"The Innovative University"

These are a few ideas of the many in this book (Christensen and Eyring 2011):

• The higher education model in the US has been seriously questioned. The bottom line is that research is expensive and probably unsustainable at its current pace due to financial constraints. Besides, as faculty have focused more on research they have given less attention to undergraduates. As a consequence the quality of undergraduate education has suffered. 
• Since its beginnings Harvard shaped the DNA of higher education. This includes the creation of tenure based on research, summer classes, majors, etc. Other schools have copied the Harvard model, some have been more successful than others at doing this. The authors of The Innovative University argue that to be Harvard schools need to have the resources that Harvard has, which is almost impossible. That is why imitating the Harvard model is not for every school. The model is very expensive because high caliber research is very expensive. 
• The universities that will survive are those that will offer the highest value for the money to their students, those that focus on their strengths (mission and values), and those that make the tough choices to focus on specific programs and goals. Currently most universities can’t do everything (graduate education, undergraduate education, research, sports, etc.).
• Some schools have defined research more broadly. For them research is not only about discovery but it includes studying how current discoveries can be applied to practical problems. Research about teaching and learning can play an important role as well. Engaging undergrads in faculty research can be very valuable too. 
• Online education is a disruptive innovation, it can be pedagogically effective and it is also much cheaper; its reach will increase. But online education can’t replace traditional (face-to-face) education completely. There is still a future for the traditional classroom experience. Most universities however must seek a right balance between on-line and traditional education. Some will probably do well if they specialize in one or the other.

I read the The Innovative University with universities in Latin America in mind. What road should they follow given the changes that US schools face? One aspect is tenure. The authors argue that tenure to promote research was key to innovation that led to prosperity in the US. Tenure in itself, they say, is not a problem nowadays. It can actually be very useful if the process through which it is granted responds to the mission and values of each school. In Latin America several private schools have adopted the tenure model, especially Colombia, Chile, Argentina, Mexico, and Brazil. Some universities in these countries have also put more emphasis on research.

As the emphasis on research in many US universities decreases it would be a mistake to abandon the tenure-research model that some universities in Latin America have adopted. Especially now that income is increasing in the region. It is true that research is expensive but to move innovation forward it is important that at least one or two schools in each country move in that direction. Innovation that responds to local needs is urgent; as it is research that can link universities and the industry. Tenure and research are still the common practices in the US, but they are exceptions in most Latin American countries. As it happens now in the US, research is not for everyone, but it will remain a niche for some schools. The hope is that some schools in Latin America start discovering that niche. 

Behind the Beautiful Forevers

Mumbai, for its marvelous rebirth, remains the largest city in an India that, in spite of being “an increasingly affluent and powerful nation … still housed one-third of the poverty, and one-quarter of the hunger, on the planet.” With the wealth of India’s top 100-richest equaling almost a quarter of the country’s GDP, today’s gap between top and bottom is virtually unfathomable.

That is from Terry Hong's book review of Behind the Beautiful Forevers by Katherine Boo. See another review here. 

Book review of the day: "One illness away"

Hans Rosling says in twitter: 

Impressed by the clearity of Anirudh Krishnas research on the ways people get out and fall back in poverty. Must read: http://www.amazon.com/One-Illness-Away-People-Poverty/dp/019958451

Two book reviews: 

(1) From the NYT:

There are several insights in this book, but one of Mr. Krishna’s more important is that, as he writes, “poverty is not an undifferentiated mass living beneath some theoretical or statistical line.” It is, rather, a constantly churning pool of deprivation, with those who escape being replenished by a new population that has fallen from relative prosperity. 

In a 25-year study he conducted in Andhra Pradesh State, for example, Mr. Krishna found that while 14 percent of households escaped poverty, another 12 percent became poor. Overall, there was a 2 percent reduction in the poverty rate, but 26 percent of households had seen their status change.

(2) From the American Public Health Association:

In their microanalysis, the teams found out that the “poverty flow” is bi-directional - people climb out of poverty and fall into poverty all the time. Hence, to address poverty, policies have to protect for people at risk for falling into poverty and provide opportunities to climb out of poverty. Among the most common reasons people become poor are major life events like death or serious illness of wage earner, and illustrated in the book: “Thousands of households in every region studies have succumbed to poverty on account of a combination of ill-health, lack of access to qualified medical attention and high health care costs. Thousands of other people continue to live only one illness away from poverty”.

