Monday, April 16, 2018

We don't know shit!

When people ask me what economic geography is about, one of the examples I give them is what I refer to as a big-picture question.  And that is: Why are some countries rich and some poor?

People always get excited about this example.  Their response is typically along the lines of "wow, I had no idea that geography includes such topics.  I would love to take your classes."

What I don't tell them is this: Don't ask me for the answer on why some countries are rich and some are poor because, well, nobody knows!

We can fairly easily explain why a country is poor.  That is not what I mean.  But, how to place a country on a path of sustained economic and social growth?  This continues to be a mystery, as it was to me when I began graduate school more than three decades ago.

The Economist addresses this metaphorical elephant in the room:
Economists have precious few hard facts about growth. They know that sustained growth in GDP per person only started in the 18th century. They know that countries can become rich only by growing steadily over long periods. They know that in some fundamental way growth is about using new technologies to become more productive and to uncover new ideas. Beyond that, almost everything is contested.
That's what I don't tell people when they ask me about economic geography.  We don't know shit!

But, this is too important a question for us to ignore. The fact that we don't know shit does not mean that we give up.  Why?
A clearer understanding of how growth happens, and why growth-boosting institutions sometimes wither or fail to take root, could raise the living standards of billions of people. The economics of growth should therefore be central to the discipline, even though the questions it poses are objectively hard, and the answers rest more in history and politics than in elegant mathematics.
Note that dig about "elegant mathematics"?  One of the reasons that I chose to go far away from from the economics folks is because of their worship of the math and statistical models, which really don't give any credible answer.  Yet, that is how the academics play their game.

The Economist wraps it up with a valuable advice:
Until they can give better answers in this area, economists should speak with greater humility about how this structural reform or that tax change might affect long-term growth. They have not earned the right to confidence.
Like I said, we need to admit that we don't know shit.

But then, Que sais-je?!

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