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1 Why Societies Stay Stuck in Bad Equilibrium: Insights From
Why Societies Stay Stuck in Bad Equilibrium: Insights from Happiness Studies amidst Prosperity and Adversity Carol Graham1 The Brookings Institution Paper presented to the IZA Conference on Frontiers in Labor Economics: The Economics of Well-Being and Happiness October 2009 Some individuals who are destitute report to be happy, while others who are very wealthy report to be miserable. There are many possible explanations for this paradox; this paper focuses on the role of adaptation. Adaptation is the subject of much work in economics, but its definition is a psychological one. Adaptations are defense mechanisms; there are bad ones like paranoia, and healthy ones like humor, anticipation, and sublimation. Set point theory – which is the subject of much debate in psychology – posits that people can adapt to anything – such as bad health, divorce, and extreme poverty – and return to a natural level of cheerfulness. My research from around the world, meanwhile, suggests that people are remarkably adaptable. Respondents in Afghanistan, for example, are as happy as Latin Americans and 20% more likely to smile in a day than Cubans. I posit that while this may be a good thing from an individual psychological perspective, it may also facilitate collective tolerance for bad equilibrium. I provide examples from the economics, democracy, crime, corruption and health arenas. 1 The author is Senior Fellow and Charles Robinson Chair at the Brookings Institution and College Park Professor at the University of Maryland. She would like to thank the participants at a Legatum Institute symposium in London in June 2009 for their helpful comments, as well as Bruno Frey and Sabina Alkatire for more detailed reviews. -
Capitalists and Revolution
CAPITALISTS AND REVOLUTION Rose J. Spalding Working Paper #202 - March 1994 Rose J. Spalding, residential fellow at the Institute during the fall semester 1991, is Associate Professor of Political Science at DePaul University. Her publications include The Political Economy of Revolutionary Nicaragua (Boston: Allen and Unwin, 1987) and Capitalists and Revolution: Opposition and Accommodation in Nicaragua, 1979-1992 (Chapel Hill, NC: University of North Carolina Press, forthcoming 1994). Research for this paper was conducted with support from the College of Liberal Arts and Sciences and University Research Council of DePaul University, the Social Science Research Council and American Council of Learned Societies, and the Heinz Endowment. ABSTRACT This paper explores the relationship between the state and the economic elite during four cases of structural reform. Analyzing state-capital relations in Chile under the Allende government, El Salvador following the 1979 reforms, Mexico during the Cárdenas era, and Peru under the Velasco regime, the author finds substantial variation in the ways in which the business elite responded to state-led reform efforts. In the first two cases, the bourgeoisie tended to unite in opposition to the regime; in the second two, it was relatively fragmented and notable sectors sought an accommodation with the regime. To explain this variation, the paper focuses on the role of five factors: the degree to which class hegemony is exercised by a traditional oligarchy; the level of organizational autonomy attained by business elites; the perception of a class-based threat; the degree to which the regime consolidates politically; and the viability of the economic model introduced by the reform regime. -
Modern Monetary Theory: Cautionary Tales from Latin America
Modern Monetary Theory: Cautionary Tales from Latin America Sebastian Edwards* Economics Working Paper 19106 HOOVER INSTITUTION 434 GALVEZ MALL STANFORD UNIVERSITY STANFORD, CA 94305-6010 April 25, 2019 According to Modern Monetary Theory (MMT) it is possible to use expansive monetary policy – money creation by the central bank (i.e. the Federal Reserve) – to finance large fiscal deficits that will ensure full employment and good jobs for everyone, through a “jobs guarantee” program. In this paper I analyze some of Latin America’s historical episodes with MMT-type policies (Chile, Peru. Argentina, and Venezuela). The analysis uses the framework developed by Dornbusch and Edwards (1990, 1991) for studying macroeconomic populism. The four experiments studied in this paper ended up badly, with runaway inflation, huge currency devaluations, and precipitous real wage declines. These experiences offer a cautionary tale for MMT enthusiasts.