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Saturday, 28 March 2015

On the Kindle

I recently stumbled on this book Economics for the Curious: Inside the mind of 12 Nobel laureates. As it says on the strap line, it is basically a collection of short articles from 12 Nobel laureates in economics edited by the Nobel laureate Robert Solow.

There are some good essays in there (e.g. Krugman on "depression economics"), but also some difficult ones follow (e.g. Nash on game theory). My favorite one was from Finn E Kydland on policy commitment. Here is a great quote on Ireland that sums up the importance of credible policy commitment :
An opposite example is Ireland over that same time period, from 1990 until the early 2000s. Starting in the 1960s and 1970s, Ireland had made secondary education free of charge. As a consequence, by 1990 the nation found itself with a potentially skillful workforce, but not enough factories and machines with which to put all of these skills to use. So the government decided to do their best to remove any uncertainty about future taxation. They announced that if you set up shop in Ireland, whether an Irish citizen or a foreigner, these will be your (not very high) tax rates in 1992, 1993, and so on, all the way to 2009. Of course there may have been other favorable factors as well. The bottom line is that Ireland grew spectacularly (have you heard of the Celtic Tiger?). In the course of about a dozen years it went from being one of the lower per- capita- income countries in Western Europe to one of the highest.
That quote resonated well with me because it is timely in view of the challenges Zambia is facing is facing in ensuring policy commitment which has caused turbulence to the Kwacha recently. But it is also helpful because it illustrates the importance (and difficult) of integrity to human flourishing. Without trust markets cannot work very well. And yet human nature naturally erodes trust - so the challenge of policy makers usually is how to design policy that gets round human propensity to fallibility or inconsistency.

Chola Mukanga
Copyright © Zambian Economist 2015

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