39984
Capacity
Building
in Economics Education
and Research
Fran�ois Bourguignon
Yehuda Elkana
Yehuda Elkana
Boris Pleskovic
Pleskovic
Editors
Editors
Capacity Building in Economics Education
and Research
Capacity Building in
Economics Education
and Research
Fran�ois Bourguignon,Yehuda Elkana,
and Boris Pleskovic
Editors
THE WORLD BANK
Washington, D.C.
� 2007 The International Bank for Reconstruction and Development / The World
Bank
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1 2 3 4 : : 10 09 08 07
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DOI: 10.1596/978-0-8213-6595-3
Contents
Foreword ix
Acknowledgments xi
Introduction 1
Aehyung Kim and Boris Pleskovic
Opening Remarks 9
Yehuda Elkana
Opening Remarks 11
Alan Gelb
Keynote Address: Disciplines of Social Sciences: Separation or Cooperation? 13
J�nos Kornai
LESSONS OF EXPERIENCE AND FUTURE DIRECTIONS
Lessons in Capacity Building from the Open Society Institute 29
William Newton-Smith
Teaching and Research in Modern Economics in the Russian Federation:
The Experience of the New Economic School 41
Gur Ofer
Creating a Market-Oriented Research and Education Institution
in a Transition Economy: The Experience of the China Center for
Economic Research at Peking University 65
JustinYifu Lin
v
vi CONTENTS
Comments
Marek Dabrowski 77
Jeffrey Miller 84
Ugo Pagano 89
Innovation, Imitation, and Adaptation: The Experience of 15Years of
Upscaling Hungarian Higher Education in Economics 95
L�szl� Csaba
Capacity Building and Policy Impact: The Experience of the
Global Development Network 109
Ramona Angelescu and Lyn Squire
The Experience of AERC in Research, Capacity Building, and the
Development of Collaborative Training Programs 135
William Lyakurwa
The Economics Education and Research Consortium 161
Robert Campbell
Comments
Tom Coup� 190
Alan Gelb 195
Sergei Guriev 198
REGIONAL PERSPECTIVES
Accelerating Poverty Reduction in South Asia by Scaling Up
Economics Education and Policy Research 207
Shantayanan Devarajan, ManuelaV. Ferro, Shekhar Shah, and Priya Shyamsundar
Capacity Building in Economics Education and Research:
A Note on the Experience of Latin America and the Caribbean 219
Mauricio C�rdenas and Guillermo Perry
Supporting Capacity Building for Economics Education and
Research in Africa 243
Benno Ndulu, Michael Crawford, and Peter Materu
Economics Education and Research in the East Asia and Pacific Region:
Experience and Directions 255
Homi Kharas
CONTENTS vii
Capacity Building in Modern Economics in the Caucasus and Central Asia 267
Ulrich Hewer
DEVELOPING GRADUATE ECONOMICS EDUCATION PROGRAMS
Developing Graduate Economics Education from Scratch:
The Case of the Central European University 277
John S. Earle
CERGE-EI: The American-Style PhD Program in Economics
for Transition Economies 301
Jan Svejnar
Comments
John P. Bonin 317
Mauricio C�rdenas 323
Ekaterina Stepanova 326
Why American University�Central Asia Should Develop an
Economics MA Program 331
Ellen S. Hurwitz
The Quantity and Quality of Higher Education in Transitional Economies 333
Jong-Wha Lee
SCALING UP CAPACITY BUILDING TO UNDERSERVED REGIONS
Capacity Building in Economic Policy Research: Outcomes and Future Steps 341
Jeffrey Fine
The Experience of the Swedish Government in Capacity Building in
Russia and Eastern Europe 345
Eva Sundquist
Scaling Up Capacity Building to Underserved Regions 349
ReginaYan
Contributors 351
Foreword
THIS VOLUME IS A VALUABLE CONTRIBUTION TO OUR UNDERSTANDING OF BUILDING
local capacity in economics education and research in developing and transition
countries. Over the past 20 years, the World Bank and its committed partners have
supported developing and transition countries in building viable educational and
research institutions that can help to effectively transform these countries' stagnant
economies into more dynamic and forward-looking economies.
The conference which gave rise to this volume was a joint effort between the
World Bank and its partners. On behalf of the World Bank, I thank our partners--
the Open Society Institute and Soros Foundation, the Carnegie Corporation of
NewYork, the Citigroup Foundation, the Eurasia Foundation, the Ford Foundation,
the John D. and CatherineT. MacArthur Foundation, the Starr Foundation, the U.S.
Agency for International Development, and the Finnish, Swedish, and Norwegian
governments--for their steadfast support in improving economics education and
research in developing and transition countries.
Over an extended period the World Bank has provided substantial support for
capacity-building in economic research through the Research Support Budget as
well as through the Development Grant Facility and the Global Development Net-
work.The main focus of this work has been on Africa and Europe and Central Asia,
most recently the Caucasus.Today we have several "centers of excellence" in eco-
nomics education and research in a variety of developing and transitional countries.
These institutions include the African Economic Research Consortium in Nairobi,
the Central European University (CEU) in Budapest, the China Center for Eco-
nomic Research in Beijing, the Center for Economic Research and Graduate Edu-
cation in Prague, the Economics Education and Research Consortium's M.A.
program in Moscow and at the MohylaAcademy in Kyiv,the New Economic School
in Moscow, as well as many others.
These "centers of excellence" in economics are recognized as leaders in educa-
tion and research in their respective country or region, because they offer high qual-
ity education and produce policy relevant research as well as skilled economists via
their masters and doctorate programs.Considering the difficulty of capacity building
in general,these efforts are seen as being remarkable achievements,and some are seen
as models for capacity-building efforts in other disciplines.
ix
x FOREWORD
The conference was held in Budapest in June 2005. It was cosponsored by the
CEU and theWorld Bank. Its first objective was to learn from experiences to date--
both successes and challenges--about developing local or regional centers of excel-
lence in economics education and research in developing and transition countries.In
order to learn what has worked and what has not worked well, we need to under-
stand the demand for highly skilled economists trained"at home"rather than abroad,
how best to measure"success,"and how to identify the main determinants of success.
In reflecting upon the creation of new or the expansion of existing centers of excel-
lence, it is also important to have some idea about the magnitude of the gaps of eco-
nomics education and research capacity in the underserved countries of EastAsia and
the Pacific, South Asia, Sub-Saharan Africa, Latin America and the Caribbean, the
Middle East, and Central Asia.This was the second goal of the conference.
The contributors and discussants in the volume provide many insights on these
issues. In particular, they offer a deep reflection on the need for capacity building in
economics education and research in each region. Many questions still remain
regarding the way in which such efforts should be conceived and structured:whether
to build separate institutions or to mainstream them into country systems, the bal-
ance between pure and applied research, funding strategies over the shorter and
longer terms, and how to evaluate the actual impact of these particular capacity
building programs.
Fran�ois Bourguignon
SeniorVice President and Chief Economist
The World Bank
Acknowledgments
THE PLANNING AND ORGANIZATION OF THE CAPACITY BUILDING CONFERENCE
("Scaling Up Capacity Building in Economics Education and Research: Lessons
Learned and Future Directions," June 14�15, 2005) was a joint effort on the part of
the Central European University (CEU), Budapest, Hungary, and the World Bank.
We extend our special thanks for the support of Yehuda Elkana, President and Rec-
tor of CEU, and Idiko Morani,Vice President External Relations, CEU.We would
like to thank Fran�ois Bourguignon, Senior Vice President and Chief Economist,
Development Economics,World Bank for his overall guidance and support.We are
grateful to Robert Campbell, Alan Gelb, Aehyung Kim, and Gur Ofer for their
advice and suggestions.Thanks to conference coordinators Theresa Bampoe and
Anna Reich, whose excellent organizational skills kept the Conference on track.
Finally, we thank the editorial staff, especially Stuart Tucker and Mark Ingebretsen
from the World Bank's Office of the Publisher, for all of their hard work on this
volume.
xi
Introduction
Aehyung Kim and Boris Pleskovic
FORTHE LAST 15YEARS,THEWORLD BANKAND ITS PARTNERS--PRIVATE FOUNDATIONS
and governments--have supported the"centers of excellence"for building capacity in
modern economics education and research in developing and transition countries.To
strengthen these efforts, the Central European University (CEU) and the World Bank
jointly organized a conference entitled "Scaling Up Capacity Building in Economics
Education and Research:Lessons Learned and Future Directions,"which took place at
the CEU campus in Budapest, Hungary, on June 14�15, 2005.
The joint conference brought together representatives of the following regional
centers of excellence: the African Economic Research Consortium (AERC) in
Nairobi; the Economics Department of Central European University (CEU) in
Budapest;the Economics Education and Research Consortium (EERC) in Kyiv and
Moscow; the New Economic School (NES) in Moscow; the Center for Economic
Research and Graduate Education (CERGE) in Prague; the China Center for Eco-
nomic Research (CCER) in Beijing;and the Global Development Network (GDN)
in New Delhi.
Opening Remarks and Keynote Address
Yehuda Elkana presents his thoughts about poverty alleviation and economic research.
He emphasizes that research institutes and the World Bank should begin to consider
seriously noneconomic aspects of development that contribute to better under-
standing of world poverty. Elkana expresses a desire to see a theoretical balance
between different kinds of reasoning, including some understanding of social sci-
ences and philosophy of science, which need to be taken into account.
An earlier version of this article was published as "Conference Reports/Scaling Up the Suc-
cess of Capacity Building in Economics Education and Research" in Acta Oeconomica 56 (1):
103�17.
1
2 A E H Y U N G K I M A N D B O R I S P L E S KOV I C
Alan Gelb notes three aspects of capacity building. First, a choice must be made
between professional or academic disciplines. Second, capacity building has been
successful, but assessments should be carried out in a measurable way to build con-
tinued support.Third,the question of scaling up is critical.These initiatives have pro-
duced a few thousand trained people, but that is a drop in the bucket compared with
what is needed to revitalize the economics professions in developing and transition
countries.
J�nos Kornai, in a keynote address, discusses current themes in interdisciplinary
research, suggesting five approaches.The first approach comprises the theory of
rational choice, created by economists, which is now used for studying family issues,
criminality, or political life.The second is game theory. Although economists are the
most frequent users of this theory, it could be used by other social and natural scien-
tists.The third is a multivariate analysis of long time series of national statistics.This
started with simple problems for explaining growth and was then expanded to look
at many other explanatory variables. However, without a theory, it is mere guessing.
The fourth is an interdisciplinary approach that uses soft data.The tradition of our
economics profession asks that we use so-called hard data (for example, figures of
production or employment). Kornai believes that period is over; we are now inter-
ested in beliefs, norms, values, and the subjective evaluation of events.The fifth is a
system approach advocated in many works, including Kornai's own book, The Social-
ist System.This approach looks at the social order as a system comprising various
spheres including political structure, social norms, and property rights. Kornai argues
that we cannot look at an issue such as stabilization as a simple macroeconomic prob-
lem, because it has so many political, cultural, ideological, and social implications. He
proposes three directions in building up institutions of education and research:econ-
omists must (1) get a minimum knowledge concerning the other social science dis-
ciplines, (2) encourage interdisciplinary work with the cooperation of two or more
professionals, and (3) establish a journal covering social sciences.
Session I: Lessons of Experience and Future Directions
In Session I, William Newton-Smith reflects on the Open Society Institute's experi-
ence in building new "centers of excellence" and emphasizes the importance of sus-
tainability. Experience shows that capacity building requires a charismatic, driven
individual and a market for the product.If there is a market,tuition should be charged
and loan schemes should be developed to ensure sustainability. As it becomes harder
to raise funds, another way to ensure the sustainability is to modify and enhance
existing local institutions; this requires changes in education budgets and teaching
methods. Future strategy should focus on slower and less expensive approaches, such
as a mentoring model by working with local institutions.This should include mod-
ular doctorates in economics to provide advanced-level training.
Gur Ofer presents his first-hand experience in creating the New Economic
School (NES) in Moscow and discusses future challenges. In September 1992, NES
opened as aWestern-style graduate school of economics.Thirteen years later, by July
I N T RO D U C T I O N 3
2005, it had produced 429 graduates. It has an indigenous faculty of 15--most of
whom have Western PhDs, and many of whom are graduates of NES--while estab-
lishing its own research center as well as helping create a high-level think tank, the
Center for Economic and Financial Research (CEFIR). Recently the governance of
NES was transferred to a Russian board.The immediate challenges facing NES are
to finish building the faculty and to improve the integration of its activities into the
Russian economic milieu and financial sustainability. So far NES's financial needs
have been mostly met through financial support from Western foundations and the
World Bank. NES has introduced tuition and student loan schemes--which tilted
the balance of financing more than 59 percent to Russian sources--and is examin-
ing options to move their grant-based financial support to an endowment basis.
Justin Yifu Lin presents his experience with the China Center for Economic
Research (CCER). In particular, he discusses CCER's initiatives in establishing long-
term financing mechanisms by offering business degrees at the center to subsidize eco-
nomics education, and the center's exceptional success in repatriating Chinese PhD
graduates from abroad. He also outlines the factors contributing to capacity building:
shared common goals,seeking resources instead of waiting for resources,policy research
relevant to the local economy, continuous innovation, and outreach and networking
activities. For future development, Lin recommends strengthening collaborative
resources with other international and domestic institutions,developing exchange pro-
grams for PhD students in other countries, building up a research organization, and
networking with similar institutions in developing and transition countries.
L�szl� Csaba describes structural characteristics of changes in higher education in
Eastern Europe in terms of content, time, space, and organizational structure.The
major finding is that approximation to the (not very high and by no means user
friendly) practices of the European Union has been accomplished.There is a replica-
tion of the Western European experience in terms of inadequate research and rela-
tively little success in meeting labor market demand.Csaba also discusses a normative
analysis of the status quo and of perspectives. He makes several suggestions for rem-
edying the situation, especially for avoiding the mismatch with the labor market and
the degradation of universities' research capabilities. Csaba advocates the promotion
of centers of excellence as well as a continuous review of the performance and qual-
ity of faculty.
Ramona Angelescu and Lyn Squire present the Global Development Network
(GDN)'s five broad principles. First, the proposed mission and structure were
tested-- before the network was officially set up--with a thorough analysis of both
the existing demand and the existing supply of the kinds of services GDN might
offer. Second, GDN's organizational structure is designed to allow as much experi-
mentation and learning as possible.Third, it provides a menu of services, such as
mentoring; cross-fertilization; and providing training and resources for writing, pre-
senting, and publishing research. Fourth, further assistance has been given to fill gaps
in the understanding of capacity building and policy impact. Finally, ongoing moni-
toring and evaluation of both the capacity-building process and the outcomes have
been given considerable weight.
4 A E H Y U N G K I M A N D B O R I S P L E S KOV I C
William Lyakurwa relates the story of the African Economic Research Consor-
tium's (AERC) very successful role in serving as the Africa Region's hub for educa-
tion, research, and policy making, along with indigenizing economics education and
research as a result of retaining trained economists in the region. AERC has two
major programs: (1) the Collaborative Master's Programme (CMAP), established in
1993 for anglophone Africa, which runs in 21 universities from 17 countries; and (2)
the Collaborative PhD Programme (CPP), which opened in 2002. More than 1,000
MAs have graduated from CMAP, with the enrollment of 140 students in 2004. In
2005, 70 students participated in CPP. In addition,AERC has supported about 450
thematic research projects spanning 21 anglophone, francophone, and lusophone
countries.Future challenges include securing long-term financing,meeting demands
for CPP, and upgrading research and teaching quality, as well as effectively conveying
the results of research to policy making.
Robert Campbell provides a rich history of building capacity building in Ukraine.
The goal of the MA program in the Economics Education and Research Consor-
tium (EERC) in Kiev was to create a new generation of economists. Over its first
eight years EERC produced over 300 graduates. Of these about 40 percent have
gone abroad to obtain PhDs at top-quality institutions in North America and West-
ern Europe. But now EERC is seeking to move toward longer-range goals: (1) to
entice the new PhDs to return and to enlist them in teaching at EERC and (2) to
disseminate modern concepts of economics and its teaching to other institutions in
Ukraine. EERC has begun the indigenization by transferring its operations
to Ukraine. Development banks can play a catalytic role to ensure partnerships for
long-term commitment of donors. For that reason, the Asian Development Bank
should be encouraged to join in this effort in addition to the World Bank's contin-
ued support for the long-term sustainability of EERC and other institutions.
Session II: Regional Perspectives
In Session II, Shantayanan Devarajan, Manuela Ferro, Shekhar Shah, and Priya Shyam-
sundar emphasize the importance of scaling up economics education and policy
research in accelerating poverty reduction in South Asia. First they argue that eco-
nomic reforms require grater capacity for economic policy research and education.
Economic knowledge and policy research are critical to meet South Asia's develop-
ment challenge, while the need for greater evidence-based policy making and policy
research stems from "second-generation" reforms. Second-generation reforms
require much firmer domestic ownership and deeper local knowledge. In addition,
South Asia is the world's largest recipient of remittances and the sizable South Asian
diaspora wants to leverage their remittances to reduce poverty in their countries of
origin. In order to most effectively utilize the valuable resources, it is suggested to
establish a South Asia Policy Research Foundation for building adequate capacity in
economics education and research.
Mauricio Cardenas and Guillermo Perry argue that the existence of high-quality
master's programs in the Latin America Region has allowed a growing contingent of
I N T RO D U C T I O N 5
economists to seek doctoral training abroad.Those who return to the region are
actively publishing internationally and training very good professional economists at
local universities, while their research tends to be applied and highly relevant for the
region. However, many problems remain: the difficulty of funding theoretical
research because governments prefer applied research, and the low-quality peer
review in local journals. In the areas of training, it is crucial to improve the quality of
the young PhD economics programs of LADE, the joint program of the Universi-
dad de Chile, the Universidad Torcuato Di Tella in Argentina, and the Instituto Tec-
nol�gico Aut�nomo de M�xico. Regarding policy research, a large pool of think
tanks in the region generates applied knowledge. Also Latin America and the
Caribbean has research groups such as the Economic Commission for Latin Amer-
ica and the Caribbean (ECLAC), the Corporacion Andina de Fomento (CAF), and
the Facultad Latino-Americana de Ciencias Sociales (FLACSO), in addition to the
research network of the Latin American and Caribbean Economic Association
(LACEA). However, LACEA faces challenges for the long-term sustainability.
Benno Ndulu, Michael Crawford, and Peter Materu discuss the Africa Region per-
spectives on capacity building. First, given that capacity building needs in Africa far
outstrip the resources available, there is need not only to be selective in supporting
but also to look for cost-effective approaches. Second, policy think tanks are playing
a particularly important intermediary role in improving accessibility of research to
policy.Third, given the public-good nature of capacity building, sustainability is not
simply a matter of self-financing--it is rather more a matter of diversified funding of
activities and sustained high demand for the output from these initiatives.
Homi Kharas discusses the status of higher-level economics education and research
in the East Asia and Pacific Region in three parts: (1) some important characteristics
and issues in the East Asia region, (2) a frame of reference for assessment, and (3)
some options for the future. In the region, a very small group of Western-trained
economists advises governments.National databases are inadequate for many research
purposes.There is a gap in indigenous research to bridge theory and practical policy,
while the tradition of systematic and scientific monitoring and evaluation of eco-
nomic policies is absent.TheWorld Bank's future support for capacity building in the
East Asia region will continue to cover a number of parallel initiatives, including
interaction with the Boao Forum for Asia as well as a research program on the impli-
cations of the rise of China and India. Finally, the establishment of centers of excel-
lence, along with simultaneous programs of networking and research
capacity-building will be considered.
Ulrich Hewer lists as advantages of "centers of excellence" in providing Western-
style economics education and research in Eastern Europe and Central Asia: (1)
economists can be trained in larger numbers at a lower per capita cost than they can
be at Western universities; and (2) students are closer to home and develop contacts
in the local professional and academic communities, and are more familiar with
regional issues than their counterparts who have studied abroad.The best results can
be achieved by building upon the experience of the existing centers in the region,
including early emphasis on (1) creating local capacities for economics research, (2)
6 A E H Y U N G K I M A N D B O R I S P L E S KOV I C
designing the programs as"regional centers of excellence"from the beginning,and (3)
eliciting significant government buy-in locally and in the neighboring beneficiary
countries.The World Bank's Europe and Central Asia Region is in the process of
making staff and funds available to help launch the Caucasus MA Program, to be
based at Tbilisi State University (TSU), to serve Armenia, Azerbaijan, and Georgia
(a combined population of approximately 17 million), plus parts of Turkey, Iran,
and Iraq as well as southern Russia.
Session III: Developing PhD Programs
In Session III, John Earle draws on CEU experience since 1991 in capacity building
and, in particular, the challenges in building a PhD program. Such programs have
much smaller classes, require a great deal of one-on-one work, and are therefore
much more expensive than MA programs.Unlike the MA program,a new PhD pro-
gram in Eastern Europe competes directly with well-established Western programs.
The problem of attracting students to an untested PhD program is therefore much
greater. Perhaps the most difficult challenge is developing a vibrant research envi-
ronment in which students can participate and learn as apprentices to more experi-
enced scholars. Given that salaries at capacity-building centers seem unattractive to
senior scholars,the programs need to offer some other motivation to encourage such
people to devote more time to institution building.The best motivation would be
research opportunities.Earle suggests that MA programs may be of the"plain vanilla"
flavor--simply reproducing economics the same way it is taught in Western
universities--while PhD programs may benefit from choosing some niche as a strat-
egy for competing with existing programs and for providing more direct benefits to
the region being served.This requires a delicate balance between providing eco-
nomics education at the highest possible level while encouraging the development
of a focus that will attract senior scholars and prospective students.The natural focus
therefore involves the region but transcends it, what CEU in other contexts refers to
as "the particular and the general."
Jan Svejnar provides an overview of CERGE. It was founded in 1991 with four
missions: (1) to train future public officials, university and college faculty, and
researchers from the former Soviet bloc countries, (2) to stimulate and support aca-
demic and policy-oriented economic research, (3) to disseminate research and pol-
icy information to a wider group of professionals, and (4) to transfer the modern
Western standard of scientific work. CERGE produces 15�30 MA graduates and
5�15 PhDs each year.The center currently has 16 full-time local and 5 part-time vis-
iting faculty members, with 5 English-language faculties. CERGE has produced
hundreds of studies that have been used by officials in the Czech government and
international organizations. CERGE researchers have served as economic advisers to
the president and prime minister of the republic, including several ministers of the
government.While in the 1990s the main challenge was to obtain local recognition,
at present the greatest challenge is financial, especially building an endowment.
I N T RO D U C T I O N 7
Session IV: Curriculum Development, Recruitment, and
Policy Research
In Session IV, Ellen Hurwitz summarizes what she learned during the conference: the
importance of a financial plan and the need for an assessment study up front that
measures the quality of education and research.
Jong-Wha Lee discusses the allocation of public and private resources for the pro-
duction of tertiary education in developing and transition countries.Transitional
economies in particular, which have limited resources, may face difficulties in
improving school inputs at once, so setting priorities in allocating public resources is
important.Also, to recruit and retain qualified professors and researchers, it is neces-
sary to provide sufficient incentives.
SessionV: Scaling up Capacity Building to Underserved
Regions
In SessionV, Jeff Fine raises the question of how to put a value on the kind of non-
client-specific research. Cross-subsidization for economics education with business
departments, unlike in the case of CCER in China, may not be feasible in many
countries. Fine notes that the discussion at the conference has clearly established the
need for intensified collaboration on a regional and global level. He also argues that
donors are in the public sector and have a responsibility to finance public goods such
as economics education and research. Fine therefore suggests establishing a support
group or network, similar to the Consultative Group on International Agricultural
Research (CGIAR), for the long-term financial sustainability of these centers.
Eva Sundquist discusses the Swedish government's support for EERC in Russia
and Ukraine.The funding was executed through a special government fund, depart-
ing from funding through the Swedish International Development Agency because
of enhanced credibility coming from the participation of the World Bank and the
Open Society Institute She also emphasizes the importance of a quality stamp
attached to proposals supported by theWorld Bank;donors should be there for long-
term support; indigenization should be taken as a priority; and independent evalua-
tions should be carried out periodically.
ReginaYan discusses her experience as a donor representing the Eurasia Founda-
tion, which co-founded EERC-Moscow and EERC-Ukraine. She observes that
some of these programs are lacking in financial and administrative capacities, and
often donors are to blame for their unwillingness to support such costs.Without such
support these programs are handicapped in their ability to develop into sustainable
and well-run institutions. In order to retain long-term support, she finds that it is
essential to inform donors on different aspects of the program over time.Yan argues
that capacity building requires both international donor support and long-term
commitment from the local community.
Opening Remarks
Yehuda Elkana
IT IS MY PLEASURE AND PRIVILEGE TO WELCOME EVERYONE--SPEAKERS, PANELISTS,
and distinguished audience--to this conference. I would like to begin by congratu-
lating the World Bank for many years of dedicated effort in the area of capacity
building. I also want to say how grateful we all are here at Central European Uni-
versity that this event is taking place at our institution.
This is a truly international event and promises to bring us up to date on crucial
developments.There is every reason to be confident that participants as well as the
World Bank will indeed succeed in drawing important lessons from the contribu-
tions presented here.
In addition to these words of welcome,I would like to make two remarks.Let me
note that I have no pretensions to being an expert in the area under scrutiny,but per-
haps I can for the moment profit precisely from the fact that I am standing here as a
layman and not as a professional.
First, the World Bank's readiness to accord central significance to the problem of
world poverty among its manifold interests and activities is definitely to be applauded.
At the same time,in listening to politicians,we all realize that in most countries--in the
United States, Europe, and elsewhere--the issue of world poverty is typically addressed
in a hypocritical and superficial manner. This is indeed a very serious problem.
As for relevant research activities, from what is once again emphatically a layman's
perspective,it seems to me that it would be imperative for research institutes in general
and the World Bank in particular to take very seriously noneconomic aspects of the
problem of poverty. This is because there is mounting evidence that an appreciation of
such noneconomic aspects can significantly contribute to a better understanding of
world poverty, and also--even more importantly--to our doing something about it.
What I am referring to here is the approach to poverty that Amartya Sen has pro-
pounded so effectively in book after book but that has still not become an integral
part of research programs at economic research institutions and still has not been
taken up by university departments of economics. You find the same approach in the
9
10 Y E H U DA E L K A N A
works of Arjun Appadurai, who has written perhaps more incisively than anyone else
about the central issues at hand. Appadurai is an anthropologist who originally
worked at the University of Chicago;he has recently become the provost of the New
School for Social Research in NewYork.He has never failed to emphasize that when
you deal with poverty you always deal with societies, nations, and so on.The point is
that "soft" considerations such as aspirations, norms, and values are genuinely effec-
tive economic factors, not merely extraneous cultural attitudes, and must also be
accommodated by economists when thinking about poverty. I am aware that some
work has already begun on these issues. Nevertheless, from the layman's vantage
point, what has been done so far is quite insufficient. It is therefore high time that
serious research got underway, research that seeks to leverage concepts like aspiration
(which is, in my view, among the most fundamental notions relevant to the problem
of poverty).