† JEL Nos: E12, E42, E61, F31 Keywords: Modern Monetary Theory, central bank, inflation, Latin America, hyperinflation The Hoover Institution Economics Working Paper Series allows authors to distribute research for discussion and comment among other researchers. Working papers reflect the views of the author and not the views of the Hoover Institution. * Henry Ford II Distinguished Professor, Anderson Graduate School of Management, UCLA † I have benefited from discussions with Ed Leamer, José De Gregorio, Scott Sumner, and Alejandra Cox. I thank Doug Irwin and John Taylor for their support. 1 1. Introduction During the last few years an apparently new and revolutionary idea has emerged in economic policy circles in the United States: Modern Monetary Theory (MMT). The central tenet of this view is that it is possible to use expansive monetary policy – money creation by the central bank (i.e. -
The Macroeconomics of Populism in Latin America
This PDF is a selection from an out-of-print volume from the National Bureau of Economic Research Volume Title: The Macroeconomics of Populism in Latin America Volume Author/Editor: Rudiger Dornbusch and Sebastian Edwards, editors Volume Publisher: University of Chicago Press Volume ISBN: 0-226-15843-8 Volume URL: http://www.nber.org/books/dorn91-1 Conference Date: May 18-19, 1990 Publication Date: January 1991 Chapter Title: The Macroeconomics of Populism Chapter Author: Rudiger Dornbusch, Sebastian Edwards Chapter URL: http://www.nber.org/chapters/c8295 Chapter pages in book: (p. 7 - 13) 1 The Macroeconomics of Populism Rudiger Dornbusch and Sebastian Edwards Latin America’s economic history seems to repeat itself endlessly, following irregular and dramatic cycles. This sense of circularity is particularly striking with respect to the use of populist macroeconomic policies for distributive purposes. Again and again, and in country after country, policymakers have embraced economic programs that rely heavily on the use of expansive fiscal and credit policies and overvalued currency to accelerate growth and redistrib- ute income. In implementing these policies, there has usually been no concern for the existence of fiscal and foreign exchange constraints. After a short pe- riod of economic growth and recovery, bottlenecks develop provoking unsus- tainable macroeconomic pressures that, at the end, result in the plummeting of real wages and severe balance of payment difficulties. The final outcome of these experiments has generally been galloping inflation, crisis, and the col- lapse of the economic system. In the aftermath of these experiments there is no other alternative left but to implement, typically with the help of the Inter- national Monetary Fund (IMF), a drastically restrictive and costly stabiliza- tion program. -
Curriculum Vitae Carol Lee Graham
CURRICULUM VITAE CAROL LEE GRAHAM CURRENT POSITIONS Leo Pasvolsky Senior Fellow, Global Economy and Development Program, The Brookings Institution College Park Professor, School of Public Policy, University of Maryland Senior Scientist, the Gallup Organization Research Fellow, Institute for the Study of Labor (IZA), Bonn Expertise: poverty, inequality, subjective well-being, economics of happiness; development economics PREVIOUS POSITIONS Professor, School of Public Policy, University of Maryland, 2005-2008. Co-Director, Center on Social and Economic Dynamics, and Senior Fellow, Economic Studies, The Brookings Institution, 1998-2006. Vice President and Director, Governance Studies Program, The Brookings Institution, July 2002-June 2004. Visiting Professor, Department of Economics, Johns Hopkins University, 1999-2000 Special Advisor to the Deputy Managing Director, International Monetary Fund Fall, 2001. Special Advisor to the Executive Vice President, Inter-American Development Bank, 1997-98. Visiting Fellow, World Bank, Office of the Chief Economist and Vice Presidency for Human Resources, 1994-95. Participated in design and implementation of safety net programs in Latin America and Eastern Europe. Developed comparative