The oldest questions are the most important. Adam Smith started it with his [amazon_link id=”0199535922″ target=”_blank” ]Inquiry into the Nature and Causes of the Wealth of Nations[/amazon_link]. Over time, the developed world has come to take prosperity for granted (it might be changing), and the question has focused on why some countries have remained poor. As Bill Easterly’s book labelled it, it was [amazon_link id=”0262550423″ target=”_blank” ]The Elusive Quest for Growth[/amazon_link]. There is now a new contribution by Justin Yifu Lin, until recently the World Bank’s first non-western chief economist, [amazon_link id=”0691155895″ target=”_blank” ]The Quest for Prosperity: How Developing Economies Can Take Off[/amazon_link]. It will be a must-read for anyone interested in development economics, and for anyone rethinking the role of industrial policy in developed economies too.

I’ve always thought ‘growth miracle’ was exactly the right term for the handful of experiences of catch-up in the post-WW2 era: rare and dramatic. Each example has also had its own special characteristics; generalisation into standard policy prescriptions is difficult, and the most widely applied prescription – the so-called Washington Consensus – is discredited. So it would seem either brave or foolhardy to offer an alternative. But I think this book offers a very credible general prescription which inherently recognises that every country will need to adapt this to its own circumstances. Not surprisingly, in this post-crisis economic moonscape, Lin ditches everything about the Washington Consensus but its sensible macroeconomic stability measures. Not surprisingly, for a Chinese economist, he assumes an important role for the government, albeit a role a large and growing number of conventional neoclassical economists will find sensible.

In a nutshell, the argument is that countries must play to their comparative advantage. A resource-rich African country with ample labour but little capital (human or physical) is foolish to opt for an import-substitution policy aiming at the capital-intensive top of the value chain – as so many newly independent countries tried in the 1960s and 70s. On the other hand, they absolutely should aim to substitute simpler manufactures for imports. Import substitution of this realistic kind – a link or two along the value chain – is a “necessary step”. Often the investment and expertise will come from inward FDI.

The government should identify the kinds of activity that play to comparative advantage and strategic potential, and provide the infrastructure that will be needed. This is not ‘picking winners’ but it is making choices, as different sectors will require different infrastructure priorities. Lin calls it a ‘new structural economics’:

“It sees the state as a facilitator that helps a developing country convert its backward structure to a more modern structure in an open market economy.”

Post-crisis, it sounds more like common sense than a grand new theory, but then economists are on quite a journey these days. Lin distinguishes it, though, from an older structural economics associated with ‘big push’ development theory, in endogenising the direction in which the state should be pushing.The ideal industrial structure will change as the economy develops but will always be guided by the resources and skills available at each stage. At each stage, the market is the best allocation mechanism, but the state needs to enable development by investing in infrastructure that reduces firms’ transactions costs and enables them to compete viably in international markets. This includes ‘soft’ infrastructure. For example, freight and insurance costs in many African countries are 250% of the global average, and road transportation takes two or three times longer than in comparator Asian countries.

The book also distinguishes this framework from the approach of pre-crisis mainstream structural adjustment economics, which made the mistake, he argues, of advocating the removal of economic distortions without understanding that the distortions were second-best workarounds of strategically mistaken state support for firms that are not viable given the resources and skills available.

It is a bit dismissive of the other recent hot new trend in development economics, the use of randomised control trials, as described in Banerjee and Duflo’s [amazon_link id=”1586487981″ target=”_blank” ]Poor Economics[/amazon_link]. Lin says these are of limited use as the results do not generalise. But then, his top-down framework does not generalise either; in fact he specifically says country-specific context makes a difference for policy. It would have been nice to see him engage more with the RCT approach.

Clearly, the framework can apply to any country at any stage of development along the spectrum, and the book has a useful checklist for policymakers. Its level of generality is high, but a prescription for growth that does not say ‘all you have to do is X’ is very welcome. After a century of misfired silver bullets, some endogenous policy prescriptions are very welcome. Lin sums up his approach for me with an apt Chinese proverb: “One cannot pull up the seedlings to make them grow.”

[amazon_image id=”0691155895″ link=”true” target=”_blank” size=”medium” ]The Quest for Prosperity: How Developing Economies Can Take Off[/amazon_image]

On the train in the searing (although doubtless brief) London summer, I read a reissue of E.B.White’s 1948 essay [amazon_link id=”1892145022″ target=”_blank” ]Here is New York[/amazon_link] – written in the sultry dog days of the August of that year. It’s a delightful essay. This leapt out:

“The collision and the intermingling of these millions of foreign-born people representing so many races and creeds make New York a permanent exhibit of the phenomenon of one world. The citizens of New York are tolerant not only from disposition but from necessity. The city has to be tolerant, otherwise it would explode in a radioactive cloud of hate and rancor and bigotry. If people were to depart even briefly from the peace of cosmopolitan intercourse, the town would blow up higher than a kite. In New York smoulders every race problem there is, but the noticeable thing is not the problem but the inviolate truce.”