For my other layman's remark, I will have to refer to a conference that bore the
title"OneYear after Accession:Looking East,LookingWest"and was hosted by Cen-
tral European University a few months ago. Six or seven former or incumbent min-
isters of finance attended this extremely interesting event, some sitting on the panel
and some in the audience. Currently serving or ex-presidents of the national banks
of Hungary and of neighboring countries were also present. Now, quite surprisingly,
each one of them put forward a"one-center"solution--that is,a proposal with a sin-
gle formula for all the different problems arising in these countries.
I am the last person to pretend to have understood either the relative importance
of these issues or that of the respective solutions proposed. I do not know whether
one must tackle first, interest rates or inflation, or whether one most also take on
board a number of other problems too. However, given my own background--
which is not in economics but rather in the social sciences and the philosophy of
science--I tend to regard with a high degree of suspicion every "all-purpose" expla-
nation that poses to be both exclusive and total. I would urge instead the kind of
research that attempts to strike a theoretical balance among alternative ways of rea-
soning and that seeks to accommodate as many relevant considerations as possible.
Let me recount a telling and,it seems to me,most pertinent episode from the field
of medicine. A friend of mine, who had been diagnosed with cancer, sought my
advice about whom to consult.I in turn asked a retired but still highly respected Swiss
expert who told me the following:"We cancer people know only three things.We
poison,burn,or cut.I advise you to try and find an expert who can do all three so that
he or she would not decide solely on the basis of his or her limited expertise."
I think this metaphor also applies exceedingly well to what we should expect of
economic thinking. Accordingly, my suggestion to the World Bank as well as to
many other research institutes is to begin thinking along these lines, that is, to adopt
a markedly problem-oriented, pluralistic, and interdisciplinary approach. This, I
believe, is crucial because world poverty is without doubt the most pressing chal-
lenge facing mankind today.
In closing, I would like to thank you for your attention and wish you an enjoy-
able conference.
Opening Remarks
Alan Gelb
ON BEHALF OF THE WORLD BANK, IT GIVES ME GREAT PLEASURE TO WELCOME YOU
all to this very significant conference. I would also like to thank our hosts, the Cen-
tral European University, for providing us with the occasion to meet here, and also
for the great weather and for the opportunity to visit Budapest--an excellent expe-
rience for all of us.
I would like to start by noting that the initiatives in building capacity in the area
of economic analysis and research are partnerships.The Bank has, of course, been
very much engaged in this process, but we must emphasize that we have many part-
ners.To mention only a few, they include Carnegie; Ford; Citigroup; the Eurasia
Foundation; the MacArthur Foundation; the Soros Foundation and the Open Soci-
ety Institute; USAID; the Finnish, Swedish, and Norwegian governments; the British
government;the French government;and others.We greatly value their engagement,
and thank them for it.Although the Bank is engaged in capacity building, we are not
actually well set up for it, unlike a foundation or other long-term grant-giving
financier.
Three points on this conference. First, I have been impressed by the depth of
thinking in the papers, not only in terms of reporting what has been done, but also
in setting out the philosophy that has underpinned capacity-building efforts. All
efforts have faced choices--whether to go, for example, toward more professional
and vocational education or toward more academic disciplines, and how to balance
attention between methodology and applications.The choices that are made reflect
distinctive philosophies,and I think we are going to learn a lot from exchanging per-
spectives on this.
Second,the title of the conference assumes something--that the capacity-building
efforts have indeed been a success.We are taking it for granted,therefore,that these are
successful efforts. But I don't think that we should stop there.We should always be
going back and asking: How do we know that they are successful?What are the indi-
cators that we are really looking for in terms of understanding whether an initiative is
11
12 A L A N G E L B
successful? And how do we continue to justify the initiatives in terms of these crite-
ria and measurements, which will be necessary to continue further support in the
area? We should not be complacent about what has been achieved.
The third point is to note that the question of scaling up is critical.We meet here
with a number of initiatives that have produced perhaps a few thousand trained peo-
ple, whether through research competitions or courses or other approaches, but this
number is really a drop in the bucket compared with the number needed to revital-
ize the economics professions in the regions concerned.This is a good time to think
also about scaling up.
So, thank you all very much. I return you to the chairman.
KEYNOTE ADDRESS
Disciplines of Social Sciences:
Separation or Cooperation?
J�nos Kornai
I WOULD LIKE TO BEGIN BY RECOUNTING TWO RECENT EXPERIENCES. UNDER THE
auspices of the Collegium Budapest Institute for Advanced Study, between 2000 and
2002, Professor Susan-Rose Ackermann of Yale University and I convened and
directed a group of researchers who analyzed the topic "Honesty and Trust in the
Light of Post-Socialist Transition."1 The group comprised people from various pro-
fessions, including legal scholars, economists, sociologists, political scientists, scholars
of political philosophy, and historians.We gathered for weekly seminars to report on
the progress of our work.We were all perplexed by the fact that we had difficulties
understanding one another. Each discipline is based on its (explicitly stated or tacit)
axioms and basic assumptions. Each has its own language and vocabulary. Scholars in
each discipline consider different contributions to be "classic," but all think that the
work they consider classic is familiar to everyone else.There is great variety across
disciplines with regard to which contemporary works have become famous and
which subjects have become "hot." Despite this, members of each profession
expected members of others to be familiar with knowledge in their field.
The interdisciplinary character of the research group demanded a certain kind of
self-discipline from the participants. It compelled them to speak in seminars in a
manner that is also comprehensible to others.We learned from one another and
attempted to be open to ideas suggested by other disciplines.
In early 2005 I traveled to China.When preparing for the lectures that I was to
give there, I tried to familiarize myself with the most recent literature on the Chinese
reform process. I read a number of papers by the best economists studying the area
and was struck by the fact that,despite touching on the political aspects of the reform,
they did not refer to a single article from a political science journal.At the same time,
I read papers by the leading political scientists specializing in this area and found the
same one-sidedness--although they mentioned the reform of the economy several
times, no reference was made to economic journals. Hardly any intellectual commu-
nication between these two groups of experts on China seemed to be taking place.
13
14 J � N O S KO R N A I
In view of this, I decided to take a closer look at the relationship among the var-
ious social science disciplines. Economics student No�mi P�ter assisted me in this
work.We focused on four disciplines:economics,political science,sociology,and law.
We selected five leading journals from each of these disciplines and reviewed one
volume of each, that is, all articles published in 2004.
We added up the number of references, which we classified in various ways (the
method of calculation, the principles of classification, and the main results appear in
the annex). In economics journals we found 316 articles to which our methodology
was applicable.Of the 4,885 references found in these articles,88.9 percent were also
from economics journals, 6.6 percent from interdisciplinary social science journals,
2.2 percent from political science journals, 1.2 percent from law journals, and 1.0
percent from sociology journals.The overwhelmingly dominant source of knowl-
edge for the profession of economics is, therefore, the profession itself--work pub-
lished by other economists in economics journals.The profession is inward looking
and scarcely acknowledges products of other social science disciplines.A similar sit-
uation prevails in the other examined disciplines (see annex).
I do not want to overestimate the value of the quantitative results of this minia-
ture data collection.We would obviously obtain far more precise and reliable results
if we analyzed several volumes of these journals edited in several different years and
included more disciplines and journals in the analysis. On this occasion, we excluded
from the summation references in which the discipline generating the source of the
reference was ambiguous. A more precise calculation would require a great deal of
work, and I hope that someone will carry it out.The conclusion of this small study
is clear, however: the intellectual ties among the branches of the social sciences are
very weak.
Where do we stand now with respect to separation and cooperation in the social
sciences?What can be done to bring these disciplines closer together so that they will
provide a coherent multipronged approach to the problems they now each confront
separately? I attempt to give only a partial and draft response here, mainly to inspire
the reader to think about these difficult questions.A deeper understanding of these
problems requires more thorough and extended research.
Five Encouraging Examples of Interdisciplinary Approaches
The general picture of interactions across disciplines is slightly more favorable than
that suggested above. I describe here five examples of intellectual streams, scientific
positions, and methods that have crossed the confines of traditional disciplines and
promoted convergence and cooperation among them. I am convinced that many
other examples could be found.
Theory of Rational Choice
The theory of rational choice constitutes the core of neoclassical economics. Its rig-
orous discussion starts withWalras;Arrow and Debreu worked it out in greater detail.
DISCIPLINES OF SOCIAL SCIENCES: SEPARATION OR COOPERATION? 15
Although this theory evolved within the framework of economics, it has become
widely used in other disciplines as well.A pioneer in efforts to extend economics is
Gary Becker, who was awarded the Nobel Prize in that field in 1992. Becker argues
that, in many cases, the motives behind human behavior can be described by assum-
ing that the decision maker who chooses among various alternatives will choose the
one that guarantees the most favorable combination of benefits and disadvantages.
This decision maker is assumed to be a consistent person whose preferences fulfill
certain consistency requirements and who maximizes a utility function--that is, he
or she attempts to make the optimal choice from the alternatives. Applying the
model of rational choice allows us to analyze not only economic decisions (such as
a producer's choice among various technologies or a consumer's choice between two
commodities) but also a wide array of other issues, such as crime, suicide, family size,
and elections.
My book Anti-Equilibrium (1971) discussed in great detail my criticism of the
theory of rational choice. I am certainly not an uncritical supporter of this theory;
instead I do understand the limits of the model. I should also stress, however, that it
would be a grave mistake simply to throw it away. We should also avoid reducing the
problem to a conflict between disciplines or subdisciplines,saying things like"we,the
sociologists [or political scientists or legal scholars] dislike the theory of rational
choice and you, the economists, want to force it upon us." No, the point lies else-
where.There is no such a thing as the sociologist or the economist.There are several
kinds of sociologists and several kinds of economists. Economists include people, like
me, who are critical of this theory but who know that it has significant explanatory
power and therefore needs to be used and applied.We should, however, also under-
stand the limits of its validity as well as its benefits.
Clumsy users of the theory of rational choice (and there are many of them)
believe that it is a key to understanding all phenomena--that no human behavior
exists that could not be described (perhaps with some slight strain) with the help of
this model. In contrast, people who apply the theory sensibly and with sobriety (and
there are also many of them) know that this theory can explain certain phenomena
but not others.They also know that the explanation is only partially valid even in
those cases where it has an explanatory power. It is unable to shed light on the entire
phenomenon, but it is able to point out certain important elements.Therefore, I use
the theory of rational choice only with caution and within appropriate limits.If I am
faced with a phenomenon that needs explanation, especially if it is a complicated
social phenomenon, I do think it is worth asking what the decision makers' motives
are, what objectives are driving them, and whether they have easily understandable
interests (these may be nonfinancial interests, such as motives to obtain power, or
emotional motives). It is worth analyzing what inspires individuals to action because
it helps us understand the reason for the event that takes place as a result of their
choices and decisions, conscious or unconscious.
I am against the "imperialism" of the theory of rational choice, its aggressive dif-
fusion, and the practice of imposing it on researchers. I consider it, however, very
important and desirable to meditate about it and use it wherever possible. By now
16 J � N O S KO R N A I
none of the social science disciplines are capable of escaping the impact of this
theory.
GameTheory
In the case of rational choice, a fundamental assumption (that a decision maker
makes an optimal choice) has spread beyond the disciplinary boundaries of econom-
ics. In the case of game theory, a form of description, a possible technique for describ-
ing situations, has gone beyond the confines of a discipline.
The first illustrative examples to which game theory appeared to be applicable
were social games,but Neumann and Morgenstern's classic work (1944) started to be
applied to economic phenomena shortly early on. It soon became clear that the the-
ory could be used to analyze any social phenomenon. More specifically, it is applica-
ble to every situation that involves interaction (cooperation, conflict, harmonization
of behavior, acting against other actors) among social actors or in which interaction
might emerge. People are connected by a wide variety of social links. If there is any
kind of a link between them, most phenomena related to their interaction can be
described with some kind of a game-theoretical model,which can help lead to inter-
esting conclusions. Phenomena that can be analyzed with game theory occur in the
spheres of politics, family life, military situations, and countless other contexts.
Most academics working on game theory work in departments of economics.
But game theory has grown beyond the confines of economics to become a general
analytical technique applied across the social sciences.
Multivariate Analysis of LongTime Series of National Statistics
The abundance of data and the acceleration of computing are bringing the disparate
branches of social sciences closer together. During the 1960s, the Republic of Korea,
Brazil, and a few other countries achieved remarkably rapid economic growth.
Researchers at the time noticed that all of these countries were governed by oppres-
sive dictatorial regimes, leading some to conclude that dictatorship fosters growth by
creating far better conditions for economic development than democratic systems
do.The typical argument was to refer to one of the high-growth countries and
attempt to draw some kind of a generalized conclusion from it or perhaps from one
or two other such countries.
Many changes have taken place in the decades since then. First, huge databases
have been created, with data series of 100 to 150 countries over long periods. Some
of these time series cover economic data (for example, GDP); others cover noneco-
nomic phenomena.
The other significant development that has taken place in past three decades is the
development of extremely efficient computers, which allow for the rapid solution of
giant equation systems, multivariate regression computations, and other
mathematical-statistical analyses.These computers are able to carry out tasks that
require 100,000 computations in a single series.
DISCIPLINES OF SOCIAL SCIENCES: SEPARATION OR COOPERATION? 17
Many projects make use of the new possibilities offered by huge data banks and
fast computers. Among the pioneers was Robert Barro (see, for example, his 1991
study).In the last 15 years this kind of analysis has become an industry in which hun-
dreds of researchers work.2
The typical procedure is as follows.Say a researcher wants to explain an economic
phenomenon (such as growth or income inequality) or a noneconomic phenome-
non (such as the level of illiteracy).He or she may consider a wide variety of explana-
tory variables, ranging from quantitative economic statistical data, such as the
investment rate or a country's openness to foreign trade, to various qualitative social
characteristics, such as the extent of democracy or dictatorship prevailing within a
political system.The researcher may account for the country's legal system (Anglo-
Saxon or German). He or she may investigate how frequently corruption occurs and
what the dominant religion of the country is.
If a diverse set of phenomena is included in the set of explanatory variables, the
researcher can come up with more than a few arbitrarily chosen examples of factors
that affect the growth of the phenomenon being studied. Following the careful
analysis of this type of multivariate calculations may not always yield clear and unam-
biguous responses or lead to conclusive results.But whatever the outcome is,we have
made a long step forward in learning.With the tools of statistics, the social sciences
in general,not just economics,can now investigate the casual relations among a wide
variety of economic and noneconomic phenomena.
This approach raises many serious methodological difficulties. Its application is
disquieting in many cases. Researchers often abuse the methodology briefly
described above and draw irresponsible conclusions from the analysis.Yet despite
these problems, a method now exists that, if applied cautiously, may prove valuable in
understanding complicated interrelations.
Let me express a warning about this method. Computers today are so fast that
researchers can carry out experiments randomly--as the ironic article "I Just Ran
Two Million Regressions" (Sala-i-Martin 1997) suggests. Anything can be put on
the right-hand and left-hand sides, a regression can be run based on millions of cal-
culations, and a well-fitting equation can be found.The warning by Tjalling Koop-
mans remains valid: all meaningful measurements and enlightening quantitative
analysis must be based on an underlying theory (Koopmans 1947).
Use of "Soft" Data
Some two or three decades ago, economists would have taken seriously only empir-
ical analyses that contained ex post statistical data.They would not have accepted the
idea that serious economic analysis could be based on interviews, believing that only
market researchers or, perhaps, sociologists would conduct this kind of research, not
respectable economists.Today this is no longer the case.
The profession now understands that the phenomena that take place in peoples'
minds matter. Economists need to understand peoples' expectations, hopes, and per-
ceptions; and they need to appreciate the values affecting their ways of thinking and
18 J � N O S KO R N A I
the levels of their optimism or pessimism.Welfare has always been among the vari-
ables considered by economists to be important, but this used to be measured exclu-
sively by the volume of consumption. It has become common to attempt to measure
the level of people's happiness by asking people how happy they are (see Frey and
Stutzer 2002).
Many studies today are conducted by researchers who rely on techniques that had
not previously been applied by economists, but had been regularly used by sociolo-
gists.These kinds of data may be obtained from a number of sources, including opin-
ion polls, interviews, and responses to written or oral questions.The evaluation of a
research project should not be based on whether the underlying data are "soft" or
"hard" but in terms of whether the data are representative and consistent and the
research carefully performed.
"System Paradigm"
I hope that it will not give the impression of immodesty if, as a last item, I list a char-
acteristic approach that I usually apply to my own work, which I call "system para-
digm" (Kornai 2000). Consider the historical period in which the former Soviet
Union and Eastern Europe were under communist dictatorship. Describing exclu-
sively the political regime (the political monopoly of the communist party) would
generate a one-sided presentation of the region and the era. On the other hand,
describing the economy solely by noting the elimination of private ownership as a
means of production,the nationalization of all productive assets,the squeezing out of
the market, and the central management of economic processes would provide
another one-sided picture.A fuller picture would need to address both aspects, and
also ideologies, the dominance of Marxist-Leninist ideals, the persecution of alterna-
tive views, and the rhetoric and propaganda of the communist regime.
The only possible way to understand the reality of this region before 1990 is to
attempt to study the system as whole.We should attempt to understand simultane-
ously all spheres and dimensions of the system, how the various elements affected
one another, what interactions prevailed among them, and how mutual interde-
pendence emerged.
System paradigm has rich intellectual traditions. I would consider Karl Marx to
be its first pioneer. Other remarkable scholars involved in it include Karl Polanyi
(1944) [1962]; Friedrich von Hayek (1935, 1944); and Joseph Schumpeter (1942).
The application of a system paradigm is needed not only to study socialism but
also to understand the capitalist system as a whole rather than only one or another of
its spheres. This system approach has become especially important now, when
change--or as Karl Polanyi puts it, the Great Transformation--is underway in the
once-communist countries.Those who, over the past 15 years, have specialized in
studying changes in the former Soviet Union,Central and Eastern Europe,China,or
Vietnam--the so-called transitologists, including experts from the World Bank, the
International Monetary Fund, and the European Bank for Reconstruction and
Development--have a proper understanding of this. Even if they do not use the
DISCIPLINES OF SOCIAL SCIENCES: SEPARATION OR COOPERATION? 19
phrase system paradigm, the character of their work compels them to apply this
approach.
The system paradigm cannot be applied within the narrow borders of one or the
other social science discipline.The very essence of the approach is its interdiscipli-
nary character.
Desirable Directions
What are the desirable directions of change? I do not suggest destroying the borders
that separate disciplines. I do not suggest that departments of economics, sociology,
and political science be united into a comprehensive department of social sciences. I
am not a merger maniac, and not only for reasons of tactics (that is, in order to pre-
vent the struggles for power that usually follow mergers).
Separate disciplines are rich in valuable traditions,methodologies,and approaches.
Members of each profession have a refined knowledge of a subset of the set of the
literature in all social sciences.It would be a grave mistake if,in the future,only"uni-
versalists" conducted research and taught students in social sciences. I do, however,
have three suggestions for improving the sharing of knowledge across disciplines.
They are modest ones and perhaps have a greater chance of being adopted.
� Suggestion 1: Obtain at least a minimum knowledge of other disciplines
Whatever your special discipline is,obtain a minimum knowledge of other dis-
ciplines of social science. Max Weber is not the only scholar outside of eco-
nomics whose work economists should understand. Just as a minimum level of
knowledge of mathematics and statistics is needed to get a PhD in economics,
minimum requirements should be set with respect to the social sciences and
history. As for "adult" researchers, we must educate ourselves.We should read
far more works produced by the other social science disciplines, and we should
follow their latest achievements and debates.
Should mandatory minimum requirements be set for students, or should we
content ourselves with recommending that universities encourage broader
knowledge and give credits for courses taken outside the basic discipline? I am not
sure what the right answer is;it would be worthwhile to continue this discussion.
But this is not the most important thing.The really important thing is the atmos-
phere prevailing within a university, and peers' expectations from one another.
There is a term used by members of the Hungarian intelligentsia: professional bar-
barian. It refers to people who are experts in a narrow field but who know noth-
ing else.We need to create an atmosphere in which professional barbarians are
ashamed of being uneducated, however strong they are in their own fields.
� Suggestion 2: Encourage interdisciplinary work and cooperation among experts
from different disciplines
Interdisciplinary work is more common than it was a few decades ago, but it
has not yet become widespread. It would be desirable to have more interdisci-
plinary research projects and more interdisciplinary courses at universities.
20 J � N O S KO R N A I
The term interdisciplinary scholar does not convey high respect today."She is
the best philosopher among economists" is not high praise.This assessment
needs to change.
A handful of journals cover two neighboring disciplines (for example, eco-
nomics and sociology or economics and law.) But there is not a single presti-
gious English-language academic journal covering the whole body of social
sciences.When writing my article on system paradigm, I failed to find a single
journal in whose profile it could fit. I am happy that the volume being pub-
lished byWorld Bank will include this paper. It is a paper that does, in fact, not
fit into any specialized journal,either;and it would fulfill its aim only if it could
be published in the journals of the various disciplines simultaneously. But the
policy of editing prohibits such a practice by adhering to the right of first pub-
lication.A journal proud of its reputation would never become a second pub-
lisher. I mention this only ironically and to describe the current situation in
which, despite the dumping of journals, there is not one adequate journal
forum for comprehensive messages covering all social science disciplines. If I
were younger, I would initiate the founding of a comprehensive social science
journal.
� Suggestion 3: Encourage the development of a new kind of multidisciplinary
scholar
We need to encourage the appearance of a particular kind of a scholar, the
"social scientist," in the academic sphere. Most scholars will prefer to remain
econometricians, or experimental psychologists, or empirical social anthropol-
ogists.But a small group of researchers and teachers who try to develop a more
comprehensive approach to problems is needed. Such comprehensive minds
are needed not only to become the new Hayeks or Schumpeters, but also to
meet more modest needs. Presidents and prime ministers, for example, need
advisers who have more comprehensive knowledge than the current advisers
(often rather narrowly trained) have--advisers who are familiar with many dis-
ciplines, people with a thorough knowledge of history, political science, eco-
nomics, sociology, and social psychology.They need not be experts in these
fields, they need only be able to orientate within these disciplines and to know
which books to read. Creation of this kind of scholar might help politicians
obtain better advice than they have received so far.
As a conclusion, let me point out once more that there are no ready recipes for
the solution of problems described in this paper. But this paper may be useful in
drawing attention to a difficult problem that has not yet been handled properly.
DISCIPLINES OF SOCIAL SCIENCES: SEPARATION OR COOPERATION? 21
Annex: Methodology and Numerical Details of the Study
on References Across Disciplines
Five relevant journals each in economics, law, political science, and sociology were
selected (table A.1), and every article in these 20 journals published in 2004 was ana-
lyzed.The selection of the economics journals was based on various surveys of "lead-
ing journals." Experts in the other disciplines selected the journals in law, political
science, and sociology.Although most of these journals are published in the United
States, the set included at least one non-American journal in each discipline. Ulti-
mately, the selection was rather arbitrary, although it appears to be certain that each
of the selected journals rank among the leading 10 to 15 journals of their disciplines.
References in each article to articles published in the regular issues of other jour-
nals were tallied (table A.2). Sometimes articles that appeared in special issues were
also included. For example, the analysis included the Papers & Proceedings issue of the
American Economic Review, the Conference Papers of the Economic Journal, and the Sym-
posium and the Supreme Court 2003Term of the Harvard Law Review.
Individual references were assigned to one of the following categories: econom-
ics, law, political science, sociology, interdisciplinary, other.Articles on foreign affairs
TABLE A.1
Journals Selected in Each Field (2004)
Economics Law Political science Sociology
American Economic American Journal of American Political American Journal of
Review International Law Science Review Sociology
Economic Journal Columbia Law Review Comparative Politics American Sociological
Review
Journal of Economic Harvard Law Review European Journal of Annual Review of
Perspectives Political Research Sociology
Journal of Political Rabel's Zeitschrift Journal of Democracy Social Forces
Economy
Review of Economic Yale Law Journal World Politicsa Sociology
Studies
Source: Author's selections, with the help of Noemi Peter.
Note: a. The last issue from 2003 was included, as the journal published only three issues in 2004.
TABLE A.2
Number of Issues, Articles, and References Analyzed
Item Economics Law Politics Sociology Total
Issues 27 32 18 22 99
Articles 316 65 164 176 721
References 8,637 9,952 6,567 12,827 37,983
Source: Author's calculations, with the help of Noemi Peter.
22 J � N O S KO R N A I
and international relations were characterized as political science articles; articles on
gender were characterized as sociology articles; articles on criminology were catego-
rized as law articles; and articles on economics, industrial organization, finance,
industrial relations, business, and political economy were classified as economics
articles.
The process of establishing the interdisciplinary category was as follows. In some
cases, the title of the journal unambiguously identifies the disciplines whose areas it
covers (for example,The Journal of Law & Economics).In other cases (for example,The-
ory and Society), judgment was required to determine whether the journal is
interdisciplinary.
If the reference had been published in a journal, the relevant category was usually
clear. Since other references were difficult to classify, they were grouped under
"other." This category included all books,working papers,Internet sites,journal arti-
cles, newspaper articles, and other publications falling outside the five categories
established.
Tables A.3 and A.4 reveal that the proportion of references to one's own discipline
is very high if we consider the references classified into the five categories (what is
more, the proportion is highest in the papers published in economics journals).The
percentage figures in the diagonal entries reflect the high degree of "inward-
looking" in all the disciplines under scrutiny.The figure was highest in economics
(88.9 percent) and law (84.0 percent) and lowest in political science and sociology
(65.8 percent for both these disciplines) (tables A.3 and A.4).
TABLE A.3.
Distribution of References
Type of publication in
which reference was Type of journal in which reference appeared
originally published Economics Law Politics Sociology Total
(1) Economics 4,344 256 341 625 5,566
(2) Law 60 3,428 70 190 3,748
(3) Politics 109 84 1,379 286 1,858
(4) Sociology 50 15 110 3,077 3,252
(5) Interdisciplinary 322 296 197 497 1,312
(6) Subtotal: Number
of references
identified by
discipline or as
interdisciplinary
(items 1
through 5) 4,885 4,079 2,097 4,675 15,736
(7) "Others" 3,752 5,873 4,470 8,152 22,247
(8) Total
(8 = 6 + 7) 8,637 9,952 6,567 12,827 37,983
Source: Author's calculations, with the help of Noemi Peter.
