Thursday, September 21, 2006

The importance of a good analogy

When I was a college student (even in economics!!!) I took it for granted that industrialization is the key to development. Agriculture is backward and plays no role in development, except to give up its workers for manufacturing (and thereby shrink). What a shame if we can't produce our own hammers, screwdrivers, cars, computers, and all that marvellous stuff made in those big macho factories.

Now as a professional economist I find myself arguing otherwise: in most cases, development of agriculture is a prerequisite to industrialization. What changed my mind? A lot of research, thinking, and exposure to data. Lots of data.

And a good analogy. Some analogies have become abused and have led to catastrophic policies. Like the Big Push and the Take-off, or the analogy between national power and economic power.

One good analogy is "flying geese." Succinct and accurate. A better analogy (and perhaps the best): the "ladder" of development. What better way to encapsulate the idea of accumulating physical and human capital and know-how? How else to demonstrate the folly of getting to the top without passing through the rungs in between? So is economic development. You don't get there by making cars and buses and computers at once, and all by your lonesome (without those pesky foreign investors, who are sooooooooo demanding about your roads and bridges and power supply and sticking to your policies and...)

The first step up involves: rice, corn, coconut, chromium, and all that unsexy stuff. But then this allows a country to accumulate wealth and know-how, and climb up. At the end of the ladder: cellphones, MP3 players, medical instruments, even smart missiles, passenger jets, and sattelites. And last, but not the least, the end of poverty. One rung at a time.

No comments: