On 7 June 2017, the Rafael del Pino Foundation organised the Keynote Lecture "We and Prosperity" by Ricardo Hausmann.
Professor Hausmann is Director of the Center for International Development at Harvard University and Professor of Economic Development at Harvard's Kennedy School of Government. He is also the George A. Cowan Chair at the Santa Fe Institute.
Educated at Cornell University, where he received his B.S. in engineering and applied physics and his Ph.D. in economics, Ricardo Hausmann was the first chief economist of the Inter-American Development Bank, where he created the Research Department. He has chaired the Development Committee of the International Monetary Fund and the World Bank and has advised more than 80 governments on their economic growth and development strategies.
Before embarking on his intense and prolific academic career, Professor Hausmann held a number of political posts in Venezuela, including Minister of Planning and member of the Board of Directors of the Central Bank.
Considered one of the foremost researchers in the field of international economics, his areas of academic research have been economic growth, structural transformation, macroeconomic volatility, international finance and development policy.
Summary:
On 7 June 2017, Ricardo Haussmann, director of the Center for International Development at Harvard University, gave a lecture at the Rafael del Pino Foundation entitled "We and Prosperity", in which he analysed the relationship between economic development and societies' sense of identity, of belonging to a group or community. Hausmann began by asking what makes countries rich or poor, a question that has been asked since Adam Smith published "The Wealth of Nations" in 1776. At the time, the richest country in the world was the Netherlands and its per capita income was four times that of the poorest countries. But what was a 4 to 1 problem became a 256 to 1 problem. The reason for this is that per capita income has a particular behaviour over time. Throughout history it has remained stagnant, until the last 200 years when it started to grow. Its graphical representation is like a hockey stick, with the last two centuries forming the base of the "J". Acemoglu and Robinson, in their well-known book "Why countries fail", explain that the difference between rich and poor countries is due to the higher or lower quality of their institutions. However, when looking at countries such as Mexico, where the income differences between states are very high, despite having the same economic, political, judicial, etc. system, it can be concluded that the explanation is different. The answer can be found in technology, or rather in the combination of the tools and protocols it provides with the know-how of the people who work with the technology. Technology needs to be complemented by that know-how because without it, it is almost nothing. That know-how, however, moves with difficulty. Tools can be transported from one country to another, from a rich country to a poor one. Protocols can be uploaded on the internet so that they are available to everyone, but the same is not true for know-how, mainly because modern technology requires teams of people with different know-how to collaborate in production. That's what makes it difficult to move it, that you have to move not people, but teams of people. A company has more know-how because it knows how to do more things and people are specialised. As individuals know different things and these differ from one person to another, societies as a whole know a lot. Modern organisations mobilise a great deal of knowledge to function because products are like words: they are produced by putting know-how together in the same way that words are built by putting letters together. As the diversity of know-how in a system increases, not only the number of different products that can be made increases, but also the number of products that are difficult to make. This can be measured by the economic complexity index. Countries with a low index tend to be poor, while those with a high index tend to be rich. The problem with knowledge diffusion is that coordination problems have to be solved. Know-how moves from firm to firm, but to move it you have to move people. The problem is that developing countries have been very closed to immigration and impose great restrictions on the hiring of foreigners, which makes the movement of know-how difficult. The reason for this is that foreign presence would violate the feeling of collective identity, of belonging to the group or the community, and thus this feeling hampers the possibilities of economic development.
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The Rafael del Pino Foundation is not responsible for any comments, opinions or statements made by third parties. In this respect, the FRP is not obliged to monitor the views expressed by such third parties who participate in its activities and which are expressed as a result of their inalienable right to freedom of expression and under their own responsibility. The contents included in the summary of this conference are the result of the discussions that took place during the conference organised for this purpose at the Foundation and are the sole responsibility of its authors.
