So, I’m in Ethiopia (without a mule, sadly), and despite a meeting schedule that could be used as a cudgel (all fascinating, of course, but for someone for whom a blank diary is a form of rapture, also a challenge) I’m having a great time. It’s a fascinating place at a fascinating time, yes; but a lot of what makes it such a great place to be hasn’t changed for a while: kitfo, coffee, and the birdlife. Apparently, so long as one has no shame whatsoever, it’s not entirely frowned upon to bring an enormous bird guide everywhere you go, including meetings. I’ve stopped short at bringing the binoculars because there’s a thin line between eccentric and crazy, and I’ve been known to use it as a jump rope in the past. Anyway. It seems like a come-down after all those amazing endemics, but on to the economics.
1. I’m here thinking about, among other things, employment. It’s a complicated and difficult subject, and a good way around that is to outsource one’s thinking to Francis Teal. Here, he considers whether it’s small firms or large firms that policy should promote, and concludes that small firms are good at generating some work, and that work – though badly paid – gets slightly better paid over time, but large firms are where economies become productive. My attempt to square this is thus: it’s the productivity gains, value-added and rents that large firms generate that are crucial to driving up the returns to working in small firms, and so neglecting them will allow you to get lots of people into some kind of work, but limits the rate at which that work becomes better paid. As Francis concludes, “Policy, not for the first time in Africa, seems to be focused on completely the wrong problem.” (Full paper here).
2. Dietrich Vollrath is the most readable and sensible growth economist out there. In development, we talk a lot about within-sector productivity growth and across-sector productivity growth, terms that are not inherently intuitive. Dietz explains them excellently here, and I encourage everyone to read it all – if the equations scare you, ignore them and read the explanation, which makes everything clear. He’s talking about the US (and briefly South Korea) here, but the intuition applies everywhere, and he summarises it thus: “You cannot talk about aggregate productivity growth without talking about both technology and the distribution of workers across sectors.” In most developing countries, the distribution of workers across sectors isn’t great, and that’s why economists keep banging on about structural transformation.
3. This week in stuff that makes me so, so angry: social protection and social policy typically evolves based on a strange mix of political expediency, short-term firefighting and ideology. They then persist for a very long time, even when circumstances render them insane. Planet Money looks at US housing support (often awarded as part of a lottery. Yes, a lottery, that’s not a typo), and explains how bad this makes coverage. (Transcript).
4. Speaking of which, here’s the promised Tim Harford post on the idea of a basic income. a typically intelligent and measured response, he concluding: “the idea appeals to three types of people: those who are comfortable with a dramatic increase in the size of the state, those who are willing to see needy people lose large sums relative to the status quo, and those who can’t add up.” I suspect category three is substantial.
5. This might be my favourite map of Japan – when you plot the location of electric car charging points, you can no longer see anything else. They might not have the charm of the decrepit and terrifying Ladas that dominate the Ethiopian taxi market, but they’re a hell of a lot greener.
6. Great LitHub piece on the decisions that underpin what a free market is, and how it looks in different contexts.
7. Lastly, because I love her, Jessa Crispin burns all her bridges. Every. Last. One. (alternative title: how to be awesome).
Have a great weekend, everyone!