About the author. See a good interview here.  

Book Review of the day: "The Dragon's Gift"

From The Independent:

The Chinese involvement in Angola counters claims they are just plundering Africa's wealth, only building infrastructure in order to ferry out natural resources. Angola's oil is deep offshore, but China has built hospitals, schools, irrigation systems and roads inland. Indeed, unlike Western donors, who tend to have their favoured nations, China has given aid to every country in sub-Saharan Africa - except those nations supporting Taiwan, with whom it has engaged in something of a bidding war across the continent. 

The case of Angola demonstrates two themes that emerge clearly from this important book. First, the endless hypocrisy of the West as it watches the long march of the Chinese through Africa. The critics, often woefully ill-informed, ignore the West's own history of exploitation, encouraging corruption and supporting unsavoury regimes. Even after 60 years of Western aid, there remains a reluctance to accept its failure to promote development or tackle poverty.

The template was set with the first involvement in Africa, which came in Guinea after the French were told to leave in 1959. An interest-free loan led to the building of factories, paddy fields, a plantation, a cinema and a conference centre. Seven years later, there were an estimated 3,000 Chinese aid workers, including 34 medical experts. Unlike Western aid workers, they live in similar style to the locals. "How can you reduce poverty but live in a five-star hotel?" asks one Chinese expert pointedly.

By the late 1980s, as Western companies pulled out of what was being branded as "the failed continent" and aid for infrastructure dried up, Beijing saw only a land of opportunity. The West failed to notice the Chinese teams managing state-owned factories, building bridges and repairing irrigation systems. Markets across the continent began selling textiles and metal bowls made in China. Their methods were rigorous. When Liberia asked China to rehabilitate a sugar-cane factory and plantation, it expected a rapid and positive response. Instead, a 50-man unit was sent over for a feasibility study, concluding that the project would need an annual £2m subsidy and telling Liberia to find better projects.

Some concerns are justified – there is clear evidence of Chinese companies importing the low standards common in their homeland, of violating minimum wage laws and destroying the environment. And even this author has qualms over Chinese firms taking over large tracts of agricultural land, although she is too forgiving of China in other areas, such as its support for Robert Mugabe in Zimbabwe.

The author concludes that China's embrace of Africa is strategic, long-term and still evolving – and that it is up to Africa's leaders to shape the relationship to serve their own ends. The West, she says, should admit the shortcomings of its own approach and learn from the way the Chinese use investment, trade and technology as levers for development. There is little doubt that while the dragon's gifts are cloaked in ambiguity, we would do well to stop believing in myths and start engaging with the reality of a rapidly-changing world order.

The Filter Bubble: Book Review

From the WSJ:

It turned out that Facebook had changed the algorithm for its news feeds, in response to its users' complaints that they were being overwhelmed by updates from "friends" whom they hardly knew. The 600-million-member social network now filters status updates so that, by default, users see only those from Facebook friends with whom they've recently interacted—say, by sending a message or commenting on a friend's post.

For now, the best Mr. Pariser can hope for is to educate readers who don't want to live in a solipsistic subset of the Internet, especially regarding political matters. Just knowing that Google and Facebook personalize what you see, and that you can turn it off if you want—on Facebook, click Most Recent instead of Top News atop your feed; for Google, get instructions by searching "deleting Web history"—is a good start. "The Filter Bubble" is well-timed: The threat is real but not yet pandemic. Major news sites are toying with personalization but haven't rolled it out en masse. And in a test I conducted myself, I enlisted a handful of heavy Google users across America to search for "Bin Laden raid" soon after the event. The search results that came back were all nearly identical. To tell the truth, we were kind of disappointed.

This is a battle between reduction in transaction costs versus increasing confirmatory bias.

