Economics Moving Target

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Economics

&

Moving

Targets

I a J Azis ija @ o ell.edu

Basic

Premises

• E o o i g o th a e li ked to k o ledge

p odu tio , ad a ed skills, a d isi g de a d fo

highe edu atio t o‐ a ausalit

• U i e sities go e o d a o o fi es of

a ade ia, to e e t al to de elop e t a ati e

• “pe di g su ge, isi g i t a & e t a o ilit

• Qualit gap‐‐i t a a d e t a— e ai s; a d highe

edu atio eeds to adjust to the speed a d atu e

of ha ges a oss the glo e

–U fa o a le: k o ledge e te p ise as pu li good is o p o ised due to o e ializatio .

(2)

Centuries

of

Rise

&

Fall

• P e ‐

th

_{e tu : Chi a’s i e tio of}

gu po de , o pass, p i ti g p ess

• ‐

th

_{e tu : i dust ial e olutio & g eat}

di e ge e

•

th

_{e tu : A e i a e tu}

•

st

_{e tu : As e di g Asia….. hose e tu ?}

Lesso s: self‐dest u t: is o du t of those ithi

the ou t ; e i o e t/ li ate; geog aph ;

ultu e; eligio ; poli ies; i stitutio s

(3)

Convergences

Problems

. Dis uptio i atu al o de s: populatio &

e o o i g o th outpa es the apa it of

atu al s ste s affe ti g the a s hu a

ei gs o ga ize the sel es, ausi g

dist i utio of flo a a d fau a to ha ge

. Te h olog o e ea h & to se e o l a s all

sha e of populatio to li e e o d the ea s



isis & g o i g i e ualit

. C u li g of so e esta lished e o o i

theo ies/ odels

Policies

Theories/

Models

Data/

Measurements

Objectives/

Targets

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Development

Data Systems and Measurement

of Performance

Interrelationships for Research in Economic Development

-Import substitution - Industrialization - SOC & urban infrastructure GDP growth

National income accounting

- Stages of growth, take off

- Minimum requirement criteria

- Aggregate investment Objectives/Targets

Theories/Models Data/Measurements Policies

I a Azis

1970s

-GDP growth - Employment - Income distribution - Poverty (“basic needs”) - External equilibrium

- Integrated rural development - Comprehensive employment

strategy

- Redistribution w/ growth - Asset distribution - Radical collectivist

-Rural development - Informal sector - Rural-urban migration - Appropriate technology - Growth-employment trade off - Dependency theory

- SOC

- Multiple objectives

- Early forms of CGE (non-SAM) - Sectoral planning

- National income accounting - IO Table

- Employment census - Integrated rural survey - Informal sector survey - Demographic survey

Objectives/Targets Policies

Theories/Models Data/Measurements

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• Stabilisation

• External (balance-of-payments)

equilibrium

• Internal (budgetary and monetary) equilibrium • Structural adjustment • Efficiency

•Endogenous growth

•Link between trade & growth •Interrelationships between human capital & tech transfer •New institutional economics and role of institutions •Interlocking factor markets •Markets (e.g. outward orientation vs. Intervention) •Policy Analysis and Measurement

•Impact of fiscal & trade policy •CGE models str adjustment

•Stabilisation and structural adjustment

•Outward orientation •Reliance on markets •Privatisation

•Minimisation of role of government

•Social Accounting Matrix (SAMs) and whole set of data shown in 1970s Chart

•Comprehensive disaggregated

large-scale income expenditure

•Good governance/institution building

•Resurgance of poverty reduction

•Financial crisis avoidance •Limiting globalization & liberalization

•Role of institutions

•Path-dependence & policy endogeneity

•Monopolistic competition & role of market & intervention •Economics of corruption •Role of social capital •Sources of growth & TFP •Growth regression

•CGE modeling on impact of crisis, policy response & structural policies

•Extending East Asian miracle •Continued deregulation •Improve socio-economic conditions

•Appropriate financial regulation

•Improved Social Accounting Matrix (SAMs)

•Comprehensive

disaggregated large-scale income expenditure household surveys

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2000s

• “a e o je ti es as i s Cha t ith st o ge e phasis o uestio i g the Washi gto Co se sus

• MDG: Hu a de elop e t e.g. edu atio a d health,

e i o e t

• “DG

• QE & Fi a ial sta ilizatio

• I e ualit %‐ %

• Ca o li it & t adi g

• Ma aged glo alizatio a d egio al i teg atio

• P o‐poo g o th

• Ma op ude tial

• Fi a ial i lusio

• Multiple e uili ia

• “e o d‐ est fi a ial de egulatio

• E doge eit u se & i stitutio

• Co t ol a d a do ized e pe i e ts & age t‐ ased

• Mi o‐ a o si ulatio odels

• Beha io al studies & eu o‐ e o o i s

•Pa el data

•Ma o & Fi s’ ala e sheet

•Mo e detailed apital flo s data & easu es

•Fi a ial “AM ith o e i o‐ le el household/i di idual data a d i teg ated FOF

•Beha io ‐fo used & pe eptio su e s

Objectives/Targets

Theories/Models _{Data/Measurements} Policies

• Feed a k & spillo e s i a o‐ elfa e li kages e.g., g o th‐ i e ualit ‐po e t e us

• “ha i g e o o i s suppl ‐fi st, de sit ‐ o u it ‐t ust d i e

I a Azis

21

st

_Century

?

