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July 27, 2009

Economist's View - 4 new articles

"A Breakthrough in the Fight against Hunger"

Jeff Sachs seems relatively pleased and cautiously optimistic:

A breakthrough in the fight against hunger, by Jeffrey D Sachs, Commentary, Project Syndicate: The G-8's $20bn initiative on smallholder agriculture, launched at the group's recent summit in L'Aquila, Italy, is a potentially historic breakthrough in the fight against hunger and extreme poverty. With serious management of the new funds, food production in Africa will soar.

Indeed, the new initiative, combined with others in health, education, and infrastructure, could be the greatest step so far toward achieving the Millennium Development Goals, the internationally agreed effort to reduce extreme poverty, disease, and hunger by half by 2015. ... One cornerstone of the project was "smallholder farmers", meaning peasant farm families in Africa, Latin America, and Asia – working farms of around one hectare (2.5 acres) or less. These are some of the poorest households in the world, and, ironically, some of the hungriest as well, despite being food producers.

They are hungry because they lack the ability to buy high-yield seeds, fertiliser, irrigation equipment, and other tools needed to increase productivity. As a result, their output is meagre and insufficient for their subsistence. ...

The Millennium Project recommended a big increase in global funding for this purpose. ... Now the key is to make this effort work. The lessons of history are clear. ... Not only will food yields rise in the short term, but farm households will use their higher incomes and better health to accumulate all sorts of assets: cash balances, soil nutrients, farm animals, and their children's health and education. ...

A consensus has now been reached on the need to assist smallholders, but obstacles remain. Perhaps the main risk is that the "aid bureaucracies" now trip over each other to try to get their hands on the $20bn, so that much of it gets taken up by meetings, expert consultations, overhead, reports, and further meetings. ...

If donor governments really want results, they should take the money out of the hands of thirty or more separate aid bureaucracies and pool it in one or two places, the most logical being the World Bank in Washington and the International Fund for Agricultural Development (IFAD) in Rome. ...

Governments in hunger-stricken regions, especially Africa, would then submit national action plans... An independent expert panel would review the national plans to verify their scientific and managerial coherence. Assuming that a plan passes muster, the money to support it would quickly be disbursed. Afterward, each national programme would be monitored, audited, and evaluated.

This approach is straightforward, efficient, accountable, and scientifically sound. Two major recent success stories in aid have used this approach... Both have ... paved the way to a new more efficient and scientifically sound method of development assistance.

Not surprisingly, many UN agencies and aid agencies in rich countries fight this approach. ... The bureaucracies must be bypassed to get help to where it is needed: in the soil tilled by the world's poorest farm families.

On developmental assistance more generally, let me add this from Murat Iyigun:

Easterly's Had It for a Long Time. How about you?: Bill Easterly's critique of Paul Collier's book in the latest issue of the Boston Review is right on. For me, things get especially pertinent when he has this to say about the half-baked empiricist turned interventionist development economist:

"Given that Collier's evidence base collapses when subject to scrutiny, it is all the more disturbing that his policy recommendations are remarkably interventionist. Collier tells bottom-billion societies that are recovering from civil war that they must accept international "peacekeepers" (a nice euphemism to help us forget that these are soldiers who kill people), whose deployment is decided by the Western powers... Even more outlandish, Western powers will use military force to pass judgment on elections. If the West decides that a country's election is free and fair, then the West will invade that country if its military subsequently overthrows the government. If the West decides that an incumbent stole an election, then the West will withdraw the anti-coup guarantee, lending Western encouragement to a coup. As Collier nonchalantly notes, "an incumbent who stole an election would face a heightened risk of a coup."

No doubt, Collier makes himself an easy target with such recommendations. Who can disagree with Easterly when he declares "If being a professional skeptic means putting a large burden of the proof on those who want to invade poor countries, run people's societies for them, and deny poor people their own democratic rights, I plead twice guilty." I certainly don't, as long as your definition of Western 'democratic rights' are not my Eastern 'theocratic infringements'.

But let's not go there. The real question is whether development economists are comfortable with more benign non-military interventions by the West based on econometric evidence that Easterly currently approves of. I'll join their ranks if and when they aren't.

If Bill Easterly responds to Jeff Sachs or Murat Iyigun, and I can imagine he might, I will post an update.