Saturday Book Review: "Poor Economics: A Radical Rethinking of the Way to Fight Global Poverty"

Book review by Dr. Dale Adams

The recent book by Abhijit V. Banerjee and Ester Duflo (Poor Economics: A Radical Rethinking of the Way to Fight Global Poverty, New York: PublicAffairs, 2011) joins Karlan/Appel in the food fight with the appologists for the microdebt industry. On the one hand, the RCT folks argue that microlending isn't doing much to alleviate poverty. On the other hand, Accion International, FINCA, Grameen Foundation, Opportunity International, Unitus, and Women's World Bank trot out a handful of anecdotes to "prove" that more debt is transforming the lives of millions of poor people in their "Measuring the Impact of Microfinance: Our Perspective." Everyone who is interested in the microfinance industry ought to take a reasoned position in this important debate, and reading B and D should help in that reasoning.

As was the case with Karlan/Appel, the B&D book reports on the recent results of random controlled trials (RCT). About a third of B&D focuses on microfinance issues: debt, savings, and risk/insurance. I enjoyed the fact that some talented economists have gone to the boondocks and collected large amounts of primary data, including talking with lots of poor people. I also appreciate their use of an evaluative technique that eliminates the selectivity bias, the attribution problem, and the representativeness problems that plagued earlier types of evaluations of microfinance, including anecdotes. I also like the fact that they focused their research on ways to improve development projects.

A few quotes from B&D gives a flavor of their controversial findings on microfinance:

[Referring to the results of an RCT study in India] The fraction of families that started a new business over the fifteen-month period went up from about 5 percent (in the control group) to just over 7 percent (in the treatment group)--- not nothing, but hardly a revolution (p. 171).

In our eighteen-country data set, the majority of businesses operated by the poor have no paid staff, with the average number of paid employees ranging from essentially zero in rural Morocco to 0.57 in urban Mexico (p.213).

Perhaps the many businesses of the poor are less a testimony to their entrepreneurial spirit than a symptom of the dramatic failure of the economies in which they live to provide them with something better (p. 226).

. . . [w]e are kidding ourselves if we think that they (microloans) can pave the way for a mass exit from poverty (p. 234).

In order not to appear fawning, I have five minor quibbles with B&D. The authors get lost in the weeds in their discussion of savings/deposits. I remember hearing Dick Patten, the Titan of deposit mobilization, say that capturing deposits was easy. Offer an attractive and flexible deposit product, locate the financial facility close to clients to keep their transaction costs low, provide security, offer a positive reward for depositors, and adjust the incentives of bank employees to reflect their work in capturing deposits. When these simple measures are in place, get out of the way so you won't be trampled by people rushing in to deposit.My second quibble with B&D deals with the displacement that occurs in microlending, a point that Milford Bateman has made on various occasions. The economic gains realized by one microborrower who wedges her new (or expanded) business into an already crowded market takes business away from other entrepreneurs in the market. Her gain may be another's loss. If B&D added displacement to their analysis, it would likely reinforce their negative conclusions.

Quibble number three relates to the transaction costs that clients of microfinance incur. B&D expend quite a bit of energy on how interest rates do or do not affect clients' decisions, but interest is only part of the clients' costs of transacting a loan or a deposit. In some cases transaction costs dominate their decisions and help to explain why informal finance continues to be so popular.

The fourth quibble is the same as one raised by William Easterly. RCT's are extremely useful in helping to make decisions about variants of a development program. For example, how to design the best set of incentives to induce people in malarial areas to place mosquito nets over their beds, or how to promote the use of de-wormning medication for children. RCTs, however, don't shed much light on larger policy issues such as selecting among a range of policy alleviation programs: education, health, nutrition, law-and-order, financial services, and land titling, for examples. RCTs also have limitations when it comes to evaluating programs that improve the quality of life for the poor gradually over time and don't leave a very large economic footprint in the short term, typically covered by an RCT study. I suspect this latter point holds for microfinance. The proponents of microfinance may be right that their activities take the edge off poverty and enhance the quality of life of millions of people, even though it doesn't lift many of them out of poverty as the RCT crowd is increasingly asserting.

My final quibble regards the cost of RCTs. The heart of economics is comparing costs with benefits. B&D and Karlan/Appel have exposed us to the benefits of RCTs, but they haven't shared information about the costs of these obviously expensive studies. One thing to be said for anecdotes is that they don't cost much, even if they can be seriously misleading. The profession needs some ideas about the costs of these studies before passing judgement on their overall usefulness and how many more RCT credit-impact studies out to be done . . . jane austin.

