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The art of economic development: markets, politics, and externalities

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BauerPeter T.. Reality and Rhetoric: Studies in the Economics of Development. Cambridge, Mass.: Harvard University Press, 1984.
EdwardsSebastian. Real Exchange Rates, Devaluation, and Adjustment. Cambridge, Mass.: MIT Press, 1989.
LaiDeepak. The Poverty of ‘Development Economics.’Cambridge, Mass.: Harvard University Press, 1985.

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Published online by Cambridge University Press:  22 May 2009

Wing Thye Woo
Wing Thye Woo
Affiliation:
Assistant Professor of Economics and Head of the Pacific Rim Studies Program at the University of California, Davis.
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International Organization , Volume 44 , Issue 3 , Summer 1990 , pp. 403 - 429
Copyright
Copyright © The IO Foundation 1990

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References

I am grateful to Edward Chen, Max Corden, Sebastian Edwards, Anne Hay, Albert Hirschman, Lovell Jarvis, Chalmers Johnson, Moshe Justman, Stephen Krasner, Anne Krueger, Ian Little, Jeffrey Sachs, Steven Sheffrin, Jennie Woo, and two anonymous referees for valuable comments on early drafts of this article. I remain indebted as always to the late Professor George Andrews Hay for intellectual mentorship on development issues. I thank Wen Hai and Hong Yi Li for excellent research assistance.

1. Cited in Yotopoulos, Pan A. and Nugent, Jeffrey B., Economics of Development: Empirical Investigations (New York: Harper & Row, 1976), p. 3, fn 1Google Scholar.

2. See Hirschman, Albert O., “The Rise and Decline of Development Economics,” in Hirschman's, Essays in Trespassing: Economics to Politics and Beyond (Cambridge: Cambridge University Press, 1981), pp. 1–24Google Scholar; and Lai, The Poverty of ‘Development Economics’.

3. The first use of the term “activist” was by Okun, Arthur in “Fiscal-Monetary Activism: Some Analytical Issues,” Brookings Papers on Economic Activity, no. 1, 1972, pp. 123–63CrossRefGoogle Scholar. The term was then publicly embraced by Franco Modigliani in his presidential address to the American Economics Association, “The Monetarist Controversy, or Should We Forsake Stabilization Policy?” American Economic Review 67 (03 1977), pp. 1–19Google Scholar.

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16. Myrdal presented the special reasons for protection in underdeveloped countries in An International Economy (New York: Harper Torchbooks, 1956), pp. 275–79Google Scholar, and he recognized that export of manufactured goods would perform the same functions. His strong objections to continued economic ties to the West are developed in Economic Theory and Underdeveloped Regions.

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20. Ibid., p. 403.

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22. Ibid., p. 5. The principle of the hiding hand is thus an early statement of the “learning-by-doing” literature and of the human potential movement.

23. Myrdal, Gunner, Asian Drama (New York: Pantheon, 1968)Google Scholar.

24. The two earlier collections of Bauer's, Peter essays are Dissent on Development (Cambridge, Mass.: Harvard University Press, 1971)Google Scholar and Equality, the Third World and Economic Development (Cambridge, Mass.: Harvard University Press, 1981)Google Scholar.

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27. Ibid., p. 57.

28. Ibid., p. 156.

29. Ibid., p. 43.

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33. Adelman, Irma and Morris, Cynthia, Economic Growth and Social Equity in Developing Countries (Stanford, Calif.: Stanford University Press, 1973), p. 179Google Scholar. The limited time series evidence now available suggests an indeterminate relationship. Fields, for example, found impoverishment of the poorest groups in three of twelve countries in his sample. See Fields, Gary S., “Income Distribution and Economic Growth,” in Ranis, and Schultz, , The State of Development Economics, pp. 459–81Google Scholar.

34. See Schumacher, E. F., Small Is Beautiful: Economics as If People Mattered (New York: Harper & Row, 1973)Google Scholar; Haq, Mahbub ul, The Poverty Curtain: Choices for the Third World (New York: Columbia University Press, 1976)Google Scholar; Lele, Uma, The Design of Rural Development: Lessons from Africa (Baltimore, Md.: Johns Hopkins University Press, 1975)Google Scholar; and Timmer, Peter et al. , The Choice ofTechnology in Developing Countries: Some Cautionary Tales (Cambridge, Mass.: Harvard University Center for International Affairs, 1975)Google Scholar.

35. For a thorough treatment of ERP, see Corden, W. M., The Theory of Protection (Oxford: Oxford University Press, 1971)Google Scholar. Appendix I of the book gives the history of the development of the ERP measure.

