We Remember September 11, 2001
Brookings Panel on Economic Activity Conference Blogging II

Brookings Panel on Economic Activity Conference Blogging I

Session 1: Dani Rodrik (2008), "The Real Exchange Rate and Economic Growth." Some notes:

Undervaluation does two things. It shifts your employment and production toward export and import-competing tradeables-producing industries. It also gives you lousy terms of trade. Dani wants to argue that the first is good--that there are powerful wedges which make emerging-markets countries, especially, prone to have too small a share of employment and production in those export and import-competing tradeables-producing industries. But the second has to be bad for growth.

I realize that this is the room in which Charlie Schultze back in 1984 carried out his intellectual police action against the industrial-policy tradeables-subsidizing faction of Gary Hart, Bob Reich and company. And it seems that you don't you want to push your argument further and say that--at least with a relatively-autonomous, technocratic state apparatus, at least for emerging-markets economies--that Gary, Ira, Bob, and company were right. Why not? You identify market failures, and then you say that direct subsidies to neutralize them run into problems of implementation--but I want to see you spend more time on the implicit theory of government failure that underlies your conclusion that depressing the value of your currency is the best strategic intervention that a government can undertake. There must be a strongly-held view of government failure underlying this conclusion. What is it?

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