#1 Appointment and Delegation

Perhaps the most important task of a chief executive, e.g. PM, is that, (a) she appoints the very best people to lead key areas, and (b) delegates proper authority to them
Poor countries need to "build stuff" from the ground up - they are poor precisely because they lack the systems, infrastructure and institutions that are necessary for development

Building this stuff is hard - it requires skills that only a very few typically have
A rich country can afford to appoint incompetent people once in a while because the quality of its systems hedges against incompetence at the top - but a poor country does not have this luxury.

In poor countries, incompetent appointments only perpetuate the cycle of misery
However, selecting the right person is not a simple problem

e.g. how does a PM figure out the best person for a niche area like energy? Can she resist nepotism or the usual sycophants that surround power?
So a lot of thought, care and energy needs to go into this important question

If you want to forecast the performance of a government, just look at the quality of its top 10 appointments

Unfortunately, the fate is usually sealed at this stage
As hard as it is, appointing the right person is not sufficient. One has to give him the appropriate discretion and authority - this is where delegation comes in

Sometimes a good person is appointed at the top, but then her hands are tied one way or another - delegation is key.

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More from @AtifRMian

5 Aug
Is the executive/PM in developing countries constrained by "talent pool" for top leadership positions?

Not really. The market for top talent is global, and as such there is little excuse for incompetence at the top.
One reason for failure to attract competence is environment - it's not about the money: the opportunity to work at the "country level" is super attractive

But executive needs to create the right environment, e.g. delegate properly, that is her job.
The more important reason perhaps is that discovering the right top talent for the right job is a very difficult problem -

this is why there are large "head hunter" firms dedicated for this job.
Read 4 tweets
6 May
How important is global capital for growth in developing countries?

Not as much as it is traditionally hyped in theory and practice

The reason?

Global capital is a double-edged sword. Its promise versus its perils must be carefully adjudicated

(thread)
Correlation is not causation, but a useful fact to keep in mind is that developing countries with higher capital inflows tend to have *lower* growth

Countries like China with very low or negative net inflow tend to have the highest growth rate
So should countries just ban capital from coming in?

Of course not.

The key is understanding what kind of capital is healthy versus unhealthy for the economy

kind of like figuring out healthy versus unhealthy food for the body
Read 9 tweets
23 Mar
Today's question for #WhyStudyEconomics

Should we provide relief to debtors when there is a recession, such as in this pandemic or the housing crisis before that?

The answer illustrates how good economics is about making the sum bigger than its parts
Each debtor has a lender. So providing relief to the debtor means we are taking something away from the lender

Isn't this a zero sum game then?

Why provide relief to the debtor at the expense of the lender?

Economics tells us that this apparently simple logic is incorrect
The reason: In the midst of a recession, demanding an additional dollar from a debtor takes away one dollar from their total spending

But giving the same dollar to the lender does not add this dollar back into total spending, because lenders try to save some portion of it
Read 10 tweets
19 Mar
I'll do occasional thread on #WhyStudyEconomics - explaining how this science can be used for our collective good when used properly

Today's question: Should we have a minimum wage?
Questions in economics are social in nature which can understandably trigger an ideological/emotional response

But one must resist that initial temptation and start with a formal framework to think objectively about the question at hand

This is what theorists try to do
For a question on the minimum wage, we must start with a theory of how labor market works

A theory does not tell us how labor markets *actually* work, but it guides us by spelling out conditions under which a minimum wage is desirable versus not
Read 13 tweets
25 Feb
The administration is reviewing U.S. economic resilience - this is much needed

Why is it necessary? And how should one do it?
Resilience => ability to absorb "shocks" such as disruptions in microchips or bursting of a bubble without major layoffs

An inability to do so is very costly. This study by @ojblanchard1 @LHSummers & Cerutti shows that short-run losses often become more permanent Image
So how can we make the U.S. economy more resilient?

There are two sides to it (as always)

The supply-side and the demand-side

The administration is currently focusing on the supply-side
Read 7 tweets
30 Jan
GameStop is an interesting story, but there is a bigger and much more serious question about financial markets

As someone who studies finance, I know finance has tremendous potential to benefit society

But there is something serious to worry in the trend since the 80s
Let's start with the story we like to tell students in finance 101

"financial markets take money from savers and give it to entrepreneurs who invest it to make economic growth possible"

This is indeed a very important function of financial markets

However ....
Since the 80s financial market has increasingly been doing something quite different

The size of financial sector has almost *doubled* in terms of credit given out per $ of output

Yet, investment has not risen at all and in fact been trending down
Read 7 tweets

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