Modern Development Economics Research Articles

Experimental approach to development economics: a review of issues and options

ABSTRACT Randomized control trials (RCTs) are recognized as the preferred tool of analysis in modern development economics literature/research and policy evaluation. This may lead to methodologies, including case studies, tabular analysis, simple regressions, taking a back seat. This survey explores the implications of such a methodological hierarchy and the implications of preoccupation with a particular evidence/methodology for research and policy. Similar developments in macroeconomic modelling are also discussed. Major advantages and limitations of RCTs and the attempts to address them are highlighted. The article argues that preoccupation with a methodology can sometimes lead to important inquiries for research and policy getting side-lined on methodological considerations. This leads to inferences favouring a particular technique/methodology or issue. Focusing solely on methodologies that emphasize quantifying the ‘effect’ may not be appropriate to address all questions relevant to development. As policies involve multiple and conflicting social concerns, methodological pluralism may be preferable.

INSTITUTIONAL PRINCIPLES OF EFFECTIVE BUSINESS STRATEGY FORMATION

The article investigates economic mentality as an informal institution that affects the motives and behaviors of employees, determines their level of economic activity, allows to create different management approaches, styles of management, helps to develop the organizational structure of the enterprise; economic mentality determines the processes of socialization of the economy, it promotes economic integration, the formation of its competitive potential, determines the level of economic freedom. Modern development economics is characterized by increased attention to the psychological determinants of economic behavior. Representatives of institutionalism and neoinstitutionalism explore the motivation of human behavior with regard to the role of the prevailing social norms and rules of behavior - economic mentality. Economic mentality has certain properties that are characteristic of any social institution, such as historicity, structuring and functionality. Economic mentality is not only dependent on other institutions, but can also produce new institutions because its media is constantly creating new rules regulating economic relations that correspond to the realities of modern economy. A prospect for future research of economic mentality is an integrated approach to the analysis of its main components, promoting its development and use of mental characteristics of society to address the priorities of social and economic policy, because it but can also produce new institutions creating new rules regulating economic relations that correspond to the realities of modern economy.

Israel Kirzner On Dynamic Efficiency And Economic Development

Israel Kirzner lays the foundations of entrepreneurship as the driving force of the market process by referring to alertness, uncertainty, and plan coordination. His approach, following the footsteps of Mises and Hayek, legitimizes entrepreneurial creativity and profit-making as the heart of the dynamic market process. He argues that an accurate insight into the economic system requires exploring how entrepreneurial dynamics work in society. This statement contrasts with the theories and models that govern modern development economics, such as randomized controlled trials (RCTs), in which the zero-intelligence agents replace the flesh-and-blood entrepreneur.
 Randomized controlled trials are considered the gold standard in modern development economics to assess treatment intervention efficacy in underdeveloped countries (Rodrik 2009). As a causal inference method, RCTs seek to determine whether a program had the outcome for which it was designed. Experts often utilize purely quantitative and experimental strategies for their guiding insights through trial and error of different interventions. In the ethics domain, experts seek to maximize the cost-benefit of specific interventions subject to a given set of data to rectify the inequalities generated by the market economy in underdeveloped economies. The economist becomes a kind of plumber who designs the creation and distribution of the “social pie,” assigning the respective slices to the specific individuals who participate in the experiments. Consequently, RCTs have justified active government intervention in the market process on behalf of policy advisers.However, Kirzner’s theory of entrepreneurship indicates that modern development economics’s core problem is epistemological and related to using the criterion of static efficiency in applied economics. Although RCTs are considered one of the most rigorous methods to inquire into the effectiveness of development policies, their design lacks interpretative capacity on the essence of economic phenomena. Experts on RCTs do not recognize that economic development is the byproduct of achieving social cooperation and coordination driven by purposeful human action under the division of labor. If the essence of economic phenomena is disregarded, it is impossible to address poverty causes adequately. Accordingly, RCTs are limited to testing cosmetic problems of economic underdevelopment.This article does not seek to offer specific proposals to remedy RCTs’ shortcomings, but it provides a theoretical foundation to guide further theoretical and empirical work. It argues that development economists have overlooked Kirzner’s theory of efficiency, which cannot be omitted without impairing the premise that development theory involves studying the dynamic process of plan coordination. Its relevance lies in the fact that Kirzner’s research can reshape modern development economics, which implies a theoretical advancement in several areas:• Kirzner’s analysis of static efficiency reveals the epistemological and ethical problems of modern development economics.• The framework of Kirzner’s dynamic efficiency clarifies the role of entrepreneurship in understanding how the market works.• Dynamic efficiency recognizes the creative and coordinating potential of entrepreneurship and capital accumulation in economic development.• Kirzner’s economic development theory responds to ethical dilemmas about (in)equality and pure profit within a market economy.• Contemporary research on dynamic efficiency explores new branches, such as the role of psychology, culture, and morality in economic development.Most research on efficiency and underdevelopment is still packaged in mathematical models that reduce the market’s complexity to comparative statics. Fortunately, a growing number of theories have begun to challenge this state of affairs by examining the following: First, psychology’s impact on productivity or the unproductiveness of entrepreneurial profit opportunities. Second, the role of culture in the dynamic process of institutional change and the adaptation of the entrepreneurial performance that ensures or deter economic development. Third, the relationship between personal morality and dynamic efficiency concerns private property and contractual ties. Hence, there are several strands of new literature on dynamic efficiency and development economics. This article focuses on one aspect that concerns both economists and governments in terms of modern thinking and practice: the role of efficiency (static and dynamic) in economic development.