[amazon_image id=”1892145022″ link=”true” target=”_blank” size=”medium” ]Here is New York. With a new introduction by Roger Angell[/amazon_image]

For New York in 1948, substitute London in 2012, or any other successful global city. I wrote in [amazon_link id=”0691145180″ target=”_blank” ]The Economics of Enough[/amazon_link] about this paradox of the high degree of trust manifest in these cities, at a time when trust in so many traditional institutions and political organisations is plummeting. As the Olympics starts, the combination of impatience and tolerance towards strangers of all kinds is on ample display in London. I’ve just ordered Craig Taylor’s [amazon_link id=”184708253X” target=”_blank” ]Londoners[/amazon_link] and am really looking forward to it as one of my summer holiday reads.

[amazon_image id=”184708253X” link=”true” target=”_blank” size=”medium” ]Londoners: The Days and Nights of London Now, As Told by Those Who Love It, Hate It, Live It, Left It and Long for It[/amazon_image]

An extraordinary event took place, almost unnoticed, at the University of York last week – 30 female economists, ten of them professors, met to set up a mentoring scheme for women in the profession. Organiser Professor Karen Mumford, the chair of the RES Women’s Committee, said: “Women are under-represented in this discipline. In 1992, there was just one female  economics professor in the UK and, although things have improved dramatically, they are still  relatively rare.”

The figures are depressing, despite the improvement. In 1997, just five per cent of professors of Economics in UK universities were women;  10 per cent of senior lecturers and 15 per cent of lecturers. The figures now have risen to 10 per cent, 20 per cent and 30 per cent respectively. The proportion of women among economics students is higher again, and the balance in sixth forms is nearly even. In other words, more girls and women get squeezed or discouraged out at every stage as they progress along the professional pathway.

No doubt there are many causes. In the London-based Women Economists Network Amanda Rowlatt and I set up several years ago (still going strong), we found there are many more women working in the government service than the private sector, and more in applied economics jobs than in academia. The conditions for working mothers are better in the public sector than elsewhere, and academic career tracks are extraordinarily difficult to combine with a family. The structure of the REF (and its predecessors) is institutionally sexist because of the requirement to publish lots of papers during prime child-bearing years. There are sociological reasons too – economics is socially more like engineering than like political science or anthropology. Some women believe that females are too sensible to buy into the intellectual character of neoclassical economics – I don’t buy this argument myself.

Anyway, intertwined causes mean easy solutions are unlikely. But the mentoring scheme for academic women economists launched at York is very welcome.

The most powerful book on this subject I’ve read recently is [amazon_link id=”069108940X” target=”_blank” ]Women Don’t Ask[/amazon_link] by  Linda Babcokc and Sara Laschever. It offers a simple but depressing solution to the gender pay gap: women need to ask for higher pay as so often we quietly expect merit to be recognised and rewarded. But when we do ask, the men pay up – and dislike us for it.

[amazon_image id=”069108940X” link=”true” target=”_blank” size=”medium” ]Women Don’t Ask: Negotiation and the Gender Divide[/amazon_image]

At the charity bookstall on the way to the park on Saturday I picked up a copy of Tom Stoppard’s [amazon_link id=”0571165702″ target=”_blank” ]Television Plays[/amazon_link] and have read Professional Foul, which I still remember seeing on the BBC when it was broadcast in 1977 (there’s a clip on YouTube). In Stoppard’s characteristically brilliant way, it combines wit, sharp political comment and insight into people’s weaknesses, in the setting of a group of lefty British academics attending a conference in Communist Prague. There is an important football match taking place, and one of the academics is in contact with a dissident.

Of course, in the late 1970s the fall of the Communist regimes seemed a dream so distant as to be delusional. Like many children of my time, I’d had occasional nightmares about the Cold War resulting in nuclear attacks – a nightmare of being the only person left in a devastated landscape of ash. Being set in its time, the play might have felt like a period piece.

But in fact, its ruminations about the nature of the collective organisation of society stand the test of time. (Its acidly funny critique of academic jealousy is timeless, too.) The most appealing thing about Stoppard’s world view is its reasonableness. As this dialogue puts it:

McKENDRICK: “The mistake most people make is, they think a moral principle is indefinitely extendible, that it holds good for any situation. ….. There’s a point, the catastrophe point, where your progress along one line of behaviour jumps you into the opposite line; the principle reverses itself at the point where a rational man would abandon it.”

CHETWYN: “Then it’s not a principle.”

McKENDRICK: “There aren’t any principles in your sense. There are only a lot of principled people trying to behave as if there were.”

[amazon_image id=”0571165702″ link=”true” target=”_blank” size=”medium” ]The Television Plays, 1965-84 (Play Series)[/amazon_image]