam Smith's Wealth of Nations. The recipient of this award must be an individual who has acquired an international reputation as an eloquent scholar and advocate of free enterprise and the system of entrepreneurship which underlies it..."

Previous award winners include Nobel Prize winners James Buchanan, Vernon Smith, Douglass North, and Elinor Ostrom, and other leading economic thinkers such as Armen Alchian, Robert Barro, Harold Demsetz, Allan Meltzer, and Gordon Tullock...

Easterly's work is not just a critique of efforts at development planning due to perverse incentives, bureaucratic bottlenecks, and errors in economic calculation, but also contains a deep understanding of the role of the entrepreneurial market process in lifting individuals out of poverty and producing a social order of freedom, dignity, peace, and prosperity. Economic development follows from a society of free and responsible individuals; who participate in a market economy based on profit and loss; who participate in a political regime governed by principle, not privilege; and live in a society that exhibits neither discrimination nor dominion...

Easterly will be honored on Sunday, April 14th, 2013 at the opening banquet of the annual meetings of APEE. This years conference will be held at the Sheraton-Maui. Here is the call for papers, please consider submitting a paper and/or a panel for the meetings.

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How much do Europeans account for economic development?

From the Wall Street Journal, by Daniel Lippman:

European settlement had a longstanding positive effect on economic development in countries that were colonies, notwithstanding the terrible effects of Western diseases and political oppression that often resulted, according to new research.

The paper, titled “The European Origins of Economic Development,” was written by New York University’s William Easterly and UC Berkeley’s Ross Levine, who set out to build a new comprehensive database of the European share of the population in the early phases of colonization. It also looked at the impact of the settlers on the former colonies’ economic development today.

In an “illustrative exercise” that the two professors run in their paper, they find that “47% of average global development levels today are attributable to Europeans.”

What could accounts for that large number? The paper argues that it could partly be explained because “Europeans brought growth-promoting characteristics — such as institutions, human capital, connections with international markets, and cultural norms — that diffused to the rest of the population over generations.”

A large number of commentators generously congratulated the authors on being obvious, wrong, and racist.

You may find the NBER link to the paper above to be restricted. If so, here is an unrestricted link.

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False Dichotomies: National vs Humane Development

By Gregg Gonsalves Lant Pritchett—a Professor of the Practice of International Development at the Harvard Kennedy School—has been leading a campaign against the election of Jim Kim to the World Bank presidency.   While he isn’t the only critic of Dr. Kim’s nomination, he is among the most vocal, prominent and well known.   Though his views are his own, many of them have been amplified and echoed by other leading development economists like William Easterly at New York University and several people associated with the Center for Global Development in Washington, DC.

Over the past few weeks, Pritchett has questioned Kim’s qualifications, saying a lack of training in economics and experience in world finance should disqualify him from consideration for the post. He has further suggested that the nomination is about the arrogance of American power and hegemony over the institution and that he should step aside for a merit-based election in which the Nigerian candidate for the post, Ngozi Okonjo-Iweala, a World Bank, Harvard and MIT alum and finance minister of Nigeria would sweep to victory.

A few days ago, Pritchett wrote an article in the New Republic, which finally comes clean about the real reasons for the escalating, grasping campaign of opposition to Jim Kim. The piece for the New Republic (TNR) is called Why Obama’s World Bank Pick Is Proving So Controversial.   The title again is an overreach: it should really read why Obama's World Bank Pick Is Proving So Controversial to Me and My Friends.  Again, while Pritchett’s views are his own, his article has resonated with other development economists, including Easterly, who have circulated links to it over the past few days.  Pritchett’s piece has clearly struck a nerve among his peers.

Jim Kim has extensive support around the world for his candidacy, but it is vital for us to understand Pritchett’s objections to Dr. Kim as it all really boils down to what we think "development" is, what all of our work is about in our countries, whether we live and work in poor, middle-income or even rich nations. Pritchett in the TNR posits two kinds of development: national development and humane development.

National development "would involve the natural replication of the four-fold historical transformation of the developed nation-states: Economies would become more productive and hence support broad-based prosperity, polities would become more fully responsive to their citizens, administration would become more capable, and societies would become more equal as birth-based distinctions (such as class and caste) and divisive identities (of kith and clan) faded in favor of modern social relationships. Note that each of these was something that would happen not just to individuals but to a country."

Pritchett goes on to define humane development as a kind of philanthropy, where people step into the breach where national development has failed, where “these idealists and the organizations they run have helped to mitigate famines, pandemics, poverty, violence, and lawlessness in some of the poorest areas in the world.”  Jim Kim is a humane development type in Pritchett's eyes, not fit to run the Bank, which should focus on national development alone, an approach that Ngozi Okonjo-Iweala, a card-carrying economist would bring to Washington, DC.  However, Dr. Pritchett who has been a leader in the field of modern national development is deeply myopic.

First, while many people have been lifted out of poverty over the past century due to economic growth, inequity is pervasive and we are well on our way to creating a new transnational economic elite or rich people without borders.  The birth-based distinctions and divisive identities that Dr. Pritchett rightly decries are being replaced by class-based ones.  However, when you worry mostly about growth in the aggregate, the little people don't matter.