Was Gerschenkron right? Bulgarian Agricultural Growth during the Interwar Period in Light of Modern Development Economics

The classical view of Bulgaria's failed industrialization prior to the Second World War was established by Alexander Gerschenkron. According to his interpretation, an inherently backward small peasant agriculture and well-organized peasantry not only retarded growth in agriculture but obstructed any possible industrialization strategy. Following Hayami and Ruttan, we utilize the decomposition of farm labor productivity into land productivity, and land-to-man ratio to analyze the sources of growth in Bulgaria's agriculture 1887-1939. Our results show that Bulgaria's peasants did cross the threshold to modern growth during the Interwar period. Rich qualitative evidence supports the findings of our quantitative analysis that contrary to Gerschenkron's view and conventional wisdom, Bulgaria's peasants substantially contributed to the modernization of Bulgaria's economy and society. We interpret our results in light of modern development economics, and conclude that agriculture formed no impediment to Bulgaria's industrialization. The reasons that a 'large industrial spurt' did not occur in Bulgaria until 1945 are not to be found in the agricultural sector.

Somboon Siriprachai (edited by Kaoru Sugihara, Pasuk Phongpaichit, and Chris Baker). Industrialization with a Weak State: Thailand's Development in Historical Perspective. Singapore and Kyoto: NUS Press in association with Kyoto University Press, 2012, xii+183p.

