Today's IPIC (Industrial Policy & International Competitiveness) class was fun. Our professor, Olivier Cadot, is a low-key French economist whose lecture style is as flat as it is cynical. Of course, this makes me a fan, and he seems to be another professor who makes me laugh constantly through class even though when I look around me, no one else seems to be getting the joke.
We discussed Chile today, and the debate surrounding government support for inward FDI. He has written a quite nice case entitled "Chile: In Search of a Second Wind", which, thanks to the magic of the Internet, you can read and discuss at dinner with your family. If only my family had discussed things like this when I grew up, I'd probably have a John Bates Clark medal and wouldn't have to write anonymously, but I digress.
The analysis was easy to follow; Chile should have been more active in drawing FDI from multinationals, not from the immediate benefits (because usually there aren't any; the MNCs are able to claim tax holidays, etc.), but rather from the spillover effects, which are (1) taxes from wages paid that are subsequently spent on domestic consumption, and (2) the network of support services and other companies that together form a business "cluster" (per Michael Porter). I think his arguments were quite strong, though in terms of analysis, I am not sure that we could take a similar case and produce coherent arguments; there are so many factors and these problems always look so easy in hindsight.
At 17:12, he said, "OK, we will take the last three minutes of class to discuss the ethical implications of third-world countries subsidizing first-world shareholders with tax breaks. Do you think this is a problem?" I don't. He does. Do you?
Other notable things he said:
"They [the Chileans] replaced copper with other things... you might have tasted Chilean wine, it's quite good..."
[referrring to the 'Chicago boys', who implemented the first Washington Consensus (Full Monty Remix) in Chile, under Pinochet in the 1970s] "You've had a chance to see professors just out of grad school, and you know how little they know about the real world."
Prof. Cadot is a candidate for this period's Quote of the Day source. I've only had two classes (of five) so far, and we must give others a chance to contribute...
10:41:07 PM 
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