Paul Romer Is the Bank's New Chief Economist

Paul Romer is the bank’s new chief economist July 18, 2016 – The Economist It has been a while since a chief economist of hotbeds for the creation and transmission of the World Bank attracted much attention. In ideas. That focus, in turn, sparked a radical the 1990s, when Larry Summers and Joseph notion of economic development oriented Stiglitz held the job, those occupying the around “charter cities”. Poor countries, he position were often at the centre of heated argued, should create new cities and give them debates on economic policy. Mr Stiglitz, a leeway to experiment with daring economic fierce critic of the conditions imposed by and political reforms. Such reforms should be international organisations like the easier to implement on the relatively blank International Monetary Fund on countries slate of a charter city than in existing affected by the crises of the late 1990s, was population centres. Such new cities might then dismissed from the position for his heresies. follow the model of Hong Kong or Shenzhen, Since then chief economists have been less becoming economic powerhouses in their own outspoken. right, as well as proof for the rest of the economy of the benefits of economic reform. Mr Romer made a name for himself in the 1980s and 1990s, when the hottest topic in Mr Romer has sought to interest governments macroeconomics was growth—in particular, in the idea, so far without much success. He why some countries managed it while others ended his involvement with an experiment in did not. Prevailing models of growth assigned Honduras over worries about accountability an important role to technological change, but within the proposed charter city. His new lacked a convincing explanation for how it platform at the World Bank will presumably came about. Instead, the models treated new give the idea a boost. ideas a bit like manna from heaven, arriving in More recently Mr Romer has upbraided his a mysterious and unpredictable manner. fellow economists. He criticises the growing Mr Romer sought to change that. His work taste for obscure prose and “mathiness”— made the development of new ideas arcane equations in economic papers that are “endogenous”, meaning that it sought to so hard to follow they allow their authors to account for them, rather than writing them off avoid close scrutiny. If economics is to benefit as “exogenous” surprises. In his “endogenous society, he argues, researchers need to make growth” theory, new ideas materialise as firms arguments which are clear enough to be invest in physical capital or research and understood, tested and disproved. development, creating knowledge that spills Many question the relevance of the World over to the rest of the economy. That suggests Bank in a world in which China, which has that open economies, with institutions that long defied the World Bank’s prescriptions, is encourage investment in physical and human the poster child for development and is capital, ought to do best. building an alternative set of development The importance of the quality of institutions institutions. The sort of bold and challenging and of the dissemination of innovation led Mr ideas for which Mr Romer is known might be Romer to focus on urban areas, which are often just what it needs. .

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