DISCIPLINES OF SOCIAL SCIENCES: SEPARATION OR COOPERATION? 23
TABLE A.4
Distribution of References Identifiable as Originating in a
Specific Discipline
(in percentage)
Type of publication in
which reference was Type of journal in which reference appeared
originally published Economics Law Political science Sociology Total
Economics journal 88.9 6.3 16.3 13.4 35.4
Law journal 1.2 84.0 3.3 4.0 23.8
Political science journal 2.2 2.0 65.8 6.1 11.8
Sociology journal 1.0 0.4 5.3 65.8 20.7
Interdisciplinary journal 6.6 7.3 9.4 10.6 8.3
Total 100.0 100.0 100.0 100.0 100.0
Source: Author's calculations, with the help of Noemi Peter.
Note: The 100 percent figures in the last row refer to that subset of all references that is displayed in row
6 of table A.3. For example, of the references of economics articles, the 4,885 identified references consti-
tute the 100 percent displayed at the bottom of the table. A total of 88.9 percent of these 4,885 references
referred to articles in economics reviews.
A more detailed study could try to distribute the references that fall into the
"other" category. This study did so only for economics. For the results of the exper-
iment targeted at a finer segregation of the "other" category, see table A.5, which
shows that the disciplines listed here for closer examination are also mostly ignored
as reference targets by economics articles.
The proportion of "other" is interesting with regard to the explanatory power of
this analysis.We managed to classify 57 percent of all references in economics but just
41 percent in law, 37 percent in sociology, and 32 percent in political science.
TABLE A.5
Distribution of "Other" Items Cited in Economics Articles
(percent)
Pieces Percentage
Category of "others" in total 3,752 100
Of these, identifiable as originating in certain disciplines:
(1) History 4 0.1
(2) Mathematics, statistics 87 2.3
(3) Psychology 103 2.8
(4) Philosophy 10 0.3
(5) Anthropology 3 0.1
(6) Subtotal: Identified references
(items 1 through 5) 207 5.6
(7) Remaining unidentified references, in total 3,545 94.4
Source: Author's calculations, with the help of Noemi Peter.
24 J � N O S KO R N A I
Notes
1. Papers elaborated in the framework of the research project are collected in two vol-
umes: Kornai and Rose-Ackerman (2004) and Kornai, Rothstein, and Rose-Ackerman
(2004).
2. For discussions of this work, see Djankov and others (2003) and Knack and Keefer
(1995).
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Marx, Karl, and Friedrich Engels. 1848 (1962)."The Manifesto of the Communist
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Brothers.
Lessons of Experience and
Future Directions
Lessons in Capacity Building
from the Open Society Institute
William Newton-Smith
This paper begins with a definition of "capacity building," suggesting that we understand this
notion in the present context as creating the power to produce locally the human capital
needed for the development and preservation of open societies. This might be facilitated by
the creation of new institutions or by the modification of existing institutions. Considering
the mission of the Open Society Institute (OSI), the author lists what have come generally to
be seen as the crucial ingredients in this normative ideal of an open society: an open society
is a democratic society, governed by the rule of law with strong civic institutions. It is not
merely a tolerant society, it is one whose members positively enjoy and value diversity in
regard to ethnicity, religion, and culture. And, most importantly, it is a society of "engaged"
individuals. This conception of an open society as one composed of engaged citizens seeking
the knowledge necessary to refine their views on the issues of the day explains why OSI's
interest in capacity building in higher education is almost exclusively focused on the humani-
ties and the social sciences. The author proceeds to offer conjectures for discussion and fur-
ther investigation in the form of lessons learned by OSI about capacity building.
The first and most general lesson is that successful capacity building has to be contextual-
ized, and it must have strong local involvement in its design and implementation.The second
lesson is to make sure that efforts will enhance local capacity building rather than encourage
a long-term dependency on nonlocal capacity. The third lesson is that one should think of
enhancing existing local capacity rather than creating a new institution: enhance, do not cre-
ate. The corollary is that effective capacity enhancement requires the commitment of a men-
toring institution or institutions.
The paper then notes that if sustainability had always been a criterion for going forward
with a project, many OSI projects that have turned out to be most successful would never
have been allowed to start. An undue concern with issues of sustainability would tend to
unduly discourage those exciting gambles that may, after all, be sustained. It is more useful
to look at the creation of institutions in terms not so much of sustainability but in terms of
costs and benefits assessed on an annual basis. In the case of NES and EERC, for example, the
29
30 W I L L I A M N E W TO N - S M I T H
cost per MA produced is a reasonably modest figure and so, even if these institutions proved
in the end not to be sustainable, the benefits produced while they existed would make it
worth having had them in existence even if for a limited time.
If, in the face of these lessons, one is faced with a young would-be capacity builder who
nonetheless wants to create a new institution, the OSI experience suggests three lessons.
First, determine whether the market is ready for the product. Second, if the market is
there, it follows that there is someone who will pay for the product. The new institution
should charge for the product from the very beginning. The third lesson concerns the impor-
tance of beginning with a proper governing structure. From the beginning there must be an
independent board that appoints the rector or director and controls the finances--it can
become something of a challenge to introduce a controlling board at a later stage.
The need to build capacity in economics education remains pressing. If we do not find the
substantial funds needed to replicate the successes of EERC, CERGE, CEU, and NES, we must
nonetheless proceed using more limited resources to enhance the education currently on offer.
And that means working with existing institutions.
THE ORGANIZERS OF THIS WORKSHOP MADE AT LEAST TWO MISTAKES IN ASKING ME
to speak. First, I am a philosopher and no philosopher can approach a topic without
first dissecting the terms in which it is posed.When Boris asked that I talk about the
experience of the Open Society Institute (hereafter OSI) in capacity building in eco-
nomics education my natural reaction was to ponder the very concept of "experi-
ence." What is the nature of experience? How should one best define the concept?
Of course I know something about experiences by virtue of having them. But what
are these things that I have? Is it right to even think of experiences as being"things"?
This train of thought took me to Descartes' sceptical challenge: How do I know that
there is anything other than my experiences?1 Perhaps I am nothing but a brain in a
vat being fed electro-chemical impulses that simulate a virtual reality.Well, some
months later I still had no transcendental proof of the existence of a world beyond
my experiences. For all I know, I remain alone in the world. Strictly speaking that
should read: For all I know the world is in me, but never mind.
In desperation I decided to leave experience alone and move to the next term:
capacity building.The notion of a capacity is another tricky one,philosophically speak-
ing. You do not see capacities; they are not given in experience.We experience only
what we call their manifestations.And tough-minded empiricists deny that there is
anything over and above these "manifestations." In the hope of making progress I re-
read an entire book on capacities by Nancy Cartwright that has a particular focus on
economics.After 181 pages of close argumentation she concludes modestly enough
that a capacity is a "something in the world" (Cartwright 1989, p. 81).That being so,
there is a world after all; a world inhabited at least by capacities and perhaps other
things.While her book thus helped to stem my sceptical Cartesian doubts, it made
me lose my grip entirely on the notion of a capacity and hence on the notion of
capacity building.Consequently I turned to the friend of desperate philosophers,the
Oxford English Dictionary, which defines a capacity as "the ability or power to do,
experience or understand something."That seems good enough to be getting on
LESSONS IN CAPACITY BUILDING 31
with given an appropriate specification of the particular ability or power. I suggest
that we understand capacity building in the present context as creating the power to
produce locally the human capital needed for the development and preservation of
open societies.This might be facilitated by the creation of new institutions or by the
modification of existing institutions.
We can come to the organizers' second mistake, which was to ask anyone from
the Open Society Institute to speak about anything. For we have been programmed
to seize any opportunity to propagandize about OSI's mission,and I am going to take
a moment to do just that. For in assessing our successes in capacity building to date,
and in outlining how past experiences are shaping future endeavors in capacity
building, we need to do so in relation to our conception of what we are aiming to
do.The term open society was popularized by Popper, who did not pause to give it
much positive content.2 In the early days of the Open Society Institute there was
much debate about how to articulate the notion of an open society. George Soros
(2000) hoped to derive the content from Popper's notion of fallibility--the idea that
rational agents recognize that they are fallible and that even their most cherished
beliefs may be wrong.
Certainly you can derive some ingredients of the notion of an open society from
this starting point.The basic argumentation was laid out by John Stuart Mill in his
On Liberty (1982).3 Mill argued that we have an interest in the development, the
articulation, and the forceful defense of views contrary to our own. For we have to
recognize that we may be mistaken, and the process of confronting the counterargu-
ments may move us from error to truth. And even if we are not mistaken, we will
develop a better understanding of the contents of our beliefs and of the grounds for
them through a process of challenge in open, public debate.Thus we have an inher-
ent interest in freedom of expression and freedom of the press.
But there is much in the concept of an open society that cannot be derived from
the recognition of human fallibility. For our present purpose it will be best to leave
aside the philosophical groundings and merely list what have come generally to be
seen as the crucial ingredients in this normative ideal of an open society. First and
foremost, an open society is a democratic society, governed by the rule of law with
strong civic institutions.It also embodies what I would term"tolerance plus."It is not
merely a tolerant society, it is one whose members positively enjoy and value diver-
sity in regard to ethnicity, religion, and culture.And, most importantly, it is a society
of"engaged"individuals.That is to say,the citizens,or at least a significant proportion
of them, have the capacity to and an interest in the use of rational discourse as the
means of settling issues. It is a society that places a high value on acquiring knowl-
edge relevant to social decision making and one that cares to discuss and debate
widely the issues involved.
The world being what it is, building and maintaining such societies do require a
stable economy offering at least an element of economic growth.The absence of sta-
ble economic growth can tend to create the conditions favorable to the development
of non-open societies. And hence OSI does take a particular interest in capacity
building in economics and management education.
32 W I L L I A M N E W TO N - S M I T H
This conception of an open society as one composed of engaged citizens seeking
the knowledge necessary to refine their views on the issues of the day explains why
OSI's interest in capacity building in higher education is almost exclusively focused
on the humanities and the social sciences. For the natural sciences are quite periph-
eral to this aim. If we (that is, society) decided to abandon all research in physics and
chemistry, that would not impede our ability to build and maintain an open society
in the least. Indeed, we might well be better off if the resources currently expended
on the high-tech hard science of physics were deployed instead to more socially
worthwhile ends.When I last checked, the annual budget of CERN (the European
Organization for Nuclear Research) exceeded the entire expenditure on education
in Albania.We (in particular the Albanians) would be better off with an appropriate
redistribution of the CERN funds to promote general education of the type required
by an engaged citizenry.
The situation is entirely different in the case of the humanities and the social sci-
ences for two reasons. In the case of some subjects--for instance, economics--the
engaged citizenry needs the special knowledge that the subject provides in order to
develop enlightened views on issues of social policy. Other subjects, such as philoso-
phy (or at least certain areas of philosophy) seem devoid of any practical content.
However, those subjects contribute to the development of the rational faculties
needed by the engaged citizen.Through the study of philosophy in particular and the
liberal arts in general,students come to master and enjoy the art of discussion,debate,
and rational dialogue. Philosophy delivers a process rather than a product, a process
whose internalization can contribute to the rational resolution of the issues of the
day. Economics has a privileged position. It may indeed deliver special knowledge of
particular relevance to practical decision making in the real world,as economists typ-
ically hold. But if it fails to do so (as the occasional skeptic claims) it can still claim
with philosophy to provide useful training in analytical thinking.
The study of physics does tend to develop a kind of analytic ability, but it is not
the sort of intellectual ability most suited to the resolution of issues of social policy.
In this area we face intractable issues,issues for which we have no answer and,indeed,
in regard to which we possess no methodology for finding a definite answer on
which a consensus can be easily built. In spite of this we need to continue rationally
discussing the issues, seeking to come up with the best answers we can. It is for this
reason that the study of history or philosophy is of much greater practical utility in
developing engaged citizens than physics or chemistry.I include economics with his-
tory and philosophy, mindful of the fact that this inclusion is contentious and that
some see economics (or some future more mature form of economics) as being
methodologically akin to physics.
Against this quasi-philosophical background, I turned to the less abstract issue of
what we have learned in the course of seeking to build capacity. But first a sort of
Surgeon General's warning is needed. As a philosopher of science I cannot even pre-
tend that generalizing from a handful of cases without any controlled experiments is
methodologically acceptable. For the most part what I offer are conjectures for dis-
cussion and further investigation.
LESSONS IN CAPACITY BUILDING 33
The first and most general lesson is that successful capacity building has to be con-
textualized.One simply cannot take an institution that produces human capital in,say,
Canada and replicate it in Tajikistan, expecting it to produce the same human capital
in the same way. Perhaps no one proceeded after the Iron Curtain collapsed in quite
such a crude, imperialistic way. However, it is certainly true that in the early 1990s,
some who sought to indulge in capacity building were not sensitive enough to the
local context.This lesson has a corollary to which I will return below: capacity build-
ing must have strong local involvement in the design and implementation phase in
order to maximize the chance that the project has been properly contextualized.
Creating institutions is obviously not the only way one can build human capital
in the postcommunist world. One can also do this through scholarships, fellowships,
and exchanges to established Western institutions. However, this is the antitheses of
institutional capacity building. Decades of scholarships will not on their own build
local capacity.Indeed,using scholarships abroad as a means of delivering local human
capacity can even institutionalize a kind of dependency. Scholarships do have an
important role to play in building understanding and in enriching the perspectives of
the young.They are certainly a good thing even between the United States and the
United Kingdom. But on their own they do not build capacity. I give but one of
countless examples to illustrate this contrast.We were approached by a well-known
museum in the United States for scholarship funds to train students from the region
in the conservation of art.There was a pressing need for a large number of trained
conservators.But a museum in the United States is not the answer.Instead of an end-
less flow of students to the United States,bringing tuition revenues and adding to the
cosmopolitan image of the museum,we proposed a time-limited program to develop
a training center in the region with the museum acting as a mentor and"training the
trainers." The museum lost interest.This sort of capacity building does not generate
tuition income and requires more work than the museum was are prepared to pro-
vide.These reflections give us our second and rather obvious lesson: make sure that
your efforts will enhance local capacity building rather than encourage a long-term
dependency on nonlocal capacity.
Scholarships as a means of building human capital are in some contexts an
absolute prerequisite of any future capacity building exercise.The conditions are not
ripe for a capacity building exercise in Belarus or Uzbekistan at the moment. But
unless we build a critical mass of human capital through a scholarship program, the
conditions will never be ripe!
The third lesson we have learned is enshrined in the maxim: Don't Do It!
If you are thinking of creating an institution as part of a capacity-building exer-
cise, do not do it. One should think instead of enhancing existing local capacity.The
slogan should be: enhance, do not create. To make my argument marginally more
respectable methodologically I will cite institutions with which we have been
involved other than those devoted exclusively to graduate training in economics. I
know that economics is special but I doubt that it is so special that lessons about
capacity building in economics education cannot be learned from capacity building
in other areas of higher education.
34 W I L L I A M N E W TO N - S M I T H
Working with a local institution is likely, though not necessarily, to mean, work-
ing with a state university.That has many advantages, not least of which is that it dis-
plays respect for those locally engaged and that display, in turn, will facilitate
acceptance and dissemination.To elaborate I will use two pairs of examples. In St.
Petersburg we supported the enhancement of the School of Management of the state
university and the creation of the European University of St. Petersburg. Both teach
economics; the former is technically part of the economics faculty. In terms of aca-
demic quality both are highly rated. But in terms of sustainability the contrast could
not be greater.The School of Management has a guaranteed income stream from the
state, a stream that will be increasingly augmented by tuition income.The European
University has no income stream (unless you count the grants of Western founda-
tions, foundations that are notoriously prone to fickleness). And being outside the
state sector, the European University has no power to give recognized degrees, a
constraint that severely limits its ability to charge tuition, unlike the School of Man-
agement. I am as concerned as they are that this excellent university may well not be
able to surmount the challenge of sustainability. Insofar as sustainability is a concern
(and I will be critical of any excessive concern with sustainability below), one should
stick to enhancing local state universities. Obviously very special conditions need to
obtain for this to be an effective strategy. In the case of the state university there was
and is a rector prepared to grant relative autonomy to sectors of the university to
develop independently. And there was a Western institution--the Hass School of
Business at Berkeley--prepared not only to mentor the school through faculty and
curriculum development but also to assist in fund-raising.
This third lesson has a corolloary: Effective capacity enhancement requires the
commitment of a mentoring institution or institutions.The mentoring institution
can provide (among other things):
� Advanced degrees for the local faculty
� Apprenticeships in teaching methods
� Advice in curriculum development
� Assistance in fund-raising
� Visiting lecturers
Even with an extensive mentoring program, the cost of enhancement is small in
comparison with the cost of creation. And, very importantly, the costs of enhance-
ment are time limited. After a period the job is done. In the case of institution the
costs can run indefinitely into the future.
Happily there is no longer the need to rely exclusively on relatively more expen-
siveWestern institutions for the mentoring.The School of Management in St.Peters-
burg is providing this service most effectively for departments in Belarus and
Kyrgyzstan through a modular doctoral program that enables faculty to obtain a
higher qualification while continuing to teach.We are interested in considering
other proposals to provide in-region mentoring of weaker institutions by relatively
stronger ones.
LESSONS IN CAPACITY BUILDING 35
There is an interesting comparative history to be written of the American Uni-
versity in Bulgaria (AUBG) and the American University of Central Asia (AUCA),
which will richly illustrate the pros and cons of creating a new institution versus the
reform of an existing one.AUBG was created in Bulgaria as an American liberal arts
college with an American faculty and an American administration, guided largely by
the University of Maine. It largely replicated the curriculum and teaching style of an
American college and was able to offer a quality education unique of its kind in
Southern Europe from its very inception. On the positive side, this "creation by
transplantation" has meant that AUBG received American accreditation early. But on
the negative side, this style of creation has meant that AUBG has been slow to inte-
grate fully into the local educational scene. For instance, even at the time of this con-
ference, its degrees had not been recognized by the Bulgarian authorities. Happily,
however, that changed subsequently.4 And, more worryingly, it is a costly operation.
The extensive use of expatriate faculty means that there is no chance for AUBG to
cover its costs from tuition income and substantial subsidies have been needed. By
the time the local economy is strong enough to enable enough students to fund the
real cost of education at AUBG, Bulgaria will have been in the European Union for
some considerable time; by then the students with the means will have many other
opportunities for quality liberal arts education elsewhere in the EU. While there is a
reasonable chance that AUBG (particularly with recent improvements under the
current leadership) will survive, this is by no means certain.
By contrast, AUCA started life as a faculty of the state university ("the Kyrgyz
American faculty").The faculty were entirely local and most instruction was in
Russian. It offered a standard Soviet curriculum and style of teaching but was able to
grant a degree recognized locally. I once asked the primary founder what it was that
made the project "American." She replied that it was "American in spirit."At a cer-
tain point the project was given autonomy from the state university as an experi-
mental self-governing institution, called first the "American University of
Kyrgyzstan" and later the "American University of Central Asia." AUCA as the
descendent of a preexisting indigenous institution had two advantages over AUBG.
First,it inherited the ability to give locally recognized degrees. And,second,it inher-
ited a local faculty.The inherited faculty represented both good news and bad news.
The good news was that the cost of running the institution was low and remains rel-
atively low. AUCA has received very much less in subsidies than AUBG (in both
cases the support has come almost entirely from the U.S. government and OSI). I am
confident that the modest endowment provided by OSI and the U.S. government,
together with tuition income, is adequate to make this institution sustainable. I hope
that AUBG will be sustainable. However, even though it has received much greater
financial support, its survival is not guaranteed; and this remains its greatest chal-
lenge.The challenge to AUCA is not merely to survive. It is to improve the quality
of education.Many of the faculty still teach in Russian;the curriculum needs further
reform and the qualifications of the faculty need to be enhanced. AUCA will have
to struggle to meet these challenges over several more years if it is to achieve the
American accreditation that AUBG obtained.The moral I draw from this thumbnail
36 W I L L I A M N E W TO N - S M I T H
comparison is that reforming an existing local institution enhances the chances of
sustainability but makes real innovation more challenging.Transplanting a Western
institution gives instant innovation, but makes sustainability challenging.
AUBG could improve its financial position and thereby increase its chances of
becoming sustainable by regionalizing the faculty. It is perfectly feasible to staff the
university entirely with lower-cost faculty members from Bulgaria and the neigh-
boring countries who have been trained in Western universities or in Western-style
universities such as the Central European University (CEU). But universities, even
new ones, are fundamentally conservative institutions.And taking this idea seriously
would call into question the university's own image of its identity.The AUBG board
will tell you that AUBG is an American institution after all. And the students, who
share this orientation with the board, complained strongly when there was a very
modest increase in the percentage of regional faculty members. But this objective
needs to be pursued in spite of this opposition. It makes financial sense and it serves
the aim of capacity building in a general sense. AUBG can afford to pay Western-
trained faculty from the region more than a state university in the region can. Con-
sequently, AUBG has a important role to play in encouraging young faculty members
to return to the region to teach.
I have sketched an aspect of the story of AUBG and AUCA to give further sup-
port to my negatively phrased maxim: enhance rather than create. Reflecting on the
contextual character of capacity building, we can see that it was not a mistake to cre-
ate AUBG. In the context there was no institution within the state sector that was
ripe for enhancement.The success of such institutions as AUBG has played a role in
changing the very context in which capacity building takes place.Universities within
the state sector have become interested in replicating the kind of education provided
at AUBG. For instance, at the University of St. Petersburg a liberal arts college,
Smolny College, has evolved within the state structures. No doubt projects such as
AUBG served as models,prompting the impulse to replicate them elsewhere as in St.
Petersburg.
OSI is taking this general lesson to heart. Although we do not categorically
exclude creating new institutions, our preference is now to work at enhancing exist-
ing institutions. Georgia is a case in point.We declined various proposals to create
institutions and are working instead with Tbilisi State University to upgrade their
research and teaching in sociology and international relations at the MA level, with
mentoring being provided by the Moscow School of Social and Economic Sciences
in the case of sociology and by Oxford University in the case of international rela-
tions.The approach involves faculty and curriculum development using partner
universities.
This strategy of using institutions we have helped to develop to act as mentors for
departments in the state sector is likely to be increasingly important for us.We are
funding the departments of history and of political science in CEU to act as mentors
to a range of university departments within the state sector.We hope thereby to
improve the curriculum, the teaching styles, and the research abilities of the faculty
in a number of departments and thus improve the education, in a sustainable way, of
LESSONS IN CAPACITY BUILDING 37
many more students than we could if the same funds were devoted to creating a new
stand-alone institution.
Suppose that you, as a young would-be capacity builder, having heard these per-
haps cynical remarks of an older person, nonetheless wants to create a new institu-
tion.How should you go forward? First,find yourself a charismatic,driven individual
who has never heard of the concept of sustainability. For, if any of the projects we
have supported, including those that have proved sustainable, were required to show
that they were sustainable at the time of their inception nothing would have hap-
pened. Even if you substitute the weaker notion of "having a reasonable prospect of
being sustainable," little would have happened and the world would have been a
poorer place.
There is an interesting thesis to be written on the history of the discourse about
sustainability. No doubt those of you in theWorld Bank have always been concerned
with sustainability.This was not so in the foundation world.When OSI started its
Higher Education Support Program (HESP) we were focused on finding good peo-
ple who were doing interesting things and merited support. Sustainability was not
even on our thought horizon. I remember my shock when someone in Washington
some 15 years ago asked whether one of our projects was sustainable.That was not
how we thought about things. If we had, many of our projects that have turned out
to be most successful would never have been allowed to start.After the initial excite-
ment of the early 1990s, a time came in which we started to think in terms of sus-
tainability. Many of the things that foundations like to do (such as scholarships) are
not sustainable in any real sense of the term. I sometimes have the cynical thought
that the effect of this discourse about sustainability has been simply to loosen the cri-
teria for the application of the term to the point where any intervention that has a
good effect is deemed to be "sustainable." In any event, I sense that this discourse was
a fad that is now fading somewhat.
Whether an institution will be sustainable depends on many factors that are
unknowable at the time the institution is created. A switch in policy from funding
universities with block grants from the state to funding students with vouchers that
they can use where they like can totally change the sustainability of an institution.
And, as noted above, an undue concern with issues of sustainability would tend to
unduly discourage those exciting gambles that may, after all, be sustained. I am not
denying that sustainability is a virtue. My point is only that caring too much about
sustainability is not a good thing. Consequently I suggest looking at the creation of
institutions in terms not so much of sustainability but in terms of cost and benefits
assessed on an annual basis. In the case of the New Economic School (NES) and
Economics Education and Research Consortium (EERC), the cost per MA pro-
duced is a reasonably modest figure and so, even if these institutions proved not to be
sustainable, the benefits produced while they existed would make it worth having
had them in existence even if for a limited time.
Given that you have identified the charismatic, driven individual who does not
think in terms of sustainability, what have we learned that might help him or her in
taking his or her project forward? The OSI experience suggests three lessons for the
38 W I L L I A M N E W TO N - S M I T H
would-be institution builder. First, determine whether the market is ready for the
product. It may well be that this is not a serious issue in regard to economics educa-
tion given the success economists have had in persuading everyone globally that
economists are essential for our well-being. However, we have learned in other areas
that you can move too quickly. We are interested in capacity building in social work.
As a first step we established an MA scholarship program to the United States.We
had expected the returning MAs to both work as social workers and, most impor-
tantly, to become the nucleus we would assist in developing in the region local MA-
level training.However,the market was not there.Social work is not even recognized
as a profession in most countries of the region.The students were not able to find
employment in the relevant government social services. Some of them work for rel-
evant NGOs; others have joined the internal brain drain, using their English-
language skills to work for multinational companies.We have not yet been able to
find the right combination of a government and a university interested in taking
forward the creation of a professional school of social work.
We have not abandoned this project but we are no longer confident that we will
be able to add value given the current perceptions. Kyrgyzstan has recently recog-
nized social work as a profession and has designated an institution dating from the
Soviet era as the training school for social workers.The director told me that there is
not a single properly trained social worker in the country. I thought this might be
our opportunity to assist with faculty development. However, when I asked if this
meant that he would have problems teaching social work he said "not at all!"
We ought to have been more cautious.A decade or so ago, we thought of devel-
oping capacity in the area of educational policy.We thought this particularly appro-
priate given the prospects of significant reform in the educational systems of the
region.We envisaged creating two institutions that would teach education adminis-
tration and policy: one in Russian for the CIS countries and one in English for East-
ern and Central Europe.We largely abandoned the project on sage advice from
someone from the World Bank who argued that the market was not yet developed.
He rightly noted that ministries of education did not appreciate the need for the
product of such institutions. He proposed that we make some smaller steps to con-
vince governments of the benefit of individuals trained in educational policy and/or
administration. In this regard the situation has definitely changed. For instance, we
have just been approach by the minister of education in Georgia for help in devel-
oping MA-level training in this area.