research project on political sustainability of reform. Georgetown University, Department of Government, Adjunct Professor, 1990-1994. Guest Scholar, Foreign Policy Studies, The Brookings Institution, 1990 - 1994. Research on safety nets and the sustainability of economic reform in Latin America, Africa, and Eastern Europe. Funded by World Bank, IDB, and the MacArthur Foundation. Duke University, Department of Political Science, Assistant Professor, August 1989 - May 1990. Carol Lee Graham/2 of 24 02/18/18 EDUCATION 1980-1984 Princeton University - A.B. (High Honors) Woodrow Wilson School of Public and International Affairs 1985-1986 The Johns Hopkins University School of Advanced International Studies - M.A. -
Capital Controls, Sudden Stops, and Current Account Reversals
This PDF is a selection from a published volume from the National Bureau of Economic Research Volume Title: Capital Controls and Capital Flows in Emerging Economies: Policies, Practices and Consequences Volume Author/Editor: Sebastian Edwards, editor Volume Publisher: University of Chicago Press Volume ISBN: 0-226-18497-8 Volume URL: http://www.nber.org/books/edwa06-1 Conference Date: December 16-18, 2004 Publication Date: May 2007 Title: Capital Controls, Sudden Stops, and Current Account Reversals Author: Sebastian Edwards URL: http://www.nber.org/chapters/c0149 2 Capital Controls, Sudden Stops, and Current Account Reversals Sebastian Edwards 2.1 Introduction During the last few years a number of authors have argued that free cap- ital mobility produces macroeconomic instability and contributes to fi- nancial vulnerability in the emerging nations. For example, in his critique of the U.S. Treasury and the International Monetary Fund (IMF), Stiglitz (2002) has argued that pressuring emerging and transition countries to re- lax controls on capital mobility during the 1990s was a huge mistake. Ac- cording to him, the easing of controls on capital mobility was at the center of most (if not all) currency crises in the emerging markets during the last decade—Mexico in 1994, East Asia in 1997, Russia in 1998, Brazil in 1999, Turkey in 2001, and Argentina in 2002. These days, even the IMF seems to criticize free capital mobility and to provide (at least some) support for capital controls. Indeed, on a visit to Malaysia in September 2003 Horst Koehler, then the IMF’s managing director, praised the policies of Prime Minister Mahathir, and in particular his use of capital controls in the after- math of the 1997 currency crisis (Beattie 2003). -
Left Behind Latin America and the False Promise of Populism
Left Behind Latin America and the False Promise of Populism Sebastian Edwards THE UNIVERSITY OF CHICAGO PRESS I CHICAGO AND LONDON Contents Preface xi 1 Latin America: The Eternal Land of the Future 1 • The Economic Future of Latin America and the United States • From the Washington Consensus to the Resurgence of Populism: A Brief Overview - The Main Argument: A Summary • A Conceptual Framework: The Economic Prosperity of -. Nations and the Mechanics of Successful Growth Transitions PART ONE A Long Decline: From Independence to the Washington Consensus 2 Latin America's Decline: A Long Historical View 21 • A Gradual and Persistent Decline j The Poverty of Institutions and Long-Term Mediocrity - Currency Crises, Instability, and Inflation - Inequality and Poverty - So Far from God, and So Close to the United States 3 From the Alliance for Progress to the Washington Consensus 47 • The Cuban Revolution and the Alliance for Progress • Protectionism and. Social Conditions ' Informality and Unemployment • Fiscal Profligacy, Monetary Largesse, Instability, and Currency Crises • - Oil Shocks and Debt Crisis • The Lost Decade, Market Reforms, and the Washington Consensus PART TWO The Washington Consensus and the Recurrence of Crises, 1989-2002 4 Fractured Liberalism: Latin Americas Incomplete Reforms 71 • Institutions and Economic Performance - Institutions Interrupted: A Latin American Scorecard - Economic Policy Reform: A Decalogue Manque * Summing Up: Mediocre Policies and Weak Institutions v __^ 5 Chile, Latin America's Brightest Star 101 * -
Robert E. Litan's CV