Industrialization with a Weak State: Thailand's Development in Historical Perspective Somboon Siriprachai (edited by Kaoru Sugihara, Pasuk Phongpaichit, and Chris Baker) Singapore and Kyoto: NUS Press in association with Kyoto University Press, 2012, xii+ 183p.Over the past decade, Thailand has experienced constant political turmoil. Although fair evaluation of the reforms of the Thaksin government (2001-06) is not yet possible, there is little doubt that these reforms cut into Thailand's socio-economic fundamentals-long treated as a taboo subject-and affect the core factors that have stabilized and integrated the nation. Undoubtedly, Thaksin's growth strategies, various redistribution policies, and drastic rearrangements of vested interests (i.e. rents) enlarged the economic pie. But these also brought vast wealth to crony business factions, attracting serious complaints from groups that held opposing traditional vested interests. Since the coup d'etat of 2006, the political system has failed to adjust to conflicts in a democratic fashion and the last 10 years have seen the actual democratic process itself continually undermined. Public conflicts between competing groups have become a daily scene, leading to both the military and the judiciary asserting political control, even as the bureaucracy and monarchy do not show any signs of being in full control of the situation.Somboon Siriprachai's posthumous book, Industrialization with a Weak State, develops his observations on and analyses of long-term development in post-war Thailand until 1990s. Adopting a critical stance toward standard development theory, it describes the Thai as a weak state, one contrasted to the strong typically found in East Asian countries. Within such a context, the book discusses the characteristics and shortcomings of Thailand as well as the prospective challenges that the Thai economy faces. While the period the book focuses on is a little out of date (pre-1990), the argument nevertheless contains many insights which remain relevant for Thailand's present socio-economy.The author, Professor Somboon Siriprachai, was a prominent Thai economist, who had long engaged in academic work on Thailand's development in Thammasat University. Regrettably, he suddenly passed away in December 2008 while in Japan, on his way back home from a conference at Kyoto University, where he gave a talk based on one part of the manuscript that became this book, and this reviewer was his discussant. Carrying out his wishes, his friends in academia, Kaoru Sugihara, Pasuk Phongpaichit, and Chris Baker, edited his published journal papers and gathered them together in this book.Owing to the nature of the publication process, this book is a collection of the author's major journal papers, rather than a monograph. However, all chapters share a common concern: to shed light on the fundamental structure of the Thai economy. The seven chapters are divided into three parts. Chapter 1 presents an overview of the book and its basic questions. Chapter 2 focuses on export-led industrialization under the conditions of abundance; chapter 3 on demographic change, land cultivation, and deforestation; and chapter 4 primarily on the inconsistency of development policy. The second half of the book, chapters 5 to 7, revisits the question of East Asian development. These chapters offer a critical overview of modern development economics and focus on the nature of the state as a policy authority in East Asia and Thailand by pointing out the limitations of the applicability of the East Asian miracle to Thailand.Chapter 1 provides an overview of the trajectory of the development stages that took place between the 1940s and the 1990s. These were: the state-owned-enterprise-based economy of the Phibun regime in the 1940s; the private capital-led economy with national development plans and the conservative macroeconomic management of the Sarit regime in the late 1950s to 1960s; industrialization with primary product export and import substitution in 1960s; gradual conversion toward export-led industrialization while coping with the global recession of the 1970s; and serious macroeconomic imbalance and its recovery in the early 1980s. …

Some Useful Concepts for Development Economics in the Tradition ofLatinAmerican Structuralism

AbstractThe aim of this article is to provide a selective account of some of the most important conceptual contributions of theLatinAmerican structuralist tradition to the area of development economics. We argue that this account may help modern development economics theory overcome visible limitations and develop in a more fruitful way. We trace back the origin of these conceptualizations and identify some recent and scant efforts to incorporate them into the mainstream economic development literature. We try to clarify the meaning of the concepts and amplify their current economic significance for developing countries. The constructs selected are: (1) structural change, (2) structural disequilibrium, (3) bottlenecks, (4) structural heterogeneity, (5) endogenous nucleus of technological dynamization, (6) social disarticulation, and (7) conflict‐led instability.

Unternehmen als Agenten der Armutsüberwindung und Entwicklung. Ihr Beitrag aus Sicht von Ordoliberalismus und Capability-Ansatz / Corporate potentials to fight poverty and foster human development. Ordoliberalismus and Capability Approach perspectives

Zusammenfassung Potenziale von Unternehmen als Agenten der Armutsüberwindung in Entwicklungsländern stoßen in letzter Zeit auf ein verstärktes wissenschaftliches Interesse. Dieser Beitrag soll Gemeinsamkeiten, Unterschiede und Komplementaritäten von Walter Euckens Ordoliberalismus und des entwicklungsökonomischen Capability-Ansatzes aufzeigen, um konzeptionelle Rückschlüsse auf die Reichweite von Unternehmen zur Armutsüberwindung in Entwicklungsländern ziehen zu können. Zunächst wird Euckens Verständnis ordnungskonformer Sozialpolitik und der zugrundeliegenden sozialen Fragen skizziert. Bis heute sind in vielen Entwicklungsländern alle drei Typen der Euckenschen sozialen Frage anzutreffen. Wie sich diese im Capability-Ansatz konzeptionell verorten und auf welche Weise der Beitrag von Unternehmen zur Armutsüberwindung weit über einkommens- und gütermarktzentrierte Effekte hinausgeht, steht anschließend zur Diskussion. Schließlich zeigt sich, dass ordoliberale Analysen der Interdependenz von Wirtschaftsordnung und politischer Ordnung in der modernen Entwicklungsökonomik stärkere Beachtung finden müssen, um zu einer ordnungskonformen, freiheitsorientierten Konzeption unternehmerischer Potenziale in der Armutsbekämpfung zu gelangen.

