24 January 2011

Collier vs The Economist (or Moyo vs the World)

Provocative economist Dambisa Moyo burst onto the scene with 'Dead Aid' and has followed up quickly with her most recent book titled "How the West Was Lost: Fifty Years of Economic Folly—and the Stark Choices Ahead." Her first book general received positive reviews from those who were newer to the topic and mixed reviews from those within the aid community. It became easy to accuse those within the aid community of wanting to save their own jobs.

However, it looks like the newest book from Moyo might have vindicated such critics. The economist writes a scathing review that kicks off with the title "How the reader was lost" and questions Moyo's ability to understand basic economics, saying:
The trouble starts when Ms Moyo ventures into economic analysis. In comparing America’s economy with China’s, for instance, whether you convert yuan into dollars at market exchange rates or after adjusting for purchasing power matters a lot. Measuring at purchasing-power parity makes the gap in GDP and living standards look narrower. This explains a great deal of the difference between two sets of figures that Ms Moyo cites. Yet she does not mention it.
This is basic stuff. Much else in elementary economics also gets mangled here. Governments usually manipulate exchange rates to make their currencies artificially weak, not strong. In the Keynesian national-income identity, G represents government spending, not the budget surplus.
What is more striking is the review in the Guardian Development Site by Moyo's former PhD advisor Paul Collier where he praises Moyo but allows plenty of wiggle room for her arguments saying:
Moyo is not, I think, seriously advocating these policies; rather, her point is that as a credible threat they would improve American bargaining power vis-a-vis China.
What are we to make of the Moyo thesis? Inevitably, in a short book of such a sweeping nature, there are many hostages to critics. I will let these pass. I do not share Moyo's pessimism, but I applaud her brave alarum against our economic and social complacency: her core concerns are sufficiently close to painful truths to warrant our attention.
The only reasonable conclusion that can be drawn from the difference between the two reviews is that The Economist received an early rough draft that had not been edited while Collier got his hands on the edited and reviewed final copy of the book.  This is the only way that the two could have had such differing experiences of the same book.

Does anyone else have a theory for the difference in reviews?

Also see Moyo discuss the book on BBC News and hear Dr. Irwin Stelzer of the Hudson Institute offer some of his concerns about the new book: