Monday, July 20, 2015

Tyler Cowen Interview with Jeffrey Sachs

An interview between Jeffrey Sachs and Tyler Cowen. 


Jeffrey Sachs:
Now I would say if you have resource wealth, one problem is you’re likely to be invaded. You have more vulnerability to geopolitics as well as to internal politics to mess things up.
I've certainly heard about the resource curse from many economists. I've also heard it explained by multiple countries all fighting over the same pool of resource, and them all losing as a result. But I'm not sure how well this quote from Jeffrey Sachs matches up with something I heard Steven Pinker say.
Studies that look at climate stress at time 1 and organized violence at time 2 find very little relationship. Usually zero. At first people are surprised by that because they a lot of people think that wars are fought over competition over resources. Then you start to think about individual wars, and you try to think of a war that was fought over diminishing resources, it's really hard to think of any. So when you think about what are the current wars over, in Ukraine or the Islamic state, they're over ideas and ideology and nationalism and tribalism and seeking perfect justice and rectifying historic injustices. It's very hard to find a war that is fought over some pool of water or oil that two parties both want.
I found this back and forth really interesting.

I should explain this idea of clinical economics, as I’ve called it, or differential diagnosis... The purpose of a differential diagnosis is two things. First, it is of course to try to get to the core reasons so that you can make a proper prescription based on a proper diagnosis. Second, it’s done in a way that you’re minimizing serious risk.


and

I’ve listened to my wife take an oral history a thousand — thousands of times, perhaps. It’s a wonderful art, first of all, because a mother calls with a crisis of a baby or a young child — usually a high fever... The first question always that my wife asks is, “Is the baby’s neck stiff, or do you notice that?” Because that’s one of the symptoms of meningitis. If the mother answers that way, the next point is “I’ll meet you at the emergency room. Don’t stop. Just go.” Because it could be something that is fulminant and life-threatening immediately...
It’s an hour of sequenced questions down a decision tree, and it’s fascinating to watch. I wish as economists we had those basic skills inbred. I certainly didn’t learn them, and it took me a long time of seeing lots of “patients” to see that one needs that same kind of approach.

And then there's Tyler gives the libertarian critique, at least the one of the George Mason variety:

One of my worries is that the doctors are not actually in charge. It may be the lawyers, which is . . . We’re in a law school, but still, if I may say, in some ways a step down.
To some extent you have people voting on the baby, not all of whom even know who the baby is or what the baby’s symptoms are. The differential diagnostics may exist in a kind of platonic realm, but you are more optimistic about them than I am.

Jeffrey responds well:
I believe that knowledge matters and that the more clarity, the more evidence, the more appropriate an analysis, the more likely we can find a good outcome to things. Many people are cynical. I tend not to be. I’m sometimes accused of being gullible as a result, or being too soft in the face of whatever. But I believe that there’s a way to reach an agreement, typically, among pretty conflictual and often pretty antagonistic actors.I tend to believe there’s a way out of a crisis, and I tend to believe that a lot of what poses as either pure zero-sum struggle or harsh ideological conflict is often resolvable by good, clear ideas, or good, clear evidence, or a good, clear game plan.
You'll never get anywhere without the optimism Jeffrey talks about, but when the "best chance" of succeeding is not very high, shouldn't you revert your attention -- your expertise, to things you actually can change? For example:
For me, the biggest, most complicated mess that we’re in that is like the one you’re describing is climate change. Which in my now 43 years of thinking about economics, so it’s a long time, is the most complicated mess that I can imagine. It’s got every attribute of just a terrible, terrible problem. It’s global, it’s long-term, it’s uncertain. It’s got vested interests, it’s got hugely unequal payoffs, it’s got everything wrong with it as a problem.
 Okay, now, how much work are you going to put into solving global warming? One one hand it won't be solved without clarity, evidence, appropriate analysis, and knowledge... On the other hand it is the most complicated mess in his 43 years of thinking about economics, shouldn't you divert your attention elsewhere?

On another subject, his response to worries about African premature de-industrialization:

I don’t think that there’s any magic to manufacturing. What there is crucially is a need for all developing countries to export. You need to export because you need to import technology. Manufacturing has been a route to export earnings, to earning a place in the world that allows you to import the technology which 99.9 percent comes from outside your country.
The question to ask for Africa is how is it going to pay its way in the world? Not whether it’s going to have manufacturing or not.

No development economics talk is complete without a mention of China. What will happen with China now, and what do they need to do?

What’s happened of fundamental significance for the world is that East Asia has become the third growth pole in the world, or arguably the second, because for the first 200 years of modern economic growth, it was all the North Atlantic. 
You could call that two regions or one depending on how you want to define it, but it was the US and Europe that defined 90 percent of the technological advance that created the underlying dynamics to which the whole rest of the world would engage in catching up, integration, or falling under imperial rule, or whatever it was. 
Now, because of the long history of Japanese development, because of the 50-year history of Korean and Taiwanese, Hong Kong, Singapore development, and especially because of the post-1978 scale of China’s achievement, East Asia is an absolutely key, transformative growth pole of the world. This, I think, is a fundamental geopolitical, historical, and economic significance.