Review of: " Selfish Reasons to Have More Kids"

Selfish Reasons to Have More Kids: Why Being a Great Parent is Less Work and More Fun Than You Think. New York, NY: Basic Books. 2011.

Blogs are the New World of the mind -- the land where science meets common sense, and logic meets life." Bryan Caplan.

It was in 2003 when Bryan Caplan, the author if Selfish Reasons to Have More Kids, was my professor microeconomics II at George Mason University. It was then when he learned that his wife was going to have identical twins. He posted the sonograms in his website and gave updates on the evolution of the pregnancy. As an exemplar nerd he made some Bayesian calculations to analyze the behavior of fraternal twins vs identical twins, or something like that. The matter is that he seemed totally excited! That excitement plus tons of research gave bird to this book.

Bryan has also become a very popular, sharp, and wise blogger. Today's post in his blog is an example of the wisdom.

His micro II class was probably the most challenging of the PhD. As time passes I respect him more, as an intellectual, but even more as a kind and respectful parent. I was a pretty responsible student in his class but I wish I had paid even more attention. There is indeed a lot to learn from Bryan.

The main point of the book is that parents overestimate the cost of having kids, therefore they don't have as many as they should. Bryan claims that having more kids is more fun and less work. As any other product in the market, a lower price should translate itself into a higher quantity demanded (with some qualifications). 

The book presents a very compelling argument. It is carefully informed by research on behavioral genetics. A lot of future parents will be persuaded by his arguments (may be a lot of people already are). Having more kids gives pleasures (especially) when parents are older and kids have grown up (the utility that kids provide grows as time passes -- unfortunately, Bryan argues, some times couples do not take into account these future benefits when making their decisions ).

Having more kids also generate positive externalities, on average, for the wold as a whole. The influence of Julian Simon on Bryan's thinking and research is clear, as it is the theory of endogenous growth.    

His conclusions mainly apply to families in developed countries. But being from a developing country I kept wondering how the main conclusions would apply to Latin America, or Africa for example. They do not apply, and he is clear about this. A different body of research will be necessary -- but it seems that there is no data. 

The other important conclusion is that nature rules over nurture when it comes to behavior and other human traits (with the caveat mentions above).

Parents should relax more about their kids, should not feel that the future of their kids regarding personality, income, happiness, criminal behavior, etc, is up to the parents. Some freedom, or a lot of freedom, and less control an supervision is better. As a rule of thumb, if a couple is eligible to adopt a kid by an adoption agency, it is a good enough couple and their kid(s) will turn out just fine -- just enjoy the ride:

Instead of thinking of children as lumps of clay for parents to mold, we should think of them as plastic that flexes in response to pressure—and pops back to its original shape once the pressure is released. 

Don't forget, however, that parents can affect certain outcomes. For example, they can affect the way kids perceive parents, and the way kids will remember parents in the future. This is a call to treat kids with kindness and respect.

This is a video of Bryan explaining his theories.

Sunday Book Review: "More Than Good Intentions."

Dean Karlan and Jacob Appel, More Than Good Intentions: How a New Economics is Helping to Solve Global Poverty, New York: Dutton, 2011.

Book review by Dr. Dale Adams.

Knowing that Karlan is a proponent of number crunching, I thought the book would be filled with numbers, statistics, equations, tables, footnotes, and other sleep-inducing details. Instead, it is an entertaining and spirited tour through recent random controlled trials (RCT) that document the results of various poverty alleviation programs. I envy the ability of the authors to wade through the two depressing topics (poverty and industrial-strength research methods) while making the tour interesting. Their narrative is sprinkled with anecdotes to snare the interest of readers, and then the authors briefly summarize the findings of RCT studies to buttress the point they raised in the anecdote. This is certainly a lot more honest way to use anecdotes than using them to represent a population as a whole without supporting numbers to show they are representative. Visit the publications of most any NGO for examples of the latter.

About a third of the book reports on microfinance RCT-studies, both credit and savings/deposits.

The work by the nascent RCT industry is starting to filling a gaping void in developmental work. Heretofore, much of the so-called post-project evaluations of these activities were self serving, naive, badly flawed, or nonexistent. I was recently re-reminded of this void after looking through the paperwork associated with about 100 USAID-funded land-titling projects around the world that involved something well worth of a half-billion dollars in US taxpayers' money. I found only one badly-flawed ex-post evaluation of a single project in the mound of paperwork! That makes me cringe as a taxpayer. I also grit my teeth when I see the World Bank and other major donors do captured, in-house evaluations, and I see the cozy relationships between donors and their stables of consultants who do evaluations that are far from being systematic, independent, or objective. There will always be inherent problems in the close tying of the funding of development projects and the funding of evaluations, but it is a major step forward to locate most RCT research in universities that have some independence from the project funders.

Understandably, advocates of RCT see almost unlimited opportunities for their methodology, but I wonder if it can be expected to fill the entire research void? The results reported in the Karlan/Appel book suggest that RTC is more effective on some activities than on others. It is powerful in showing the effectiveness of variants of a development program, for example, various incentive packages to enhance school attendance. It is also dynamite in evaluating programs that yield relatively short-term, measurable results, for example, how de-worming kids affects school attendance. Nonetheless, it is less effective in accessing programs that yield benefits that accumulate gradually over long periods and in forms that are difficult to measure. It seems to me that most microfinance efforts yield benefits that fall into this latter category. Increased access to loans, deposits, micro-insurance, and electronic banking takes the edge of poverty and enhances the quality of life of poor people, without leaving large economic foot prints that can be captured in RCT studies that cover only a year-or-so. Karlan/Appel admit as much when, in their conclusions, they ignore microcredit in their list of seven things that work in resolving poverty. I am happy to see that savings/deposits, however, did make their list of seven. Way to go Dean and Jacob!

Another issue that gnawed at me while I read the book was the uneasy feeling that the projects receiving RCT attention were mostly nibbling around the edges of the heart of poverty. The most pressing problem that all poor people have is jobs, not having more debt, getting their kids de-wormed, or using better farming techniques. Most budding micro-entrepreneurs or subsistence farmers would gladly abandon what they are doing if they had access to good steady jobs. Unfortunately, RCT studies don't shed light on this important topic. Perhaps there is a need for additional studies that more directly address why jobs are, or are not created, for the poor. (Where is Carl Liedholm and his crew at Michigan State when we need them most?) That type of information won't come from RCT studies that focus on the poor themselves, but rather from studies of the small- and medium-sized firms that provide most of the additional jobs in an expanding economy.

As an aside, I wonder what percentage of all the funds committed to development efforts are expended on serious evaluations of results? . . . Harriet Bet Your Soul.

Book Review: "Gang Leader for a Day" (Penguin 2008).

This is a fascinating book about the informal economy, gangs, drugs and poverty. It is the result of sociological and ethnographic research that the author, Sudhir Venkatesh, conducted in a Chicago project. The study focuses on the project called Robert Taylor, which use to be one of the largest in the city (it was demolished a few years ago). Population wise, the project was the equivalent of a small city. Sudhir spent around six years visiting frequently the project. The leader of the gang in the project, the Black Kings, befriended him. Sudhir witnessed shootings, and he even became a leader of the gang for one day - therefore the title of the book.

Sudhir started his visits to the project when he was a PhD student of sociology at the University of Chicago. His friendship with the main leaders of the project allowed him have access to information that otherwise would have never been public. For example, the financial records of the commercialization of cocaine.

The book is now one of my favorites. It vividly tells the complexities and beauty of ethnographic research. My appreciation of ethnographic research was heavily influenced by two books: Stranger and friend: The way of an anthropologist by Hortense Powdemaker, and Money has no smell: Africanization of New York City, by Paul Stoller. Gang leader for a day joins this list now.

The life of ethnographers in the field is complex, especially because their emotions mix themselves with the object of study. It is almost impossible to be objective. Sudhir says this clearly when the leader of the gang tells him:

"Either you'r with me or you're with someone else." In this world there was no such thing as neutral, as much as the precepts of my academic field might state otherwise.

