Some governments used to support individual companies with a view to helping them become successful. They were known as national champions. The record was mixed, and today governments tend to concentrate more on providing a good business environment for all companies.
There may be lessons for Western governments in their development policy. They often identify foreign leaders as being worthy of celebration, with potential for embarrassment if they do not live up to their billing. As with industrial policy, the record is mixed. Often, a country's institutions, generally a product of its people and history, should be celebrated rather than the leaders.
The obvious change in development policy would be to avoid identifying with particular leaders, but instead provide support for the emergence of good governance. So instead of giving selected leaders social and other benefits, Western countries might outlaw bribery by their own companies or make market access contingent on human rights standards.
The idea is very vague, but it might have legs. I have no data on whether it would be successful.
Thursday, 8 May 2008
Successful academic papers are like hampers
I spend a lot of time reviewing academic papers, and some of them have been reviewed in the "disproportionately useful" series here. I've reached some conclusions about what makes a successful academic paper, and will explain it with a picnic analogy.
A standard published academic paper will have a few new results, enough to keep an existing area of research going, but does not pioneer. It is like a basket taken on a picnic, with some tolerable jam in it and maybe some warm salad.
A good published academic paper will have more new results, and perhaps innovates within an area. It is like a hamper taken on a picnic, with lots of food for everyone, and containing a few favourites.
A great published academic paper will have a high density of new results, and in a pioneering area. It is like a premium hamper, specially prepared for the purpose, and surprising everyone with its contents.
The hamper comparison isn't always perfect for a great paper as some of them present just a few important results. But it's picnic weather in London today, so there you go.
A standard published academic paper will have a few new results, enough to keep an existing area of research going, but does not pioneer. It is like a basket taken on a picnic, with some tolerable jam in it and maybe some warm salad.
A good published academic paper will have more new results, and perhaps innovates within an area. It is like a hamper taken on a picnic, with lots of food for everyone, and containing a few favourites.
A great published academic paper will have a high density of new results, and in a pioneering area. It is like a premium hamper, specially prepared for the purpose, and surprising everyone with its contents.
The hamper comparison isn't always perfect for a great paper as some of them present just a few important results. But it's picnic weather in London today, so there you go.
Tuesday, 6 May 2008
Principles common to business and aid allocation
There are some principles which are common to both business and aid allocation. One might be diversification, avoiding putting all the donor's or investor's money in a single recipient or region in case the project fails and there is no benefit to the commitment. Another might be avoiding sending new money to a failing project.
I wouldn't push the analogy too far, but businesspeople who are concerned about donating in the most effective way could use portfolio analysis techniques.
I wouldn't push the analogy too far, but businesspeople who are concerned about donating in the most effective way could use portfolio analysis techniques.
Business assistance in Africa
There has been a UK government call this morning for business to help with international development. Many businesspeople would like to help in the developing world if they could, but are not sure how to help. Working physically in a low income country is possible but not necessary, and there are few obvious avenues for private individuals to use their business skills there.
Local entrepreneurs and senior employees are often highly aware of the demands of business and may require similar skill building to UK managers, particularly on the international stage. Civil servants may also benefit from commercial awareness.
The highest possible impact of foreign business in development may involve facilitating and teaching about internal company capital accumulation. Information previously discussed on this blog suggests that it may be the principal source of China's sky high investment rate. The connection is so important that I will revisit the evidence presently.
Local entrepreneurs and senior employees are often highly aware of the demands of business and may require similar skill building to UK managers, particularly on the international stage. Civil servants may also benefit from commercial awareness.
The highest possible impact of foreign business in development may involve facilitating and teaching about internal company capital accumulation. Information previously discussed on this blog suggests that it may be the principal source of China's sky high investment rate. The connection is so important that I will revisit the evidence presently.
Friday, 2 May 2008
Recessions in developing and developing countries
This post could be called SSA speaks to the IMF part 2, since it discusses briefly the South African bank governor's comments (mentioned in my last post) on the chance of recession in developing countries. Some of the risks he identified are experienced by developed countries too, such as balance of trade shocks from oil price hikes and a collapse in global demand for goods. Other risks, such as fluctuations in aid flows and droughts are more specific in their impact.
The effects of recessions similarly have shared and distinct features between the two regions. A point of difference which works in favour of developing countries is that an economic downturn, at least in the early stages, can mark a substantial slowdown in accumulation of capital goods, physical and technological. In developing countries, although physical capital accumulation may slow, still quite fast technological capital accumulation may continue for utilisation during a subsequent economic upturn. The point of difference is that intellectual capital transfers from developed countries to developing countries can continue for an extent even during a recession. So a downturn may be viewed as growth deferred, rather than lost.