One Dog, Two Dog, Red Dog, Blue Dog

Robert Waldmann explains Basic Football Terminology:

To Red Dog (alternative phrase for to blitz):

Linebacker crosses line of scrimmage attempting to sack opposing quarterback.

Often works, sometimes risky. Shows that player (and/or defensive coordinator) has guts.

To Blue Dog (alternative phrase for To Benedict Arnold):

Linebacker crosses own goal line and spikes own helmet.

Shows that player forgot which team he is on.

Should Bernanke Be Reappointed?

Nouriel Roubini says:

Ben Bernanke ... deserves to be reappointed. Both the conventional and unconventional decisions made by this scholar of the Great Depression prevented the Great Recession of 2008-2009 from turning into the Great Depression 2.0.

Anna Schwartz has a different perspective:

As Federal Reserve chairman, Ben Bernanke has committed serious sins of commission and omission — and for those many sins, he does not deserve reappointment.

Here's how I see it. It's true that we failed to notice that the patient was getting sick. The signs of disease were there, but we either didn't see the signs or they were misdiagnosed. In fact, there's a case to be made that we saw some of the changes in the patient as signs of improving health. Had we made the correct diagnosis early enough, maybe we could have prevented the patient from getting sick (though it's not clear the patient would have taken our advice, so stronger measures than mere advice may have been required).

And once the patient showed up in the office and was clearly sick, we didn't get it right initially either. We thought the patient needed fluids - liquidity as they say - and the patient did need some of that, but we didn't immediately see that there were also some key nutrient deficiencies and chemical imbalances that were threatening to cause further problems.

Bu we kept at it with tests and other diagnostics, and eventually got a handle on the problem. Once we did, we began to administer the medicine the patient needed. The patient will get better, the deterioration was rapid and turning it around will be difficult - it won't happen fast enough to suit any of us - but what has been done prevented a complete collapse, and is helping to move the patient towards recovery.

So I'm with Nouriel, Bernanke should be reappointed. It's true that the progression of the underlying disease was largely missed, but that's pretty much true across the board, all the doctors missed it. It's also true that there was some dispute over how to interpret the initial symptoms and test results, and what to do to cure the patient. But again that was largely true across the board in the tumultuous period just after the patient began to exhibit clear and serious problems. It's not like everyone except the patient's doctors knew exactly what to do. The uncertainty in that initial period created fear, and the fear made the patient - who needed calm above all else - even worse off.

But as just noted, the doctors who were put in charge - Bernanke in particular - persevered and began to understand more precisely what was going wrong and what was needed, and that allowed them to save the patient from a much, much worse fate. They deserve credit for that. The patient will live, and that wasn't always so clear. In the initial confusion they did what you need to do - they administered wide spectrum drugs and other procedures that were known to abate the symptoms they were observing, and these did help, and that gave them time to find more targeted remedies. They used the time wisely to find and structure better remedies, and once those remedies were ready they used them to attack the various ways in which the disease was shutting down vital systems (not everything they tried worked, but the things that did work helped quite a bit).

There was one scary point, however, and that was when they thought the patient had become strong enough to go without the medicine, and they withdrew it too soon (the Lehman episode). The result was that they almost lost the patient completely, and only quick action saved the day. That's the one point where I think the doctors could have done better. I understand the concerns over the side effects of this medicine, but it was too soon and it created too much unnecessary uncertainty and fear.

But overall, they did the things that needed to be done to make sure the patient did not suffer an even worse, prolonged, debilitating collapse, and those efforts were successful. Failing to diagnose a disease is different from not knowing what to do once you figure it out. The disease was a difficult one to diagnose or it wouldn't have missed so widely, and it wasn't clear at first precisely what was wrong, but in every case, once they understood the problem, they took the proper course of action.

Here's the question I ask myself. If I were to suddenly come down with the same disease, would I want the current group with it's current leadership in charge of bringing me back to health, or would I want a different group led by someone new who thinks they know what to do, but has never actually been through it? I'd want this group, the one with experience. They're likely to have learned enough to spot the disease the next time and head it off all together, one hopes so. But if not and I get the disease, they are also likely to know just what to do - while avoiding the missteps they took the first time - to get me back on my feet as fast as possible (and please don't let politicians second guess them).

links for 2009-07-26

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