If the market is there, it follows that there is someone who will pay for the prod-
uct.This is the second lesson I would pass to the institution builder: charge for the
product from the very beginning. In retrospect we should have moved earlier and
more energetically to charge tuition at NES and EERC. Naturally such an approach
needs to be married with financial aid in the form of student loans and needs-based
scholarship support. It is sometimes said that there is a culture of entitlement that
leads students to expect free higher education. If there is such a culture it is not
unique to the region. Students in the United Kingdom, in resisting the introduction
of tuition charges, seem to feel that charging them would infringe some inalienable
LESSONS IN CAPACITY BUILDING 39
and universal human right! However, once charges were in place they paid.They are
clever enough to calculate that the benefits of a degree outweigh the tuition costs. In
general it seems to me that those who administer the programs we support are more
reluctant to introduce tuition charges than the students are to pay them.The level of
tuition should reflect the real running costs of the institution.The donors can then
focus on providing the necessary capital investments and in providing the student
loans available to all students and bursaries for those whose means are most limited.
The third lesson for our charismatic, driven individual concerns the importance
of beginning with a proper governing structure. From the beginning there must be
an independent board that appoints the rector or director and controls the finances.
The driven charismatic individual naturally gets on with things.And it can become
something of a challenge to introduce a controlling board at a later stage.We have a
number of institutions (I am not thinking here of institutions providing graduate-
level training in economics) that do not have such boards in place.And not having
them in place, there is no succession mechanism to deal with the day that the charis-
matic leader is run over by a bus.
The need to build capacity in economics education remains pressing. But in
moving forward we are going to have to think in terms of Ladas rather than Cadil-
lacs.I must immediately remark that I am not suggesting that those who worked tire-
lessly to create the programs in Kiev and Moscow were driving around in Cadillacs.
The interest and generosity of various funders including the World Bank enabled
these centers of excellence to be established in very short order. I do not think that
there is the same interest among funders at the moment, a moment when we des-
perately need to develop regional centers of excellent in graduate economics educa-
tion in Central Asia. I certainly hope that we will find the substantial funds needed
to replicate the successes of EERC, CERGE, CEU, and NES. However, if we fail we
must nonetheless proceed using more limited resources to enhance the education
currently on offer. And that means working with existing institutions, seeking to
upgrade the faculty using modular doctorates among other things. It may take much
longer in a Lada but you still get there in the end!
Notes
1. See Descartes (1985).
2. See Popper (1945), vol. I passim.
3. Mill (1982), chapter 2 passim.
4. Bulgarian accreditation was granted to AUBG on July 20, 2006.
References
Cartwright, Nancy. 1989. Nature's Capacities and their Measurement. Oxford: Claren-
don Press.
40 W I L L I A M N E W TO N - S M I T H
Descartes, Ren�. 1985. The PhilosophicalWritings of Descartes, vol. II.Trans. J. Cotting-
ham, R. Stoothoof, and D. Murdoch. Cambridge: Cambridge University Press.
Mill, John Stuart. 1982. On Liberty. London: Penguin Books.
Popper, Karl R. 1945. The Open Society and its Enemies. London: Routledge & Kegan
Paul.
Soros, George. 2000. Open Society. NewYork: PublicAffairs.
Teaching and Research in
Modern Economics in the
Russian Federation
The Experience of the New Economic School
Gur Ofer
The paper tells the story of the New Economic School (NES), a graduate school of economics in
Moscow, in the context of and as a case study of the transfer of modern economics to the Russ-
ian Federation during the first decade of the transition to a market system and a democratic
regime. The best-known part of such a transfer is the replacement of the Marxist version of
"political economy" with modern economics, as a behavioral, analytic, and positivistic science
as developed in the West over the last two centuries. As it turns out, a number of additional
key elements of teaching economics (and in some cases other sciences) had to be replaced.
There was the need to combine teaching with research; to change and expand the teaching of
methods of empirical analysis; to replace the narrow focus and specialized teaching of econom-
ics (separately to each branch of the economy) with a broader and more general approach; to
introduce new methods of teaching based on problem solving and on independent reading and
studying; to open up the teaching and research in economics to the global arena, to integrate
economics in Russia with that of the profession elsewhere, more along the Anglo-Saxon line
than the continental one; and finally to supplement the dominant state-run system with inde-
pendent institutions of higher learning, a part of the growing civil society.
The paper tells the story of the development of NES, and lists its main achievements in
all the dimensions listed above and its development as a center of excellence in teaching
research, policy work, and dissemination. By 2005 NES boasted an indigenous faculty of 15,
many with PhDs from the West, publishing in leading journals; and more than 500 graduates.
It is now run mostly by the Russian government and raises more than half its revenues in
Russia.
The paper discusses some of the main dilemmas and problems: openness to the world and
becoming a part of the global economics profession is highly beneficial to Russia but also
brings with it the problem of brain drain. Leaning outward may come at the expense of visibil-
41
42 G U R O F E R
ity in Russia and involvement in major policy issues facing Russia and the transition. NES,
together with its close partner the think tank CEFIR, seems to have been able to strike the
right balance between these two poles.
THIS STORY STARTS INTHE FALL OF 1991. ATTHATTIME,THE SOVIET UNIONWAS DIS-
integrating, following August's failed coup.The political upheaval was only slightly
more alarming than the state of the economy,which suffered from acute shortages,the
breakdown of supply networks, and emerging inflation. Central planning was virtu-
ally dead, and whatever nascent market that existed was chaotic and dysfunctional.
During this time, I visited a number of institutes of economics in the former
Soviet Union as a guest of a prestigious Moscow institute. Upon my return to
Moscow, I met with George Soros-- the financier and philanthropist who con-
tributed large sums of money to the "opening up" of the Soviet Union--and
expressed my astonishment at the almost complete absence of any new teaching of
modern economics to accompany the emerging reforms. Mr. Soros's skeptical
response was,"If you get an idea let me know and I may be able to help." He was
skeptical because I struck him as a typical absent-minded egghead academic, who
spent most of my life in the ivory tower. He was right.
A few days after this conversation, a mutual acquaintance arranged a meeting for
me with the head of the Central Economics and Mathematics Institute (CEMI),
Valery Makarov, who was reportedly thinking along similar lines. He had done more
than just think: whatever I had in my head at the time, Makarov already had in writ-
ing. Following the usual introduction he handed me a one-page document entitled
"The CEMI Econometric School-CES,"which he proposed organizing through the
joint efforts of CEMI, an American or European university, Moscow State Univer-
sity, and Dialog (an investment company).The document suggested three directions
of study targeting three groups of students: modern economic theory (basically
mathematical economics), econometrics, and business.
Richard Portes, a professor at London University and the head of the Centre for
Economic Policy Research, also attended the meeting.We both offered to think
about what Professor Makarov proposed. Portes may have been smarter than I was:
he didn't come back to Makarov.I invited Makarov for a visit to Jerusalem,where we
received the blessing of the Hebrew University, prepared a draft plan and a budget,
and sent it to Mr. Soros. I learned later that Mr. Soros sent a colleague of his to
Moscow to check out the idea; based on this investigation he gave the green light
(backed by a modest financial grant to start the New Economic School (NES), a
Western-style graduate school of economics.
Classes started just one year later, in September of 1992.Thirteen years later, as a
result of the dedicated efforts of so many people who joined immediately and over
the years, and with a total expenditure of about US$20 million, we stand here today
to tell you what we had in mind and what was accomplished.
Since its opening, NES has offered a two-year master's program in economics.
Students are admitted on the basis of merit, determined by entrance exams in math-
ematics, English, and economics.The graduate curriculum was taken from those of
E X P E R I E N C E O F T H E N E W E C O N O M I C S C H O O L 43
leading graduate schools in the United States. Graduate studies were preceded by
one semester of undergraduate courses in statistics, mathematics, English, and basic
economics.The academic year lasts 35 weeks, divided into five modules.
Over the years, courses on the Russian economy and on transition were intro-
duced. More recently, more applied courses have been added; these were eventually
clustered into a number of specializations.These courses were added largely in order
to give more practical training to graduates who plan to work in the private and
public sectors.
All courses are accompanied by weekly problem sets and section classes. In addi-
tion to course work, second-year students prepare a master's thesis, eventually within
the framework of a research center that was established later at the school.
At the start, most teaching was done by visiting professors from the West and
courses were taught in English. Over time, more and more courses were offered by
new Russian faculty members, mostly in Russian. NES established a library with a
few dozen leading journals and multiple copies of texts, a computer center with net-
work and Internet connections, and a number of important data sources
For a few years NES charged no tuition.This was changed in 2001; tuition now
stands at US$5,500 year.The best students receive fellowships, and loans for the full
amount are offered to all others. More details on the structure, rules, and culture at
NES can be found on the NES website (www.nes.ru) and in what follows (see also
Ofer and Polterovich 2000).1
By July 2005 NES had graduated more than 400 students (see table 1). Most of
these graduates work in the academic,public,and private sectors in Russia and in the
Commonwealth of Independent States (CIS) (see table 2).In the 13 years since it was
founded, NES has developed an indigenous faculty of 15. Many of these faculty
members are graduates of NES; most earned their PhDs in the West and publish in
international journals. NES also established its own research center and helped cre-
ate a high-level think tank, the Center for Economic and Financial Research
(CEFIR), whose researchers--most of them NES graduates--work on transition
and the Russian economy. By 2005 NES's outreach center had organized more than
100 workshops and summer schools in economics all over Russia and the CIS.
On September 1, 2004, NES itself graduated into adulthood, when a board with
a majority of Russians and a young Russian leadership took over its governance
from the previously foreign-dominated leadership. NES will continue to need aca-
demic guidance during the coming years and continues to depend partially onWest-
ern financial support. But the assumption of full responsibility over the management
of the school is an important part of a mission accomplished.
From the beginning,NES and CEFIR have cooperated closely in teaching,super-
vising students' research, and conducting research and policy projects.As part of the
governance change, they also created a joint faculty, which runs joint seminars, and
they are governed by the same board. They are gradually moving toward a full
merger.
So let us go back to the beginning.The introduction of modern economics to
Russia can be viewed as a foreign direct investment project, and as a transfer of tech-
44 G U R O F E R
TABLE 1
Number of NES Applicants, Students, and Graduates, 1992�2005
Number of
Year Applied Admitted Graduated diplomas issued
1992 87 52 0 0
1993 116 53 0 0
1994 155 53 32 24
1995 129 62 31 37
1996 106 54 29 29
1997 112 60 38 38
1998 89 44 38 38
1999 94 46 42 42
2000 183 80 26 24
2001 190 86 22 24
2002 190 83 54 54
2003 185 83 61 63
2004 171 82 56 58
2005 196 102 52 52
Total 2,003 940 429 483
Source: NES files.
nology. The next section discusses the content and nature of such a transfer. The fol-
lowing section identifies some achievements and discusses a number of problems.
The Mission and Nature of the Transfer of Economics
The grand mission of the endeavor was to replace the Marxist economic paradigm
and the way economics had been taught under the communist regime with a new
paradigm of modern,Western economics--something that was completely alien to
most Russians. The task involved an extremely radical shift,with only few precedents
in the history of science. The change was complicated by the fact that it took place
at the same time that many radical changes--political, social, and mental, as well as
economic--were occurring.This meant that although the project itself had to be
conceived as a long-term one, short-term requirements also needed to be addressed.
The design of the model of such a transfer involves two major aspects.The first is
the choice of the package of content, methodology, and didactic elements.The sec-
ond is the choice of strategy, the vehicle used for the transfer.
In terms of the vehicle for transferring knowledge, the enormous size of Rus-
sia (and other transition economies) and the limited financial and human resources
available from the West for this task dictated a basic strategy of training trainers or
even trainers of trainers. The main goal was to train a new generation of academic
and professional economists for the new market economy that has started to
E X P E R I E N C E O F T H E N E W E C O N O M I C S C H O O L 45
TABLE 2
Job Placements of NES Graduates, 1994�2005
Item Number
Total number of NES graduates 469
Work in Russian Federation and CIS 283
Private sector 201
Financial sector 67
Consulting companies 57
Other 48
Manufacturing 29
Public sector 9
Academic institutions 69
Think tanksa 40
of which CEFIR 25
Universities 25
of which NES 12
Research institutions 4
International agencies 4
Work abroad 86
Universities 39
International agencies 6
Private sector 41
Study abroad (PhD programs) 93
Graduates with additional degrees
Western PhD 70
Russian PhD (Candidate of Science) 12
MBA 11
MA 12
Source: NES files.
a. Many of the think tanks are in the public sector.
emerge in Russia.The strategy of transfer also had to take into account the fact that
the shift would replace a deeply entrenched technology rather than introduce a
new one on a tabula rasa.This usually calls for a strategy of a "green field." Under
these circumstances, resistance is expected and means must be developed to over-
come it.
The transfer of modern economics to Russia was a much more complex, multi-
dimensional task than simply replacing one body of knowledge with another. Before
the Revolution,Russia had developed a very respectable--in some areas even exem-
plary--tradition in many fields of natural sciences, as well as in the humanities, cul-
ture and the arts, and the social sciences.There was an extensive system of higher
education and research institutes, accompanied by a vibrant intellectual and cultural
community with extensive international connections.
46 G U R O F E R
The Soviet regime fostered the development of higher education, mainly in engi-
neering and the natural sciences;in the social sciences,literature,and the arts,the doc-
trinal bias was strong. On the verge of the transition Russia's situation was unique:
unlike many other developing countries, it possessed a solid intellectual and cultural
infrastructure, and the level of knowledge and research in fields related to economics,
such as mathematics,was high.But other features of higher education and science had
to be replaced.While the main focus behind the NES was on changing the content
of economics, radical changes were also needed in the general scientific approach,
organization, method of teaching and didactics, and related scientific fields.
Adopting Neoclassical Economics
Modern neoclassical economics is an analytical, positivistic behavioral science, based
on solving theoretical or empirical problems through the development of theoreti-
cal models and their empirical scientific testing.This genre of modern economics
had been slowly replacing the descriptive, historical, legal, philosophical, and institu-
tional approach that dominated economics throughout theWest until the end of the
nineteenth century and continued to be practiced in continental Europe until after
World War II.
During the second half of the twentieth century, economics slowly began to
change in continental Europe and elsewhere; the process is far from over (Coats
2000; Frey and Eichenberger 1993; Frey and Frey 1995; Kadish and Tribe 1993;
Rothblatt and Wittrock 1993. Early successful examples of such changes took place
in Israel and Latin America. In Israel the transformation began when Don Patinkin
joined the Hebrew University in 1948 (Patinkin 1994).Within less than a genera-
tion, academic economics in Israel achieved a respectable standing across the world
and established modern economic training as the professional standard for both pub-
lic and private management and policy making. Latin America also effected a trans-
formation of the profession (Harberger 1996; Cardenas and Perry in this volume).
CombiningTeaching with Research
As an analytical science, economics thrives best when teaching is combined with
research, as is the case with respect to most other sciences.Teaching universities are
by nature conservative institutions that store,conserve,teach,and disseminate knowl-
edge and cultural traditions across generations.
A revolution in higher education took place in Germany in the nineteenth cen-
tury, with the establishment of the University of Berlin, which combined research
with teaching (Wittrock 1993).The university proved itself a key dynamic force in
pushing the frontiers of science, not less in the rapid dissemination of scientific dis-
coveries to (graduate) students and through them to the economy and society at
large. French, German, and other European systems of higher education retreated
later to some extent, increasing the number of independent research institutes and
thus restoring some separation between teaching and research.But universities in the
E X P E R I E N C E O F T H E N E W E C O N O M I C S C H O O L 47
United States improved on the German model, by becoming simultaneously teach-
ing halls and scientific laboratories.The combination of teaching and research under
one roof tilted the nature of universities from a strong conservative force that pre-
serves and disseminates existing knowledge and traditional values into more balanced
institutions that serve also as pioneers in creating new knowledge and reshaping val-
ues.At about the same time that universities began conducting research, economics
was recognized as a distinct discipline and separate departments of economics
formed. Formerly most economics study was conducted under the faculties of law.
Even before the Russian Revolution, a degree of separation between teaching
and research had been brought to Russia from continental Europe (De Witt 1961).
This trend intensified during the Soviet period. It fitted the needs of the communist
totalitarian regime beautifully, since it allowed for better control of what was being
taught at universities and ensured that scientific discoveries,whether"true"or"false"
and potentially damaging--not to mention new ideas or values--were confined
within the well-protected and controlled environments of more isolated research
institutes. Research was conducted by a relatively small number of carefully selected
specialists. The political elite dictated the directions and areas of investigation, even
in the natural sciences. In the social sciences and humanities, such control was dom-
inant,and the separation of research from teaching was even greater there than in the
natural sciences.This separation made it particularly difficult to make the paradigm
shift when transition began.
The combining of teaching and research is not only about the proximity and
speed of dissemination. It is also about the investigative approach to teaching--
teaching that encourages the search for solutions to unresolved issues and that pro-
motes the analytical way of thinking, skills, creativity, and curiosity.This kind of
thinking is fostered partially through teaching by problem-based learning, in which
students regularly solve problem sets, when possible before their lectures, through
self-study.This approach contrasts with lecture-based learning and the recitation of
prepared (and censored) professors' notes, a form of teaching that is typical in totali-
tarian regimes. No wonder that a comparative study on the quality of education
across countries found the Soviet Union to be strongest on "awareness of facts,"
weaker on their application, and weakest on creativity (World Bank 1996).
Combining teaching and research also helps make professors full-time residents at
their universities, a rare phenomenon at Soviet universities. Decent salaries for such
professors limit their outside commitments and contribute to their full-time pres-
ence at the university.
Using Quantitative Methods in Empirical Research
Research demands a quantitative methodology. Like other sciences, economics is
based on empirical research that can test refutable hypotheses. Empirical research is
an integral part of the new analytical economics. Empirical studies are designed to
select the appropriate theory among a number of candidates. Empirical studies are
the link between theory and concrete policy issues. (On the different approaches to
48 G U R O F E R
empirical issues between continental Europe and the Anglo-Saxon world, see Frey
and Eichenberger 1993, Frey and Frey 1995, Tabellini 1995, and Coats 2000.)
Econometrics and other quantitative scientific-empirical methods in economics
were perceived as extremely dangerous for a regime that in many cases prescribed
the scientific conclusions before the start of the investigation.To fill this gap, there is
therefore a need in Russia for the teaching of, training in, and research on modern
methodologies of empirical research. Fortunately, most Russian students are well
trained in mathematics and statistics, the parent sciences of econometrics.
General versus Professional Education
A centrally planned educational system complements a totalitarian regime by mak-
ing sure that people study only as much as needed for their predetermined profes-
sional activities (as well as social and political ones).This is both politically prudent
and even economical, but only as long as planning in the allocation of human
resources is efficient and the system remains relatively static; this condition, however,
is seldom fulfilled The extreme shortage of academics at the early stages of the great
leap forward during the 1930s may have justified such a narrow approach.The result
was the segmentation of much of higher education in the Soviet Union into many
narrowly defined subspecialties at universities and, particularly, ministerial institutes
of higher learning.This approach reduced the number of broader-minded academ-
ics, who might have become too independent and critical.
Modern universities face a constant tension between the demands of the society
and the economy for professional training and the aspirations of "liberal educa-
tion"--learning for its own sake, across a wide range of domains of knowledge.The
Humboldt brothers in nineteenth-century Germany aspired to a liberal education,
but during the course of the century the University of Berlin and other German
universities developed a strong professional emphasis (Wittrock 1993).Although, all
along, most undergraduates in the United States pursued a "liberal" education, most
other countries begin discipline or professional teaching from the first or second year
of studies. Even so, the breadth of studies in the West was much wider than in the
Soviet Union.
Modern economics, as practiced in (most of) the West, is almost the exact oppo-
site of the Soviet pattern.The main emphasis in theWest is on general rules and pat-
terns of economic behavior and on developing a way of thinking. Courses on the
economics of agriculture or of natural resources may be offered, but there is no
course on the economics of the steel or shoe industry.In specialized courses in mod-
ern economics, the aim is always to flesh out the general lessons and patterns that
emerge from a specific problem (such as"Dutch disease,"or dynamic planning in the
case of natural resources).This allows a graduate in economics to become a researcher
or a professional economist anywhere in the system and to change positions over his
or her career.
This broad approach to teaching has become even more important in recent
years, as a result of the accelerating pace of technological, structural, and institutional
E X P E R I E N C E O F T H E N E W E C O N O M I C S C H O O L 49
changes.At the same time human capital has become the main driving force of mod-
ern economic growth, and economic growth has become the main goal of compe-
tition among nations. Providing a general economics education, focusing on how to
approach and solve problems and when to look for relevant information rather than
on the accumulation of information, is the best way to ensure that economists con-
tribute to efficiency and growth.
Creating Nonstate-Run Institutions of Higher Learning
Under the Soviet Union, nonstate-run institutions of higher learning hardly existed.
Such institutions are needed in order to play a role in economics education in the
CIS today. Development of a viable civil society that can mobilize social capital and
help develop a cohesive society in the CIS is at least as important as building a mar-
ket economy. Creation of an independent, nonstate higher education sector is also
essential to ensure academic freedom, the competition of ideas, and pluralism. Many
countries in the West that finance higher education through government budgets
have managed to preserve academic independence and freedom.In the Russian Fed-
eration, however, where academic freedom was absent for a long time, the develop-
ment of a private sector of educational NGOs at the side of the state sector is
therefore very important.2
Nonstate higher educational institutions are also important to alleviate the finan-
cial burden on the public sector, especially during the first decades of transition,
when the fiscal burden is especially heavy.Who, then, should pay? Students should
bear some of the cost, preferably with the help of a student loan fund.The business
sector, depending on the development of a proper market infrastructure but also as a
supporter of civil society, should also contribute. Regrettably, many reformers and
entrepreneurs in Russia who were ready to jump into the rough waters of a nascent
market system have failed so far to recognize their responsibilities to support a well-
developed nonprofit sector. It is essential that the business community understand
that the market and the NGO sector are complements, essential partners in a bal-
anced economy and society.The business community needs to support the nonprofit
sector through grants that are not tied to direct benefits accruing to them. Providing
favorable tax treatment of contributions to the NGO sector would encourage the
private sector to play a larger role in its financing.
Openness
The backbone of modern economics is about the properties, positive and negative,
of a market economy. Just when economics became an independent university dis-
cipline, at the turn of the twentieth century, the open American model of univer-
sity education was developing.This model was based on multifocal (multichair)
departments, with both intra- and interdepartmental pluralism; competition within
and among universities; and significant faculty mobility across universities. Such a
structure generated the appropriate incentives and rewards to achieve scientific
50 G U R O F E R
excellence (Tabellini 1995).This was in contrast with departments having a single
chair, a rigid hierarchical structure, and limited faculty mobility between universi-
ties--and therefore poor incentives and weak competition--that characterized
most universities and higher education systems in continental Europe, including to
some extent those in Great Britain.This pattern prevails even today in most conti-
nental universities (The Economist 2005). Many observers believe that the open and
pluralistic mode of research and teaching in the United States has partly accounted
for the ascendancy of the United States over Europe in terms of economic research
(Tabellini 1995).
Openness in economics education, as well as in other sciences, should extend
beyond national borders. A free exchange of knowledge and people, cooperation,
partnership, and cross-fertilization with other scientific communities around the
world has been very important in the past; in this age of global knowledge explosion
they are critical. The study of economics in the United States gained enormously in
the late nineteenth and early twentieth centuries because U.S. universities sent peo-
ple to study in Germany and because the United States benefited from the knowl-
edge of immigrants (Mason 1982).
Russia today has much to gain from complete openness: the potential costs of
brain drain are far lower than the losses incurred by scientific isolation. Openness is
a two-way street, but remote, isolated areas have the most to gain from efforts made
to reach them. In the case of Russia, the flow of knowledge will naturally be for
some time in an easterly direction:Russians will study in theWest,and ideas will flow
eastward into Russia fromWestern universities.However,even at this early stage,new
experiences of the transition have contributed to the economics by focusing atten-
tion on the specific issues of transition, institutional developments, and political
economy.This contribution to economics was accomplished through the work of
foreign as well as domestic economists. Initially, many Russians will seek to study
modern economics in the West. But even those students of economics who stay
abroad for good do not represent a total loss.They serve as important bridges link-
ing economics in Russia to global economics. Significant numbers of Asian, French,
German, Israeli, Italian, and Latin American economists have settled in the United
States and other Western centers. But many also return to their countries of origin,
having gained experience abroad.
Globalization and/or Americanization?
The issue of openness and of belonging to the global community of economists is
related to the debate initiated by Bruno Frey and Reiner Eichenberger during the
late 1990s regarding the differences between U.S. and (continental) European econ-
omists and economics. Frey and Eichenberger claim that the limited and segmented
market for economists and economics in Europe keeps European economists busy
with domestic economic issues and specific local institutions, with "down-to-earth"
policy issues relevant to the countries or regions in which they work. In contrast, in
the United States, where the market is vast and open, general theoretical issues take
E X P E R I E N C E O F T H E N E W E C O N O M I C S C H O O L 51
center stage, and there is stronger competition, manifested by greater mobility and
the emphasis on publication; economics there has moved away from being a real
social science, engaged in issues of society (Frey and Eichenberger 1992, 1993, 1995;
Frey and Frey 1995).This debate is also reflected in volumes edited by A.W. Coats,
who examines whether the economics community is becoming "internationalized"
or "Americanized" (Coats 1996, 2000). In these volumes there seem to be a consen-
sus about globalization and internationalization; the debate is largely over the degree
of domination of American economics over the process.
I side strongly with the views expressed byVives (1995) andTabelini (1995), who
recognize the advantages in the larger market for economists provided by the U.S.
model and the incentives that come with it.There may be some distancing of the
content of economics from "real life" issues in parts of the top echelon of depart-
ments and journals in some fields (see Krueger and others 1991),but this gap is being
filled by other economists, who use abstract models as guidance for systemic think-
ing and applications in empirical and policy-oriented studies. But even on the issue
of content--high-brow theory versus "down-to-earth" issues--Frey and Eichen-
berger and others may not be completely right.The way economics is working in
the United States leaves the door open for new ideas, topics, even entire fields that
are imported from abroad and then expanded domestically and reexported.This is
what happened with respect to Keynesian theory, with the introduction of open
economy issues to macroeconomics,with the empirical studies of economic growth,
and recently even with transition and the new institutional economics.The Ameri-
canization of the profession seems to be even more important in terms of the ways
teaching and research are performed and how the professional market works than it
is in terms of content.
Even Frey and Eichenberger observe how continental Europe has been joining
the global market of economics during the past few decades, a phenomenon they
mourn. Indeed, during this period continental Europe witnessed the flourishing and
expansion of economics, partly as a result of the unification of Europe.A number of
centers of higher and graduate studies and research in economics along the U.S.
model were founded--institutions such as the Stockholm School of Economics,
Tilburg University, the University of Louvaine, Bonn University, the University of
Toulouse, Delta, the University of Madrid, Pompea Fabra University, and others.
There has also been much more movement and exchange of people and ideas within
Europe and between Europe and the United States, and Europeans have begun pub-
lishing more in English-language journals and offering some courses in English
(Williamson 1996; Coats 2000).
The scientific environment in Russia is now ready to follow theAmerican model,
for two reasons. First, all along there has been in Russia a high level of teaching and
preparation in mathematics of many students.This led to some extent to the second,
related reason: the high development and level of the field of mathematical econom-
ics--it was more independent than other fields of economics from political interfer-
ence,and closer in content and methodology to its counterpart in theWest (Ofer and
Polterovich 2000).
52 G U R O F E R
Achievements and Problems
The long discussion in the previous section came in order to present the long list of
issues facing a decision to establish modern economics in Russia,or in any other for-
mer communist country. In addition to the issue of the content of economics, one
would like to combine teaching with research,to introduce modern modes of teach-
ing and learning (problem sets, long library hours, written exams), with an emphasis
on quantitative methods for empirical investigation; to select a curriculum with as
wide a horizon as possible, which includes an increasing number of Russian and
transition-related courses; to guarantee openness and strong connection with the
global economics community, by, among other things, inviting economists from the
outside to teach and sending the best students to study abroad, and by requiring pro-
ficiency in English; and to create a solid, independent nongovernment institution,
"owned" as much as possible by Russians, an example in many respects of a model
civil society institute for the new Russia. And, to accomplish all the above while
training academic and professional economists who will contribute knowledge, pol-
icy work, teaching, and research relevant to Russia and the transition. In summary,
NES was conceived as a "center of excellence," like some of those mentioned above,
working to accomplish as much as possible of the above-mentioned goals. It was
developed as such and is aspiring to become as good as the best among them. Given
the long aspect of the needed change, no wonder that the choice was made for a
"green field"strategy,albeit in cooperation with a Russian research institute (CEMI);
and no wonder the Russian partner excelled in the field of mathematical economics
(Ofer and Polterovich, 2000).
Thirteen years later,there is the first and only department of economics at a grad-
uate level in Russia with a majority of Western-trained faculty,including quite a few
graduates of NES.The faculty, full-time faculty--another first in Russia--is now
(2005) made up of 15 tenured and tenure-track members,fortified by additional slate
of domestic instructors.They do research and publish in Russian and in Western
journals,3 go to conferences, and work hard to earn tenure or promotion. NES and
its close partner, the research center CEFIR, have so far brought back from abroad
15 economists with PhD, a few of whom are teaching and working in other aca-
demic institutions. How many other Western-trained PhDs in economics are there
in Russia? Finally nearly 250 graduates are holding positions as economists in the
emerging market sector in Russia. Let's turn now to discuss some of the problems
and dilemmas facing NES.
Russian versus "Global" Orientation
While most of the goals seem by now more or less clear, the issue of the appropriate
mix and balance among them,or that of the"center of gravity"of NES,that was men-
tioned above in a global context, deserves further discussion. Should NES aspire to
develop a "global" orientation, or should it direct more effort and give priority to a
domestic, Russian orientation? This question recently came up during deliberations
E X P E R I E N C E O F T H E N E W E C O N O M I C S C H O O L 53
among members of the NES community over a new mission statement for NES for
the next decade or two.The issue arose in view of criticism that NES had not achieved
the impact or visibility it had hoped for in the domestic policy realm.To make sure
NES and CEFIR are deeply engaged in Russian and transition-related research and
policy work.They have not interacted satisfactorily with other bodies,however.Some
NES and CEFIR members have recommended that the institution adopt a stronger
domestic orientation. Several questions need to be addressed. Should faculty research
be oriented to topics covered by international journals or to domestic ones? How
much of this work should be Russian and policy oriented? What is the appropriate
mix of economic theory versus practical, professional training of students?
My view is that if the meaning of a"domestic"orientation is the continental model
described by Frey and Eichenberger, this direction is even less appropriate for Russia
than it is for Europe. Only a global context, connection, and guidance can provide
Russia with the tools needed for sound economic policy, and only a global reputation
can provide NES with the capability and position to have a say in economic discussions
over Russian issues. NES is a small and elite institution in a very large country; it can-
not engage in everything. In my view, it should be responsible for the link to the out-
side world. NES should apply this link to economic and policy issues in Russia at the
highest level and train professional economists to work in the Russian environment,
and it should do both these things with a hefty dose of spillover of modern econom-
ics.At least some of the economic problems faced by Russia are among those that are
currently of significant interest in the field (the economics of institutions, transition,
political economy).The international arena is thus ready to discuss and publish good
work in these areas. Let me add that most of the academic publications of the faculty
of NES and CEFIR in international journals are related to Russia or transition, as are
most of the master's theses prepared by the second-year students (recent faculty research
projects are shown in table 3).CEFIR,although doing high-level academic research,is
devoted to work on the Russian economy and transition. Diverting faculty members
to do too much "visible" short-term policy work would, in my view, be a grave mis-
take that would undermine the central mission of NES.
Regarding the curriculum, it is true that it was initially almost entirely theoreti-
cal, similar to that of leading graduate schools in the West. Over the years, more
courses on Russia and transition were added,and more emphasis was directed to the-
oretical courses in fields more relevant to Russia. In a gradual process that is still
going on, more "applied" courses are being offered to prepare graduates better for
positions in the private sector.These applied courses are now clustered into special-
izations such as finance and policy analysis.
Another aspect of the inward orientation of NES is the small number of gradu-
ates that have taken positions in the public sector (see table 2).This is partly explained
by low public wages and the wide wage differentials between the private and public
sectors. Low wages is also one reason why only a small number of NES graduates,
with or without PhDs,teach at other universities.But one must assume that this phe-
nomenon is also explained by the potential threat to higher ranking officials from
better-trained professionals.Among the small number of NES graduates that did go
54 G U R O F E R
TABLE 3
Research Projects by NES and CEFIR Faculty, 2004/5
NES CEFIR
� Econometrics of Financial Markets: � Microeconomic Estimation of the Conse-
Nonparametric Methods quences of Tax Reform (Taking into
� Who Holds Power in the Russian Consideration Expectations of Economic
Parliament? Agents)
� Financial Policy of Russian Companies � Technical Assistance to Develop the
System of Direct and Contingent
� Topics in Microeconomics
Liabilities Management of Tver Oblast
� Income Distribution, Mobility, and
� Technical Assistance to Develop the
the Labor Market
System of Direct and Contingent
� Imperfect Information and Bounded Liabilities Management of the Taimyr
Rationality with Applications to Autonomous District
Macroeconomic Dynamics
� Monitoring the Administrative Barriers to
� Natural Resources Potential and Small Business Development in Russia
Russian Economy Development
� Development of "Standard" Monitoring
� Empirical Auctions System of Regional Finances
� Knowledge Economy Market in Russia � Entrepreneurship and Environment in
� Trends in the Banking Sector in Russia Russia
and Bank Ratings IV � Microeconomic Estimation of the Conse-
� Economics of Nonprofit Organizations quences of Tax Reform (Taking into Con-
� Globalization and Economic Growth in sideration Expectations of Economic
Developing and Transition Economies: Agents)
Institutional Aspects � Technical Assistance to Develop the
� Welfare Effects and Society Losses System of Direct and Contingent
of Taxation and Inflation Liabilities Management of Tver Oblast
� Topics in Microeconomics: Experts, � Technical Assistance to Develop the
Intermediaries, Communication System of Direct and Contingent
Liabilities Management of the Taimyr
� Mathematical Models of Electricity
Autonomous District
Markets
� Impact of Active Labor Market Programs
� Macroeconomic Reforms in Russia:
in Transition Economies
The Appraisal of Social Economy
Consequences in General Equilibrium � Microsimulation of Tax-Benefit Reforms in
and Microsimulation Models Russia
� Capital Flows in Transition � Legal Reform Project
Source: NES and CEFIR files.
to the public sector, a few reached higher positions. NES should look for ways to be
more aggressive in sending its graduates to the public sector.Time and more public
sector reforms may expedite this process.
Openness and Brain Drain at NES
To date, nearly 200 NES graduates have enrolled in foreign PhD programs in eco-
nomics (a few are enrolled at business schools).The list of universities at which NES
graduates are studying is impressive, as is the fact that almost all of these students
received full four-year fellowships from these institutions (table 4).By the summer of
E X P E R I E N C E O F T H E N E W E C O N O M I C S C H O O L 55
TABLE 4
PhD Studies Abroad, by University, 1994�2005
Instutution/year 1994�2001 2001�2 2002 2003 2004 2005 Total
Total 119 9 14 16 12 9 179
Australian National University 5 5
Boston University 5 5
Brandeis University 1 1
Brown University 2 2
University of California, Berkeley 1 1
Cambridge University 2 2
Carlos III University, Madrid 1 2 3
Carnegie Mellon University 1 1
Catholic University of Leuven 2 2
University of Chicago
Department of Economics 1 1 2
Graduate School of Business 3 1 4
Columbia University
Department of Economics 1 2 3
Columbia Business School 1 1
Cornell University 1 1 1 1 3
University of Delaware 1 1
De Montford University,
United Kingdom 2 2
Duke University 4 1 2 1 8
Universit� de Geneve 1 1
Harvard University 7 1 2 2 12
Hebrew University 1 1
Indiana University, Bloomington 3 3
John Hopkins University 2 2
Universit� Libre de Bruxelles 1 1
London Business School 3 2 3 2 10
Maastricht University, Netherlands 1 1
University of Maryland, College Park 3 3
MIT/ Economics and Sloan School 6 2 8
University of Michigan, Ann Arbor 3 1 4
Midi Pyr�n�es Sciences Economiques,
Toulouse 3 1 1 5
New York University 1 1 2
University of North Carolina,
Chapel Hill 2 1 3
Northwestern University 5 1 1 1 8
Oxford University 1 1
University of Pennsylvania 2 1 3
(Table continues on the following page.)
56 G U R O F E R
TABLE 4
PhD Studies Abroad, by University, 1994�2005 (continued)
Instutution/year 1994�2001* 2001�2 2002 2003 2004 2005 Total
Pennsylvania State University 8 1 4 2 2 17
University of Pittsburgh 1 1
Pompeu Fabra, Barcelona 1 1 2
Rochester University 3 1 4
Rutgers University 1 1
University of Southern California 1 1 2
Stanford University
Stanford Business School 1 2 3
Department of Economics 1 1
Stockholm School of Economics 4 1 5
Tilburg University, Netherlands 4 1 1 6
University of Toronto 1 1
University of Virginia 1 1
University of Washington (St. Louis) 2 2
Western Ontario University 1 1 2
Wharton School, University of
Pennsylvania 1 1 2
University of Wisconsin-Madison 7 7
Yale University 5 1 6
INSEAD, France 1 1
Colorado Business School, Denver 1 1
UCLA 1 1
Source: NES files.
2005, nearly half of these students were still completing their studies. Of the 70 or so
who had already completed their PhDs, many stayed abroad, taking positions in aca-
demia, consulting, and international organizations. Nearly 40 NES graduates have
accepted academic positions abroad, many of them at top-ranked universities, such
MIT, Yale, Columbia, Stanford, and the London School of Economics and Political
Science. NES and Russia can expect to reap significant benefits from the contribu-
tions of these people, even if they stay abroad. Indeed, many of them have already
come to teach at NES, to lead outreach workshops, to collaborate with NES and
CEFIR faculty on research projects, and to undertake their own research on eco-
nomic issues related to Russia and the transition.They clearly help NES fulfill one of
its central missions: positioning itself in the global arena.
The experience of other countries has demonstrated that academic (and other)
communities of foreign nationals abroad contribute in many ways to the advancement
of the field in their country of origin. They provide a foundation for global network-
ing, which is so important today. Even if all this talent is "lost" permanently to Russia,
NES has already generated substantial net benefits to Russia. In Israel hundreds of stu-
E X P E R I E N C E O F T H E N E W E C O N O M I C S C H O O L 57
dents have pursued PhD studies in economics in theWest. Many among them did not
return to Israel;some returned at a later stage.Yet academic economics in Israel is thriv-
ing at six major universities, two of which--the Hebrew University andTel Aviv Uni-
versity--are among the top 100 departments in the world. Other countries in which
significant numbers of nationals have remained abroad have also prospered intellectually.
The return to NES and to Russia of young faculty members from the West is
influenced by economic considerations.There is no way to make academic salaries
in Russia equal to those in the West, especially in the United States, and there is lit-
tle chance of bringing people back given Russian academic salaries. Since the late
1990s, NES has offered returning faculty members an annual salary of $35,000 (plus
permission to devote 20 percent of their time to non-NES work).This level is a far
cry from academic salaries in the United States and or salaries in the Russian private
sector.The dilemma is clear: salaries have to be raised in order to compete with the
West,but raising them severely limits the number of Russian universities that may be
able to match them. Higher salaries also place a heavy financial burden on NES,
which lacks the support provided to private universities in theWest by their alumnae
and their endowments.This issue is also related to whether or not it is possible to dif-
ferentiate between salaries of returning and domestic scholars.
There seem to be something in the claim, voiced mainly by Oded Stark (2003),
that merely opening the opportunity to study (and stay) abroad lures so many highly
talented candidates to the field that it produces a clear net gain in the stock of human
capital in the country of origin alone. But even if this is not true, I do not see an
acceptable alternative to adopting an open approach for NES.The option of provid-
ing only limited training or otherwise constraining the free choice of graduates to
move, especially in a country that was locked for so long, is absolutely unacceptable.
NES and CEFIR are doing their best to bring back as many qualified economists
as possible.They, however, cannot bear the full responsibility for attracting back all
their graduates and others who are studying abroad. Both the former and current
presidents of Russia spoke of the importance of study abroad for economists and
managers, and of the need to make special efforts to bring these people back.This
can be done, for example, by creating a special national fund, financed by the busi-
ness sector and the government that provides adequate salaries and an advanced sci-
entific infrastructure and environment in order to attract back Western-trained
academics. If such conditions are created, more of these scholars will return.After all,
Russia is now one of the most exciting places in the world for economists. NES
proves this on a small scale; it is up to Russia to do so on a wider one.The needed
changes are especially important for the university sector.The main mission of NES
is to transform economics in Russia; this demands the involvement of many more
universities.It is time to expand the teaching of modern economics beyond the small
group of institutions that are already teaching it at the graduate level. It is also time
to increase cooperation among the members of this small group.
When NES was established,it was assumed that a major reform in higher education
would take place relatively soon and that NES would be able to provide the needed aca-
demic cadres to help accomplish this goal.This has still not happened in a major way.
58 G U R O F E R
NES may thus think of itself as ahead of its time. For similar reasons, there seems to be
weak demand for PhDs in economics in government and the public sector.
Worrisome developments in Russia may make the country less attractive to come
back to even for Russians who would prefer to live and work in their motherland.
Russia has made strides toward becoming a market economy and a free democratic
society. But lately there seems to have been a significant slowdown in economic
reforms and some retreat in democratic freedom. In a recent paper,Yegor Gaidar
warned against such developments, which he characterized as "authoritarian ten-
dencies" and labeling these developments a "closed democracy"(Gaidar 2004). Dur-
ing a recent visit to Moscow, I was confronted with a headline in the Moscow Times
that read"FSB Chief:NGOs a Cover for Spying"(FSB is the main intelligence office
of Russia and the heir of the former Soviet KGB) (May 13,2005,p.1).The FSB chief
was probably referring to NGOs with Western connections.Taken seriously, this
headline reads like a warning against openness, international cooperation, visiting
professors, and the development of a civil society.These recent developments cause
people who have learned to enjoy and appreciate the benefits and advantages of free
societies to hesitate about giving these benefits up. Many seem at least to sit on the
fence, postponing making a final decision about returning.
Clearly, a number of factors, including those mentioned above, determine the
rates of retention for different countries.Why do only 9 percent of Chinese students,
but 85 percent of Korean students, who study abroad return home after graduation?
Is there here a gap between lagging expected developments in Russia and the suc-
cess of NES? I hope that this gap will soon prove to be a temporary one and that
Russia will catch up before too long.
Financing NES
NES still lacks full financial security. It has been fortunate to receive steady support
from a number of top Western foundations, beginning with the Soros Foundation
(this support now comes via the Higher Education Support Program) Eurasia, the
Ford Foundation, the World Bank, and the MacArthur Foundation. Most of these
still provide annual or multiyear grants, but some are weighing exit options. Efforts
to supplement, not to speak of replacing, this Western support with Russian dona-
tions have been only partially successful. About half a dozen NES chairs are financed
by Russian donors,albeit on an annual basis,and a few other Russian donors provide
smaller, less-steady grants. At the beginning this could have been explained by the
financial situation in Russia; but following the crisis of 1998, money is not an issue
anymore.The issue is partly lack of recognition of the key role of NES by the new
class of entrepreneurs and affluent people, and partly the lag in the development of
the culture of philanthropy and support of civil institutions by the business sector.
The lack of support may also reflect suspicion toward the West and the fear of
being identified as a supporter of openness and of connections to theWest.The trans-
fer of control and governance to a Russian body seems already to improve matters.
Should NES make more efforts to demonstrate its contribution to Russia? Until
E X P E R I E N C E O F T H E N E W E C O N O M I C S C H O O L 59
more Russian support can be generated, it is up to Western supporters to continue
to stand by NES, financially and through public support.
The financial problems of NES are just one aspect of the gloomy financial situa-
tion of higher education in Russia.The state budget is unable to provide the funds
needed for a reformed and transformed system of higher education, including sig-
nificantly higher academic salaries. Such higher salaries is a precondition for the
rehabilitation of the profession of academic teachers as full-time professors, in both
teaching and research. Given the severe budget constraint, Russia has shifted toward
increasing commercialization of public universities, by charging tuition to a growing
proportion of students at state universities and by allowing the growth of private for-
profit, tuition-based higher education institutions. Although these are legitimate
steps, they deny higher education to most of those who are unable to pay. Here, too,
NES has been a pioneer,by establishing,in cooperation with a private Russian bank,
a student loan fund that allows any qualified student to enroll and to pay the tuition
in the form of a 10-year loan (including a 2-year grace period) to be repaid as a rel-
atively small proportion of the student's salary after graduation.A national program
of student loans could provide a partial solution to the financial plight of higher edu-
cation in Russia. For NES the student loan fund provided by the Bank serves as
financial source akin to an endowment. NES and its supporters are starting to exam-
ine possibilities and options for transforming grant-based financial support into fur-
ther elements of an endowment, with the aim of eventually providing NES with an
endowment that will enable it to reduce or eventually eliminate Western support.
Concluding Comments
There are a number of ways to accomplish the transfer of new knowledge, none of
which is without problems. Given the enormity of the task, an onslaught from many
directions is definitely warranted. First, during the past 15 years many state universi-
ties across Russia have slowly been changing their curriculums by replacing some
old courses with new ones.In most cases,principles of modern economics are taught
at various levels, using both translated Western texts and new Russian ones.A good
principles course can convey much of what economics is all about.
Second, new domestic "green field" institutions of higher education have been
established, staffed largely by Russian professors who are self-taught or who have
received some training and guidance from abroad. Examples include the High School
of Economics (HSE), a state university in Moscow and a number of other major cities
established in 1992, and the European University established a few years later in St.
Petersburg.A multitude of private institutions also teach economics (and business),albeit
at a much lower level.These institutions are extremely important,as they can reach large
number of students and act as an important stimulant of change for more conservative
universities.When NES was established, its founders considered establishing it within
Moscow State University. Russian friends warned that this would not be possible. In
2004 a graduate school of modern economics was opened at Moscow State University,
albeit independent of the faculty of economics, which is also changing, if very slowly.
60 G U R O F E R
Third, institutions such as the Economics Education and Research Consortium
(EERC) (see Campbell's paper of that name in this volume) have disseminated
knowledge.The idea is to spread modern economics and modern research, even
though at a rather basic level across the largest area possible.
Fourth, the Russian-Western partnership at NES has brought the study of mod-
ern economics to Russia in full force. Initially, this was accomplished by importing a
complete Western graduate curriculum and inviting mostly visiting professors to
teach.Later the best graduates were sent to theWest to obtain PhDs in order to grad-
ually build an indigenous academic base and faculty for modern economics in Rus-
sia. (For a full discussion of NES, see Ofer and Polterovich 2000.) While the choice
of the NES variant reveals the preferences of those who took part,it also reflects their
perceptions of their comparative advantage.
The strategy for technology transfer chosen by NES seemed to have a number of
clear advantages. One of the most important is the combination of the importation
of the entire package of modern economics from abroad and the nesting of the pro-
gram within a joint venture that is institutionally and conceptually"owned"by Rus-
sians.This feature is very important for the success of foreign direct investment and
technology transfer projects in general.This strategy, although providing the best
economics available and doing the most to protect it within the Russian institutional
environment, could not be directed to a large audience. It was conceived as a train-
the-trainers model,or even elevated above it --a resource center that provides advice
and inputs, a model that shows the right and safe way, and that can be seen as a goal
for others.
In the brainstorming meeting on the new mission of NES mentioned above, a
second set of options for the future was presented in addition to the "global" versus
"Russian" (or "focused" versus "broad") issue. Is NES ready to embark on new tasks,
such as developing an undergraduate program, establishing a PhD program, creating
master's programs in public administration, and the like?4 It was decided that NES
should stick to its original mission of a "center of excellence" in graduate econom-
ics, by expanding the faculty to 20�30; strengthening its financial base; somewhat
diversifying the curriculum by offering more "applied" options, including a program
in finance; and, on this more solid base, trying harder to integrate more fully into the
economic action of policy making in Russia, though always from the "global" base
(NES,2005). This decision not to expand laterally is a courageous one,for which the
new leadership of NES should be commended.The new mission can improve sus-
tainability and increase the institution's impact. Joining forces with CEFIR and
eventually, it is hoped, with the EERC will provide the required critical mass and
sustainability needed to fulfill the joint mission.
Epilogue
In September 2004 I gave up my position as chair of the international advisory com-
mittee of NES,when Sergey Guriev was elected rector and Maxim Boicko chairman
of the board. Erik Berglof became the new chair of the international advisory com-
E X P E R I E N C E O F T H E N E W E C O N O M I C S C H O O L 61
mittee. Over the past dozen years people have asked me why I got involved in the
NES project.There are two answers.The first is that after 25 years of studying the
Soviet economy (during which I was never allowed entry), it seemed out of place to
continue to do routine research in the face of the revolutionary changes that were
taking place, changes that for the first time I was also able to witness firsthand. I felt
the urge to do something about what was happening.The second answer is much
simpler and explains most of the important changes (decisions?) in one's life: a heavy
dose of sheer chance or the intervention of heavenly powers.
Working on and at NES was arduous, but it was very gratifying to watch NES
form,grow,bloom,and mature.The work was particularly gratifying as a result of the
close cooperation with so many close partners who became dear friends, in Russia
and around the world.
Notes
1. A detailed report about NES, the 2003�04 Annual Report, can be found at http://
www.nes.ru/files/annual_report/AR2003-2004.pdf.
2. An article in The Economist (2005) finds a positive relationship between the quality of
higher education and the plurality of types of ownerships and sources of finance.
3. Among the journals that published works of NES/CEFIR faculty are American Eco-
nomic Review, Econometrica, Quarterly Journal of Economics, Journal of Economic Perspectives, Eco-
nomic Letters, Journal of Economic Development, Journal of Public Economics, Journal of Money, Credit
and Banking, Journal of Comparative Economics, Economics of Transition. A full publication record
can be found at http://www.nes.ru/english/research/publications_external.htm.
4. Starting a PhD program is extremely expensive, as it requires outside advisers. Once
more members of NES's faculty receive tenure,this option will become more natural and fea-
sible.
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Creating a Market-Oriented
Research and Education Institution
in aTransition Economy
The Experience of the China Center for Economic
Research at Peking University
JustinYifu Lin
At the beginning of transition from the socialist planning economy to a market economy, China
did not have a modern economics profession and the contribution of modern economics to
China's transition was small. However, as the Chinese economy becomes more market oriented,
there has been an increasing need for modern economics education and research. To meet this
need, the China Center for Economic Research (CCER) at Peking University was built in 1994
with the initial support and endorsement of the Ford Foundation and the World Bank. In the
past 11 years, the CCER has expanded from 6 to 27 faculty members, all with PhD training in
economics from universities abroad, and has become an important education and policy institu-
tion, as well as an academic research one, in China. Currently, the CCER provides undergraduate
double major programs, an MA and PhD in economics, an MA in finance, and an international
MBA program to over 2,500 students each year. The CCER is also active in policy consultations
with the Chinese government and international organizations, in addition to its excellent aca-
demic publication records both domestically and internationally. The CCER's success is attribut-
able to its members' devotion, personal qualifications, and democratic arrangements; and its
commitment to education and independent research, outreaching, networking, continuous
innovation, and service culture. In the coming years, the CCER plans to strengthen its PhD pro-
gram by student exchanges with other universities abroad, and initiate a NBER/CERP type net-
work and a consortium of similar institutions in other transition and developing countries.
CHINA WAS THE FIRST CENTRALLY PLANNED ECONOMY TO MOVE TOWARD A MARKET
economy,and so far it has also been the most successful.Since the end of 1978,when
the transition began, China's annual GDP growth rate has averaged 9.4 percent and
the economy has grown by a factor of 10.3. In the same period, international trade
grew at a rate of 16.7 percent, and China's trade volume has increased 56 times--
from US$20.6 billion in 1978 to US$1,154.8 billion in 2004.When China began
65
66 J U S T I N Y I F U L I N
this transition, the nation's ranking in the international trading system was number
34. Now, China is number 3.
In spite of China's success in moving to a market economy, the country did not
have a modern economics profession, and in the beginning of the transition, modern
economic analysis did not play a major role. At that time, the Chinese government
wanted only to improve the performance of the old planning system, not replace the
old system with a completely new market system. It therefore adopted a gradual,
piecemeal approach to the transition process. Under the old system, there were bot-
tlenecks in almost every sector of the economy.With the gradual,piecemeal approach,
a good policy maker was someone with a good grasp of the economic realities and a
liberal mind.The policy maker needed to know where the bottlenecks existed and be
pragmatic in introducing policy changes that could remove the bottlenecks.As long
as the policy maker could do this,the direct effects of policy changes would outweigh
the indirect effects and the economy could grow dynamically.
This piecemeal approach was successful, but success in the past does not guarantee
success in the future. As China's economy has become more and more market ori-
ented, the economic system has become more complicated.The negative indirect
effects of reforms in state-owned enterprises--both in the financial sector and in
other sectors--often outweigh the positive direct effects of those same reforms. Gen-
eral equilibrium�type analysis is required to assess the potential direct and indirect
effects before undertaking policy reform. Conducting this kind of analysis requires
that Chinese policy makers and researchers have a good understanding of modern
economics. For China to complete the transition to a market economy, it is therefore
imperative to have institutions that can engage in modern economic research and
provide education in modern economics. In response to this need, the China Center
for Economic Research (CCER) at Peking University was set up in 1994.
In the rest of the paper, I provide an overview of the CCER's achievements, dis-
cuss the lessons that may be relevant to similar institutions in China's transition and
in other developing countries, and provide brief outlines for the CCER's future
development.
Missions and Achievements of the China Center for
Economic Research
The CCER was founded with seed money from the Ford Foundation and an
endorsement from the World Bank. It aims to mobilize domestic and international
resources for bringing together a group of well-trained economists to contribute to
economics education and research at Peking University. It also aims to contribute to
China's market-oriented reform and development, as well as to the development of
modern economic theory.
