 | Thisbiography of a living personrelies too much onreferences toprimary sources. Please help by addingsecondary or tertiary sources. Contentious material about living persons that is unsourced or poorly sourcedmust be removed immediately, especially if potentiallylibelous or harmful. Find sources: "Ricardo Hausmann" – news ·newspapers ·books ·scholar ·JSTOR(September 2007) (Learn how and when to remove this message) |
Ricardo Hausmann | |
|---|---|
 | |
| Born | 1956 (age 68–69) |
| Academic background | |
| Alma mater | Cornell University |
| Academic work | |
| Discipline | Development economics |
| Institutions | Harvard Kennedy School |
| Notable ideas | original sin,self-discovery,growth diagnostics,dark matter,the Product Space |
| Website | |
Ricardo Hausmann (born 1956) is the Rafik Hariri Professor of the Practice of International Political Economy and the founder (2006) and Faculty Director of Harvard's Growth Lab at theHarvard Kennedy School atHarvard University.[1] He is also a formerVenezuelan Minister of Planning and former Head of the Presidential Office of Coordination and Planning (1992–1993). He co-introduced several regularly used concepts in economics includingoriginal sin,growth diagnostics,self-discovery,dark matter,the product space, andeconomic complexity.
Ricardo is the father of theatre director and producerMichel Hausmann, art historian Carolina Hausmann, and comedianJoanna Hausmann.
Hausmann was born to a Jewish family inVenezuela. His father was a refugee of theHolocaust who was born inLeipzig, Germany and was orphaned as a teenager. His mother was from Belgium.[2] He earned a bachelor's degree in Engineering and Applied Physics (1977) and a PhD in economics (1981) atCornell University. From 1985 to 1991, he was professor of economics at theInstituto de Estudios Superiores de Administracion in Caracas, where he founded the Center for Public Policy.[1] From 1992 to 1993, he served as Minister of Planning of Venezuela and as a member of the Board of theCentral Bank of Venezuela. Around the same time, he was Chair of theIMF-World Bank Development Committee. Hausmann served as the first Chief Economist of theInter-American Development Bank (1994–2000), where he created the Research Department.[3]
In September 2000 Hausmann came to Harvard. He held the George A. Cowan chair at theSanta Fe Institute. Between 2005 and 2008 he chaired the International Panel on the Accelerated and Shared Growth Initiative for South Africa,[4] an international panel of economists called upon by South African government to advise their economic growth program. He also teaches two development-related subjects:Development Policy Strategy andWhy Are So Many Countries Poor, Volatile, and Unequal?. Concurrently with his position at CID, Hausmann has also held several positions at profit and non-profit organizations: he was a member of the board of Venezuela's full-service telephone companyCANTV (2001–2007), of microfinance institutionACCION International (2009–2011), and of the advisory board ofAbengoa, a renewable energy and engineering company based in Spain. From 2010 to 2011, he was also the elected president of the Latin-American and Caribbean Economic Association.[5]
At the Growth Lab, Hausmann has concentrated his research efforts in two broad areas: the underlying determinants of macroeconomic volatility,financial fragility and crises; and the determinants of long run growth. Themes he has been exploring include the causes of growth accelerations and collapses; the causes and consequences oforiginal sin;growth diagnostics, the process of structural transformation andthe Product Space; and global imbalances anddark matter. Country-specific studies he has been involved with have included projects on Algeria, Argentina, Armenia, Australia, Azerbaijan, Belize, Brazil, Colombia, Chile, China, El Salvador, Egypt, Ethiopia, Guatemala, India, Jordan, Kazakhstan, Mexico, Morocco, Panama, Paraguay, Peru, South Africa, Spain, Sri Lanka, Tunisia, Venezuela, and the United States. He also works on gender issues and has been a co-author of theWorld Economic Forum's yearlyGlobal Gender Gap Report during its creation in 2006 and until 2009. He writes a monthly syndicated column forProject Syndicate covering economics of development.[6]
On March 4, 2019,Juan Guaidó named Hausmann as Venezuela's representative to theInter-American Development Bank (IDB), a Washington-based multilateral agency and the only international financial organization to recognize Guaidó as the legitimate president of Venezuela.[7][8] The IDB cancelled its annual meeting inChengdu, China after Hausmann was denied a visa by the Chinese government.[9] On September 27, 2019, Hausmann resigned as ambassador to the IDB, writing on Twitter that "his academic duties at Harvard University are incompatible with the job at the IDB".[10] Hausmann emphasized that he would be available to help Guaidó "any way he could"; he recommendedAlejandro Plaz as Venezuela's IDB representative, who was named to the post by Guaidó.[11]
The expressionoriginal sin was first used in international finance in a 1999 article byBarry Eichengreen and Hausmann.[12] The authors define original sin as a situation in which the residents (or government) of a country are unable toborrow in their own domesticcurrency. In other words, a poor country is forced to borrow funds denominated in foreign exchange (e.g. the U.S. dollar, the euro, or the yen). Based on their measure of original sin the authors show that original sin was present in most of thedeveloping economies and independent from histories of highinflation andcurrency depreciation. This is seen as problematic because if the borrowing country's domestic currency depreciates, the loan will become more difficult to pay back, since their currency is now worth less relative to the loan.
