Read on Twitter
1/A follow-up thread on Nobel Prizes and Big Questions.
Branko asks: Why don't we award prizes for economists who work on the incredibly important question of how China grew so fast?
It's a very good question... https://twitter.com/BrankoMilan/status/1316573079074680834
Branko asks: Why don't we award prizes for economists who work on the incredibly important question of how China grew so fast?
It's a very good question... https://twitter.com/BrankoMilan/status/1316573079074680834
2/Why DID China develop?
Many people who read the news think that the answer is perfectly obvious. Unfortunately, these "perfectly obvious" answers tend to be quite lacking: https://twitter.com/SnoozeButtonBen/status/1316471507812581376
Many people who read the news think that the answer is perfectly obvious. Unfortunately, these "perfectly obvious" answers tend to be quite lacking: https://twitter.com/SnoozeButtonBen/status/1316471507812581376
3/Sure, lots of politicians yell about China playing unfair on trade. But does that mean restricting imports makes you grow fast? LOL, no.
Lots of countries restrict imports. Most do not exhibit China-like development. https://blogs.lse.ac.uk/africaatlse/2015/08/17/nigerias-import-restrictions-a-bad-policy-that-harms-trade-relations/
Lots of countries restrict imports. Most do not exhibit China-like development. https://blogs.lse.ac.uk/africaatlse/2015/08/17/nigerias-import-restrictions-a-bad-policy-that-harms-trade-relations/
4/More broadly, in the mid-20th century, lots of countries did try a strategy called "import substitution industrialization".
The results were not as terrible as advertised, but they weren't great. They didn't produce a lot of Chinas. https://rodrik.typepad.com/dani_rodriks_weblog/2007/08/does-import-sub.html
The results were not as terrible as advertised, but they weren't great. They didn't produce a lot of Chinas. https://rodrik.typepad.com/dani_rodriks_weblog/2007/08/does-import-sub.html
5/OK, so what do we really know about why countries develop?
It IS a huge important old ongoing area of research. Many people work on it. A number of Econ Nobel prizes have been given to people who work on it.
It IS a huge important old ongoing area of research. Many people work on it. A number of Econ Nobel prizes have been given to people who work on it.
6/For example, in 1987, Robert Solow won for his growth model. While the Solow Model doesn't fully answer the question of why countries develop, it DOES explain why simply saving a lot and building roads and factories won't get you all the way there. https://www.nobelprize.org/prizes/economic-sciences/1987/press-release/
7/Paul Krugman followed up on the model's predictions, demonstrating that high savings rates and capital accumulation could lift countries like the USSR into the middle rank of development, but not to the top.
https://pdfs.semanticscholar.org/82fe/231630d3fb710db6c2843355b137f196b58a.pdf
https://pdfs.semanticscholar.org/82fe/231630d3fb710db6c2843355b137f196b58a.pdf
8/Krugman, who won the prize in 2008, helped create a model of economic geography, in which development spreads from region to region. Countries can boost their chances of being the next place to develop, but ultimately it's a one by one process. https://www.amazon.com/Spatial-Economy-Cities-Regions-International-ebook/dp/B08BSWG2CJ/ref=sr_1_1?qid=1602779919&refinements=p_27%3AKRUGMAN+%26+VENABLES+FUJITA&s=books&sr=1-1
9/This is pretty consistent with the "flying geese" model of industrial development that was long popular with Japanese economists (note that one of Krugman's co-authors, Masahisa Fujita, is Japanese). https://www.sciencedirect.com/science/article/abs/pii/S1049007804001435
(hold on brb)
