T HE ROL E OF COMPARAT I VE ADVANT AGE DI SPE RSE D K - PowerPoint PPT Presentation

T HE ROL E OF COMPARAT I VE ADVANT AGE DI SPE RSE D K NOWL E DGE AND DI ST RI BUT E D AGE NCY I N SUST AI NABL E E CONOMI C DE VE L OPME NT Ste ve Bra dle y - Ba ylo r Unive rsity

Susta ina ble De ve lopme nt • Wha t is it? – De ve lo pme nt that me e ts the ne e ds o f the pre se nt witho ut c o mpro mising the ab ility o f future g e ne ratio ns to me e t the ir o wn ne e ds (UN, 1987). e mpha sis o n e q uilib rium with b a sic e c o lo g ic a l suppo rt syste ms (Stive rs, 1976)

Susta ina ble De ve lopme nt • Wha t is it? – Susta ina b ility c a n a lso b e tho ug ht o f in a no the r se nse ….. – A susta ina b le c o mpe titive a dva nta g e is g a ine d b y po sse ssing inimita b le , ra re , a nd va lua b le re so urc e s tha t a llo w individua ls o r firms the a b ility to g e ne ra te a b o ve no rma l pro fits a nd e c o no mic g ro wth (Ba rne y, 1991)

De ve lopme nt • T he L imits o f Histo ric a l & Curre nt Appro a c he s – T o p-Do wn (e .g . F DI ) • Re so urc e s - histo ric a lly inve ste d in no n- re ne wa b le e xtra c tio n (Dia mo nd, 1997) • L o w-c o st la b o r – iro nic a lly, initia l de ve lo pme nt c a use s wa g e s to rise limiting furthe r inve stme nt – Bo tto m-up • Mic ro c re dit a nd b a se -o f-pyra mid e ntre pre ne urship ma y e mpo we r b ut no t ra ise sta nda rd o f living (K a rna ni, 2006)

Re se a rc h que stions • Wha t re so urc e s sho uld b e a so urc e o f susta ina b le e c o no mic de ve lo pme nt? • I f de ve lo ping e c o no mie s c o nta in re ne wa b le re so urc e s tha t a re uniq ue a nd va lua b le , why a re the ir e c o no mic b e ne fits o fte n no t ma ximize d? • Ho w c a n this re so urc e de ve lo pme nt pro c e ss b e a c c o mplishe d in a wa y tha t a lle via te s e xtre me po ve rty?

Compa ra tive Re sourc e Adva nta g e • Compa ra tive a dva nta g e – Ric a rdo (1821) no te d tha t a ltho ug h o ne c o untry ma y ha ve a n a b so lute disa dva nta g e with a no the r, va lue c a n b e c re a te d fo r b o th c o untrie s b y a llo c a ting re so urc e s to the mo st c o mpe titive a re a o f the disa dva nta g e d c o untry. T his is b e c a use a n o ppo rtunity c o st is c re a te d whe n the a dva nta g e d c o untry spre a ds re so urc e s a c ro ss multiple a c tivitie s inste a d o f c o nc e ntra ting the m in its a re a o f g re a te st stre ng th. – E xpla ins la b o r o utso urc ing - e .g . the a tto rne y a nd se c re ta ry • Compa ra tive re sourc e a dva nta g e – re so urc e s tha t a re uniq ue to a pa rtic ula r c o untry a llo w o ppo rtunity fo r hig he r ma rg in a c tivitie s e ve n if te c hno lo g ie s a nd e ffic ie nc ie s in pro duc tio n do no t ma tc h mo re de ve lo pe d c o untrie s

Compa ra tive Re sourc e E xa mple s • Sug a r c a ne a nd e tha no l pro duc tio n in Bra zil • Pha rma c e utic a l flo ra in Ande s • Co c o nuts in the tro pic s

oduc ts Coc onut Pr

Compa ra tive Re sourc e E xa mple s Que stio n: if the se re so urc e s are so valuab le , why is the ir po te ntial utility o fte n no t maximize d?

Soc ia l Constr uc tion of T e c hnolog y • Human ag e nc y shape s o ur vie ws o f artifac ts and the ir po te ntial use s and the e me rg e nc e o f te c hno lo g y re g arding the ir use is distrib ute d ac ro ss multiple ac to rs who are e mb e dde d in the te c hno lo g ic al path (Garud & Karno e , 2003)

Compa rison of Coc onut T e c hnolog y by Country Sri L a nka L ibe ria Gha na Indone sia Pro duc e rs Me d. skill L o w skill L o w skill Me d. skill T ra de suppo rt Hig h L o w L o w Hig h Re g ula tio n Me d/ Hig h ? Me d Me d/ Hig h E nd use rs L o c a l/ e xpo rt L o c a l Prima rily lo c a l L o c a l/ E xpo rt E nd Pro duc ts Ma ny F e w F e w Ma ny