The book offers a large menu of interesting experiences and ideas. For instance, the world of a gang and the world of a corporation such as McDonald’s are very similar (Steven Levitt explains in this TED video). In both organizations there are executives at the top of the hierarchy that earn 200 or 400 thousand dollars a year (or even millions). At the other extreme the sellers in the streets earn salaries that could be under the minimum wage. Concepts like franchise, mergers and acquisitions apply really well to the operations of the gang.

According to the book gangs generate and enforce informal institutions. This makes one think about the current situation in Mexico, and Central America. If Sudhir's results can be generalized in any way one can conclude that gangs respond the economic incentives (in very complex social environments). They also fill out an institutional vacuum, especially when the policy does not do its job. As it happens in several parts of Latin America, in the projects people were scared by the police. Sudhir cites the manager of the Black Kings:

A drug economy, he told me, was 'useful for the community,' since it redistributed the drug addict's money back into the community via the gang's philanthropy. [A sort of corporate social responsibility?]

Mexico and Central America witness high crime and violence due to gangs fighting for trade routes. This book is relevant to this situation because it presents the dynamics of the distribution at the other side of the commercial chain, in the distribution in the US. Although his field work was made more than ten years ago, during the pick of the commercialization of crack and cocaine, the book is relevant for current discussions. Obviously a large part of the profits of this business, that extend itself from the projects in Chicago to the Amazon and Putumayo jungle in Colombia, stay in the US.

The book is also valuable in terms of the method. Sudhir actions and decisions in the field are examples of the do's and don'ts. His findings suggest that economics and ethnography, and sociology, can complement themselves. In fact they can be excellent complements, instead of substitutes. The collaboration between Sudhir and the University of Chicago economist Steven Levitt has generated a fair amount of academic articles that have helped us understand the underground economy (see this one on prostitution, for example).

Sudhir is a professor of Sociology at Columbia. He has become a very prestigious scholar. At the end of his book he tells an advise that his father told him regarding grad school, the advice is very valuable for those who plan to study a PhD:

Write every day, visit your professors with well-formed questions, and always read everything that is recommended, not just what the professor requires.

When I finished the book I felt a gigantic emotion, a sort of pride for our work as social scientists.   

Book review(s) of the day: "Measuring How and Why Aid Works—or Doesn't"

William Easterly writes a review of two recent books on the field of behavioral economics/randomized trials/field experiments. Here. My source here.

Mr. Banerjee and Ms. Duflo, along with Mr. Karlan, are luminaries in this branch of economics. (Mr. Appel seems to have helped out Mr. Karlan as a writer and field worker). "More Than Good Intentions" says that it's addressing the "new economics" of global poverty, while "Poor Economics" concerns a "radical rethinking" of the same subject, and indeed the two books are so similar that it's hard to distinguish between them. In the end I gave up and regarded them as a two-volume set—and a marvelous, rewarding one at that.

The books' signal achievement is in addressing two disgraceful problems that beset humanitarian aid. The first is that the effectiveness of aid is often not evaluated at all; the second is that even when aid is evaluated, the methods are often dubious, such as before-and-after analysis that doesn't take into account variables that have nothing to do with the aid itself. Humanitarian aid is usually flying blind. These books take the blinders off—de-worming does work, many other efforts do not.

"More Than Good Intentions" and "Poor Economics" are marked by their deep appreciation of the precariousness that colors the lives of poor people as they tiptoe along the margin of survival. But I would give an edge to Mr. Banerjee and Ms. Duflo in this area—the sheer detail and warm sympathy on display reflects a true appreciation of the challenges their subjects face. Messrs. Karlan and Appel are at their best in addressing the subtleties of behavior and testing them in the psychology laboratory and in the field. They have produced a remarkably readable and credible analysis of the intertwining of irrationality and poverty.

This TED video (Solving social problems with a nudge) shows also that behavioral economics has a lot to say about economic development.

Lant Pretchett sees field experiments from a wider perspective when he claims:

At the same time, many, if not most, of the consequential questions of development economics are simply not susceptible to this approach. No formal method—from the use of calculus to general equilibrium to simulations to controlled experiments to "field" experiments—tells us which are the important questions. The risks of letting any method, rather than the phenomena themselves, dictate research questions are obvious. I worry that the drive for "clean" identification as a methodological obsession is driving some junior researchers—unlike their more senior experimentalist peers whose early careers were based in non-experimental economics addressing the big questions—to a pursuit of the cute instrument (whether natural or experimental). This is leading them down the intellectual cul de sac of precise answers to trivial questions.

