Paul Romer cuts a controversial figure as the World Bank’s new chief economist | The World Weekly
The World Bank has appointed Paul Romer, a longtime advocate of the economic power of human capital and student of urbanisation, as its new chief economist, bringing arguably the highest-profile name to the role since Nobel winner Joseph Stiglitz.
Mr Romer, a US economist who teaches at New York University, is expected to replace Kaushik Basu later this year. A spokesman for the bank would not confirm Mr Romer’s appointment but others within the institution did.
Mr. Romer will commence his role as chief economist on September 30.
The move would put an important and occasionally provocative voice in economics in charge of the bank’s research department.
For me, the most exciting part of economics is going beyond knowledge that is only potentially useful to knowledge that is actually useful, and doing so on a scale that touches millions or billions of lives, if this is what motivates you to come into the office each day, there is no better place to work than the World Bank." - Paul Romer, in a statement
His 1990 paper arguing the case for “endogenous growth” — the theory that knowledge and innovation can spur growth — is considered one of the most influential papers in economics of the past 30 years.
“It’s an impressive choice,” said Scott Morris, a former US Treasury official who follows the World Bank for the Centre for Global Development. “It’s more in the [Larry] Summers and Stiglitz mold of picking an American superstar economist.”
He added: “The bank’s ability to recruit Romer also seems to me to reflect some reputational gains in the last few years, where the bank has been seen as more activist and more relevant to a range of pressing global issues.”
In recent years Mr Romer has focused on the power of cities to transform economies and how to deal with the rapid urbanisation seen in the developing world.
He has called, for example, for turning impoverished cities in the developing world into vast “reform zones” to spur economic growth and change, citing the example of the southern Chinese city of Shenzhen, which in the 1990s became a living laboratory for the economic reforms that set off China’s rapid growth.
It turns out that this is a unique time in human history when it is possible to start many new cities because there is an enormous, unmet demand for city life.” - Paul Romer, in an interview with iMoney magazine
Mr Romer is an ardent supporter of the power of economic growth to reduce poverty and will be joining the World Bank at a time when slowing emerging economies are presenting it with a host of new challenges. Economists at the bank last month warned that slowing developing economies had set back their efforts to catch up with rich economies like the US by decades.
“We often lose sight of how important even small changes in the average rate of growth can be,” Mr Romer wrote in a blog post published on Saturday.
The son of Roy Romer, a former Colorado governor, the economist has also been forthright in his occasional criticism of his own profession and some of what have been its most fashionable movements in recent years.
He has called for more economists to use clear writing, something the World Bank’s research department has often been accused of failing to do. “Clear writing produces clearer thoughts. Sloppy writing produces sloppier thoughts,” he argued last year.
He also has accused advocates of using randomised control trials to determine how best to help people in poor countries of being blinded by their own obsession with data, putting him at odds with powerful advocates of data-driven development policy such as Bill Gates.
In a blog post last year titled “Botox for Development” based on a talk he gave at the World Bank, he likened advocates of randomised control trials to a doctor prescribing Botox to a cancer patient to help him look younger even as he faced almost certain death.
Too often, he argued, the need for data to prove a theory led economists in the path of small ideas and projects rather than bigger bolder ones whose eventual impact on poverty were exponentially larger.
“Our goal should be to recommend treatments and policies that maximise the expected return, not to make the safest possible treatment and policy recommendations,” he wrote.
“We have to weigh the trade-offs we face between getting precise answers about such policies as setting up women’s self-help groups [against] other policies [like] facilitating urbanisation or migration that offer returns that are uncertain but have an expected value that is larger by many orders of magnitude.”