Economics & Marginalia: October 11, 2024

Hi all,

This week, I’ve been reflecting on the unexpected similarities between the Tory party and the Pakistani cricket team. For those of you keeping track, the Tories are about to elect their 3,218,573th leader since 2015. On Tuesday evening it appeared that the choice would be between James Cleverly (one-time Foreign and Home Secretary) from the centrist wing of the party and one of Kemi Badenoch and Robert Jenrick, who are, not to too fine a point on it, not from the centrist wing of the party (or indeed, humanity). But in, in an apparent bit of freelancing, some of Cleverly’s supporters appear to have backed his rivals in order to secure an easier path to the leadership for him. But the problem with freelancing in a strategic game is that you usually need to have an idea of what everyone else will do in order to make the right move; Cleverly’s supporters appear to have missed the game theory week of their higher education. Badenoch and Jenrick now enter a run-off to lead the party, while Cleverly is sent packing. The cricket fans among Marginalia readers will instantly see the parallels to the Pakistan team: not only does the team chew through captains like Fox Mulder with a bag of sunflower seeds, they have an unparalleled ability to seize defeat from the jaws of victory, as this week’s test match with England showed. But I predicted the Pakistan outcome. Even a connoisseur of the absurd like myself was left gobsmacked by the Tories.

1. It’s not just absurdity in high supply this week. Good writing on economic growth in developing countries is too. First, this piece in Asterisk by Karthik Tadepalli is truly outstanding, arguing that we can effectively focus on growth in developing countries by helping firms grow—a topic which we can and do study with the highest levels of rigour. This is bang on: “And while ‘How do we make countries grow?’ produces platitudes, “How do we make firms grow?” has real answers. Economists can study the impact of economic policies on companies in the same country without having to make messy cross-country comparisons, or use traditional RCTs to study which policies help firms grow. As a result, development economists have written hundreds of papers about firm growth, and what policies could accelerate it.” He points out that small and micro-firms, so beloved of a million development interventions are a symptom of failure, not where our efforts should focus. If I have one criticism to make, it’s that supporting firm growth is a politically charged activity; and the things that do it have political consequences. Understanding the political dynamics around growth remains critical, because it will affect what can be done, and to whom.

2. But that’s not all. I was bowled over by this working paper by Michael Walker and various co-authors, on slack and economic development. Slack is the existence of underutilized inputs: a worker who works just a couple of hours a day, a machine that runs idle most of the time, a taxi waiting at the rank. The authors use new survey data to empirically estimate the extent of this slack (much larger in developing than richer countries) and use modelling and the results of randomized control trials to demonstrate the profound implications this slack has for interventions like cash transfers or basic income provision. It is very convincing, and has helped allay much of my scepticism about the effects of large-scale, generalized cash transfers in poor countries. Indeed, I think I’ve dramatically underestimated their potential benefits. And if this isn’t enough, we also have a VoxDev talk with David Atkin, about the importance and impact of connecting firms in developing countries with larger markets. 

3. I don’t think I can do justice to this lovely, gripping Tim Harford piece about the extraordinary life of Alban Phillips, the man who invented the Moniac machine (and who features in Laurens van der Post’s memoirs, and then went on to become a professor at LSE despite not even completing a Bachelor’s degree). My friend Tom has seen a working Moniac machine in the flesh, for which I am very jealous (he can also confirm that I did indeed predict Pakistan’s rapid descent to defeat). The article is fantastic. Do read it. 

4. Tom crops up in Susan Barron’s reflections on 25 years of working on the ODI Fellowship scheme. Susan was my main contact when I was a Fellow in 2005-7 in Malawi; she’s seen hundreds of other fellows come and go too. The ODI Fellowship is one of the best things a young person can do to really understand international development better (while making an impact); and the list of distinguished former fellows is extremely long. And you make lifelong friendships. It must be quite a thing to witness over such an extended period.

5. Andrew Gelman on interaction terms; if, like me, you use them a lot this is helpful, rather than terrifying, which is how I usually feel when I see he’s written about a method I’ve used.

6. Three climate links to (almost) close: first, Patrick Behrer in Development Impact has a good piece on what counts as climate adaptation, and a new paper that looks at whether or not we’re having any success at achieving it (spoiler: a bit, but not a lot). I’ll have something to add in this space soon, I hope. Secondly, Hannah Ritchie charts the dramatic and now terminal decline of coal power in the UK. And finally, Nan Ransohoff shows that we can, in fact, raise enough money to pay for enough global carbon removal to meet climate targets—though I have to admit a little discomfort that her napkin-math uses the entire global development budget to make the case.

7. Finally, it’s not-a-real-Nobel season! That magical time of year when every bore without critical thinking faculties tells us that the economics Nobel is not a real Nobel prize, as if the original list was some set of commandments carved in stone, transcribed from the mouth of god. Last year’s win for Claudia Goldin was extremely popular and extremely well-deserved. I’ve seen speculation that this year will, finally, be Daron Acemoglu’s (most likely with James Robinson)—well deserved, though I’d expect lots of criticism, too; other names that have cropped up include Susan Athey (with Manifold giving 40%+ odds that she will win before 2030; her husband won it in 2021) and David Autor (if pushed, my bet—though I note Scott Cunningham predicts Acemoglu will win with Autor and Larry Katz). We’ll find out on Monday!

Have a great weekend, everyone!

R