The CCER has expanded from 6 faculty members in 1994 to 26 members in
2005. All faculty members have PhD training in economics from leading universities
abroad: 24 from the United States, 1 from the United Kingdom, and 1 from Japan.
The CCER has the largest concentration of foreign-trained economists in China.
EXPERIENCE OF THE CHINA CENTER FOR ECONOMIC RESEARCH 67
At the beginning, the CCER had two very small offices in an old Stalinist-style
building.Today it is located in a beautiful, spacious area that was once a royal garden.
The improvement in the CCER's working space mirrors its continuous develop-
ment in the past decade.
Education Programs
The primary mission of the CCER is to provide modern economics and manage-
ment education in China.To achieve this goal,in 1996 the CCER set up an MA and
a PhD program in economics.
A student who has completed the required economics courses and written a the-
sis can obtain an MA or PhD in economics. Normally, it takes two to three years to
complete the MA degree and an additional three years to complete the PhD.Annual
enrollment at the CCER is 15 students in the PhD program and 45 students for the
MA program.
The CCER's MA program is considered the best in China. Upon graduation,
about one-third of these students go to work in the financial sector; one-sixth go to
work for government institutions. About half enter PhD programs at distinguished
universities in theWest, including Harvard, the University of Chicago, Stanford,Yale,
Northwestern, and many other universities worldwide.Among these students, about
one-third accept jobs at universities,one-third go to work in the financial sector,and
one-third go to work for government institutions.
In the fall of 1996, the CCER began offering a double major in the economics
program as well as a minor in the economics program to undergraduate students at
Peking University whose major is not economics.These two programs have become
very popular.In September 2003 the programs were extended to undergraduates out-
side Peking University.The CCER now admits 800 undergraduate students a year to
these two programs.They are the largest undergraduate programs at Peking University.
For improving the business education of its students, the CCER set up a group
of International MBA programs (BiMBA) at Peking University in 1998.The pro-
grams were established jointly with a consortium of 26 U.S. universities, with Ford-
ham University in New York as the degree-granting university. BiMBA offers a
full-time MBA program, a part-time MBA program, and an Executive MBA
(EMBA) program to meet the professional and scheduling needs of students.The
interactive, participative American pedagogy is followed, but cases are often taken
from Chinese situations.
The International MBA program admits about 200 students a year. In 2005 both
Fortune and Forbes magazines ranked BiMBA the top-ranking MBA program in
China.
In response to the needs of financial sector reform and development, the CCER,
in cooperation with the School of Economics and Finance at the University of
Hong Kong,started offering an MA program in finance in 2001.Students who com-
plete the required courses and thesis in two years obtain a master's degree in finance.
The program is considered the top financial training program in China.
68 J U S T I N Y I F U L I N
The total number of students at the CCER increased from 352 in 1996 to 2,588
in 2004, a more than sevenfold increase (see table 1).
In 1995 the CCER established a committee to organize and publish a series of
textbooks on economics and management. Professors GangYi and Wen Hai served
as editors in chief. To date, 14 economics and management textbooks have been
published. Most of the authors of these textbooks received their PhDs in economics
or management abroad and have extensive research and teaching experience both in
China and abroad.These textbooks contain many real problems in China as exam-
ples in discussing the theories.
Research
CCER faculty members are committed to increasing the quality of research on eco-
nomics and management, to analyzing problems in economic transition using mod-
ern economic theories and methods,and to bringing economic research in China up
to the international level. CCER faculty and students have been very productive in
conducting theoretical and policy research. Many research papers have been pub-
lished in top economics journals in China and abroad. Numerous research findings
and their policy implications have had a significant impact on Chinese economic
reforms and government policy making.
Between 1994 and 2004, CCER faculty published 49 papers in top international
economic journals, such as the American Economic Review, and more than 400 papers in
Chinese economic journals.Faculty members also published more than 70 books,20 of
which received domestic and international awards. Fifty-five papers written by CCER
faculty were included in the U.S. Social Sciences Citation Index from 1994 to 2004.
TABLE 1
Enrollment at the CCER, 1996�2004
Economics program
Undergraduate
Outside MA in
Year PhD MA Major Minor university finance MBA/EMBA Total
1996 2 10 287 53 -- n.a. -- 352
1997 11 26 435 128 -- n.a. -- 600
1998 15 49 584 105 -- n.a. 77 831
1999 22 68 895 155 -- n.a. 156 1,292
2000 13 85 971 -- -- n.a. 303 1,573
2001 16 107 1,418 38 -- 41 403 2,047
2002 19 115 1,083 58 43 433 1,751
2003 31 116 1,601 52 50 42 504 2,396
2004 33 116 1,689 36 141 40 533 2,588
Source: CCER.
n.a. Not applicable.
-- Not available.
EXPERIENCE OF THE CHINA CENTER FOR ECONOMIC RESEARCH 69
In addition to academic research, since its founding the CCER has participated
in almost every single policy dialogue in China. It has maintained an independent
voice in financial sector reform, state-owned enterprise reform,WTO accession,
rural reform, and many other policy issues, in some instances supporting the govern-
ment and in others diverging from the government's stand.
CCER policy recommendations are supported by careful research and analyses.
Since 1994 CCER has created many research commissions.These have included 27
national- and ministry-level projects, 32 international projects, and 12 projects
funded by private firms.The projects have covered macroeconomics, international
trade, monetary policy, financial reform, state-owned enterprise reform, private sec-
tor development, industrial organization, the securities market, rural development,
the labor market, the land tenure system, the health care system, the social security
system, population policy, and other issues.
To facilitate research on the emerging equity market, the CCER launched the
CCER Chinese Securities Market Database in 2000.The database covers current
and historical data since 1990, when the Chinese securities market was reopened.
The variables in the data set include the share prices, reports and news of listed com-
panies, and securities market regulations.The database has been used frequently by
researchers on China's financial market.The CCER has also developed a partnership
with China's National Bureau of Statistics and has access to the bureau's household
survey, enterprises survey, and census and other data.
The CCER receives many visitors from abroad each year.At the end of the vis-
its, many of them remark that they feel at home at the CCER. Unlike their visits to
many other institutions in China, they could carry out the same kind of intellectual,
critical dialogues at the CCER to which they are accustomed at their own
institutions.
Training and Short-Term Programs
To maximize its impact on education and China's reform,the CCER provides train-
ing programs in economics and management for faculty at other universities, jour-
nalists, government officials, and managers in both domestic and international firms
and organizations.
Training of Faculty
Only a small number of faculty with PhD training in economics and management
have returned to China. In order to improve the teaching quality of economics and
management at other Chinese universities, in 1999 the CCER started a short-term
summer training program for junior faculty at other universities.The courses covered
international finance, international trade, international business, dynamic economet-
rics, microeconomics, macroeconomics, and related fields.To support development in
the hinterland provinces, the CCER offers a training program for faculty members of
management schools in western China.With grants from the business community, the
CCER trains 10 business school faculty at the BiMBA each year.
70 J U S T I N Y I F U L I N
Research Training and Mentoring Program for Young Women Economists
As in many other places in the world, there is a gender gap in the economics profes-
sion in China.Together with a group of overseas economists, and with financial sup-
port from the Ford Foundation,in the spring of 2002 the CCER launched a training
program for young women economists.The goal of the program is to increase the
presence of women in economic research and education by providing rigorous train-
ing and mentorship to young women faculty.The program also aims to promote
economic research and education on women and gender issues in China. The
instructors and research mentors, who have extensive experience in teaching and
training, have established respectable research records on important issues in China.
In just two years, this program has achieved tremendous success.The number of
women economists participating in domestic and international conferences has
increased markedly.
Fellowship Program for Journalists in the Financial and Economic Media
With the coming of the information age, public opinion has played an increasingly
important role in shaping the directions of China's reform and future development.
Journalists are key players in the formation of public opinion.Since 1999 the CCER,
together with Caijing Magazine, a leading biweekly journal, has sponsored 10 fellow-
ships for outstanding economics and finance journalists and editors in the Chinese
media to study at the CCER.The fellowship program involves a three-month-long,
tailor-made program in economics, management, and in-depth analysis of financial
news. The responses from fellows who have completed the program has been
overwhelmingly positive.
Training for Senior Officials in Government and Business
In response to the need to improve policy making and management in a market
economy, the CCER offers training programs for officials in government and the
business sector. In association with the ministry of health and the China Academy of
Health Policy at Peking University, since 2002 the CCER has hosted the China
Hospital Management Program for executives of Chinese hospitals.The program
cooperates with the North Shore�Long Island Jewish Health System to help upgrade
the management skills of hospital executives in China and satisfy their demand for
advanced and international management techniques for health institutions in fields
such as finance, human resources, quality control, and information systems.The
CCER also provides training for senior officials of China Telecom, Ping'an Insur-
ance, Taikang Insurance, Novartis, and other companies.
Exchanges
Part of the CCER's basic mission is to promote academic exchange. Since its found-
ing, it has developed various programs to promote exchange with other economists
and research institutions, in China and abroad.
EXPERIENCE OF THE CHINA CENTER FOR ECONOMIC RESEARCH 71
Weekly Seminars
Inaugurated by Professor Robert Mundell of Columbia University in March 1995,
the CCER's Weekly Economic Theory and Policy Seminar invites distinguished
scholars to present their research papers on theoretical or policy issues.The list of dis-
tinguished scholars includes Nobel laureates, the president of the American Eco-
nomic Association,professors and researchers from China and overseas,domestic and
international entrepreneurs, presidents of foreign universities, and high-ranking offi-
cials from the Chinese and foreign governments.
Visitors and Postdoctoral Programs
Started in 1996 under the sponsorship of the World Bank, CCER's Visiting Fellow
Program has invited more than 10 visiting scholars from China and abroad to con-
duct three to eight months of research at the CCER.The CCER postdoctoral pro-
gram, started in 1998, allows young economists with PhDs in economics from other
universities in China or abroad to spend two years at the CCER. More than 100
overseas Chinese economists and domestic scholars have visited the CCER through
these programs. During their visits, the CCER has organized workshops, study
groups, and short courses for them. In addition, CCER faculty members have attend
academic conferences in the United States,Japan,the United Kingdom,France,Aus-
tralia, the Republic of Korea, Hong Kong (China),Taiwan (China), and elsewhere.
Annual Lecture Series
To promote modern economic research and education in China, the CCER estab-
lished the Yan Fu Memorial Lecture on Economics in 2001. Mr.Yan (1854�1921)
was one of the first Chinese scholars to study abroad. He was a former president of
Peking University. His translation and publication of Adam Smith's The Wealth of
Nations in 1901 marked the introduction of modern economics to China. Every
year, the lecture series invites a world-class scholar of economics to deliver a lecture.
Nobel Prize winner Robert Mundell, of Columbia University inaugurated theYan
Fu Memorial Lecture Series in October 2001. Professors Amartya Sen and Partha
Dasgupta have given the subsequent lectures.
With the aim of enhancing international exchange in economics as well as eco-
nomic development in China, the CCER, with support from the Hong Kong and
Shanghai Banking Corporation Limited (HSBC), sponsors the HSBC-PKU Eco-
nomic Forum. Nobel Laureate A. Michael Spence, of Stanford University, inaugu-
rated the lecture series in 2004. Nobel Laureate Gary Becker, of the University of
Chicago, gave the 2005 lecture.
China Economics Annual Conference
The CCER initiated the China Economics Annual Conference in 2001 with the
aim of strengthening academic exchange and economic research and education
among economists at Chinese universities.The first conference was held in October
72 J U S T I N Y I F U L I N
2001 at Peking University. The secretariat for the conference is housed at the CCER,
but the conference site rotates every year.The conference has become the largest
gathering of economists in China, with the number of participants rising from
between 200 and 300 in 2001 to between 600 and 700 in 2004.
Annual NBER-CCER Conference
Since 1998, the National Bureau of Economic Research (NBER) and the CCER
have jointly sponsored an annual conference on issues related to China, the United
States, and the global economy.The NBER sends a delegation of about 10 econo-
mists to the conference each year.The Chinese delegation includes CCER faculty
and members of other universities and research institutes.
Conferences on Selected Topics
Based on the interests of economists in China and abroad, the CCER has organized
several national and international conferences each year on selected topics related to
China's development and reform.Topics covered have included rural development,
land tenure reform, poverty reduction, and income inequality.
Summer Camp for Honor Undergraduate Students
To promote exchanges among undergraduate students majoring in economics,inter-
actions between students and economists, and interest in research on the Chinese
economy, since 2000 the CCER has organized an annual Summer Camp for Honor
Economics Students.The camp also provides the opportunity to select some of the
most outstanding students to join the MA program at the CCER. Each year 30�40
third-year undergraduates attend the summer camp. Half of them become graduate
students at the CCER.
The London School of Economics and Political Science�Peking University
Summer School
With the success of China's transition, there is increasing demand from foreign stu-
dents to understand the Chinese economy. In 2004 the London School of Econom-
ics and Political Science joined with the CCER to meet this demand.The courses
offered at the summer school include courses on China's reform and development,
economics, finance, and management
Dissemination and Networking
Another part of the CCER's mission is to foster economic reform and develop-
ment in China.To that end, the CCER takes part in several programs for dissemi-
nating its findings and promoting networking among economists.
Web site
CCER's Web site (www.ccer.edu.cn) features the latest news, publications, and
major activities of the CCER. Each day the site receives about 22,000 visits. In Jan-
EXPERIENCE OF THE CHINA CENTER FOR ECONOMIC RESEARCH 73
uary 1999 the CCER established the first electronic network, the China Economic
Network (CENET; www.cenet.org.cn) for Chinese economists. Since 2001
CENET has served as the officialWeb site for the secretariat of the China econom-
ics conference.The Web site aims to promote economic research, education, and
exchange in China; to provide domestic economists and policy makers with a wide
range of information and data; and to become an important information and com-
munication channel for economists in China and abroad. It receives about 80,000
visits a day.
The CCER Newsletter
To publicize the CCER's research findings and policy recommendations, the
CCER publishes 50�60 issues of newsletters annually, which it sends to more
than 900 domestic policy research institutes, academic institutes, and representa-
tives of the media. The newsletters have attracted widespread attention within
policy circles in China and have had a visible impact on policy and the public
opinions.Articles in the newsletters have often been picked up by other newspa-
pers and outlets.
Occasional Working Papers
To disseminate CCER faculty members' research results promptly, the CCER pub-
lishes occasional working papers, in English and Chinese.The working papers are
downloadable from the CCER Web site.The CCER exchanges its working papers
with other economics departments and research institutes in China and abroad.
The China Economic Quarterly
To promote rigorous academic researches in China, in 2001 the CCER established
the China Economic Quarterly, a peer-reviewed journal.The Chinese-language jour-
nal publishes original theoretical and empirical research as well as extensive literature
reviews on new development in specific fields. It is considered the leading economic
journal in China.
The CCER Economic Papers
The CCER Economic Papers is a Chinese-language quarterly journal of the CCER
Graduate Student Association. It is an academic publication for promoting research
by graduate and undergraduate students.The articles can be downloaded from the
CCER Web site.
Nobel Laureate Lecture Series
In 10 years the CCER has become an influential research and education institu-
tion in China and the world.To celebrate its success, the center organized a Nobel
Laureates Lecture Series for its 10th anniversary. Ten Nobel Laureates--Gary
Becker, Robert Fogel, Clive Granger, James Heckman, James Mirrlees, Robert
Mundell, Douglass North,Vernon Smith, Michael Spence, and Joseph Stiglitz--
gave lectures.
74 J U S T I N Y I F U L I N
Lessons Learned
Nine lessons can be drawn from the successful experiences of the CCER.
1. Devotion, passion, and a common goal.The key factor behind the CCER's success
has been the group of devoted and passionate faculty members who have been
willing to sacrifice personal benefits and seize every opportunity arising from
China's transition to contribute to the betterment of Chinese society.
2. An elite team. The CCER's success has depended on faculty members who
were not only devoted but also talented.The CCER is proud to say that, if one
asks people in China to provide the names of China's 10 best and most influ-
ential economists, at least 5 in the list are from the CCER.
3. Democratic institutional arrangements.The CCER has an extremely talented group
of faculty.Each has a unique personality,unique opinions,and unique ideas.The
principle of democracy has allowed them to work together successfully. All
major decisions are made not by the administrator alone but rather at the
CCER's faculty retreat each year.The role of the administration is to build con-
sensus on major initiatives and to implement the decisions agreed upon by all
faculty members.
4. Seeking rather than waiting for resources. The CCER did not wait for the govern-
ment or for an institution to provide it with funds. Instead, it mobilized funds
actively from all possible sources to achieve its goals.
5. Research and education. Research and education are the CCER's core missions.
All members understand that without excellent research and education pro-
grams, the CCER cannot sustain itself as an influential institution.Therefore,
although the center engages in a variety of other activities, all faculty are com-
mitted to active research and teaching.
6. Independent research on problems relevant to the Chinese economy. In terms of
research, the CCER needs to be independent and the projects it undertakes
need to be relevant to China. Independence refers to both the conventional ide-
ology and the conventional wisdom of theWashington Consensus. China is in
a process of transition. Many old institutions need to be torn down. However,
the institutions necessary to implement the policy recommendations of the
Washington Consensus work may not yet be in place.Therefore, it is necessary
for the CCER to remain independent of both influences--that of conven-
tional ideology and that of the Washington Consensus--to make its research
and policy recommendations relevant and helpful to China's transition.
7. Continuous innovations. Continuous innovations are necessary both in the
CCER's programs and in the ways the institution is run. Innovation is needed
not only because of the rapid expansion of the CCER but also because of the
natures of the CCER and Chinese society. At its founding, the CCER was the
only institution in China in which every faculty member had received PhD
training abroad.This remains true today. At the beginning, Chinese society
EXPERIENCE OF THE CHINA CENTER FOR ECONOMIC RESEARCH 75
tended to be very suspicious of the CCER's intentions.In such an environment,
many experiences from other institutions abroad could not be adopted.The
CCER had to find its own ways for performing its functions.In a rapidly grow-
ing transition economy,one needs to be pragmatic about what can be done;one
also needs to be innovative in handling challenges in a totally new institution.
8. Outreach and networking.Outreach and networking are important.If the CCER
talked only to its own faculty members and students, its influence on society
would be limited.To increase its impact, domestically and internationally, the
CCER adopted an outward strategy, using its unique position in China to cre-
ate networks with individuals and institutions in China and abroad.
9. Service, tolerance, and a humanistic working environment. The success of the CCER
depends not only on good faculty members but also on capable support staff.
It is important to cultivate a culture of service, tolerance, and a humanistic atti-
tude among support staff.To achieve this goal and be proud of their jobs at the
CCER, staff should embrace the CCER's missions and be committed to con-
tributing to China's transition.
Directions for Future Development
The CCER has expanded from 6 faculty members at its founding in 1994 to 26 faculty
members in 2005.To do what it wants to do in China, it needs more faculty members
and more innovations. In addition to increasing the numbers of faculty and securing
reliable funding sources, the CCER is trying to strengthen its work in three areas:
� Developing exchange programs of PhD students with other universities. The CCER
hopes to send PhD students to spend a semester or a year at top universities in
the United States, Europe, and elsewhere to conduct research on their disser-
tation topic and increase their international exposure. After receiving their
PhDs from the CCER,students are most likely to stay in China.This exchange
program will enhance not only the CCER's PhD program but also the overall
quality of economics education and research in China
� Building up an NBER/CEPR type of research organization for economists at other
universities or research institutions in China.This new organization would encour-
age economists in China to work on development and reform issues, provide
them aWeb site on which to publish their working papers promptly, and allow
them to meet regularly in small groups with other economists working on
similar topics.
� Networking with similar institutions in transitional and developing countries.There are
many new institutions similar to the CCER in Eastern Europe, the Russian
Federation, and other developing countries.They face similar challenges.The
experiences and research findings from each of them may be particularly rele-
vant to others.Therefore, the CCER hopes to initiate a network among these
new institutions.
76 J U S T I N Y I F U L I N
Note
The author gratefully acknowledges the help of Ms. Xiaoping Ma in preparing the lecture on
which this paper is based.
Comment on Gur Ofer and
JustinYifu Lin
Marek Dabrowski
BUILDING A SYSTEM OF MODERN ECONOMICS EDUCATION IN THE POSTCOMMUNIST
countries of Central and Eastern Europe and the Russian Federation is challenging,
for variety of reasons. Some of them relate to the past (and not only to the commu-
nist era); others reflect the current institutional flaws in university education and sci-
entific research in most transition economies, or an agglomeration effect (that is, the
concentration of the best human potential in a relatively small number of countries
and academic centers). I will try to address some of these issues and discuss the role
that high-quality education initiatives supported by international public and private
donors can play to improve the situation.
The Region's Difficult Historical Legacy
The poor quality of economics education in former communist countries is usually
linked to the legacy of the communist ideological and political control of social sci-
ences and the entire education process.This is true but it does not give a full his-
torical picture. Even before the communist era, Central and Eastern Europe was on
the periphery of modern economic thought and high-quality economics educa-
tion. During the twentieth century, only a few scholars from this region--such as
Vasiliy Leontieff, Nicolas Kaldor, and Michal Kalecki--really contributed to the
mainstream of economic theory on a global scale, and all of them did their impor-
tant work in the United States or the United Kingdom.When Kalecki came back
to communist Poland afterWorldWar II, his contribution to mainstream theory was
definitely over.1
Before World War II, most universities and university-level economics schools in
Central and Eastern European had a very practical, business-type orientation, with-
out a wider intellectual context. As result, graduates who were interested in high-
level academic careers had to continue their education in Western Europe and the
United States.
77
78 M A R E K DA B ROW S K I
The communist period brought a dramatic deterioration in higher education in
the region, as "bourgeois" professors were forced to stop teaching and leave univer-
sities, were forced to emigrate, or were killed (this was the fate of many Russian
economists in the 1920s and 1930s).2
In that period, all disciplines of the social sciences, including economics, had to
serve the communist party and its Marxist-Leninist ideology. Research agendas and
university curricula were oriented either toward building the "theoretical" founda-
tion of a communist, nonmarket economy or toward dealing with technical ques-
tions related to the central planning of production and investments in various sectors
and industries.The theoretical focus led to the development of such disciplines as the
political economy of socialism and the theory of central planning.The focus on tech-
nical questions led to various types of sectoral "economics." Some of the directions
of theoretical analysis--for example, various optimization models of central plan-
ning, price setting, and investment allocation or foreign trade--accomplished a high
level of technical sophistication and employed modern econometric methods. But
because they were based on unrealistic ideology assumptions about the behavior of
economic agents, most of this work was useless in guiding policy decisions.When
central planning simply disappeared at the end of 1980s, it left most of the academic
and research community in the region completely unprepared to deal with the new
challenges of market-oriented reforms and market education.
The far-reaching political, ideological, and (sometimes) police control over uni-
versities in the former communist countries was augmented by the physical isolation
of these countries and their harsh censorship.As result, even scholars who wanted to
learn how a market economy worked had problems doing so,because they could not
travel freely abroad and lacked access to Western publications.Their only possible
avenue for studying the functioning of a market economy was through the prism of
the Marxist-Leninist "critique" of capitalism.
However, there were some gaps in the communist party's total ideological and
political control, and these gaps increased as the communist system gradually weak-
ened. First, countries that experimented with "market socialism" (the former
Yugoslavia and, to smaller extent, Hungary and Poland in the 1970s and 1980s) had
partially to reorient the agenda of their economic research and their curricula of
economics education.These countries enjoyed more freedom in terms of contact
with the West (including academic exchange and cooperation) and weaker censor-
ship. Second, geopolitical rivalry with the West required some knowledge about the
capitalist enemy.To meet this need, some enclaves in which capitalism and the mar-
ket economy were studied--within the Academy of Sciences of the Soviet Union or
similar institutions in other communist countries--were permitted.
After the collapse of communism, these gaps and enclaves proved sufficient to
produce a relatively narrow group of reformers who took professional responsibility
for the economic transition in many countries, in most cases with success. However,
these enclaves were insufficient to effect the reconstruction of economics education
and economic research.
C O M M E N T O N G U R O F E R A N D J U S T I N Y I F U L I N 79
What Has Happened in the Past 15Years?
One might have expected that the collapse of communist control over the social sci-
ences and education, the breaking of ideological taboos, the increase in freedom of
speech and thought, the opening up of the former communist countries to the out-
side world, the substantial technical assistance and research cooperation, the revolu-
tion in information and communication technology, and other factors would have
helped change the state of economics education and research in the region. Unfor-
tunately, it did not: economics education (both public and private) and economic
research in former communist countries continues to be very weak.
The old guard of communist professors continues to teach economics in both
state universities and new private economics and business schools.Although the offi-
cial curriculum has been modified, the content and quality of teaching has not
changed much. Formally, topics such as the political economy of socialism and cap-
italism, the theory of central planning, and the theory of "scientific communism"
have disappeared, to be replaced by macroeconomics and microeconomics, trade
theory, and other courses taught in theWest. In practice, however, these new courses
are taught by faculty who either remain mentally and emotionally engaged in the
previous system or whose own economics education is simply substandard. Many of
them have poor command of English, so their access toWestern textbooks, academic
papers published in the international refereed journals, and the teaching practice of
Western universities is very limited.They teach exclusively in their national lan-
guages, forcing their students to use textbooks they wrote instead of internationally
recognized textbooks, and their teaching methodology is completely outdated.
In the rapid proliferation of a higher economics and business education in most
transition economies, quality has been compromised in favor of the quantity of
diplomas granted. At the same time, national labor markets have created a limited
demand for high-quality economics education.This limited demand has usually been
satisfied by the graduates of Western universities,whose number is gradually increas-
ing.The accession to the European Union (EU) of 12 postcommunist countries may
intensify this process.
The picture in economics research is very similar to the picture in economics edu-
cation. Research remains dominated by public universities, research institutes of the
Academy of Sciences, and "sectoral" institutes controlled by various ministries and
government agencies.The research agenda and the quality of the research lags behind
the real needs and challenges facing the transition economies.The newly created pri-
vate (or nongovernment) research centers are usually too small and financially weak
to play a more important role in this sphere.Only a few of them have established solid
national and international positions.These unfavorable trends have been determined
not only by limited and distorted financing but also by a limited supply of well-
educated graduates capable of, and interested in, carrying out high-quality research.
Let me briefly highlight some of the institutional and policy factors that impede
progress:
80 M A R E K DA B ROW S K I
� The structure of both universities and public research institutes remains highly
hierarchic (feudal). Obtaining a senior position (professorship) takes at least 20
years of and requires obtaining two or three academic degrees (a "normal"
PhD, called in some countries a candidate of science; a "habilitation," called in
some countries a doctor of science; and sometimes a state professor degree).