The observation above does not cover all forms of deskilling and disaccumulation during a recession, and these may offset the potential for growth which builds up during a downturn.
The effects of recessions similarly have shared and distinct features between the two regions. A point of difference which works in favour of developing countries is that an economic downturn, at least in the early stages, can mark a substantial slowdown in accumulation of capital goods, physical and technological. In developing countries, although physical capital accumulation may slow, still quite fast technological capital accumulation may continue for utilisation during a subsequent economic upturn. The point of difference is that intellectual capital transfers from developed countries to developing countries can continue for an extent even during a recession. So a downturn may be viewed as growth deferred, rather than lost.
The observation above does not cover all forms of deskilling and disaccumulation during a recession, and these may offset the potential for growth which builds up during a downturn.
SSA speaks to the IMF
The Governor of the South African Central Bank gave a statement at the IMF last month on behalf of twenty or so Sub-Saharan countries. The text is at http://www.imf.org/External/spring/2008/imfc/statement/eng/zaf.pdf.
The Governor gave advice on the IMF's future, of a form more usual in the other direction: how the IMF can save money, how it should reduce staff numbers, how its voting arrangements should interact with its financial ones, how it should improve its operations, and so on. The pressure might be unpleasant for the IMF, but the advice was sufficiently general to allow for flexibility in its implementation. Moreover, the IMF is supragovernmental, and a monopolistic or an oligopolistic leader in provision of finance and advice to developing countries. It faces limited pressure from competition, so some demands from users are helpful in improving it.
The Governor gave advice on the IMF's future, of a form more usual in the other direction: how the IMF can save money, how it should reduce staff numbers, how its voting arrangements should interact with its financial ones, how it should improve its operations, and so on. The pressure might be unpleasant for the IMF, but the advice was sufficiently general to allow for flexibility in its implementation. Moreover, the IMF is supragovernmental, and a monopolistic or an oligopolistic leader in provision of finance and advice to developing countries. It faces limited pressure from competition, so some demands from users are helpful in improving it.
GMM and econometrics teaching
My last post discussed the impact of GMM on econometrics theory. I would also add that the ideas behind GMM could also have an impact on econometrics teaching. The explanation is a bit technical.
In most econometrics courses, the teaching roughly follows the path that econometrics took during its discovery. So least squares is taught first, then variations on least squares, then more complex testing, then maximum likelihood estimation, and so on. Least squares is intuitively relatively appealing, so the students have an easy entry to the course. However, at some point, around the entry of two stage least squares or instrumental variables, the student has to shift from the intuitive graphical representation of least squares to the abstract representation of orthogonality. The effect is a little jarring, like cycling along at a fair rate, then peddling backwards and going down a side street some hundred metres back. If the student hasn't got the idea by then, they will struggle with the derivations of recent tests on bias in residuals, which often use orthogonality twice or more in their testing procedure.
Since GMM theory establishes the general applicability of orthogonality, it seems like a reasonable idea to introduce the whole econometrics theory with a discussion of it. Of course least squares' derivation can be retained, but it should act as a support for orthogonality in the introduction rather than being the centre of attention. The whole idea of orthogonality can be given a graphical representation for each of the types of estimator - it is only right angles in a suitable space after all, and even the founding paper of GMM could be portrayed in a child's cartoon, albeit a seriously dull one. Then the main sections of conventional analysis of each of the estimators and tests could occur.
In most econometrics courses, the teaching roughly follows the path that econometrics took during its discovery. So least squares is taught first, then variations on least squares, then more complex testing, then maximum likelihood estimation, and so on. Least squares is intuitively relatively appealing, so the students have an easy entry to the course. However, at some point, around the entry of two stage least squares or instrumental variables, the student has to shift from the intuitive graphical representation of least squares to the abstract representation of orthogonality. The effect is a little jarring, like cycling along at a fair rate, then peddling backwards and going down a side street some hundred metres back. If the student hasn't got the idea by then, they will struggle with the derivations of recent tests on bias in residuals, which often use orthogonality twice or more in their testing procedure.
Since GMM theory establishes the general applicability of orthogonality, it seems like a reasonable idea to introduce the whole econometrics theory with a discussion of it. Of course least squares' derivation can be retained, but it should act as a support for orthogonality in the introduction rather than being the centre of attention. The whole idea of orthogonality can be given a graphical representation for each of the types of estimator - it is only right angles in a suitable space after all, and even the founding paper of GMM could be portrayed in a child's cartoon, albeit a seriously dull one. Then the main sections of conventional analysis of each of the estimators and tests could occur.
Subscribe to:
Posts (Atom)