36. See Balassa, Bela, Development Strategies in Semi-Industrial Economies (Baltimore, Md.: Johns Hopkins University Press, 1982)Google Scholar; Bhagwati, Jagdish, Anatomy and Consequences of Exchange Control Regimes (Cambridge, Mass.: Ballinger, 1978)Google Scholar; Krueger, Anne O., Liberalization Attempts and Consequences (Cambridge, Mass.: Ballinger, 1978)Google Scholar; and Little, Ian, Scott, Maurice, and Scitovsky, Tibor, Industry and Trade in Some Developing Countries (Oxford: Oxford University Press, 1970)Google Scholar.

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38. There are, of course, numerous systems to classify policies. Bradford and Branson have proposed a broader spectrum of classification in “Patterns of Trade and Structural Change,” in Bradford, Colin I. and Branson, William H., eds., Trade and Structural Change in Pacific Asia (Chicago: University of Chicago Press, 1987), chap. 1CrossRefGoogle Scholar. The theoretical inconsistency and empirical emptiness of their classification scheme has been discussed in an earlier review; see Woo, Wing Thye, “Review of Trade and Structural Change in Pacific Asia,’ Journal of International Economics 25 (07 1988), pp. 199–204CrossRefGoogle Scholar.

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41. Friedman, Milton, A Monetary History of the United States (Princeton, N.J.: Princeton University Press, 1963)Google Scholar.

42. See Bank, World, World Development Report (Oxford: Oxford University Press, various years)Google Scholar.

43. See Edwards, Real Exchange Rates, Devaluation, and Adjustment; and Lin, Latin America Versus East Asia.

44. Lin, Latin America Versus East Asia.

45. See Edwards, Real Exchange Rates, Devaluation, and Adjustment; and Lin, Latin America Versus East Asia.

46. Edwards, Real Exchange Rates, Devaluation, and Adjustment.

47. Lai, , The Poverty of ‘Development Economics,’ p. 109Google Scholar.

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49. Ranis, Gustav and Fei, John, “Development Economics: What Next?” in Ranis, and Schuitz, , The State of Development Economics, p. 103Google Scholar.

50. Ibid., p. 130.

51. Ibid.

52. Findlay, Ronald, “Trade, Development, and the State,” in Ranis, and Schultz, , The State of Development Economics, pp. 78–99Google Scholar.

53. Ibid., p. 91.

54. Ranis, and Fei, , “Development Economics: What Next?” p. 101Google Scholar.

55. Ibid., p. 110.

56. Sachs, Jeffrey, “External Debt and Macroeconomic Performance in Latin America and East Asia,” Brookings Papers on Economic Activity, no. 2, 1985, especially pp. 548–65Google Scholar. East Asia in Sachs' usage includes Southeast Asia.

57. Ibid.

58. The exception is the brief interlude of emergency rule in 1975–77.

59. Woo, Wing Thye, “The Economic Policy-Making Equation in Indonesia,” Pacific Rim Studies Program Working Paper no. 5, University of California, Davis, 1988Google Scholar.

60. This implies that the constraints are not binding.

61. See Johnson, Chalmers, “Political Institutions and Economic Performance: The Government Business Relationship in Japan, South Korea, and Taiwan,” in Scalapino, Robert, Sato, Seizaburo, and Wanandi, Jusuf, eds., Asian Economic Development: Present and Future (Berkeley: University of California Institute of East Asian Studies, 1985), pp. 63–89Google Scholar; and Pye, Lucian, “The New Asian Capitalism: A Political Portrait,” in Berger, Peter and Hsiao, Michael, eds., In Search of an East Asian Developent Model (New Brunswick, N.J.: Transaction Books, 1988), pp. 81–98Google Scholar.

62. Johnson, , “Political Institutions and Economic Performance,” p. 67Google Scholar.

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65. JrLucas, Robert E., “On the Mechanics of Economic Development,” Journal of Monetary Economics 22 (07 1988), p. 14CrossRefGoogle Scholar.

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68. Li, , The Evolution of Policy Behind Taiwan's Development Success, pp. 104 and 142Google Scholar.

69. Ibid., p. 106.

70. Jennie Hay Woo, “Taiwan as a Case of Successful Educational Planning,” World Development, forthcoming.

71. Li, , The Evolution of Policy Behind Taiwan's Development Success, p. 147Google Scholar.

72. Woo, “The Economic Policy-Making Equation in Indonesia.”

73. Lai, , The Poverty of‘Development Economics,’ p. 46Google Scholar.

74. Johnson, Chalmers, MITI and the Japanese Miracle: The Growth of Industrial Policy, 1925–1975 (Stanford, Calif.: Stanford University Press, 1982)Google Scholar.

75. Lucas, , “On the Mechanics of Economic Development,” p. 12Google Scholar.

76. The slope of the balanced growth path is known as the steady-state growth rate, and it equals the sum of the population growth rate and the rate of technical innovation. The trade regime can affect the slope only if it affects either of these two rates.