Many transition countries do not officially recognize (or did not recognize
until very recently) academic degrees obtained at U.S. or Western European
universities. Candidates for academic degrees are forced to present and publish
their dissertations in national languages rather than in English.The official eval-
uation/attestation criteria for universities and research institutes (and, conse-
quently, the recruitment criteria for their academic staff) give priority to
domestic academic degrees and domestic publications in national languages
rather than publication of high-quality, internationally recognized research.
This sector is thus essentially closed to external competition, allowing poorly
educated "red" professors3 to control academic nominations and the distribu-
tion of public funds for research and education.4 Academic careers of prospec-
tive young scholars are either stymied or blocked, because they are considered
dangerous competition to the "old guard."
� Public funding of economic research and higher education in economics is not
only limited (due to fiscal constraints) but also badly distributed. In most tran-
sition economies, political populism continues to maintain the illusion of free
higher education, which is practically unrealistic and hinders the introduction
of a transparent mechanism of support to students from low-income families
and competition between public and private universities on equal terms. Most
research funding goes to institutional support to "old-type" publicly owned
research institutes instead of financing concrete research projects on a compet-
itive basis.The financial mechanism tends to favor incumbents at the expense
of market "newcomers" (that is, potential competitors).
� Poor funding and rigid rules of employment and remuneration of academic
staff result in low basic salaries that are unrelated to output.This reward system
stimulates adverse selection of staff, with the most gifted young graduates pre-
ferring careers in private business or academic careers at Western universities.
Those who opt for careers at domestic universities and research institutes
search actively for second or third jobs, often only loosely related to their aca-
demic job, in order to be able to maintain an adequate living standard.
� Western Europe does not provide a good model either.Although universities and
public research institutes in Western Europe are better financed, offer higher
salaries, and do not face the specific problems of postcommunist transition, they
suffer from many of the institutional flaws that affect their Central and East Euro-
pean counterparts.The structure of academic life and careers is feudal,the system
of academic employment is inflexible, and most funding comes from public
sources.As result,most European universities and research institutes lose in com-
petition with similar institutions in the United States and United Kingdom.
C O M M E N T O N G U R O F E R A N D J U S T I N Y I F U L I N 81
� Agglomeration effects seem to play an important role in shaping the education
and research market. In the past few decades, high-quality economics educa-
tion and research have become increasingly concentrated in a small number of
academic centers in the United States, the United Kingdom, Canada, and
Israel. Because of the lack of good track records and reputations, universities
and research institutes in postcommunist countries face substantial barriers in
attracting internationally respected scholars, private funding, or demand for
education and research services. Internationally, these institutions are perceived
as capable of meeting only local demand and conducting research on local top-
ics. Changing this perception will not be easy.
The Role of New Education Initiatives
Thanks to the efforts of international official and private donors, a fewWestern-type
centers of graduate economics educations have been established in the region.The
Central European University (CEU) in Budapest, the Center for Economic
Research and Graduate Education (CERGE) in Prague, the New Economic School
(NES) in Moscow, and the Master's Program of the Economics Education and
Research Consortium (EERC) at the Kiev-Mohyla Academy are the best known
and have the best track records.Although these institutions can train only small num-
bers of students, it is hard to overestimate their positive demonstration role in the
mostly outdated education systems in the region. These institutions are important
for several reasons:
� They set a high education standard and provide a kind of benchmarking for
domestic education initiatives, especially in the private sector.
� They supply the new generation of economic think tanks in the region with
well-educated young researchers, helping to upgrade their still limited human
potential.
� They help create regional research networks and international academic con-
tacts for their professors and graduates.
� They offer "bridging" to further (mostly postgraduate) education in the West.
These initiatives face a number of serious challenges, related largely to their finan-
cial sustainability. Many donors who have supported these institutions are now look-
ing for exit strategies. Some of them wrongly assumed that economic recovery in the
region and EU accession of Central European and Baltic countries would create suf-
ficient domestic sources of financing for foreign financing to be phased out.Too early
withdrawal of international donors and forcing the new education institutions to
search for alternative (mostly domestic) sources of financing could cause a variety of
problems, including a decline in educational standards; the "nationalization" of cur-
ricula, academic staff, student recruitment, and teaching languages; and a shift in
emphasis from economics to business.
82 M A R E K DA B ROW S K I
Is There Hope for the Future?
Is there any chance of improving the bleak landscape of economics education and
research in the region? Some factors related to globalization and European integra-
tion may help improve education standards, at least to a certain extent.
Continued economic growth, the inflow of foreign direct investment, and
increasing trade and investment links with the outside world will increase demand
for well-trained economists.This may also increase demand for economic research
and analysis, financed from public and private sources. Increasing demand for high-
quality economists can be met by Western universities, especially given European
unification.However,it is very unlikely that outsourcing can fully solve this problem,
and outsourcing education involves the risk of brain drain. Local labor markets in
Central and Eastern Europe and Russia may therefore push for upgrading at least
some their domestic education institutions.
The increasing role of the single European research market (particularly of EU-
funded framework programs) will help upgrade some research institutions in transi-
tion economies (mostly but not only in EU new member states) in terms of their
human potential, research standards, and market mode of operation. In fact, this
process has already begun. EU-funded education support and research training
schemes can also help upgrade the standards of some universities in the region.
A natural generation change may eliminate or at least reduce the problem of red
professors who resist changes in education curricula and methods. However, positive
changes depend on far-reaching institutional reforms in higher education and
research institutions,particularly changes related to financing,employment rules,and
the system of academic degrees.
Even under the most optimistic scenario,the role of the new education institutions
will remain important, and they will require continuing donor support for a quite a
long time.These institutions should retain their regional character and not be "nation-
alized."They represent a kind of international public good that should not be lost.
Notes
1. The same was true of the other important economist of Polish origin, Oskar Lange,
who was well known for his polemics with Ludwig von Mises in the 1930s. His contribution
to mainstream theory was more problematic, however. His attempts to defend the potential
economic effectiveness of a socialist economy looked very elegant in terms of formal model-
ing, but this defense was never confirmed in practice.Again, after coming back to communist
Poland, his role as the internationally known scholar was finished.
2. Nikolai Kondratieff, the author of the theory of long waves in business cycles (popu-
larized by Joseph Schumpeter) spent eight years in communist prisons before being killed in
1938.He was just one of many examples of Bolshevik and then Stalinist terror victims among
Russian intellectuals and scholars.
3. The former German Democratic Republic is an exception. After German reunifica-
tion, the old academic cadres in social sciences were fired and replaced by "imported" faculty,
mostly from the Federal Republic of Germany.
C O M M E N T O N G U R O F E R A N D J U S T I N Y I F U L I N 83
4. The collapse of the communist regime was associated with the introduction or
enhancement of the autonomy of state universities, research institutes, and academies of sci-
ence.Combined with continued budgetary funding,the feudal hierarchy of academic degrees
and positions,and the lack of external competition,it helped consolidate the position of"red"
professors and slow adaptation to the new market conditions.
Comment on Gur Ofer and
JustinYifu Lin
Jeffrey Miller
IT IS A PLEASURETO DISCUSSTHESE PAPERS BYTWO PEOPLEWHO HAVE BEEN SO INSTRU-
mental in establishing economics educational projects in transition economies. Hav-
ing directed a similar, more limited project in Bulgaria in the early 1990s, I can
appreciate both the effort and the rewards that come from working to establish pro-
grams such as the China Center for Economic Research (CCER) and the New
Economic School (NES). Although the success of such projects is hard to measure
in the short run, the impact of economics educational programs can be significant if
people understand more about the economic situation that surrounds them and are
able to make decisions and implement policies that improve the well-being of their
countries.
What is most striking is how similar the goals of the CCER and NES are. As
Ofer states them:
The grand mission of the endeavor was to replace the Marxist economic par-
adigm and the way economics had been taught under the communist regime
with a new paradigm of modern,Western economics--something that was
completely alien to most Russians.The task involved an extremely radical
shift,with only few precedents in the history of science.The change was com-
plicated by the fact that it took place at the same time that many radical
changes--political, social, and mental, as well as economic--were occurring.
Later Ofer states that "the main mission of NES is to transform economics in
Russia."In these statements there is clear recognition that accomplishing this mission
is not a simple task. It is not normal changes that are required but rather "an
extremely radical shift, with only few precedents in the history of science." Indeed,
the breadth of the changes raises the question of whether the establishment of such
a program is like placing a foreign organ into the human body, only to see the organ
rejected by the body.
84
C O M M E N T O N G U R O F E R A N D J U S T I N Y I F U L I N 85
Ofer argues that the issues are more than just a question of content. Indeed, they
involve a major reorganization of how economics should be taught.At NES, teach-
ing and research--activities that were pursued in different institutions during the
communist period in Russia--are seen as highly complementary activities. Rather
than teaching the material so it can be learned by rote, NES promotes a more inves-
tigative, problem-solving approach.This approach is designed to give students a
broader perspective than they would receive from professional training.Although Lin
is less explicit about the approach his program has taken, it is clear from the research
achievements of the faculty at the CCER that the objectives are similar.
Establishing such radically different institutions in a stable environment would
have been very difficult. It is hard to imagine, for example, European institutions of
higher education rapidly adopting the American model. As Ofer points out, the sep-
aration of research and teaching,characteristic of the European model,had additional
advantages within the Soviet system; and thus the Soviet system was an even more
extreme version of this model.
Given the dramatic changes that were taking place in the business and economic
environment in both China and Russia during the economic transitions in these
countries, some changes in their education systems were clearly warranted. First, if
these countries were to move to a market system, people needed a better under-
standing of these new arrangements. Indeed, it appears that the educational systems
are adjusting content to the study of market institutions,although many teachers lack
formal education in market economics.To help improve this situation in China, the
CCER has created outreach programs for faculty at other universities, including a
program specifically for faculty from management programs in western China.
Second, the educational system needs to adjust to the new work environment.
Under the old system, people who graduated from a university could expect to spend
their life in a particular line of work. Market arrangements create a much more fluid
work environment,requiring people to be prepared for a range of possible jobs during
their working years.The changing work environment also places greater demands on
people to obtain additional education or training later in life.The notion of life-long
learning is foreign to many people, especially older people, in transition economies.1
When I read these articles by Ofer and Lin, I was particularly interested to see
where the graduates of NES and the CCER are working.There were two reasons for
this interest. First, the program I directed in Bulgaria was very successful on a per-
sonal level for the students, but it was not clear to me that it was successful in meet-
ing the objective of having a major impact on economic instruction in Bulgaria.
Second, job placement by graduates is an indication of how the program may be
affecting economic policy making.
With regard to the first point, the small number of graduates that are teaching at
Russian institutions other than NES suggests that the program may not be having
the "trainer-of-trainers" impact that was hoped.This was a major objective of the
program in Bulgaria, and the results there were similarly disappointing. Ofer points
out that one reason for this is the low pay of professors in Russia.This is undoubt-
edly an important factor; but another important factor, which he also mentions, is at
86 J E F F R E Y M I L L E R
work as well: the potential threat to higher-ranking officials from better-trained
professionals.
The CCER appears to have been more successful in this regard than NES, with
approximately one-third of its PhD graduates teaching at other universities.The influ-
ence of the CCER on economics instruction is broader than this, since the CCER has
also established outreach programs and prepared textbooks for more general use in
China.Furthermore,the connections that the CCER has with the policy-making com-
munity have enabled it to participate in"almost every single policy dialogue in China."
In our Bulgarian program, we recruited young people who planned to teach as
well as faculty members who were already teaching economics. Graduates who were
seeking work had difficulty finding positions. Several graduates who already had
positions in economics programs were junior faculty.When they returned to their
positions, they were given only limited opportunities to use their new skills. Often
they ended up teaching courses directed by senior faculty members who determined
course content.
From recent discussions with Bulgarian graduate students at the University of
Delaware who have expressed interest in returning to Bulgaria to teach,my sense is that
there are still major barriers to university teaching for economists with Western train-
ing.This lack of opportunity is encouraging many Bulgarian economists to stay abroad.
Although I have seen no studies to confirm this, I suspect that the failure of uni-
versities in transition economies to adapt is having other ramifications. At first I
expected that poor instruction would lead university students to demand better
instruction through protest or other channels (for example,"voice").This has not
happened. Instead, the best students are going abroad for their education, and many
are not returning.2
Turkey provides some interesting contrasts to this situation. Although Turkey is
not a transition economy in the formal sense, its economy has been going through a
transformation that has many parallels to the transition process.The heavy involve-
ment of the state in the economy began to change only in the 1980s. A process of
privatization of state enterprises is now underway, but some estimates still place gov-
ernment employment in the nonagricultural sector of the economy at 60 percent.
Since 1986, when Bilkent University (in Ankara) admitted its first students, there
has been a movement to establish private universities. Several of these universities (for
example, Ko� in 1994 and Sabanci in 1999) were founded by families that controlled
large holding companies. Bilkent, Ko�, and Sabanci, in particular, have been seeking
to achieve a high standard of academic excellence by recruiting faculty with degrees
from Western universities and, if possible, teaching experience there. Instruction is in
English, which gives students and faculty access to the global academic community.
All three of these Turkish universities expect their faculties to teach and do
research. As they see it, the university's reputation will depend on its publication
record inWestern journals.They pay their faculty salaries that are competitive in the
global marketplace rather than the local-market salaries paid by other universities,
which are only a fraction of these salaries.These economics departments recruit new
faculty from graduate programs in the United States, just as an American university
C O M M E N T O N G U R O F E R A N D J U S T I N Y I F U L I N 87
does. In many ways, these universities represent the kind of private university that
Ofer sees as important for Russia.
There are interesting parallels between these Turkish universities and the CCER
and NES. Of course, the CCER and NES have a much narrower focus on economics
and business, mostly at the graduate level, while the Turkish programs are full-fledged
universities with broad programs.So let me focus on theTurkish economics programs.
One striking feature of these programs is that talented economists are returning
to Turkey.As a result, instruction and understanding of market economics in Turkey
is improving.The competition from these universities is also increasing the pressure
on other universities to raise their standards.
The research being done by the economics departments at all three universities
has a strong theoretical focus.This was not intentional, at least at Sabanci. In fact,
when the organization of Sabanci University was originally discussed, economics
was not going to be a department; instead there was going to be a policy program.
The evolution of the economics department partly reflected the interests of Turkish
economists studying in the United States. Since many Turkish economists were
interested in theory, the Sabanci department gravitated in that direction. But there
was also another reason. In many ways it is easier for economists outside the United
States to publish in U.S. journals if their work is theoretical. Even if their work is
applied, data available on the U.S. economy are better than data on other economies;
and it is easier to publish in U.S. journals if the topic relates to the U.S. economy.
Although the economics department at Sabanci is first rate, so far it has conducted
relatively little research on the Turkish economy.This may change over time as the
department matures--the university is only six years old and the faculty is young--but
the pressures to publish will still encourage work unrelated to theTurkish economy.
How does all this relate to the CCER and NES? First, theory has been the focus
of research at NES; it is likely to remain so if NES seeks an international reputation.
However, as Ofer explains, there is international interest in what is taking place in
Russia, so there is more latitude to pursue more applied work in Russia than there is
in Turkey. My guess, however, is that there will continue to be a strong pull toward
theoretical work at NES.
The CCER is in a different position.The success of the Chinese economy has
generated international interest. Doing research on the Chinese economy is not a
major liability for economists there, and the CCER has made an effort to encourage
research relevant to China. Indeed, establishment of the London School of Econom-
ics and Political Science�Peking University is one indication that interest in China is
very broad.This makes it much easier for the faculty to publish in Western journals
and burnish the reputation of the CCER.
An important aspect of the growth of the Turkish universities is that they are
indigenous organizations that have grown to meet needs as perceived by the local
community.There is a strong interest in these institutions from the business commu-
nity, which has provided financial support and been intensely involved in the man-
agement of the universities.The head of the Sabanci holding company, for example,
has been very much involved as an overseer of the university's development.
88 J E F F R E Y M I L L E R
Sabanci is also the first university inTurkey to adopt an American-style liberal arts
undergraduate curriculum,where students can change their concentration after they
have enrolled at the university.3 Sabanci demonstrates that new institutional arrange-
ments can evolve through a process of entry.
After 13 years, NES still does not have this kind of local support. Its financial sup-
port is still coming from outside Russia.As Ofer points out,the situation may change
if the business community, which now includes individuals who have accumulated
substantial wealth, decides to support such efforts.4
Although I know very little about the local situation in Russia, I would be con-
cerned that NES does not have an association with any Russian institution.When we
set up the program in Bulgaria, we tried to find a local institution with which to
associate.We failed to find a suitable partner, so I can understand how difficult this
can be--but the failure to find a suitable partner is one reason why that program no
longer exists and was, perhaps, an indication that Bulgaria was not prepared to sup-
port such a program.
Although the CCER received seed money from the Ford Foundation and an
"endorsement" from the World Bank, it is not clear from Lin's description what the
sources of continuing support are. It would be useful to know more about this, as it
might provide guidelines for other programs.
Although I have focused my remarks on the potential impact of the CCER and
NES on economic education in China and Russia, we should not lose sight of the
fact these programs can be very meaningful on a personal level for the students who
attend them.Students in these programs understand that these programs can connect
them with the larger world community and thus can have a significant impact on
their lives. I expect that many young people in these programs will make an impor-
tant contribution to future economic developments in their countries.
Notes
1. In Bulgaria in the early 1990s,we tried to recruit older faculty to participate in the eco-
nomics program. Interest was very limited, partly, I believe, because "life-long learning" was
not part of the culture. Once someone completed schooling, formal education was over.
2. The number of students receiving higher education has increased significantly in Bul-
garia.This may reflect a change in the number of openings in universities. Universities can
now provide more space because there are now additional financial resources available to uni-
versities provided by tuition-paying students.
3. In practice, setting up a university where students could change their concentration
after admissions was difficult for Sabanci, because admission toTurkish universities is based on
a national exam and a sorting process in which students are asked to identify a university and
a program within that university.The process assumes that students will stay within a certain
field of study once they enter a university .
4. TheTurks are rightfully proud of what they have accomplished.I have heard that aTurk
suggested to a Russian oligarch that he might be remembered longer for starting a university
than for purchasing a football team.
COMMENT
Historical Specificity and the
"Generality"of Economics
Ugo Pagano
Capacity Building: The Reemergence of an Old Problem
Is there a trade-off between the generality of economics and its relevance to partic-
ular situations? How much general economics should one teach relative to the eco-
nomic analysis of specific situations? These problems, considered by Professor Gur
Ofer, have arisen in many institutions, including the Central European University,
where they are currently the object of a lively debate among the members of the
department of economics.
This is not surprising.The tension between "historical specificity" and the "gen-
erality" of economics has always been around, and it is very unlikely that there will
ever be a decisive resolution to this old Methodenstreit.1
Professor Justin Lin has observed,"In spite of China's success in moving to a mar-
ket economy, the country did not have a modern economics profession, and in the
beginning of the transition, modern economic analysis did not play a major role."
Indeed, according to him, what was important for the initial success of reform was
the knowledge of specific bottlenecks. Only recently, he notes, as China has become
more and more market oriented, has the general view of the market system that is
supplied by modern economics become important.
The right balance between "general economics" and historical specificity has
important implications for the type of institutions through which modern econom-
ics is taught. Professor Newton-Smith argues that sponsoring and relying on local
institutions is more cost-effective than building new ones.These local institutions
may also be influenced by one's view of their role--whether one sees them as
engaged in a simple technological transfer or as combining in some creative way
established theories with local knowledge.
I find it difficult to understand the precise implications of this point for the best
ways to achieve capacity building. On the one hand, one can argue that preexisting
89
90 U G O PAG A N O
institutions are more likely to be endowed with local knowledge than they could
creatively mix with general economics. On the other hand, one can argue that a cre-
ative role of institutions (involving much more than simple technological transfer)
may also require the foundations of new organizations (sometimes the old ones may
be suited for simple technological transfer at best).
"General Economics" Under Socialism and During
Transition
I agree with Professor Gur Ofer when he argues that the generality of economic the-
ory is one of its strengths. I am puzzled by the observation of Professor Lin, who
notes that general economics was not applied in the early days of the successful Chi-
nese transition. He maintains that this deficiency was simply due to the fact that
modern economic theory was not known in China at the time. I am afraid that this
is only one of the reasons for this deficiency. I believe much economic theory was
not very relevant and was sometimes even damaging. During the years of socialism,
the generality of economics often led to misunderstanding situations. It is therefore
not surprising that China did better than some former socialist countries that
received advice from Western consultants.
During the years of socialism, in the West the Arrow-Lange-Lerner theorem was
a benchmark for much economic thinking.This theorem states the formal equiva-
lence of market economics and central planning.2 Both market and planned
economies were represented by the means of theWalras's auctioneer economy,where
individuals write their trading and production plans on tickets and are allowed to
implement them only after the auctioneer announces equilibrium prices.
Major characteristics of market economies were ignored by this abstract con-
struction. Whereas in the auctioneer economy exchanges occur at equilibrium
prices,in real market economies,exchanges happen mostly at nonequilibrium prices,
and disequilibrium is a real phenomenon that all market economies must face.More-
over, whereas in the auctioneer economy enforcement is assumed to be costless, in
real-life market economies costly complementary institutions are required for the
the implementation of contracts.
The representation of planning by means of the model of the auctioneer economy
(where the planning office would play the role of the auctioneer and the firms' man-
agers were instructed to choose those quantities at the prices announced by the auc-
tioneer) was even more damaging. In the Walrasian economy, agents write the
quantities that maximize utility and profits at the prices cried by the auctioneer on
tickets.They are then were asked to implement their decisions only at equilibrium
prices. In real planned economies, there is no auctioneer (or planning office) working
at zero costs.Agents have very little incentive to reveal their information. Each round
of information exchange would have taken a long time,and the final plan would have
been related to a changed reality.Even if the process had converged,there was very lit-
tle incentive for agents to carry out their plans; managers were unlikely to carry out
the plans that maximized profits simply because they were ordered to do so.
HISTORICAL SPECIFICITY AND THE "GENERALITY" OF ECONOMICS 91
The "generality" of the Walrasian general equilibrium theory did very little to
help the understanding of the main features of socialism and capitalism. It was, how-
ever, politically useful. It seemed to point out some sort of convergence of economic
systems that could, in turn, give some (limited) support to a peaceful coexistence
between the two blocs.The 1975 Nobel Prize in economics was won together by
the Leonid Kantorovich of the former Soviet Union and the Tjalling Koopmans of
the United States for "their contribution to the optimum allocation of resources"
and was a tribute to the mathematical equivalence between market prices and
planned shadow prices that could, in principle, be the basis for economic optimality.
However, beyond these theoretical and political niceties, this type of approach had
several shortcomings. Perhaps the saddest of them was that it suggested many imag-
inary and abstract ways to reform the socialist economies that did not work outside
the generalizations of economic theory.
If most economic theory did not help much during the years of socialism (and,
in some cases,was damaging),it was even less useful when socialism collapsed.In this
situation, the main issue became how to build the institutional foundations of a mar-
ket economy.The analysis of these foundations had often disappeared in the formal
equivalences of economic theory.Little had been understood about the sophisticated
complementary institutions that are necessary to the working of the market econ-
omy; and little had been understood about the diversity of corporate governance
models that had differentiated synchronically and diachronically the evolution of
real-life market economies.
Sometimes, especially in the early debates, transition became a misleading
word that implied implicitly a unique starting point and a unique point of arrival.
It ignored both the plurality of starting points of the former socialist economies
and the plurality of capitalist models to which these economies could be
directed. The main issue became the speed of transition, with "gradualists" and
"shock therapists" monopolizing much of the debate. Despite emerging robust
empirical evidence, few "general economics" theorists would have been ready to
recognize that novel institutions such as the Chinese township and village enter-
prises could play an important role in the transformation of some socialist
economies in specific moments of their history."General economists" would not
necessarily have helped the early successful stage of the Chinese transition to a
market economy.
Graduate Teaching and Historical Specificity
Despite these considerations, I would still agree with Professor Ofer that in gradu-
ate teaching one should concentrate more on general economics than on specific
situations. One can even argue that the limitations of the theories we have consid-
ered stem more from the absence of than from the excesses of genuine generaliza-
tions and that in fact one has to generalize more, and in the appropriate directions,
to obtain general economic statements that are useful to deal with specific
situations.
92 U G O PAG A N O
Statements such as the Arrow-Lange-Lerner theorem derive from the idea that
that the central problem of economics is the scarcity of resources--that is, the lack of
sufficient physical resources to satisfy our needs.Thus much economics has concen-
trated its analysis on the choices of rational individuals who coordinate decisions at
given market or accounting prices.
The problem with this view of scarcity lies in its lack of generality. It limits the
scarcity problem to only one dimension.The assumption of the unbounded ration-
ality of individuals and given prices hide two other important dimensions of scarcity:
the scarcity of adequate cognitive ability on the part of those making the choices and
the scarcity of adequate institutions. Much modern economics has generalized the
analysis of the scarcity problem in these directions, making economics better suited
to deal with specific real-life situations.
The extension of the economic notion of scarcity to cognitive scarcity has gen-
erated two lines of investigation.The first is related to the common ignorance that
individuals have about the future, which may imply that they may be unable even to
attribute probabilities to different events.The second deals with the different degrees
of ignorance that characterize different individuals. Asymmetric information is the
source of different types of both market and central planning failures; it has pushed
us very far from equivalence statements � la Koopmans-Kantorovich. Recently,
because of the growing awareness of the centrality of the problems related to
bounded cognitive resources, the assumption that individuals are endowed with the
same and complete rational capabilities has been questioned, and much research has
focused on the specific mechanisms of decision making.3 Much behavioral econom-
ics, with its emphasis on particular, sometimes cultural-specific, problems seems less
general than the standard neoclassical approach based on universal maximizing
behavior. However, the attention to specific decision-making mechanisms derives
from the fact that the restrictive assumption of free unbounded rationality has been
removed and the economic scarcity problem has been generalized.This generaliza-
tion implies that the degree of rationality may also depend on specific historical and
social conditions. Particular types of rational capabilities may grow together with the
development of markets; they cannot be taken for granted at the beginning of a
transformation process.
The extension of the scarcity problem to the limited availability of adequate
institutions implies that we have to give up the idea that all countries at any
moment in their history have institutions (including market institutions) that are
adequate to their needs. Institutions are produced by using preexisting institutions;
often this production process can succeed only if it comes together with the pro-
duction of other complementary institutions.To put it in another way, the under-
standing of institutions cannot be dissociated from the analysis of their history in
specific countries. Modern institutional economics, with its emphasis on specific
institutions, may look much less general than neoclassical economics.4 But the
attention to specific institutions comes from removing the restrictive assumption
of the free availability of adequate institutions. It comes from a generalization of
the scarcity problem that has always been the central problem of abstract economic
thinking.