CURRICULUM VITAE Robert E. Litan Home and Office Address 2018 Hogan Dr. Lawrence, Ks. 66047 [email protected] [email protected] Affilations and Employment 2014- Partner, Korein Tillery law firm (St. Louis and Chicago), specializing in Antitrust and other complex business litigation 2017- Non-Resident Senior Fellow, The Brookings Institution, Washington, D.C. Research on regulation, financial institutions, general economic policy 2019- Independent columnist on sports law and economics, The Athletic 2015-17 Adjunct Senior Fellow, Council on Foreign Relations Overseeing a seminar series on how global cities can encourage Entrepreneurship; Research on trade and domestic adjustment to it 2015-17 Co-Chair, Insurance Reform Task Force, Bipartisan Policy Center 2014-15 Non-resident Senior Fellow, The Brookings Institution, Washington, D.C. Authoring studies of regulation, financial institutions and entrepreneurship 2015- Visiting Senior Policy Scholar, Georgetown University, McDonough School of Business, Center for Business & Public Policy 2014-16 Regular Contributor, Wall Street Journal “Think Tank” Blog 2014-18 Special Consultant, Economists, Inc., Washington, D.C. 2012-14 Director of Research, Bloomberg-Government, Washington, D.C. Oversaw a team of analysts covering business impact of federal governmental decisions; authoring weekly columns on a wide range of policy topics behind the BGov paywall (and sometimes for Bloomberg.com). 2007-09 Contributing Editor, Inc Magazine 2003-12 Vice President, Research and Policy, Ewing Marion -
Insights from Happiness Studies from Around the World Downloaded From
Adaptation amidst Prosperity and Adversity: Insights from Happiness Studies from around the World Downloaded from Carol Graham Some individuals who are destitute report to be happy, while others who are very wbro.oxfordjournals.org wealthy report to be miserable. There are many possible explanations for this paradox; the author focuses on the role of adaptation. Adaptation is the subject of much work in economics, but its definition is a psychological one. Adaptations are defense mechanisms; there are bad ones like paranoia, and healthy ones like humor, anticipation, and sublima- tion. Set point theory—which is the subject of much debate in psychology—posits that people can adapt to anything, such as bad health, divorce, and extreme poverty, and at Joint Bank/Fund Library on February 7, 2011 return to a natural level of cheerfulness. The author’s research from around the world suggests that people are remarkably adaptable. Respondents in Afghanistan are as happy as Latin Americans and 20 percent more likely to smile in a day than Cubans. The find- ings suggest that while this may be a good thing from an individual psychological per- spective, it may also shed insights into different development outcomes, including collective tolerance for bad equilibrium. The author provides examples from the econ- omics, democracy, crime, corruption, and health arenas. JEL codes: I31, I32 When I sell liquor, it’s called bootlegging; when my patrons serve it on Lake Shore Drive, it’s called hospitality. (Al Capone) In the past few years there has been a burgeoning literature on the economics of happiness. While the understanding and pursuit of happiness has been a topic for philosophers—and psychologists—for decades, it is a novel one for economists. -
CAROL LEE GRAHAM CURRENT POSITIONS Leo Pasvolsky
CAROL LEE GRAHAM CURRENT POSITIONS Leo Pasvolsky Senior Fellow, Global Economy and Development Program, The Brookings Institution College Park Professor, School of Public Policy, University of Maryland Senior Scientist, The Gallup Organization Research Fellow, Institute for the Study of Labor (IZA), Bonn Expertise: poverty, inequality, subjective well-being, economics of happiness; development economics Regions: Latin American, Africa, Eastern Europe; U.S. PREVIOUS POSITIONS Professor, School of Public Policy, University of Maryland, 2005-2008. Co-Director, Center on Social and Economic Dynamics, and Senior Fellow, Economic Studies, The Brookings Institution, 1998-2006. Vice President and Director, Governance Studies Program, The Brookings Institution, July 2002-June 2004. Visiting Professor, Department of Economics, Johns Hopkins University, 1999-2000 Special Advisor to the Deputy Managing Director, International Monetary Fund Fall, 2001. Special Advisor to the Executive Vice President, Inter-American Development Bank, 1997-98. Visiting Fellow, World Bank, Office