Later research has mainly focused on the international component of original sin: the inability of most countries toborrow abroad in their own currency. Barry Eichengreen, Hausmann andUgo Panizza show that almost all of the countries (exceptUS,Euro area,Japan,UK, andSwitzerland) suffered from (international) original sin over time.[13] The authors argued that this international component of original sin has serious consequences. It makes debt riskier, increases volatility, and affects a country's ability to conduct an independentmonetary policy. This is because original sin is likely to cause acurrency mismatch in the nationalbalance sheet of a country: the currencies of itsassets and those of itsliabilities do not correspond. Thus, large swings in the realexchange rate will have an effect on aggregatewealth and it will be more difficult for the country to service its debt. In other words, original sin tends to make thefiscal balance dependent on the real exchange rate and the short term realinterest rate.
Criticism on the concept of original sin has been twofold. On the one hand, Morris Goldstein and Philip Turner claim that original sin is not a sufficient condition for a currency mismatch, and thus cannot account for the large output losses due to the currency mismatches duringfinancial crises.[14] On the other hand,Carmen Reinhart,Kenneth Rogoff and Miguel Savastano claim that the main problem of emerging market economies is to learn how to borrowless rather than learn how to borrowmore in their domestic currency.[15] They assumed that the problems of emerging markets were not due to original sin, but to so-calleddebt intolerance: the inability of emerging markets to manage levels of external debt that, under the same circumstances, would be manageable for developed countries. Eichengreen, Hausmann and Panizza respond to both criticisms in a paper elaborating the difference between currency mismatches, debt intolerance and original sin.[16]
Self-discovery is a concept developed by Hausmann and Dani Rodrik, referring to the process of discovering what economic activities can profitably be pursued in a given country. In a 2003 paper titled "Economic Development as Self-Discovery", Hausmann and Rodrik contest the notion thatgrowth will follow automatically from the presence of state-of-the-art technologies and good economicinstitutions (like well-designed and enforced property rights).[17] Another condition, they state, is thatentrepreneurs in the country know what new economic activities can profitably be pursued there—in other words, that there is sufficient self-discovery.
Self-discovery is costly for the innovative entrepreneurs that invest theirresources in it. However, the benefits of self-discovery accrue to all entrepreneurs in the country, who now know what activities areprofitable without having to find out themselves. If this eventually leads to more innovation and growth in the country, the benefits of self-discovery accrue to even larger groups of people. Thus, according to Hausmann and Rodrik, self-discovery has benefits that stretch far beyond the firm that originally invested in the discovery (in other words, it has positiveexternalities). In consequence, governments should implementeconomic policies that promote self-discovery.
In a later paper, Hausmann, Rodrik and co-author Jason Hwang nuance the previous conclusions on self-discovery.[18] They argue that some products are associated with higherproductivity levels than other. Thus, self-discovery is mainly beneficial for countries if it is discovered that high-productivity goods can be profitably produced there. This is because the new products enhance the profitability of the country'sexport basket, which in turn is associated with higher growth. In other words, some products are more interesting to discover than others, and these products are what really causes the beneficial effect of self-discovery.
Growth diagnostics is a methodology developed by Hausmann, Dani Rodrik and Andrés Velasco to determine the underlying reasons why some developing economies are not growing as fast as might be expected. The underlying assumption is that different countries experience slow growth for different reasons (compare to theAnna Karenina principle). In the handbook "Doing Growth Diagnostics in Practice", the origin of the term is explained:[19]
The growth diagnostic approach is based on the idea that there may be many reasons why an economy does not grow, but each reason generates a distinctive set of symptoms. These symptoms can become the basis of a differential diagnostic in which the analyst tries to distinguish among potential explanations for the observed growth rate of the economy.
Thus the growth diagnostics methodology departs from the "symptoms" of low growth that are visible in a country's economy—for example, low investment. Using a decision tree, all possible causes of these symptoms are inspected and if possible, eliminated. Next, the causes of these causes are scrutinized. This goes on until the most binding constraint to growth in a country is found. This is the constraint that economic policy in the country will need to address to accelerate growth. The authors argue that applying the wrong cure for the wrong disease, i.e. implementing the wrong economic reform in the wrong circumstances, can be both economically unproductive and politically dangerous.