Field experiments have taken development economic to its new and very exciting historical stage. After many years of confusion this is a very fresh and valuable approach.

Book review of the day: "Identity Economics"

Akerlof, George A. and Kranton, Rachel (2010) "Identity Economics." Princeton University Press. See the book review here.

Akerlof is the author of the now classic article on economics and identity. The book is a good effort to include different variables (other than traditional economic variables) into the analysis of human behavior.

But while Becker and his disciples account for some noneconomic motivations, they generally assume such tastes to be universal and static. Akerlof and Kranton, however, argue that taste is largely dependent on social context. "Taste has been taken as a given, and economists weren't supposed to explore where they come from and how they change. But taste is not a cultural constant," Kranton tells me. "Once you recognize that, you have a different view of how people will act in certain circumstances."

I believe that economics have been more successful than anthropologist (economic anthropologist, in particular) in crossing the boundaries of the social sciences (in this case from economics to culture).

Book Review of "India's Global Powerhouses"

India's Global Powerhouses: How They Are Taking On the World (2009).

In Jules Verne's A Journey to the Center of the Earth Professor Lidenbrock buys a manuscript written in an old and cryptic language. He spends several days trying to decipher its meaning. Sometimes I see myself like Professor Lidenbrock when trying to understand the economies of India and China. The book, India's Global Powerhouses, has helped me put some pieces together. In my economic development class we have read some articles related to India, including a comparison between the economies of China and India, but reading a complete book about the topic makes one's mind think longer and probably deeper about the topic.

India is so vast in almost every sense that one's understanding of the country depends on what sector of the economy one looks at. There is certainly poverty and inequality, and it seems like the high rates of economic growth are not translating themselves into broader improvements in leaving standards.

The recent economic growth of India is due to its cost advantage, but more recently there is also a high degree of sophistication in products and services. Infosys is a case in point. With more than ninety thousand employees around the world the company offers a plethora of highly technical consulting services.

The book looks at corporate India, it has a positive tone, and an optimistic approach. It presents the history and current growth of the Indian companies that are becoming truly global. From Tata, a consortium group that produces steel, vehicles, tea, and consulting services (among other products), to Mahindra & Mahindra, one of the world leaders in tractor production.

I took the book with me to my macroeconomic classes and by telling the story to my students, and by looking for the companies online, we have a better understanding of the of companies and people behind the consistently high rates of growth of India.

My students and I dropped our jaws when we saw an online picture of the building of Infosys, and also when we learned that Jaguar and Land Rover where acquired by Tata group. We looked at the websites of some of the companies described in the book like Mahindra & Mahindra, Suzlon, and Tata itself, and were very impressed. We also found a TED video on innovation in India, more specifically on the development of the Nano, and "ultra low-cost" little car (US$ 2000), and other advancements.

This is a well written and balanced book. The last part of the book reminds us of the huge challenges that still remain in India. Bureaucracy and corruption are ubiquitous.

I could not put the book down. At the end I felt a bit like Professor Lidenbrock in the Jules Verne's novel who after some days of study could decipher the cryptic message. Although there are still several black holes in my understanding of the Indian economy, I have made some progress :)

Books about saving the world part III

A review in the Washington Times of another book. Here

Books about saving the world

This is a book review of a new one. Here

Book review of the day

 Arab economies in the twenty-first century

Saudi Arabia . . . presents a somewhat classic case of an Arab country that is not managing its demographic transition well. In fact, even though Saudi Arabia has the world’s largest oil reserves, it can hardly employ all of its youth, let alone its graduates. Despite the efforts of the Saudi government, which acts as the employer of last resort, unemployment is a serious problem. The high jobless rate is also a threat to the country’s stability. To make matters worse, the Saudi private sector would rather hire expatriates than Saudis. The education system apparently does not produce the skills the economy needs, and that seems to be the problem with a number of Arab oil-producing countries, particularly in the Gulf.