of the Chief Economist and Vice Presidency for Human Resources, 1994-95. Participated in design and implementation of safety net programs in Latin America and Eastern Europe. Developed comparative research project on political sustainability of reform. Georgetown University, Department of Government, Adjunct Professor, 1990-1994. Guest Scholar, Foreign Policy Studies, The Brookings Institution, 1990 - 1994. Research on safety nets and the sustainability of economic reform in Latin America, Africa, and Eastern Europe. Funded by World Bank, IDB, and the MacArthur Foundation. Carol Lee Graham/2 of 24 12/18/20 Duke University, Department of Political Science, Assistant Professor, August 1989 - May 1990. EDUCATION 1980-1984 Princeton University - A.B. (High Honors) Woodrow Wilson School of Public and International Affairs 1985-1986 The Johns Hopkins University School of Advanced International Studies - M.A. -
Nber Working Paper Series Latin America's Decline: A
NBER WORKING PAPER SERIES LATIN AMERICA'S DECLINE: A LONG HISTORICAL VIEW Sebastian Edwards Working Paper 15171 http://www.nber.org/papers/w15171 NATIONAL BUREAU OF ECONOMIC RESEARCH 1050 Massachusetts Avenue Cambridge, MA 02138 July 2009 ¸˛I thank Alberto Naudon and Jéssica Roldán for their excellent assistance and comments. The views expressed herein are those of the author(s) and do not necessarily reflect the views of the National Bureau of Economic Research. NBER working papers are circulated for discussion and comment purposes. They have not been peer- reviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications. © 2009 by Sebastian Edwards. All rights reserved. Short sections of text, not to exceed two paragraphs, may be quoted without explicit permission provided that full credit, including © notice, is given to the source. Latin America's Decline: A Long Historical View Sebastian Edwards NBER Working Paper No. 15171 July 2009 JEL No. F30,F32,N26,O40,O54 ABSTRACT In this paper I analyze Latin America's very long term economic performance (since the early 18th century), and I compare it with that of the United States, Australia, New Zealand and the countries of Western Europe. I begin with an analysis of long term data and an attempt at determining when the region's decline really began. The next section deals with the relation between the strength of institutions since colonial rule and the region’s economic performance. Next I move to an analysis of Latin America's long history with instability, crises and debt defaults. -
Curriculum Vitae
CURRICULUM VITAE James A. Robinson University of Chicago Harris School of Public Policy 1307 E 60th St, Chicago, IL 60637 Telephone: (773) 702 6364 E-Mail: [email protected] Website: http://scholar.harris.uchicago.edu/jamesrobinson Nationality: British, USA Education: Ph.D. Yale University, 1993 M.A. University of Warwick, 1985-1986 BSc. (Econ) London School of Economics and Political Science, 1979-1982 Main Fields: Political Economy and Comparative Politics. Economic and Political Development. Current Positions: Reverend Dr. Richard L. Pearson Professor of Global Conflict Studies, since July 1, 2016. University Professor, University of Chicago, since July 1, 2015. Previous Positions: Wilbur A. Cowett Professor of Government, Harvard University, July 1, 2014- June 30, 2015. David Florence Professor of Government, Harvard University, July 1, 2009-June 30, 2014. Professor of Government, Harvard University, July 1, 2004-June 30, 2009. Associate Professor of Political Science and Economics, University of California at Berkeley, July 1, 2001-June 30, 2004. Assistant Professor of Political Science, University of California at Berkeley, July 1, 1999-July 1 2001. Assistant Professor of Economics, University of Southern California, September 1, 1995- June 30, 1999. Lecturer in Economics, University of Melbourne, September 1, 1992-August 30, 1995. Other Activities: Director of the Pearson Institute for the Study and Resolution of Global Conflicts since July 1, 2016. Academic Adviser to the World Bank’s World Development Report 2017. Member of the board of the Global Development Network, January 1, 2009 – December 31, 2011. Member of the Swedish Development Policy Council, a committee advising the Swedish Foreign Minister on Sweden’s International Development Policy, 2007-2010.