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Economics

O lado positivo da soberania nacional

Jun 9, 2023 Dani Rodrik

CAMBRIDGE – Comentários sobre a economia mundial nunca deixaram de exortar para uma cooperação global maior. “O que acontece em qualquer lugar afeta a todos… [portanto] está bastante claro que o mundo precisa de mais… coordenação e cooperação internacional”, escreveu um importante funcionário do Fundo Monetário Internacional em 2013. “Praticamente todos os problemas que desestabilizam o mundo… são de natureza global e só podem ser confrontados com uma coalizão global”, disse um importante colunista em 2019.

As preocupações com as inadequações da governança global e o enfraquecimento do multilateralismo aumentaram nos últimos anos, porque os Estados Unidos e outras economias avançadas têm cada vez mais colocado suas agendas domésticas em primeiro lugar. As abordagens unilaterais têm dominado o comércio, as políticas industriais e a transição climática. A Organização Mundial do Comércio – a maior conquista da governança global na era da hiper globalização que estamos deixando para trás – foi reduzida a um ineficaz espectador.

Para o comentarista globalista, isso é claramente uma notícia má. Para a economia global, porém, as consequências são menos claras – e podem ser salutares. Na verdade, em um mundo em que os governos nacionais se concentram em sua própria prosperidade sustentável e coesão social, a economia global funcionaria bem. Após um exame mais minucioso, a defesa da governança econômica global revela-se consideravelmente mais fraca do que comumente se pressupõe.

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Dawood Mamoon Jun 10, 2023

Dear Professor Rodrik, I have written a short article based on your PS article. I hereby paste below

National Sovereignty and Rational Expectations: Dialogue with Professor Dani Rodrik, Harvard Kennedy School and Professor Antara Haldar, Cambridge University

by

Dawood Mamoon

Abstract:

The author reviews the Project Syndicate Articles by Harvard Kennedy School Professor Dani Rodrik (2023) and Cambridge University Professor Antara Haldar (2023) to define the future of economics, diplomacy, foreign policy and trade policy that would take place through domestic and international governance methods.

1. Governance and National Autonomy:

Two great articles have been written in the spaces of Project Syndicate. Professor Dani Rodrik (2023) writes that there is good rational for countries to device domestic policies without any dictation from the International Institutions of Governance like the IMF and the World Bank. In other words it is a step away from ‘one policy fits all developing countries’ recipe. The governments in developing countries are the best judge for what is good for their populations. For example, as Professor Rodrik gives an example of Environmental tariffs imposed on imports by EU or for example IRA is the domestic economic policy framework for EU and the USA respectively. While it appears that IRA would distort international trade and especially trade flows from both EU and China, Biden government is justified to initiate IRA. Any step towards that fall of net global emissions is a good domestic and thereby international policy tool. Similarly international trade flows may affect developing countries in a manner that it would favor educated segments of populations than the ones who are uneducated and thereby systematically disfavor the poor. (Mamoon and Murshed, 2008). Thus and thereby a good policy domestically may be justified to protect from imports from developed countries to create a thriving industrial base whereby wages of the unskilled rise at a greater proportion than the skilled and educated while at the same time the domestic government introduces benevolent health and education policies to increase the median skill level of populations and benefit fully from international trade in future much the same way South Korea or China has done.

However the basic question remains unanswered that has been covered by Professor Antara Haldar (2023) in her Project Syndicate article and it is whether developing countries and their governments work under rational expectations. Professor Haldar gives a historic overview of how the work on rational expectations was formed and understanding of deviations around rational expectations were understood. In other words, the cause of developing rational expectations for individuals and nation states or institutions of international governance are not entirely based on economic behaviors that define behaviors based on monetary worth of goods and services, income, prices and other economic incentives. Rational expectations can be understood if non economic definitions of human behavior can be incorporated in economic models like culture, religion, languages, social status, level of education, anthropology and Economics can define and understand incentive structures within corporations or individual societies based on values like trust, kindness, truthfulness that may largely be defined and identified as good ethics.

Professor Haldar then points out in her Project Syndicate article that most of the work in understanding behavioral economics is constrained to micro economic studies focusing on consumers, individuals, workers or firms. It is indeed true that only at micro level certain control experiments can be carried out whereby certain behaviors are isolated in the experiment to understand their relationship with economic decisions and outcomes. At macro level, it is highly difficult to isolate the effect of one variable on the other and if so only loosely by running a multivariate econometric analysis.

Nevertheless, importance of understanding behavioral economics have great insights for macro economics. For example, if it is agreed that nation states should have sovereignty over its domestic policies, the second part of the question is whether these nation states are capable to adhering to international definitions of progress, prosperity and freedom for its people. In other words, the third part of the question then becomes whether the local definitions of economic progress and prosperity that the behavioral economics so much tries to understand through cultural definitions are to be relied upon by institutions of international governance like WTO, IMF and World Bank.

Only constraining to economic variables then, the local definition of the governments in developing country at macro level can simply mean more independent trade or foreign policy and even the countries can decide for themselves what governance method to rule the populations should be preferred.

Then this would become the biggest question for behavioral economics in macro studies. Has Democracy and rule of law delivered economic prosperity in developing countries or western definitions and rules have distorted domestic markets whereby economic prosperity did not result in an egalitarian outcomes benefiting the marginalized segments of the populations as it is evident for most developing countries where Governance methods from International Governance Institutions are perceived with skepticism especially in case of IMF.

If we may agree with the above statement and if national governance should be based on policies that entirely cater to the local needs of a domestic economy within developing countries, than probably the most prized instrument in developing countries become the data collection activities that not only focus on economic variables but include all the cultural and ethical variables from both consumers and producers.

This would then mean that entire paradigm for international assistance for developing countries from IMF and World Bank should thereby change guiding the foundations of macro economics dominated by tools of behavioral economics collected through such national data collection excercises.

Would that be more effective? Well Professor Rodrik (2023) exactly addresses this concern by giving the recommendation that Countries should have a right to formulate domestic policies without the influence of international laws and regulations. Thereby there should be more provision in international laws that confirm the sovereignty of a nation state in its macro policies including trade policy, fiscal policy and foreign policy.

What are rational expectations and what is asymmetric information would then be defined more accurately and would bring a revolution in macro economics, political theory and diplomacy.

Referneces:

Dani, R. ‘National Sovereignty’s Silver Lining’ Project Syndicate, 9 June 2023

Haldar, A. ‘Revisiting the Behavioral Revolution in Economics’, Project Syndicate, June 2023

Mamoon, D. and S. M. Murshed, ‘Unequal Skill Premiums and Trade Liberalization: Is Education the Missing Link?’ Economics Letters, Elsevier, 2008, 100 (3), 262-266,
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