Cross-posted from KPC. Angus 3:16

I see that “improve your WB ease of doing business score” policy advice has cropped up again on the interwebs (I’m lookin’ at you, Alex T.).

In my own special bombastic way, I’ve had a lot to say on this topic so I thought I’d collect much of it here and expand on the issue/problem.

1. To the extent there is a correlation between the “doing business” index and per-capita GDP, it is a very loose relationship whereby countries with very similar scores have very different outcomes.

Sadly, this is true of almost all institutional indicators, as Hausmann, Pritchett and Rodrik showed us lo these many years ago.

2. Even though there may be a historical correlation between “doing business” and incomes, it is far from clear that it is either causal or exploitable. The exploitability point is kind of a Lucas Critique point. If we see such a reduced form relationship in historical data, treating it as exploitable (i.e. targeting index improvements as a path to higher incomes) is pretty risky. Incredibly, some countries are making improving their scores a policy goal. Ricardo Hausmann has a nice piece on why this can be problematic. And, Matt Andrews has written a book about how countries are adopting “good looking” but not actually good, governance.

3. As Dreimeier & Pritchett show, it is often the case that the outcomes reported by the index, which is compiled by surveying “experts”  are not really related to the actual experience of business people in the country under study. This is the usual de facto vs. de jure issue that plagues many expert compiled indices.

People, we know that North Korea is poor and South Korea is rich. We know that East Germany was poor when West Germany was rich. But we really do not know in any reliable way, what macro policy advice will ensure development success. Really and truly. “Adopt the observed policies and forms of the rich countries” has been offered as advice by the IFIs for decades with very uneven results. Measures of institutions across countries are converging, but per-capita output across countries is not.

Dollarization in the Spirit World

Cambodia (and Vietnam) have a holiday where wealth is injected into the spirit world by burning effigies of the items to be given to the ancestors.



Cash is king, but Cambodians have never favored their domestic currency, the Rial. In the old days it was fake gold that was commonly burned, but in the brave new world of Southeast Asian capitalism, the dollar is now king.

Suck it, goldbugs!!

I can’t think of a better endorsement of our Federal Reserve.

The article link above is well worth a full reading.


Time to get a new electricity minister

How do you know when it’s time to replace your electricity minister?

Well if you are in Venezuela and you are facing terrible water shortages (in part because of a drought and in good part because of corruption and government mismanagement), your electricity minister probably shouldn’t be tweeting this:

Screenshot 2016-04-04 20.59.55.png

Yep, there’s the Electricity Minister himself (what a strange cabinet posting) pointing at the thunderstorm and proclaiming that God is on Venezuela’s side.  Interesting interpretation.  No comment about why God sent Venezuela a terrible drought in the first place and an even more terrible government!

h/t to a great article in the WSJ on the topic




Poop like a politician

Almost immediately after coming to power in India, Prime Minister Modi launched a campaign to clean up the country (called Clean India).  He asked“After so many years of independence, do we still want to live in filthiness? Can’t we resolve this much?”   His goal was pretty lofty too, (over) promising that “we will have a country where there is not even a speck of dirt in our village, city, street, area, school, temple and hospital.”

Modi launched the Clean India campaign in 2014 by urging bureaucrats to celebrate the 150th anniversary of Gandhi’s birth by sweeping instead of taking the day off:

“All staff were “requested” to come to work on Thursday by 9am and take a “cleanliness pledge”, promising to devote at least 100 hours every year – or two hours a week – to cleaning up, then pick up the broom and start cleaning immediately. As proof, before and after photographs have to be submitted.”

You can imagine how thrilled the bureaucrats were when they heard the news. I love the part about the before and after pics too.

Well, apparently there is still dirt to be removed and the Clean India campaign continues. The government is emphasizing the importance of ending “open defecation” and claims the it will “install 110 million toilets nationwide by 2019.”  This seems like an important goal since 40% of the population lack access to “safe, functioning commodes.”

For a number of reasons, the campaign isn’t going so well. One of the reasons seems to be cultural, in that many poor households have a long list of goods they would like to buy before adding a toilet to the house.  The article reports that a recent study used “survey data to rank 21 basic consumer goods in the order that Indian households would prefer to acquire them. According to their analysis, toilets ranked 12th — meaning a poor family would buy a television, a pressure cooker or a motorcycle before it acquired a toilet.”

So now there is growing demand for politicians to be role models when it comes to toilet use.  Seriously.

“The western state of Maharashtra this past week became the latest to pass a law requiring those running in municipal and village-level elections to present proof that they have access to working toilets. Five Indian states — with combined populations of nearly 400 million people, or roughly one-third of the country — have enacted similar legislation over the past two years.”

Opponents of the bill argue that rules like this “disqualify many poor candidates as well as those living in urban areas who use shared public toilets.”  The government eventually agreed and decided that candidates only needed to produce a certificate saying they had access to a “functioning toilet.”   I wonder which ministry is in charge of issuing these certificates… At least you can forget about framing any fancy diplomas when decorating your new office–you can just proudly display your toilet certificate instead!



My favorite journalist strikes again

This time, my man Mehdi make mincemeat out of one, Michael Hayden (ex-CIA boss) on whether water boarding is torture.

The best bit is to watch Hayden’s about face when Mehdi says, so you are OK with Assad water boarding prisoners.

Hayden is too damn dumb to keep his stay out of jail story straight!