FOO Law and Economics

Monday, January 26, 2009

Mystery of Economic Growth - a book review

The theme in Elhanan Helpman's book (The Mystery of Economic Growth, 2004; Harvard University Press) is that institutions matter more than anything else when we try to answer the question of why a country is poor. His conclusion is not obvious to many, especially non-economists, and Helpman succeeds only to some extent, though in my view it is not his fault.

The field of development economics has been one of many schools, each trying like the six blind men to describe an elephant. Helpman should get the credit for cutting through these schools. A thoughtful reader would understand that for economic growth, savings (sacrifice) and investment are not enough, that diffusion of technology does not explain very much, but that research on institutions is the key. The most important institutions are: property and contract rights, the rule of law, and constraints on the power of rulers. Of course, institutions are not established overnight, and their creation may itself be a mystery of its own.

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Economics as Zen

The market is like a post-impressionist painting.. The close view is no more real than the far view.. That is all.
-- Deirdre McCloskey

Ponzi units ... make position by selling out positions.
-- Hyman Minsky

Words ought to be a little wild, for they are the assaults of thoughts on the unthinking.
-- John Maynard Keynes

The wish is father to the thought.. What it means is that the wish is the father of faith.
-- Ludwig von Mises

T. S. Eliot wrote about the bottoms of trousers worn rolled

Having long toiled within a behemoth, I have since decamped to a quiet bay, at times on a single outrigger. I contemplate how social order and the economy interact. And what it's all about.

I've come to realize, painfully, that opportunity cost shatters the lenses of artificial privilege and self-delusion -- either you can or can't, whatever be the object. Why? Because opportunity cost is the next best thing.

Contemplation works.

-- Orlando Roncesvalles