The Other Hand: High Bandwidth Development Policy

38 Pages Posted: 12 Dec 2008

See all articles by Ricardo Hausmann

Ricardo Hausmann

Harvard University - Harvard Kennedy School (HKS)

Date Written: October 30, 2008

Abstract

Much of development policy has been based on the search for a short to do list that would get countries moving. In this paper I argue that economic activity requires a large and highly interacting set of public policies and services, which constitute inputs into the production process. This is reflected in the presence, in all countries, of hundreds of thousands of pages of legislation and hundreds of public agencies. Finding out what is the right mix of the public inputs, and more importantly, what is a valuable change from the current provision is as complex as determining what is the right mix of private provision of goods. In the latter case, economists agree that this process cannot be achieved through central planning and that the invisible hand of the market is the right approach, because it allows decisions to be made in a more decentralized manner with more information. I argue that a similar solution is required to deal with the complexity of the public policy mix.

Keywords: structural transformation, coordination failures, Business and Government Policy, International Economics, Macroeconomics, International Development, Regulation

JEL Classification: O10, O20, H10

Suggested Citation

Hausmann, Ricardo, The Other Hand: High Bandwidth Development Policy (October 30, 2008). HKS Working Paper No. RWP08-060, Available at SSRN: https://ssrn.com/abstract=1314799 or http://dx.doi.org/10.2139/ssrn.1314799

Ricardo Hausmann (Contact Author)

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