Econ Theory 101.

Over the spring, I took Michael Fairbanks’ class in International Entrepreneurism. It’s not entrepreneurship as much as it is business as usual in developing countries; Fairbanks founded the OTF Group, which specialises in strategy consulting for developing nations like Macedonia, Jamaica, Rwanda, etc. One of the last lectures he delivered in the class was a discussion of strategy versus innovation. Which economic strategies exist that support innovation? Which suppress it?

In the class, we came up with nine ways to explain prosperity in developing countries:

1. Macroeconomic: structural incentives should be put in place by the government, everything else will follow. Stabilize, Privatize, Democratize, and Liberalize. See Jeffrey Sachs, Dani Rodrik.

2. Microeconomic: firms compete, not nations. See Michael Fairbanks, Michael Porter.

3. Institutional Domain: rule of law and social welfare leads to predictable behavior.

4. Natural Capitalism: all investments and development should be made with future prosperity in mind. See L. Hunter Lovins, Amory Lovins and Paul Hawken.

5. Cultural School: culture matters, and a cultural heritage can make you progress-prone or progress-resistant. See Harrison’s Culture Matters.

6. Knowledge School: individuals should be in pursuit of closing the ‘idea gap’. See Stiglitz and Romer.

7.Comparitive Advantage: all wealth is based on finite resources, and some countries can manage their resources better than others. See
Adam Smith, Ricardo, Malthus.

8. Human Capital: all knowledge has legs, the only investment worth caring about is ourselves. See
Gary S. Becker, and a nod to Nordstrom and Ridderstrale’s Funky Business and
Karaoke Capitalism.

9. Evolution: survival only belongs to the fittest. See Thomas Seoul and
Jared Diamond.

In this list, there are specialists who concentrate in one field, maybe two, maybe three. But what if a specialist can diversify and analyse developing countries from all nine different points of view? In the lecture, Fairbanks points to a place like the Fletcher School as a place with an ability to train diverse enough scholars/practitioners able to analyse on many levels; places like the Kennedy School all subscribe to Sachs’ point of view, and other schools like Columbia’s SIPA and Johns Hopkins’ SAIS can’t do much better than that.

Maybe I’m wrong, but seeing all the economic theories up on a wall is fascinating in and of itself. Fairbanks is big on fascination, and with it, he captures attention. At least for a short while.

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