‘OTHERWISE ENGAGED’

This article explores the cultural framings that all too frequently pass un-noticed in standard cost-benefit accounts of development economics. Our purpose is not simply to add our voice to those who argue for the importance of ‘bringing culture back in’, for we assume that in contexts of modern development economics ‘the cultural’ cannot simply be added to the technical or the economic, as these perspectives are explicitly elaborated as an abstraction from the cultural. Rather, we are interested in how an exploration of the cultural dynamics of technical process leads us to a disjunctive (rather than an additive) mode of ‘inclusion’. Building on approaches from science studies and social anthropology, we draw on our ethnographic and historical investigations of road-building in Peru to explore divergent modes of connectivity through which a politics of cultural engagement is played out. Taking the example of a highway under construction in a frontier zone not generally considered of economic importance to the wider national economy, we discuss the historical desire for ‘connectivity’, highlighting the instability of the physical and social environments on the margins of a marginal state. In this context we find that the vital energies of the frontier – entrepreneurial, innovative, experimental and unruly – consistently disrupt the vision of smooth, orderly, technical integration. We argue that this tension between the cultural and the technical, so clearly manifest at the frontiers of capitalist expansion (but characteristic of technological expansion more generally) is a driver rather than an obstacle in the development process. Attempts to produce a political resolution to a perceived lack of integration on the margins of society too often proceed through further attempts at securing smooth continuity (via further technical modes of intervention) rather than building on the diverse (disjunctive) modes of engagement that already exist.

Development economics, the New Institutional Economics and NGOs

Developmental NGOs are increasingly engaging with the language of economics. Economic thinking has a direct impact on NGOs through their involvement in micro-level income generation and micro finance, to macro-level advocacy and in their critiques of structural adjustment strategies. This paper provides an economic language and framework that is empathetic with wider NGO aspirations for poverty eradication and social justice. It does so by drawing on the 50 years of modern development economics and on the past decade's engagement with the New Institutional Economics. The concepts of transition costs, transaction costs and uncertainty are used to show how a future NGO role can be understood in terms of redistributing risk and uncertainty in society in favour of the poor and disadvantaged.

Cultural endowments and economic development: Implications for the Chinese economies

In this paper, I first review the pattern model that Yujiro Hayami and I have employed to map the general equilibrium relationships among resource endowments, cultural endowments, technology, and institutions. I then provide a brief review of scholarship in modern development economics of the role of cultural endowments in economic development. In a final section, I turn to the issues raised by the current interest in the role of cultural endowments in the economic development of the East Asian economies. Taking culture into account is analogous to taking resource endowments into account. But it is exceedingly important to avoid either a resource or a cultural determinist explanation.

Asian Financial Development: A Comparative Perspective of Eight Countries

Despite the exponential explosion of published work by economists writing about the problems and issues of Third World countries, there seems to be a diminution in useful knowledge about the process of economic progress. Many articles utilize formal models-assuming fixed prices and solving for employment, or vice versa. Taxpayers in donor countries are said to be suffering from aid fatigue, and recipients are doubtful about the validity of IMF-imposed conditionality requirements. Certainly, there has been no shortage of debunkers and mythshatterers in the field. A leading modern development economics text, written about ten years ago, warns the reader against believing in four exceedingly fundamentalist dogmas:

Some reflections on the presence of ‘rural’ or of ‘urban bias’ in China's development policies 1949–1976

A concept gaining widespread currency in modern development economics is that of ‘urban bias’.’ This, rather than capitalism or unequal international relationships, is now regarded by some as the most fundamental explanation for the poverty and inequality that racks so many Third World countries today, and as the main contributing factor to the deterioration in the living standards of substantial numbers of rural inhabitants reported in many.2 In the words of its progenitor, Michael Lipton: