Worldly Philosopher: The Odyssey of Albert O. Hirschman by Jeremy Adelman is one of my all time favorite books.
In a world where economists live and die in an ideologically driven parochial view; Hirschman's micro economic solutions are based on his experiences and reality - they will outlive all of us and hopefully make this planet a little better place for all living beings.
If you haven't read it (you should) then check out Oliver Kim's summary of Hirschman's timeless wisdom:
Hirschman, however, was not so easily impressed. Having seen firsthand the difficulties of getting things done on the ground—and the arrogance of foreign planners—he was skeptical of the grand promises made by the balanced growth theorists. During his fellowship at Yale, he worked furiously at a rebuttal–a project that eventually became his 1958 classic, The Strategy of Economic Development. In it, Hirschman set out to slay the dragon of the Big Push, and replace it with a theory more grounded in reality.
Hirschman’s main critique of balanced growth stems from a simple observation. “If a country were ready to apply the doctrine of balanced growth,” he writes, “then it would not be underdeveloped in the first place.” The capabilities needed to successfully kickstart the “modern sector” in one go–the systems of organization, the scientific and technical knowledge–are precisely the ones that need to be nurtured by the development process. In other words, balanced growth theory provides the correct but unhelpful diagnosis that a country’s failure to modernize stems from its lack of modernity.
Rosenstein-Rodan’s Big Push tries to solve the problem by starting the modern sector all at once, grafting it like foreign tissue onto the traditional agrarian economy. But even if the graft somehow sticks, Hirschman observes that the results can be quite unpleasant. A common outcome is a dualist economy, which you’ll still often see today around the world—a gleaming modern sector of skyscrapers and shopping malls, next to a traditional agrarian sector that remains desperately poor. Further examples are the persistent gulf in Latin America between indígenas and mestizos, and the foreign-owned plantations that are islands of “modernity” surrounded by seas of poverty.
[---]
The solution Hirschman proposes is unbalanced growth. Instead of trying to solve all problems all at once, policy-makers should push forward in a limited number of sectors, and use the reactions and disequilibria created by those interventions to inform their next move.
Take the example of an industrial district. With limited resources, a policymaker may have to choose between building the actual factories, or laying down the highways and power-plants (what he calls Social Overhead Capital) to supply it.
[---]
Hirschman formalizes this insight with his famous notion of backward and forward linkages. Backward linkages are the demand created by a new industry for its inputs, like steel for an auto plant or milk for a cheesemaker. Forward linkages are the reverse—the knock-on effects of a new industry’s outputs on the firms it supplies. Backward linkages, Hirschman goes on to explain, are better at spurring growth than forward ones. Rather than plopping down a steel factory somewhere, with no customers assured, it is far easier to build the auto plant first, sourcing the car parts from other countries as needed, then gradually entice local producers to enter the market. Instead of a Big Push across all industries at once, Hirschman calls for the Targeted Strike–choose the sectors with the most potential to create demand for other inputs, and support those.
Ahead of his time for economics, Hirschman also argues that the “nonmarket” responses induced by a policy change may be just as important as market ones. If, say, the factories in the industrial zone face a shortage of trained workers, the locals may clamor for new schools. Or if the trucks congest their neighborhood roads, they may pressure their local officials to improve the highway. Politics cannot be separated from economics when thinking about developmental choices.
Hirschman’s theory of unbalanced growth is rooted in empiricism, allowing policy makers to test and gauge the reactions of the specific context rather than applying some universal formula. It recognizes that development is naturally a chaotic, messy process, much closer to a “chain of disequilibria” than the result of a master plan. To paraphrase another important development thinker, Hirschman’s unbalanced growth is the modest call to cross the river by feeling the stones, one intervention at a time.
[---]
Far too many Wisdom of the Ancients pieces—those op-eds that claim Adam Smith had it all right, if only you hadn’t dozed through The Wealth of Nations; or Marx saw it all coming, it’s just all in the endnotes to Capital Volume III–end up wringing their hands in despair, bemoaning what their chosen prophet would think if they saw the state of economics today.
But not so with Albert Hirschman.
Since Krugman wrote his 1995 essay, development economics has undergone another intellectual upheaval. Highly formalized growth models are still around, but the center of gravity has shifted decisively towards randomized control trials (RCTs) and micro-level evidence—a more Hirschmanian approach if there ever was one. The 2019 Nobel Prize to Abhijit Banerjee, Esther Duflo, and Michael Kremer was, in a sense, just a belated recognition of this de facto intellectual triumph.
The methodological switch to RCTs has not been without controversy; I’ll leave that whole debate aside for another time. But the randomista revolution remains underrated in one crucial respect. Running RCTs has forced a whole generation of economists to leave their desks, go to the countries they study, and talk to the people who live there. In Chris Blattman’s words, we’re all Hirschman now—tramping through fields, collecting our own data, trying our best to not let theory obscure the evidence of our eyes. It’s not hard to see Hirschman’s ghost wandering through the Busia offices of Innovations for Poverty Action, nodding his head in wry approval.
No comments:
Post a Comment