The troubling beauty of the ‘East Asian miracle’ is that there’s something in it for all ‘schools’. I’d celebrate the day more researchers took the complexity approach.

Reading Suggestion: ‘The End of Certainty: Time, Chaos, and the New Laws of Nature’, Ilya Prigogine

I myself and signing up on much of what was said above by Tord Steiro with respect to incentives, always try to use a matrix that include all the combinations between the market and the government having the right incentives or not, and possessing the resources or not, all in order to produce a second best list, that goes from worse to best.

As you can understand, as a citizen from an oil-cursed country, my best of the best is always having the market with incentives and resources and the government with incentives but NO resources. There is nothing as bad as an independently wealthy government.

you should offer policy recommendation based on your prior (ideologically rather than analytically based) beliefs on what works regardless of the place in question. The job of policy recommendations is explicitly not to try and understand why certain policies worked in particular countries at particular times, and certainly not to tailor policy recommendations to a particular context.

Understood. Good point actually.

Incentives!!!

Governments with incentives to pursue good development policies will most likely be capable of doing so, governments with an incentive to do something else, will most likely do something else.

The Kuomintang government of Taiwan was, in 1940′s, notorious for being one of the most corrupt and least capable governments in the world. Calling them incompetent would be an understatement. But they knew that the only hope they had to stay alive was through successful development of what little they had left – Taiwan – let alone their aspirations of redeployment on the mainland.

They HAD to delevop a strong industrial base and a sound economy. They HAD to outperform Mao. And they certainly did.

South Korea faced a similar threat from North Korea, that turned another incompetent government into a competent one because they knew they had to.

The incentives to pursue good policies can come in various forms, but if any such incentive is absent, we know what we will get: Your average government run development. Most developing country givernment do not have any strong incentive to develop their countries – they have strong incentives to implement corruption and predate on natural resources and aid. That do tell us something about the charachter of the challenge – developing country governments need checks and balances in oder to shape their incentives – but that doesn’t tell us anything more revolutionary than the fact that incentives matters.

And ranting on about government driven or market driven development in this context is irrelevant. If markets works and gives market agents the proper incentives – fine! If governments are facing the proper incentives – then that is fine too!