Proble m of Dispe rse d Knowle dg e • Dispe rse d kno wle dg e c a n ne ve r b e g ive n to a sing le mind a nd thus “ne ve r e xists in c o nc e ntra te d o r inte g ra te d fo rm, b ut so le ly a s the dispe rse d b its o f inc o mple te a nd fre q ue ntly c o ntra dic to ry kno wle dg e whic h a ll the se pa ra te individua ls po sse ss.” (Ha ye k, 1945) – L a rg e numb e rs re q uire g re a te r re so urc e re q uire me nts (a tte ntio n) – Asymme trie s – le a rning is pro c e ss de pe nde nt – Unc e rta inty • Asymme trie s a re pa rtic ula rly tro ub le so me fo r de ve lo ping c o untrie s whe re impo rta nt pie c e s o f info rma tio n a re una va ila b le (e .g . po te ntia l ma rke ts, te c hno lo g ie s, c o mpe tito rs)

Proble m of Impe rfe c t Ma rke ts • I nc o mple te kno wle dg e a nd limite d pro c e ssing c a pa c ity le a ds to b o unde d ra tio na lity in de c isio n ma king (Simo n,1986) • T his unc e rta inty le a ds to inc re a se d tra nsa c tio n c o sts in e xc ha ng e (Co a se , 1937). • Wa llis & No rth (1986) de te rmine d tha t 45% o f the US na tio na l inc o me wa s de vo te d to tra nsa c ting in 1970. T his will c e rta inly b e muc h hig he r in de ve lo ping c o untrie s whe re the “rule s o f the g a me ” a re unc e rta in o r c ha ng ing . • T his unc e rta inty will a lso le a d to le ss inno va tio n in pro duc tio n a nd mo re c o mmo n use a pplic a tio ns tha t do no t re q uire lo ng - te rm inve stme nt.

Proble m of Institutions • T he He rita g e F o unda tio n (2008) a nd F ra zie r I nstitute (2006) list the fo llo wing ra nking s o f e c o no mic fre e do m (HF - Busine ss F re e do m, T rade F re e do m, F isc al F re e do m, Go v't Size , Mo ne tary F re e do m, I nve stme nt F re e do m, F inanc ial F re e do m, Pro pe rty Rig hts, F re e do m fro m Co rruptio n, L ab o r F re e do m ) He rita g e F . F ra zie r 90 th (58.3) Sri L a nka 103rd L ib e ria - - 94 th (56.7) Gha na 66th 119 th (53.9) I ndo ne sia 101st 5 th (80.6) US 8th

Susta ina ble de ve lopme nt thr oug h dispe rse d knowle dg e a nd distribute d a g e nc y

Pote ntia l Solution – Institutions • I nstitutio ns a re fo rme d to re duc e this unc e rta inty a nd de fine the “rule s o f the g a me .” (No rth, 1991) • NI E pro po se s tha t e c o no mic de ve lo pme nt re sults fro m ha ving po litic o -e c o no mic institutio ns tha t (1) c re a te a nd e nfo rc e pro pe rty rig hts, (2)o b se rve the rule o f la w, (3) a llo w fo r c o mpe titive ma rke ts, a nd (4) e nsure inc e ntive s fo r inno va tio n a nd e ntre pre ne urship. • T he se institutio ns re duc e tra nsa c tio n c o sts inc re a sing ma rke t e ffic ie nc y a nd e c o no mic g ro wth.

Pote ntia l Solution - Be ne fits of dispe rse d knowle dg e a nd a g e nc y • Soc ia l e ntre pre ne urs b ring (1) ne w te c hno lo g ie s, (2) so urc e s o f c a pita l, (3) po te ntia l e xpo rt ma rke ts tha t mig ht ha ve b e e n una va ila b le to the lo c a l pro duc e r, (4) po te ntia lly g re a te r g a ins to wo rke rs due to so c ia l inte nt. • T he indig e nous e ntre pre ne ur b ring s a n unde rsta nding o f c urre nt re so urc e a va ila b ility, lo c a l ma rke ts, institutio na l hurdle s, c o nta c ts, e tc . • Institutiona l a c tors po te ntia lly pla y a ro le in he lping b o th the lo c a l a nd dispe rse d a g e nts fulfill the ir ro le s.

In prog re ss a nd future dire c tions • He lping to e sta b lish b usine ss pla ns fo r pro je c ts in Bra zil, I ndo ne sia , L ib e ria , Gha na , Sri L a nka , Me xic o , a nd Ho ndura s. • Ca n a nd ho w do a g e nts he lp sha pe the institutio ns tha t wo uld furthe r susta ina b le d e ve lo pme nt? (e .g . the b e a ve r a nd da m) • Wha t a lte rna tive info rma l institutio ns c a n b e use ful in fa c ilita ting de ve lo pme nt o f uniq ue re so urc e s if fo rma l institutio ns a re la c king ? • Wha t a rra ng e me nts c a n indig e no us a nd so c ia l e ntre pre ne urs ma ke tha t will minimize mo ra l ha za rd a nd ma ximize the e c o no mic a nd so c ia l g o a ls o f e a c h pa rty? • Wha t a re the q ua lita tive a nd q ua ntita tive de sc ripto rs fo r e a c h o f the se tha t c a n pre dic t suc c e ss/ fa ilure o r pe rfo rma nc e ?