Objectives/Targets Policies

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• Growing interactions & complexity:

un related links

• Amplification, agents’ behavior:

pro‐cyclicality

• )nstitution

• Methodology

• Evolution of theories/models

G

A. Sources

of

Flaws

(examples)

B. Concepts/Theories/Models

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* Connectedness: the density of the lines represents all the connections; thicker lines represent more significant connections among entities * Post GFC: banks red lines and sovereigns black lines are more noticeable and have greater reach across the globe R. Merton et.al,

P e‐GFC

Post‐GFC

I a Azis

(9)

“ou e: Azis & “hi , Managing Elevated Risks, “p i ge

Bala ce

Sheet

‐ Ma age e t

‐ Accou ti g

Volatility Spillo e a d Pe siste e

Leh a ollapse EU so e eig de t isis

(10)

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Things

to

Consider

• Limit of unfettered market, mechanical behavior &

probabilistic.

• Myth of perfect self‐regulating equilibrium &

agents’ behavior K. Arrow: wrong assumption that

agents protect themselves

• Cognitive and emotional factors: psychology &

biology brain evidence



far from deductive R.

Solow:

“If

you

don't

know

what

you're

doing,

for

heaven's

sake

do

it

gently”

• Breadth of socio‐political & historical perspective

• Economics’ inability to tame science , e.g., creative

destruction & to make predictions of real major

events, e.g., crisis, new markets, sharing economy



Kuhn & Popper’s unpredictability of scientific

discovery and innovation?

Humility!

Theory & Models

S

Perception & Judgment about the case/situation

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On

University

• Too u h dis ussio s o a ki g & a editatio . Yet, the a e ot a elia le a dsti k of p og ess i edu atio a d p o e to ga i g. Top u i e sities esta lished & se ed so ial eeds

efo e a hi g out to est of the ou t a d the o ld.

• The e idea of the u i e sit is a i defi a le agg egatio of ideas a d i fo atio , of hu a it a d easo , of

i agi atio a d a al sis: a eposito of k o ledge, a ho e fo i stitutio alized i uisiti e ess; a a etake of the

a etake s of the futu e

• I a ou t ies, i ludi g de eloped ou t ies, toda ’s highe edu atio is ad ift a d u e tai a out its a , ith i o ies a d o t adi tio s: “lo / et og essed affo da ilit , a essi ilit a d ualit ; Questio a le o t i utio to s ie tifi p og ess a d so iet ; U happ o stitue ies

Unhappy

Constituents?

• Pa e ts & stude ts:st esses & te sio s of gai i g ad issio a ade ia st i ed to agg a ate, allo p epa ato i stitutio s‐

o sulta ts to g o ith p i e; high osts & tuitio

• Stude ts:get u e gaged o o e u de ed tea he s, as the latte tu i to o t a to s ho de ote the ti e to thei o esea h. Not k o i g tea he e ough to ask

• Tea he :u de paid, la k of e efits health a e , a ultiple jo s, a d o dis etio a i o e fo esea h a d o fe e es Ha u i e sit ’s t o ost alua le assets!

• U i e sity:a e pushed to i ease size of appli a t pools, less i depe de e. Wealthie s hools ha e the lu u to

e pe i e t e o d apa it a d e ulated othe s

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On

Teaching

(e.g.,

Economics)

• Lea a dis ipli e o e tl the fi st ti e tha ha e to u lea it a d o e t it su se ue tl . It is e t e el diffi ult to u lea so ethi g o e o e is so ialized i to a epti g the ai te ets of the dis ipli e ithout lea i g the ualifi atio s.

• Topi s like fi a ial i sta ilit , p ospe t theo , satisfi i g, elati e i o e, o as et i i fo atio a e ot so

o pli ated a d a e e plai ed easil at the le el. Negle ti g the disto ts e o o i theo that stude ts thi k f ee a kets a o k pe fe tl ell ithout go e e tal o e sight a d egulatio , pe fe tl o petiti e odel ith pe fe t i fo atio ithout u e tai t

• P o le : E o is o ei ed as to p epa e stude ts fo i te ediate theo ou ses. Yet, ajo it do ’t take othe e o o i s ou ses so e e e posed to o e ua ed e sio of the dis ipli e a d a e the efo e i do t i ated fo the est of thei li es fo i g toda ’s i telle tual li ate

On

Research

• U i e sities to fu d esea h i te all is a e. Added/sha ed ost paid f o o sou es & othe s tuitio fills the gap?

• Co oditizatio diffe e t f o o e ializatio of highe edu atio , o lo ge o atio . A hie e e t is ased o

isi ilit a d e te al statu e, a d a ade ia’s see i g

elu ta e, i eptitude a d ultu e of o te t e t satisfied ith o o ditio u i dful of othe s . Yet, the ke is d i e to e el fo itself a d to o e o e othe s’

• Use of u i uitous, e ulous, u h a used te e elle e edu es pote tial fo o igi alit a d self‐a a e ess

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