One of the first applications of the growth diagnostics methodology was a case study of El Salvador, described in the paper "Growth Diagnostics", co-authored by Dani Rodrik and Andrés Velasco.[20] At the time, the country had goodmacroeconomic indicators, decentinstitutions, lowinterest rates and returns to education. However, it was investing little. According to the authors, the growth diagnostics methodology revealed that in the end, the low investment in El Salvador could be brought back to a problem ofself-discovery: the country was losing its traditional industries and it was unclear what it should invest in next. This lack of innovative investment ideas, then, was El Salvador's most binding constraint on growth. Since the publication of this paper, the growth diagnostics strategy has been adopted by a number of international institutions including theWorld Bank, theInter-American Development Bank, theAsian Development Bank, the UK'sDepartment for International Development and theMillennium Challenge Corporation. The PREM network currently collectscountry case studies that use the growth diagnostics methodology.
Dark matter is a term coined by Hausmann andFederico Sturzenegger to refer to the 'invisible' assets that explain the difference between official estimates of the U.S. cumulativecurrent account, and estimates based on the actual return on theU.S. net financial position. Specifically, the U.S.Bureau of Economic Analysis (BEA) estimated the netU.S. current account deficit to be 2.5 trillion in 2004. However, according to Hausmann and his colleagueFederico Sturzenegger, the U.S. current account deficit cannot in reality be as high as it is estimated to be: otherwise, the U.S. would be paying large amounts of interests on its debt. This does not seem to be the case:net income in 2004 was still a positive 30 billion, which is not lower than it was in 1980, before the U.S. built up its current account deficit. Thus, the authors argue that the "real" cumulative current account in 2004 was in fact positive, and that somehow a large amount of (foreign) assets are being left out of the calculations.[21][22][23]
The suggested source of this "missingwealth" is dark matter, resulting from the unaccountedexport of ideas and other services (such as insurance or liquidity) from the U.S. to other economies. The two authors claim that the U.S. has significantexports, mainly of businessknow-how bundled with itsforeign direct investment) that do not show up in officialtrade statistics.[24] These exports increase the real value of its foreignassets, and thus lower the real size of the deficit. Therefore, they argue, there is less reason to worry about the U.S. financial position than is usually assumed. In addition, this dark matter in the U.S. current account also has implications for the accounts of other countries, which have been inadvertently accruingliabilities by importing know-how.[25]
The idea of dark matter has not gone without criticism. First, Willem Buiter has argued that dark matter should result in a higher rate of return on U.S. external assets than on U.S. external liabilities. However, he claims, there is no convincing evidence that this is the case.[26] Second, the U.S. income from dark matter seems to vary enormously from year to year, even though it stems from permanent characteristics of the U.S. economy like the export of know-how.[27] Lastly, Mathew Higgins, Thomas Klitgaard, and Cedric Tille agree with the assertion that U.S. foreign assets are currently undervalued. However, they argue that more important, U.S. foreign liabilities areovervalued. Thus, The U.S. has fewer foreign liabilities than is currently assumed; this fact (rather than dark matter) explains the unexpectedly high net income.[28] In a 2007 article, Hausmann and Sturzenegger respond to some of these critiques, defending the existence and function of dark matter.[29]
The Product Space is a tool for understanding the process of structural transformation and self-discovery, which Ricardo Hausmann introduced together withCesar Hidalgo andBailey Klinger.[30] The Product Space consists of anetwork of products, where two products are connected according to the probability that they are co-exported, indicating that they tend to require similar capabilities.
According to Hausmann and colleagues, the Product Space predicts the actual evolution of the pattern of comparative advantage of nations. They claim that because of coordination failures, economies will diversify by moving into products that are closely connected to the products they are currently making, because these products require similar capabilities. Thus, as a country develops, it will diffuse through the product space from one product to the next, reaching more and morecomplex products as it goes. In a recent publication titled "Structural Transformation and Patterns of Comparative Advantage in the Product Space", Hausmann and co-author Bailey Klinger explain the idea of the Product Space using the following analogy:
Our metaphor is that products are like trees, and any two trees can be close together or far apart, depending on the similarity of the needed capabilities. Firms are like monkeys, who derive their livelihood from exploiting the tree they occupy. We take the forest – the product space – as given and identical for all countries. [...] The process of structural transformation involves having monkeys jump from the poorer part of the forest to the richer part, but the probability of doing so successfully will depend on the expected productivity of those trees and to how close the monkeys are to unoccupied trees where proximity is related to the usefulness of the specific assets the country has for the production of the new good.[31]
The Product Space ties in with the idea ofgrowth diagnostics, because it was developed with the purpose of identifying the coordination failures whose removal can further the economy of a developing country. The ultimate goal of the Product Space is to develop analytical tools that allow to studyeconomic development, by looking at the de facto technological capacity of countries and not only at the traditional measures of governance used by agencies such as theWorld Bank or theInternational Monetary Fund. In a 2009 paper, then, theeconomic complexity index is put forward as a more accurate predictive measure ofgrowth than previous indicators. Research on the Product Space and economic complexity by Hausmann, Hidalgo and their team is summarized in the (2011) book,The Atlas of Economic Complexity.[32]
{{cite book}}: CS1 maint: multiple names: authors list (link)