GEN talk: Procter on economic development
04/05/2012 § 4 Comments
Yesterday afternoon, the Government Economics Network (GEN) had another in its series of lectures. Roger Procter, Chief Economist of the Ministry of Economic Development, gave this one. He presented from his continuing work on what leads to economic development generally and how to apply those lessons to New Zealand. The main reference is his MED occasional paper from last year, ‘Enhancing productivity’.
Building a consistent theoretical framework is difficult, so kudos to Roger for putting this together. He brings a lot of theoretical and empirical literature to bear on the problem of how to help New Zealand develop. He also explains why there is a role for government, such as overcoming market failures that arise from innovation and information spillovers.
I talked with him after the lecture (the GEN series is intended for networking, too — please join in if you are in town!). I’m not able to comment comprehensively on the whole framework — there’s a lot to it — but here are some thoughts:
- I’m not sure what the right scale of analysis is. We can look at the macro policy frameworks, which tend to be pretty good in New Zealand. At the micro level, my research tends to find that what people and firms actually do isn’t as neat and tidy as we like to believe. And that means that policy may need to be more flexible/specialised/nuanced. Tyler Cowen’s comments (h/t Offsetting Behaviour) on the state of his industry are instructive (and not unusual):
what I see around me is a total, total mess.
- It’s really hard to see how to keep good intentions from becoming bad policy. Paul Walker over at Anti-Dismal often takes this on, for example on policy around exports. A good policy, as Roger shows, might help by increasing scale and agglomeration. In particular, increasing exports so that New Zealand firms can take advantage of economies of scale would improve economic efficiency. But, how do you keep that policy from becoming simply mercantilism — exporting for its own sake?
- Two key parts of Roger’s suggestions are greater national savings and macro conditions supportive of exporters. We can turn those around. Greater savings is the same as less consumption, and conditions that support exporters harm importers. It’s important to consider both sides. This was the origin of my post and subsequent discussion in comments with Roger earlier on the Briefing to the Incoming Minister. In a nutshell, the plan is to consume less and have more left over for production and investment.
Judging from the seminar, Roger’s report is worth a read. It will provide good material for thought and discussion, whether you agree with it or not.