World Bank to name Paul Romer as chief economist

The World Bank is set to appoint Paul Romer, a longtime advocate of the economic power of human capital and student of urbanisation, as its new chief economist, bringing arguably the highest-profile name to the role since Nobel winner Joseph Stiglitz.

Mr Romer, an American economist who now teaches at New York University, is expected to replace Kaushik Basu later this year.

A spokesman for the bank would not confirm Mr Romer’s appointment but others within the institution did. His name is expected to be presented to the World Bank’s board as soon as Monday and announced publicly later in the week.

The move would put an important and occasionally provocative voice in economics in charge of the bank’s research department.

His 1990 paper arguing the case for “endogenous growth” – the theory that knowledge and innovation can spur growth – is considered one of the most influential papers in economics of the past 30 years.

In recent years he has focused on the power of cities to transform economies and how to deal with the rapid urbanisation seen in the developing world. He has called, for example, for turning impoverished cities in the developing world into vast “reform zones” to spur economic growth and change, citing the example of the southern Chinese city of Shenzhen, which in the 1990s became a living laboratory for the economic reforms that set off China’s rapid growth.

Mr Romer is an ardent supporter of the power of economic growth to reduce poverty and will be joining the World Bank at a time when slowing emerging economies are presenting it with a host of new challenges. Economists at the bank last month warned that slowing developing economies had set back their efforts to catch up with rich economies like the US by decades.

“We often lose sight of how important even small changes in the average rate of growth can be,” Mr Romer wrote in a blog post published at the weekend.

The son of Roy Romer, a former Colorado governor, the economist has also been forthright in his occasional criticism of his own profession and some of what have been its most fashionable movements in recent years.

He has called for more economists to use clear writing, something the World Bank’s research department has often been accused of failing to do. “Clear writing produces clearer thoughts. Sloppy writing produces sloppier thoughts,” he argued last year.

He also has accused advocates of using randomised control trials to determine how best to help people in poor countries of being blinded by their own obsession with data, putting him at odds with powerful advocates of data-driven development policy such as Bill Gates.

In a blog post last year titled “Botox for Development” based on a talk he gave at the World Bank, he likened advocates of randomised control trials to a doctor prescribing Botox to a cancer patient to help him look younger even as he faced almost certain death.

Too often, he argued, the need for data to prove a theory led economists in the path of small ideas and projects rather than bigger bolder ones whose eventual impact on poverty were exponentially larger.

“Our goal should be to recommend treatments and policies that maximise the expected return, not to make the safest possible treatment and policy recommendations,” he wrote.

“We have to weigh the tradeoffs we face between getting precise answers about such policies as setting up women’s self-help groups [against] other policies [like] facilitating urbanisation or migration that offer returns that are uncertain but have an expected value that is larger by many orders of magnitude.”

– Copyright The Financial Times Limited 2016