Davos Newbies

I’ve finished the excellent Knowledge and the Wealth of Nations by David Warsh and have a small anecdote to add to his full, highly readable intellectual history of modern growth theory.

Warsh’s book centers around an influential paper by economist Paul Romer, Endogenous Technological Change. British readers will probably recall the 1995 incident when Labour’s Gordon Brown, then shadow chancellor, gave a speech which stated his adherence to “post neo-classical endogenous growth theory”. His then-aide, Ed Balls, had probably written the speech. I suspect the cerebral Brown knew what it meant, but it certainly baffled many of his listeners. Tory grandee Michael Heseltine had a clever riposte: “That’s not Brown’s. That’s Balls’.” (As Warsh makes clear, Brown’s commitment to endogenous growth theory was wise and well ahead of the curve of most policymakers.)

Incidentally, I kvetched the other day about the lack of full footnotes and bibliography in the book. Warsh explains why and provides a brief, helpful list of further reading.

James Moore: “But to put these amounts in perspective, the US taxpayers have spent–not invested, but spent–like drawing money from your ATM–about $320B on the Iraq war This is ten times the total amount that the Gates Foundation has in TOTAL ASSETS, and thus vastly more per year than the foundation spends in its work on behalf of the poor. The amount spent–spent–on the Iraq war could have ENDOWED ten Gates Foundations.”

Greg Mankiw: “In other words, success in the Doha round of international trade talks would give the world more every year than what Buffett can give once after a lifetime of being the world’s most successful investor.”

That said, Buffett’s great philanthropic act will be of enormous global benefit. Since its start, the Gates Foundation has proved a particularly wise and innovative organization, addressing some of the world’s most intractable issues.