Second, political responsiveness and accountability, better governance and administration have been integral to those of us who work on health and other issues that are not directly about economic growth and achieving the aims of national development can come through work on things other than economics and democratization in the abstract.  In fact, the fight against AIDS has been transformative in this regard.  As the South African journalist Jonny Steinberg has said in his book Three Letter Plague: “The idea of demanding that a drug be put on a shelf, or that a doctor arrive at his appointed time, is without precedent. The social movement to which AIDS medicine has given birth is utterly novel in this part of the world, the relationship between its members and state institutions previously unheard of.”

AIDS has been about accountability and state responsiveness, about better governance and administration. Pritchett has previously and vociferously complained about the provision of ART in the developing world as a prime example of palliative humane development, misguided philanthropy, but for those of us who have watched more closely this has all been about key aspects of national development, about "polity, administration, and society," as Pritchett himself terms it.

For Pritchett and his peers, Jim Kim is a crazed, lefty, charity worker who pushed pills on Africa--this is why they dislike him so.  They refuse, again and again, to see what Kim did, what we all did, as critical to their own self-professed goals around democratization. The push for AIDS treatment was not charity or mitigation, but all about what governments should do for their citizens; it was about redefining citizenship and state responsibility.

Why do they have such an inability to see this? Well, because I think there is something else going on.  Over the past several decades there has been a push from those working at the highest levels of economic and social policy around the world to redefine state responsibilities downwards.  The historian Tony Judt described this well in his book Ill Fares the Land.  We're seeing a renegotiation of the post World War Two social contract, which enshrined a system of social protections around the world, in Europe, Canada and Australia and even in the USA, which offered a safety net for the poor and the sick and saw this safety net as a core responsibility of the state.

In 1935, John Maynard Keynes said: “the ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood.  Indeed the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist.”

Nowadays, from Clinton's "welfare reform" in the 1990s, to the current, slow dismantling of the NHS in the UK by David Cameron and Nick Clegg, states are getting out of the business of helping the poor and the sick.  These political choices derive from larger intellectual frameworks constructed largely by economists where things like healthcare are not a "public good,”—they are like a loaf of bread, one eats it on one's own—and states should only invest in what provide broad based benefits, key among them economic growth and defense.  In our brave new world, the models for national development are the states of austerity-crazed Europe and a USA in the mind of Republicans, where we are slashing social protection programs, cutting public spending, all in the appeasement of the gods of growth.

For people like Lant Pritchett and a generation of development economists like him, all heirs to Thomas Malthus, you can't have it all or anything nearly like it.   We have to promote growth and democratization, even if it creates a new caste system based on inequities in wealth within countries or a new-class of have-nots, as in have-not healthcare, have-not education.  ''AIDS is a catastrophe,'' Dr. Pritchett told the New York Times several years ago. ''And it's not fair, if treatments exist, not to give them to all these people who are dying. But it's also not fair that more than a third of children in Africa are malnourished. It's not fair that maybe 140 babies in every 1,000 will die before the age of 1, and more than a third will never learn to read. All of it is unfair. Unfairness is not the test for action.'' For Dr. Pritchett the test for action is about economic growth.  We wait for AIDS drugs, we wait for better schools.  It will all come along if we all just wait for growth and democratization--as they write about in the textbooks--arrives like manna from heaven.

Our work in AIDS, Jim Kim’s work in AIDS, on TB has been about transforming the world for the better, not out of some charitable impulse, sneered at by Dr. Pritchett, but because we have a vision for what the world should look like, about what governments should and should not do for their people; about what to expect from, what we can demand in terms of delivery of public services; about our role as active citizens, not waiting for experts or politicians to come and save us.  This is national development, about polity, administration, and society.   But it really doesn't matter to Dr. Pritchett—we have all made a cardinal sin, which was to ask too much of our leaders, to question whether some idealized notion of free markets and free elections are all we need be asking for to secure a future for our children, whether the prescriptions of economists will deliver in the end for ordinary people.

Economists have gotten a bad rap lately, with so many of them having been so spectacularly wrong about so many things around the origins of the current worldwide economic crisis and its aftermath. Some of this in the end is about economics status as a science, about protecting a discipline that is deeply political, but strives to cloak itself with objectivity. Someone like Jim Kim, trained in the biomedical sciences, trained to rely on hard endpoints, is a threat is a more fundamental sense, as he doesn't take the laws of economics as equivalent to the laws of gravity, to the central dogma of molecular biology or the germ theory of disease.

To be fair, there are economists who recognize that their field is contingent, more inexact, and are raising serious questions about the rigor of their assumptions, about over-reliance on models, the need for a far better quality of evidence, far beyond the sub-specialty of global development.  These are the kinds of people, the fresh voices and thinking, one could see coming to the Bank under Kim’s leadership.  Kim is also trained as an anthropologist as well; he knows there a variety of tools with which to see the world as long as you know their limitations.  Dr. Pritchett and his colleagues don't have this humility, they have their certainty, that they know what is right, what is needed, what should be done. This is what scares me most of all.

In the end, Jim Kim represents a national development perspective, but a critical one. For Pritchett, national development is about economy, polity, administration, and society.  Kim’s work has certainly centered around the last three of these and he will bring a critical eye to the first.  I am sure Ngozi Okonjo-Iweala is brilliant.  I am not quite sure she represents much more than a reification of traditional ideas about development, has sufficient distance from things to offer a critique, bring change.  She is the establishment’s choice, even if she hails from Africa. As others have said, including economists like John Bates Clark medal winner Daron Acemoglu from MIT, the opposition to Kim all seems like a strange defense of business as usual from people who have been critics of the Bank in the past.


Gregg Gonsalves is a long time AIDS activist and an Open Society Foundations Fellow.

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How I Would Not Lead the World Bank

Bill Easterly writes for Foreign Policy

I am gratified by the widespread support that my non-nomination for World Bank president has received. My quest to help end poverty has led me to the ends of the Earth. My accomplishments speak for themselves, having successfully offended every official or interest group in any way connected to the World Bank, even the head of maintenance.

I would not lead the World Bank by assembling an expert task force of my fellow social scientists, natural scientists, and random unemployed politicians. I would not ask such a well-qualified expert task force to answer the question "What must we do to end world poverty?" -- especially if we forget to answer the question "Who put us in charge?"

I would not lead the World Bank to ever use the words "civil society." I would not emulate my deservedly respected non-predecessor as World Bank president by giving a speech on the Arab Spring without using the word "democracy," even in a purely descriptive sense. I could not possibly attain a remarkable record of five years of speeches without ever using the word d_m_cr_cy at all.

Read the full article here.

[For someone who does want to lead the World Bank, click here.]

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Public Forum: Steve Forbes Speaks In Defense of the Free Market at its Moment of Crisis

Join us for a Public Forum with Steve Forbes, who will speak "In Defense of the Free Market at its Moment of Crisis," with Bill Easterly as moderator.

When: Thursday, February 23rd, 4:00pm - 5:30pm Where: NYU Campus, Kimmel Center 914 - Silver Board Room

This event is open to the public but space is limited. Register now.

Email with any questions.

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BOOK REVIEW: Thinking, Fast and Slow by Daniel Kahneman

Professor Easterly reviews Daniel Kahneman's Thinking, Fast and Slow for the Financial Times:

There have been many good books on human rationality and irrationality, but only one masterpiece. That masterpiece is Daniel Kahneman’s Thinking, Fast and Slow.

Kahneman, a winner of the Nobel Prize for economics, distils a lifetime of research into an encyclopedic coverage of both the surprising miracles and the equally surprising mistakes of our conscious and unconscious thinking. He achieves an even greater miracle by weaving his insights into an engaging narrative that is compulsively readable from beginning to end. My main problem in doing this review was preventing family members and friends from stealing my copy of the book to read it for themselves.

Kahneman presents our thinking process as consisting of two systems. System 1 (Thinking Fast) is unconscious, intuitive and effort-free. System 2 (Thinking Slow) is conscious, uses deductive reasoning and is an awful lot of work. System 2 likes to think it is in charge but it’s really the irrepressible System 1 that runs the show. There is simply too much going on in our lives for System 2 to analyse everything. System 2 has to pick its moments with care; it is “lazy” out of necessity.

Read more on the Financial Times website.

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VIDEO: Professor Easterly Speaks at the Carnegie Council

Why is honesty so important? Professor Easterly discussed this cardinal value in his own career, and in the context of international development, with Julia Kennedy and Devin T. Stewart at the Carnegie Council on September 15. "People do know a lot about their own problems at their own level," he said. "They can give you feedback on how you're doing, if you are trying to solve their problems from the top, from government. In a democracy, you give feedback on how well, or how badly, the government is doing.

"So individual rights is also a way to mobilize all the knowledge in society that we need to make the economy work. It's the individual that has the particular knowledge so that they know how to run their factory, to employ people, to be a worker themselves, to start new businesses."

Professor Easterly previously discussed Globalization and Creative Capitalism at previous Carnegie Council events.

Watch the video below:


Or, listen to the podcast:


>>Ethics Matter: A Conversation with William Easterly (Carnegie Council Website)

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VIDEO: New Directions in Development

 These videos come from DRI's annual conference at the Cooper Union on March 4, 2011. Speakers included DRI co-directors Bill Easterly and Yaw Nyarko, Yale's Chris Blattman, NYU Economics' Raquel Fernandez and NYU Law's Kevin Davis.

Bill Easterly - From Skepticism to Development

Yaw Nyarko - Information Technology and Development

Download Yaw Nyarko's Powerpoint slides here.
Chris Blattman - Does Poverty Lead to Violence?

Download Chris Blattman's Powerpoint slides here.
Raquel Fernandez - Culture Matters

Download Raquel Fernandez's Powerpoint slides here.
Download her working paper, "Does Culture Matter?," here.
Kevin Davis - Law and Development

Download Kevin Davis's Powerpoint slides here.
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