What Does Economics Say About Institutions For Growth
1. What does economics say about institutions for growth
A Panel Presentation at the iiG Workshop and CSAE Conference 2012
Economic Development in Africa
Alemayehu Seyoum Taffesse
March 18, 2012
I. Approach
I will briefly recount the story of the formation and evolution of an
organization, highlight why it succeeded, subsequently identify
three lessons relevant to the study/impact of institutions for
growth, and conclude with a couple of implications/suggestions.
1. The story of the EEA;
2. What can we learn/ surmise from the story;
3. Implications to institutions for growth
II. A case study – EEA’s formation and evolution;
1. The state of economics in Ethiopia circa 1991
i. No economics specific journal;
ii. The top university department has no PC;
iii. Papers published on the Ethiopian economy – very few
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2. 2. The state of economics in Ethiopia circa 2012;
i. Economic analysis on/in Ethiopia has matured
considerably in the last two decades or so. This is in part
explained by the following:
The demand for economic research has grown
considerably. Reforms and other aspects of policy
choice generated greater appreciation of the role
economic research can play. Increasingly, this
appreciation has led to the use of economic analysis
as one basis of policy formulation.
In part as a consequence, the incentives to doing
research have improved substantially over the years.
Indeed, we now have a large number people and
organizations who have specialized in doing
economic research;
More resources are available to do economic
research. These include not only funding, but also an
increasing number of well-trained economists.
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3. 3. EEA’s role and transformation - State at formation, Current
state;
Item Establishment Current (2010)
(1991)
Membership Less than 100 More than 3000 (Indian
economics Association,
1917)
Office a small office a fully functioning
manned by a part- Secretariat
time staffer
Assets a few hundred a 5-story large multi-purpose
Birr building
Publications a newsletter multiple regular publications
including Quarterly Macro-
economic Report, Annual
Economic Report, Bi-annual
Ethiopian Journal Economics,
and conference proceedings
Dissemination, a simple regional and international
communicatio roundtable conferences and many
n discussion thematic discussion fora
Research Ethiopian Economic Policy
Research Institute (EEPRI) -
2000
Many observers have publicly identified EEA as one of the most, if not
the most, successful professional associations in the area of economics
in Africa.
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4. III. Impact
1. Changed the rules of the game – coordination (information),
values (incentives), memory (knowledge, attention,
coordination) [Impact – Has achieved a change in how
economics is perceived and done]
i. Journal (19 volumes, 38 issues, more than 120 articles);
Report on the Ethiopian economy (10 volumes since 2001
– reference materials);
International Only
Journal EJE
Period Journal Ethiopian
Articles Articles
Articles Authors
1969-2010 431 114 317 106
1969-1990 6.3 0 8.5 9.4
1991-1995 7.7 72.7 2.8 13.2
1996-2000 16.2 42.9 12.6 18.9
2001-2005 31.1 22.4 32.8 18.9
2006-2010 38.7 18.0 43.2 39.6
ii. Conferences – 9 annual international conferences on the
Ethiopian Economy (something like this conference and
research on African economies)
2. High Stature
i. Invited to all important public meetings on economic
policy;
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5. ii. Work with international, national, and regional
organizations in the public, private, and non-
governmental sectors;
IV. Why
1. Circumstances changed for the better
2. A group of individuals with vision, commitment – aspiration
leading to action produced the outcome;
[I want to quote from the inaugural address of Dr. Eshetu
Chole, the first president of the EEA. He expressed his vision
as follows:
“My vision is that, by the time it celebrates its twentieth
anniversary, it will have expanded its membership
substantially; established a reputation as a respectable
repository of professional knowledge; accumulated a
distinguished record of research and publications; further
advanced the cause of public education in economics; earned
the respect of the public and contributed in several tangible
ways to the economic advancement of Ethiopia.”]
V. Implications;
1. Opportunities matter, but opportunities can be passed or
opportunities can be ‘endogenously’ created;
2. Aspirations matter;
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6. 3. Individuals (or leadership) matters – symmetry breaking (the
mother of all symmetry breakers is the Higgs boson) – they
provide that marginal input that triggers a change in
‘direction’ a system takes;
VI. Implications to institutions for growth
1. Building well-functioning organizations is vital to bringing
about institutional change. Such organizations
generate/provide the knowledge (information), induce the
attention, and enable the coordination necessary for such
change. Individuals, by themselves, will not do so to the level
necessary.
For example, the emergence of relevant independent,
credible, and professional organizations, such as the EEA, can
contribute to good policy making via
i. The production, updating, and dissemination of economic
knowledge;
ii. The creation of fora for open discussion; and
iii. The Provision of advice based on rigorous theoretical and
empirical analysis and open discussion
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7. 2. Supporting ‘entrepreneurial’ individuals in the spirit of
‘venture capitalists’ may provide a small, but effective,
alternative with very high returns - regular, domestic, and
publicized tournaments for the best ideas may be one way.
Such tournaments can provide powerful incentives in the
form support and acknowledgement (or recognition);
3. Theories of institutional change, and economic change more
broadly, need to recognize the role of aspirations and
individuals more systematically;
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