Everything is Everything Ep 57: How to Do Development
Jul 26, 2024
The hosts dive deep into the failures of development economics, questioning why India lags behind the US in per capita GDP. They explore the Solow model and how early optimism misjudged development's challenges. Lessons from successful nations like Taiwan and South Korea highlight crucial factors for growth. They discuss the importance of a capable state and high-productivity firms, emphasizing that societal trust and collaboration are key. The conversation critiques misguided approaches and advocates for independent thinking in development policy.
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Never Seeing A Highway As A Young Student
- Ajay recalls that when he first left for a PhD he had never seen a highway because India had virtually none then.
- This personal memory illustrates how basic infrastructure scarcity shaped postwar development thinking.
Labor Exists But Isn't Employed
- India has abundant labor and global capital access, yet two-thirds of working-age Indians are not in formal employment.
- The core development puzzle is why firms fail to absorb labor and why institutions block capital and productivity translation into jobs.
Growth Explains Poverty Reduction
- Median (or mean) national income explains about 99% of cross-country variation in poverty rates, so growth beats micro-targeted fixes.
- Raising overall incomes is the most powerful lever to reduce poverty, more than redistribution or isolated welfare programs.
