Not Quite So Poor and Stupid

Unless you happen to govern a third world country, you probably don’t care about capital flows. Economists do. Economic theory says that liberalized capital flow should result in more capital, greater productivity, and higher wages. It’s nice to see some empirical data show up to confirm the theory. But, as you might expect, a lot of third world politicians are dead set against liberalized capital flow for reasons of national pride. And, as you might further expect, poor countries with stupid governments will remain poor countries until their governments change.

Of course, we’re not all that much better. Theory and evidence also encourage the free flow of goods and labor, both of which we strive mightily to restrict. We do a pretty good job on capital, so I guess that makes us not quite so poor and not quite so stupid, but still far below our potential.

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