Creative Capitalism, under the direction of Michael Kinsley and Conor Clarke, has assembled some of the biggest names in economics to discuss Bill Gates' proposal for a new kind of capitalism ("creative capitalism") aimed at helping the poorest countries. It's a great idea for a blog, and eventually the posts will be made into a book. At first, though, the discussion at Creative Capitalism seemed to be dominated by knee-jerk free market fundamentalism, and sounded more like the Wall Street Journal editorial page than an intelligent discussion among top economists. For example, Steven Landsburg offered up one of the most breathtakingly idiotic statements I've seen in quite a while:
I feel reasonably confident that the single best strategy for fighting tropical diseases over the next fifteen years would be to turn sub-Saharan Africa into a free trade zone.Really? That would be news to Dani Rodrik, one of the top development economists in the world, who is fond of noting that "no country has developed simply by opening itself up to foreign trade and investment." In fact, in a well-known review of the empirical literature on trade, Rodriguez and Rodrik found "little evidence that open trade policies—in the sense of lower tariff and non-tariff barriers to trade—are significantly associated with economic growth." (The point of Rodriguez and Rodrik's paper wasn't to say that open trade policies impede economic growth; the paper was concerned instead with the methodological weaknesses of prominent papers claiming to establish that open trade policies lead to economic growth.) In general, it's fair to say that the consensus among economists is that "openness to the global economy is a necessary, though not sufficient, condition for sustained growth." To confidently assert that the answer to tropical diseases in sub-Saharan Africa is trade liberalization is naïve in extremis. Obviously, Landsburg is bringing a knife to a gun fight. Similarly, Judge Posner offered up an exceedingly simplistic argument against creative capitalism, based almost entirely on an application of Econ 101. In the process, Posner criticized Ed Glaeser for suggesting that creative capitalism might give rise to an alternative to the conventional for-profit firm, better suited to the task at hand. I was a little disappointed that Glaeser—who is one of my favorite economists—responded so timidly. He certainly has the ammunition for a forceful response, having done work on "not-for-profit entrepreneus" and related topics before. Luckily, the true heavyweights (e.g., Glaeser, Michael Kremer, Abhijit Banerjee) have started to step in and provide some adult supervision. Kremer, specifically, has been eviscerating the simplistic, WSJ-editorial-page arguments. I'm still waiting for the other heavyweights—Dani Rodrik in particular, but also Edmund Phelps and a few others—to weigh in. Hopefully they'll weigh in soon.