Economics & Marginalia: March 25, 2022

Hi all,

Sorry for the unannounced silence last week. We had grand plans for a long weekend away near the RSPB Minsmere nature reserve, where we were planning to immerse our 18 month old in the quiet joys and eccentricities of birdwatching. He’s already showing great promise, loudly yelling ‘duck’ in a thick Geordie accent at every bird in our local park, and his second word was ‘owl’, though he sadly slept through his first encounter with one that wasn’t drawn by Axel Scheffler. However, these grand plans were blown to smithereens, as all plans with a nursery-aged child tend to be, by the forward charge of the Omicron BA.2 variant through the UK population, and we instead spent the week increasingly fatigued, chasing our largely asymptomatic child around. Pro tip: if you find yourself self-isolating for 10 days, try not to do it in a small flat with a baby whose energy levels are several orders of magnitude larger than yours at the best of times. Anyway, we’re all clear now, but our Airbnb booking is long gone, so it’s back to the park to offend the Egyptian geese by yelling ‘duck’ at them.

1. The sanctions imposed on Russia and Russian oligarchs have been simultaneously impressive and insufficient, in that the speed and breadth of the sanctions announced has only served to emphasise how much more we can do, and how much faster we can implement them. But what does all of this mean for the Russian economy? Three good things I read this week: first, two pieces by Branko Milanovic, looking at the short and long-term prospects for the Russian economy in this new world. Neither are good. His piece on the long term prospects is particularly compelling, demonstrating how there is no achievable strategy towards prosperity given the current context and capabilities. He also points out that the sanctions so far announced are likely to be extremely sticky: indeed, some sanctions remain in place even after the political entity they are aimed at has ceased to exist, and long after the events that prompted them have ceased. And related, Chris Blattman (seriously, how good has his return to blogging been?) has a piece on what he sees as the underlying, fundamental problem that faces both Russia and Ukraine: the absence of a political bargain among elites in each place which prioritises and incentivises economic development. Related: How Shock Therapy helped create the oligarchs under sanction today. Imagine the Millennium Village Project not being your biggest policy disaster.
2. Chris’s point about elite bargains is the perfect point to note that this, in the context of international development, is precisely the topic of Stefan Dercon’s forthcoming book, Gambling on Development. I am extremely lucky to have read the manuscript, and to have been around and often working for him while Stefan developed many of the ideas that he gives full expression to in the book, and I cannot possibly recommend it any more strongly. Stefan’s argument is that development can look extremely different in different places, but always involves a bet made by elites that their interests are best served by growth and economic development rather than extraction and short-termism; the presence of this bet in very imperfect places can explain why they make progress regardless; its absence in places with great potential explains stagnation. It’s brilliant written, full of great stories, and could not have been written by anyone else. Buy it.
3. Stefan is, of course, still the Director of the Centre for the Study of African Economies, whose conference was on last week (while I was hacking my way through a series of lateral flow tests). Dave Evans and Amina Acosta do their usual magic trick of summarising an incredible number of papers in one sentence each; the full programme is here.
4. Michael Clemens has a superb new paper (does he write any other kind?) about the impact of Donald Trump’s dramatic (and so far, permanent) reduction in the number of refugees the US admits each year. But the twist is that the impact that Michael focuses on here is on the US’s own fiscal and economic health, and he demonstrates that Trump’s policy, ostensibly an ‘Americans first’ action, instead cost the US more than $9 billion each year. This isn’t massive in the context of the US economy, but when a policy to refuse entry to desperate people who need sanctuary is taken, and it’s hurting yourself as well, it makes you a special kind of loser.
5. I’m often asked to recommend books about economics to non-economists. One book I often recommend is Elizabeth Gaskell’s North and South, which captures a sense of immense social upheaval that rapid economic change brings. But Mary Childs suggests that in some sense all books are about economics, and I don’t think she’s really wrong. Her recommendations on finance books are very good.
6. I love love love this write-up by Markus Goldstein of a very cool new paper which looks at how husbands and wives treat information the other provides; husbands discount information provided by their wives in making private decisions, but not when making joint decisions. I find this fascinating: I have a project with a couple of colleagues which is trying to investigate a very similar phenomenon, and while we don’t have results yet, our prior is very much the same. Our pre-research suggests a widespread perception that men discount opinions from equally qualified women. The title of the post is fantastic, as is the punchline.
7. Lastly, the last couple of weeks have been a struggle with Covid, and we got off lucky. But I need a fair bit of cheering up; two things that worked: a video of Magic Johnson’s greatest plays, which brought me back to my childhood, when I’d tape every Lakers game so I could rewind and watch how Magic made the ball disappear and turn up in a teammate’s hands. There is a new HBO show about Magic’s Showtime Lakers, and a forthcoming documentary about the man. Both are must-sees. And the other was this gorgeous collection of photographs of Baobab trees. Bittersweet, because they’re under threat, but there is nothing like them to be seen anywhere else in the world.

Have a great weekend, everyone!

R