ÿş<h3>Nobel laureate talks about economics, peace</h3> <div class="meta">by Ayee D. Macaraig</div> ECONOMIC DEVELOPMENT is an important prerequisite for peace, said 2004 Nobel Laureate for Economics Finn Erling Kydland, Ph.D., in his visit at the Ateneo. With the theme Peace and Economic Development in the Age of Globalization, Kydland s talk was held on February 7 at the Henry Lee Irwin Theater. The talk was part of a series called Bridges Dialogues towards a Culture of Peace, which brings Nobel Laureates from different disciplines to developing countries to talk about their work, and to promote peace, freedom, and security. The International Peace Foundation initiated Bridges, held in both the Philippines and Thailand from November 2007 to April 2008. Kydland also lectured at the Asian Institute of Management and the University of San Carlos in Cebu. Consistency is key Kydland is a Norwegian economist who was awarded a Nobel with Edward Prescott for their research on business cycles and macroeconomic policy. In his talk, Kydland clarified that he is not a researcher on peace but said that peace and economic development are closely connected; the causality runs in either directions. Kydland talked about his model, which shows that consistent economic policies are better than reactionary ones. Countries need policies that are geared for the long run, that is, for the next five, 10 or more years. Government policy has to be credible and forward looking, he added, citing Ireland as an example of a country that has benefited from consistent economic policies. What the [Irish] government did [was that] they made clear to potential investors that if they will invest in Ireland, the taxes facing them will be relatively mild, not just in the following year but until 2009. It was a credible announcement, they did not fool the investors so it removed the investors uncertainty, he added. Unlike Ireland, Argentina did not show substantial economic growth because of its government s lack of credibility in making economic policies, said Kydland. Kydland also discussed the importance of having independent central banks. When central banks are independent, you isolate monetary policy from political pressure. Your monetary policy will not succumb to pressure from politicians. Exactly contrary Economics Professor Cielito Habito, Ph.D., used Kydland s theory to analyze the Philippine economy in his column in the Inquirer. Our own experience over recent years has been exactly contrary to what Kydland s theory would prescribe. Many have lamented how the current leadership has lacked a clear vision and strategy on which to base a clear policy direction to begin with, said Habito. Worse, policy reversals and inconsistencies have marked the current administration s (mis)management of the economy ... because directions set by the competent economic managers have constantly been thwarted by politically-motivated policy reversals from the Palace. Habito said that the Philippine economy could have been growing at 8% or more now, if not for inconsistent economic policies that have beset the country over recent years. Moral framework Valedictorian candidate Paul Christopher Cheng (IV AB Eco-H), meanwhile, said that Kydland s theory is not just an economic and political framework but a moral one. Consistency says that this is my principle, I stick to it, come hell or high water. That s a moral principle, that this is the truth, I will live up to the truth [no matter what], said Cheng. He added that applying Kydland s framework to the country is problematic because the Philippines moral framework is not in sync with it. He cited the corruption of billions in the ZTE scandal and politicians mentality of changing the former government s economic policies as examples. How can you talk about economics and all of these things when at the moral level, it doesn t work? [The framework] is not feasible at the moment in the country, he said.

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