HISTORICAL SPECIFICITY AND THE "GENERALITY" OF ECONOMICS 93
Toward a New Relation Between Historical Specificity
and the Generality of Economics
Is there really a trade-off between the generality of economics and its relevance to specific
situations?The usual answer is"yes";and there are good reasons for this answer.During the
years of socialism,the excessive emphasis on standard equilibrium analysis inhibited a clear
understanding of the specific features of this system.At some deeper level, however, the
genuine generality of economics increases the understanding of particular decision-
making problems and particular institutional contexts.A more general economics may
become less abstract and better suited for building bridges with specific historical situa-
tions.However,if more general economics is to show its full potential,we have to reverse
the trend of many U.S. graduate schools, where economic history has been eliminated as
an important subject.Although a true general economics should remain at the core of
graduate teaching, the history of different countries must once again play an important
role in curricula. Or, to use economic jargon, the teaching of general economics and the
teaching of specific histories should not be seen as substitutes but as complements.
Notes
1. For a recent account of the Methodenstreit and its relevance for current economic
debates, see Hodgson (2001).
2. For a review and a criticism of this literature, see Pagano (1985, 1992). A remarkable
exception, which anticipated much later institutional thinking, was Kornai (1971).
3. This approach is also leading to a new understanding of the relation between econom-
ics and other fields. See, for instance, Camerer, Loewenstein, and Prelec (2005).
4. For examples of this approach see Aoki (2001) and Bowles (2004).
References
Aoki, Masahiko. 2001. Toward a Comparative Institutional Analysis. Cambridge, MA:
MIT Press.
Bowles. Samuel. 2004. Microeconomics: Behavior, Institutions, and Evolution. Princeton,
NJ: Princeton University Press.
Camerer, Colin, George Loewenstein, and Drazen Prelec. 2005."Neuroeconomics
How Science Can Inform Economics."Journal of Economic Literature XLIII (1):9�64.
Hodgson, Geoffrey M. 2001. How Economics Forgot History:The Problem of Historical
Specificity in Social Science. London: Routledge.
Kornai, J�nos. 1971. Anti-Equilibrium: On the Economic SystemsTheory and theTasks of
Research. Amsterdam: North-Holland.
Pagano, Ugo. 1985. Work andWelfare in EconomicTheory. Oxford: Basil Blackwell.
------.1992."Authority,Co-ordination and Disequilibrium: An Explanation of the Co-
existence of Markets and Firms."Economic Dynamics and Structural Change 3 (1):53�77.
Innovation,Imitation,andAdaptation
The Experience of 15Years of Upscaling Hungarian
Higher Education in Economics
L�szl� Csaba
The last 15 years have seen structural changes in Hungarian higher education in terms of con-
tent, time, space, and organizational structure. As Hungary has moved closer to the standards
and practices of the European Union, the structural weaknesses of those systems has been
replicated. Changes in Hungarian higher education driven by ideology and bureaucracy have
resulted in a mismatch between the supply of university graduates and demands of the labor
market in the medium to long run, a trend that is likely to intensify. Strategies to avoid this
labor market incompatibility and the degradation of university research capabilities include
the promotion of centers of excellence as well as continuous performance and quality control
of faculty.
HIGHER EDUCATION IN ECONOMICS AND BUSINESS ADMINISTRATION IN HUNGARY
reached a turning point in October 2005 when the Constitutional Court decided to
make only minor modifications to the Law on Higher Education, which affirmed
Hungary's adherence to provisions of the Bologna process. In its ruling, the court
resisted the initiative of opposition forces, including most university representatives,
who had sought a full-scale reversal of Hungary's participation in the Bologna
process. Set out in the Bologna declaration and subsequent documents, this is the
European Union's program to unify academic degree standards within a European
Higher Education Area, thus allowing students and faculty to move across borders
and ensuring the mutual recognition of degrees.The program calls for all participat-
ing countries to adopt a three-tiered system of bachelor's (BA), master's (MA), and
doctoral (PhD) degrees, taking, in most cases, three, two, and three years, respectively.
This implies a breach with the classic Continental European tradition of variety in
types of degree and length of study required and an approximation of the model used
in the United States and the United Kingdom.Also in line with UK and U.S. prac-
tices, lines of study that were previously rigid--in which achievement of the MA
unconditionally required a BA degree in the very same area--have given way to
more flexibility.
95
96 L � S Z L � C S A BA
The decision to adopt the Bologna framework, which comes within the context
of a larger process referred to as Europeanization, promises to bring deep changes to
higher education in most of the postcommunist countries, and particularly in Hun-
gary. Hungarian education used to be organized under entirely different principles
and procedures. Under communism, the Prussian model was retained, and higher
education was divided into two fields. Colleges (f�iskola) were designed to serve the
immediate interests of the business community by preparing graduates for practical
jobs,with only minimal introduction to general principles and academic studies.The
best graduates from colleges often continued their studies at universities (egyetem) and
at the postgraduate level. However, unlike colleges, universities remained elitist and
academically oriented institutions. Although enrollment in institutions of higher
education among 18- to 25-year-olds rose from about 2 percent to about 5 percent
by 1989, this was still significantly below the numbers typical of Western Europe.
Social pressures arising from democratization, the perceived need to emulate
Western European or European Union (EU) practices,and the very real needs of the
economy and of the buoyant business community--international and local--for
properly trained specialists who understand the workings of the market economy
have all contributed to an unprecedented quantitative expansion of higher education
in Hungary. Likewise, the need to retrain middle-age and older employees, who typ-
ically hold engineering, agricultural, or humanities degrees, has created a very real
social demand for economics education.Private schools and semiprivate initiatives of
existing universities, as well as quickly growing new faculties, have entered this
promising market by offering numerous programs and courses, especially master of
business administration (MBA) programs and executive MBA programs for midca-
reer professionals.
This is not the place to analyze why this quantitative expansion has failed to fol-
low any plan or vision, even a tentative one.The expansion of higher education has
not been confined to economics and business studies, law, and public administration.
Similar tendencies have emerged throughout the academy--especially in the
humanities, but also in engineering and in previously little-known and barely sup-
ported fields, from psychology to filmmaking to communications and information
technology.1 What is clear is that this unrestricted quantitative expansion has had
repercussions. Policy makers boast that "we have opened the doors of the universi-
ties," meaning that in place of the previous 2 to 5 percent of 18- to 25-year-olds
enrolled in institutions of higher education, in 2005 more than 40 percent of this
cohort was enrolled. But the quality of the degrees granted has experienced a free
fall, if for no other reason than the validity of the Gauss curve showing the probabil-
ity distribution of mental abilities. Moreover, the shortage of graduates that charac-
terized the early transition period has given way to oversupply. The mismatch
between nominal qualifications and labor market performance has grown,as an ever-
larger number of university and college graduates end up in jobs requiring lower
qualifications than they have.The wage differential between university graduates and
those who have completed only college or other skills training has been diminishing
dramatically since 2000 (Galasi andVarga 2005).
I N N OVAT I O N, I M I TAT I O N, A N D A DA P TAT I O N 97
This story is, to a large degree, a replication of theWestern European experience,
in which the expansion of higher education was driven by social and ideological
goals: equal opportunity, equal access, regional equalization, social mobility, and so
forth.Meanwhile,the labor market was reshaped by the paradigmatic changes result-
ing from the widespread use of information and communication technologies
throughout the economy, affecting everything from macroeconomic theories to
business organization.2 For this reason the mismatch between graduates and jobs has
been growing: university, and, especially college, graduates face an ever-longer wait
until they can begin their first job (currently 9�12 months for those with econom-
ics and business degrees).The growing number of jobless people with higher educa-
tion is a warning for policy makers and analysts alike (Simonyi 2006).
In the remainder of this paper I summarize the evolution of economics and busi-
ness education in Hungary, analyze the implications of recent expansionary trends,
and make recommendations for policy alternatives.
Changing Patterns of Higher Education in Economics
Higher education in economics in Hungary used to be concentrated in the Karl
Marx University of Economic Sciences, which became the Budapest University of
Economic Sciences (BUES) in 1991. Nearly every leader in higher economics edu-
cation, in the economic sector of government, and in business and banking has been
a graduate of this institution. In 2000 the BUES was integrated with the College of
Public Administration, and in 2003 the University of Horticulture was incorporated
as well and renamed Corvinus University.The university now functions, in line with
the stipulations of the Law on Higher Education, as a multifaculty, multidisciplinary
institution.The synergies that emerged from these reorganizations seem insignifi-
cant, for insiders and outsiders alike. In addition to BUES, the flagship institution,
Budapest had three colleges specializing in finance and accounting, commerce and
tourism, and international management. These--originally organized along the
Prussian model mentioned above--formed the Budapest Business School in an
attempt to retain their de facto independence and their status, and also to prepare for
the Bologna process.
The traditional predominance of the capital city in economics education has
recently been challenged by the proliferation of economics and business faculties and
colleges across the country. At this writing, the Hungarian Accreditation Commit-
tee, an interdisciplinary and independent academic regulatory agency, has granted 21
institutions the right to issue economics degrees.The new institutions are of several
types. One group consists of the descendents of regional affiliates of the core institu-
tions, such as the College of Business in Szolnok, an offspring of the College of For-
eign Trade.The Faculty of Economics and Business in P�cs, already more than 30
years old, is an outgrowth of the regional branch of the BUES.Another group con-
sists of faculties of regional universities that did not previously provide business edu-
cation.They include the economics faculties in Debrecen,Szeged,Gy�r,and Sopron.
The reorientation of some universities that had a focus on heavy engineering, as in
98 L � S Z L � C S A BA
Veszpr�m and Miskolc, or that provided higher education in law but not economics,
as in Szeged, has added to this group. Mention should also be made of the "green-
field" institutions, which have been established in response to regional or local
demand and ambition.These are based either on the omnipresent teacher training
colleges or on the equally ubiquitous (but declining) agricultural colleges. The
Kodol�nyi College of Sz�kesfeh�rv�r and the Ny�regyh�za College are examples.
In addition to the types listed above, many established institutions have adjusted
to the new conditions by launching business courses of various sorts, first as part-
time offerings and then as full-fledged programs. For example, the former Trade
Union Academy has transformed itself into the International Business School,one of
the first fully private business schools in Hungary.Increasingly,established institutions
have begun granting managerial degrees as a second diploma. The prestigious
Budapest University of Technology extended its activity to economics education,
changing its name to the Budapest University of Technology and Economics.
Kaposv�r was perhaps the most successful of these local initiatives.
The number of students receiving an economics degree of one sort or another
each year increased tenfold in the period between 1990 and 2005.This impressive
quantitative development reflects the proliferation of institutions throughout the
country. Nonetheless, it would be hard to question the continued leading role of
Corvinus and the capital city in general. Every major research institute is located in
Budapest, not only those of the Academy of Sciences but also the more business-
oriented units,such as Kopint-Datorg,GKI,Financial Research,Ecostat,the Institute
for Economic Growth,and ICEG-Europe,as well as research units of banks and con-
sultancies.The disadvantages facing provincial institutions have clearly diminished,
both because of the information technology revolution (for example, electronic sub-
scriptions to leading libraries help students overcome locational disadvantages) and
because of growing involvement in EU-related and EU-financed projects. Still, the
gap between quality and quantity, between core and periphery, persists. Mobility
among students has increased, and the establishment of new graduate institutions has
helped ease the regional overconcentration, but the crux of the problem remains.
University exchange programs,especially involvement inTempus,Socrates,and other
EU-initiated exchanges, have helped many students and junior faculty acquire for-
eign work-study experience and participate in international conferences. But the
probability of having a guest professor of truly international standing, or one who
does not speak Hungarian--thus contributing to active language skills of students--
is still much higher for students in the capital city.
As far as curriculum content is concerned, the transition phase was dominated by
lecture notes and textbooks produced domestically, usually by the professor teaching
the course, following classic Continental practice.With the passage of time and with
increased international experience, core and basic courses have tended to adopt
Hungarian editions of internationally used textbooks, such as the works of Samuel-
son and Nordhaus,Mankiw,and Krugman and Obstfeld for macroeconomics;Varian
for microeconomics; and Giddens for sociology.The switch was made easier because
Corvinus University had already adopted the standard macro/micro approach, com-
I N N OVAT I O N, I M I TAT I O N, A N D A DA P TAT I O N 99
plemented by comparative economics,back in 1986,and other institutions tended to
follow (sometimes with a lag) whatever was done in Budapest.3
It is important to recall that, contrary to some ideology-loaded retrospectives, the
economics curriculum of the pre-1990 period was not plain rubbish. Unlike a num-
ber of other ex-communist countries, Hungary, with its "goulash communism,"
allowed for the very gradual but perceptible professionalization of most of the areas
taught by economists. Although students of every faculty, whether medicine or
music, were expected to pass exams in the "ideological disciplines" of Marxism in
order to earn MA or PhD degrees, economists were expected to know their trade,
whether that was marketing, finance, logistics, or industrial organization. In each of
these areas, the Hungarian textbooks were based on their Western counterparts, and
nobody could follow these books unless they were familiar with concepts of mar-
ginalism. Regular exchanges of faculty and participation in international forums
allowed professors to assimilate and adjust to contemporary standards. In macro-
economics, reliance on econometric methods required and allowed for the use of
standard mainstream analysis. Furthermore, a special three-semester course was
offered on non-Marxist economics, introducing most of the major schools and con-
cepts of Western thinking.This course made the ritual references to the deviation of
theseWestern schools from Marxist views.Nonetheless,the quality of this course was
acknowledged by one of the world's leading academic publishers, Macmillan, which
published a revised and extended version of the textbook several years before the sys-
temic change (M�ty�s 1985).4
In sum,whatever we may think about the level and quality of contemporary eco-
nomics research in Hungary,with the benefit of hindsight it can be seen that the fun-
damentals of higher education in economics tended to be on par with Continental
European standards.5 This is not to idealize the latter, or to negate our criticism of
that model's mismatch with labor markets and its parallel loss of ground to theAnglo-
Saxon academy. However, the broad adherence to Continental standards made the
restructuring of economics higher education much less painful and more gradual in
Hungary than in most other postcommunist countries.
It is in this context that the quantitative and regional expansion of economics
education, as well as the Bologna process and Europeanization in general, must be
addressed.This expansion has taken place in a period of pervasive financial restric-
tions. Furthermore, the deconcentration of resources also means that the traditional
lead institutions have suffered disproportionately as resources are splintered to set up
new and untested institutions across the country. Library resources are particularly
scarce.The split between new opportunities and financially constrained realities has
widened by the year.
The process on the whole has been ambiguous, as in other countries of the
region. On the one hand, research and exchange opportunities that opened up with
Hungary's association and then accession to the EU have provided major incentives
for faculty to publish and also to teach in line with international standards. Publish-
ing abroad has become quite common, though the journals and books vary in qual-
ity and level. On the other hand, the growing teaching load as well as the financing
100 L � S Z L � C S A BA
of research principally through projects have made fundamental and theoretical
research unrewarding and thus marginalized.The standardization of curricula has
encouraged the mobility of students,but the research profiles of individuals and insti-
tutions tend to be lost. Research at universities in general is relegated to second
place, and "normative financing"--that is, funding of colleges according to student
numbers rather than academic excellence--has further contributed to the decline of
academic morale.
From this perspective, the changing mix of competition and cooperation, both
domestically and internationally, comes to the fore. In order to be competitive, Hun-
garian universities must play by the rules and make best use of the greatly improved
opportunities for student exchange, faculty mobility, and research projects financed
by external organizations, including business associations. On the other hand, they
are unlikely to remain important players unless they regain their lost--or never real-
ized--research prominence.They must be able to cooperate, in both research and
training, but they must also hone their competitive edge.Their former competitive
advantages--their bridging position between East and West, their ability to teach
according to U.S. standards, and curriculum and promotion procedures in line with
U.S. practices--are now irrevocably lost, even for such elite institutions as the Cen-
tral European University. Unless universities are able to develop truly novel research
capabilities, cutting-edge research, and a climate favorable rather than hostile to aca-
demic excellence, and unless they rely on academic performance criteria rather than
on arbitrarily constructed and meaningless rankings6 in assessing their accomplish-
ments, the declining trend will not be reversed.
Challenges for the Future
As Hungary arrives in the safe haven of the EU, Hungarian higher education in eco-
nomics faces new challenges.Approximation to the new Continental European stan-
dards under the Bologna process has, by and large, been accomplished. In particular,
Hungary is emulating the concept of the "service university," rather than the Hum-
boldtian university, and is meeting a variety of nonacademic requirements of mass
society with a view to building the welfare state (Hrubos 2004). But in assimilating
such Western European practices, the country has in a sense become a victim of its
own success.
If we compare the average unemployment rate of the EU's euro area, which was
9.8 percent in 1996�2000, 8.4 percent in 2001�4, and 8.6 percent in the third quar-
ter of 2005, with the Hungarian rate, which was 8.0 percent, 5.7 percent, and 6.4
percent for the same periods,we see that the EU approach has not been entirely suc-
cessful.7 Any impartial observer should feel uncomfortable at seeing the official zeal
for emulating those less efficient practices. One of the commonplaces of research on
employment and growth is concerned with human capital theory and relates the
quality--rather than the mere length--of study to success in labor markets, in terms
of both wages and job satisfaction.The Lisbon Strategy of the EU, in its March 2005
revision,considers the adjustment of higher education to labor market demands,thus
I N N OVAT I O N, I M I TAT I O N, A N D A DA P TAT I O N 101
leading to more and better employment, to be a major task facing the EU member
states.
If this is the case, the current order in which reform measures are implemented
should be reversed.As a first priority, universities, at least the leading ones, should be
empowered to carry out cutting-edge research. If not, they will be little more than
advanced-level secondary schools,where knowledge is not created but merely repro-
duced. And because these advanced secondary schools will absorb public financing
based on their high enrollment--something I doubt can be sustained--research uni-
versities will no longer be financed as units of public administration.As long as the
British practice of financing lead universities more lavishly than other schools is fol-
lowed, "normative financing" will be a direct trigger of ever-declining academic
standards and ever-growing quantitative orientation. Instead, the basis for differenti-
ation among schools should be the academic accomplishment of their faculty,defined
in conventional academic terms and measurable through customary methods of sci-
entometrics.These methods include the number and quality of publications (espe-
cially articles in foreign and English-language journals, and monographs published
by presses other than the university's own),their impact as gauged by citation indexes,
and so on. Universities that are "centers of excellence," in EU parlance, deserve more
public funding.The rest may want to follow suggestions for the "enterprising" uni-
versity, although under the limits implied by quality standards.
The current Continental European arrangements by no means guarantee that
universities will fulfill labor market needs.8 Curricula tend to be shaped by ad hoc
considerations such as the individual interests and background of the faculty. Most of
the time there is not even a minimum of quality control, as this would require regu-
lar assessment by external experts of content, structure, and output indicators.At the
moment, student preferences--which are often aimed at minimizing effort rather
than maximizing skills for long-term benefit--are the main influences on both
structure and student numbers. In the Hungarian case, empirical analyses point not
only to the unsustainability of the current number of institutions (70!) issuing col-
lege and university degrees, but also to the structural oversupply of humanities and
social science education, as well as the inadequate presence of private capital (Adler
2005, 51).
Unfortunately, the first attempts to introduce tuition fees and cost contributions,
in the context of the 1995 adjustment package, foundered on an adverse social reac-
tion encouraged by the then-opposition forces. Since that time, public discourse has
continued to frame higher education as a principal channel of social mobility as well
as the major component of welfare provision to be extended by the state.This dis-
course denies longstanding sociological findings that point to the high quality of pri-
vate higher education. Further evidence of this is the proliferation of private
fee-paying courses and institutions in all fields, not only in the financially more
rewarding consultancy and finance areas.With the introduction of the student loan
system in 1999, the major counterargument to fee-based education, namely, that it
denies equal access, has been addressed adequately. And the number of fee-paying
students in public universities has exploded. By 2005 more than 50 percent of all
102 L � S Z L � C S A BA
university revenues came from students in form of fees and contributions--this in a
system that is theoretically free of charge.
At the same time, as Deputy Secretary of Employment and Labor �gnes Simonyi
(2006) explains, low levels of qualification and the inadequate quality and inappro-
priate structure of college and university degrees constitute a stumbling block for
employing more people in better jobs, as called for by the Lisbon Strategy. In other
words, the current system provides neither equity nor efficiency.
It is unfortunate to note--on the base of countless conferences devoted to the
subject--that the ideal of lifelong learning has remained mostly an empty slogan in
Hungarian universities and colleges. Equipping students with the analytical and per-
sonal qualities needed for lifelong learning would entail teaching them abstract skills
and theories, as well as how to ask previously unheard or simply unconventional
questions and how to find sources of knowledge. Instead of this, institutions gear
their teaching to the requirements of the graduate's first workplace. It is not only the
remote provincial colleges that believe that career building requires the reintroduc-
tion of the medieval practice of industrial apprenticeship.
Likewise,cooperation with the business community exists mostly--indeed nearly
exclusively--in areas where entrepreneurs need cheap,low- to medium-skilled labor
to meet their immediate needs. Although this form of cooperation should not be
rejected, this is not what the university-business relationships in Scandinavia and
Japan--to cite the most successful examples--are all about. In sum, in terms of both
teaching input and organizational structures, ongoing practices in Hungarian higher
education seem to be based on a misunderstanding of the real needs.
Achieving a proper balance between the local and the global is a continuing chal-
lenge.The Hungarian case reflects two extremes, neither of them desirable. On the
one hand, we can see countless cases in which the challenge of transnationaliza-
tion--beyond the EU alone--has led to seclusion,that is,to national and local exclu-
sionist tendencies in terms of staff and teaching materials and incongruity with
mainstream academic developments. In quite a few courses, mainstream ideas con-
tinue to be portrayed as extreme,while radical,critical,and heterodox approaches are
treated as the standard.This occurs in fields from macroeconomics to international
economics to finance, in addition to public policy and sociology, to mention two
major borderline areas. In other cases, universities (including my own institution, the
Central European University, until about 2001) fashion themselves as enclaves.They
do so by sustaining an institutional isolation from "events on the ground" or simply
cultivating a culture of dissimilation, exceptionalism, and nonintegration.
In both these extremes, the spillover and synergy effects that otherwise would
accrue from having centers of excellence will be minimal. Furthermore, with the
evolution of the structure and content of the curricula at the local lead institutions,
the replication of British "red brick" or large U.S. state universities had clearly ceased
to be an accomplishment by the early 2000s. Although it is relatively easy to over-
come the tendency to be isolated from local realities, the tendency to be isolated
from international trends may be one of the reasons that many of the degrees from
those schools do not sell on the labor market.This is a warning that young graduates
I N N OVAT I O N, I M I TAT I O N, A N D A DA P TAT I O N 103
may be attractive to employers mainly as low-wage labor, irrespective of the individ-
ual's career plan.
A related but separate challenge is to avoid bureaucratism and other traps inher-
ent in EU-related activities.For two decades the EU was seen,with considerable jus-
tification, as a paragon of modernization, a model to be followed under almost any
circumstances.This situation has recently been changing, however, both in society in
general and in higher education in particular.The unfolding crisis in EU policies and
institutions, culminating in the rejection in 2005 of both the Constitutional Treaty
and the Financial Perspective for 2007�13, has diminished the attractiveness of the
EU as a model for the new member states (Csaba 2005).With respect to higher edu-
cation, other EU countries, at least on the Continent, face problems that are similar
to or worse than Hungary's. Furthermore, the capping of EU funds by the net con-
tributors, coupled with the inability of incumbents to reform expenditure priorities,
has made EU decision making even more cumbersome and time-consuming than
before. If a decade ago a three-page proposal ensured quasi-automatic financing in
70 percent of cases,today 10 applications,of 50 to 60 pages each,may yield one proj-
ect actually financed.
This unwieldy process may become a compelling constraint on the entire spec-
trum of higher education. At the lower end of the continuum, smaller universities
may lack both the skilled personnel and the administrative capacity to deal with such
projects efficiently.This may lead to self-exclusion, not only from the projects but
also from the civilizing and educating functions of international cooperation,includ-
ing opportunities to acquire tacit knowledge and research skills and participate in
networking.This cooperation is the real point of the entire EU exercise, but its ben-
efits could be missed completely if universities are excluded--or exclude them-
selves--from participating.
At the higher end of the continuum, the lead institutions are already deeply
involved in global networking, project writing, and cooperation with multinational
business. If they shortsightedly opt for EU involvement as a replacement for these
diverse types of cooperation--whether for reasons of prestige, politics, or inflated
expectations of funding--then they are obviously missing the point.
Being active in several universities, I can easily conceive of both circumstances as
a very real threat, at least in terms of opportunity costs. In an ideal world, the EU
itself would narrow its priorities and simplify the criteria for evaluation. In the real
world, however, there seems to be a better than even probability that procrastination
and waste of scarce administrative resources, as well diversion of research capabilities
to administrative tasks, will continue.
Can Expansion Be the Way Ahead?
Facing these difficulties, each institution has three basic options. One option is to
"wait and see";this translates into a passive strategy,accepting erosion while trying to
mobilize social and press support and finding excuses rather than solutions for the
lack of measurable performance.This is what most colleges tend to do.The second
104 L � S Z L � C S A BA
option is to close down inefficient units and join in consortia as junior partners,
accepting a submissive role that may end in complete integration with or subordina-
tion to a dominant partner.This approach, which is actually encouraged by regula-
tors, has been put into practice by a number of provincial colleges that have merged
into a lead institution in their area, such as the Agricultural College in Mosonmag-
yar�v�r. Finally, there is the "management dream" solution--the solution of uncon-
ditional and ceaseless expansion.
A commonplace of management sciences is the principle that anything that does
not grow is likely to contract. For this reason, as well as for reasons of remuneration,
which is normally related to institutional size, prestige, and power, managers tend to
think big.This is true not only in industry and banking but also in higher education.
This "bigger is better" instinct often translates into an ideology of growth or a power
game that pays little heed to anything else,including efficiency.In the business world,
the merger craze of the 1997�2000 period produced some conspicuous failures,such
as DaimlerChrysler and Deutsche Bank, that might have served as a warning. But
most academics do not read business news.
Let us be clear from the outset that there are no economies of scale in most
areas of research. This holds true for economic research (as distinct from the
administrative tasks of managing large numbers of undergraduates in their various
capacities).We would rarely find Nobel winners or other influential personalities
speaking in the huge auditoriums of the university-industrial complex in Conti-
nental Europe.There is, however, synergy, provided that departments cooperate on
academic projects and teaching, that there is a lively intellectual atmosphere, and
that making ends meet does not occupy faculty members 24 hours a day.Thus the
development of core research and related curricula at the advanced level, fostering
the role of the university as a research center by means of domestic and interna-
tional conferences and other forms of (not necessarily formal) interaction, may
create a fertile soil for productive academic exchange.But such activities can hardly
survive on their own, especially if they concern areas that are detached from the
core research interests of (and teaching lines of) existing faculty. In that case, syn-
ergies remain imaginary.
From this perspective, ill-conceived expansion may be the gravest threat to both
the quality and the viability of an institution.And I would argue that all expansion
other than organic expansion is ill-conceived. For instance, joining forces with oth-
ers only to become bigger, or to acquire the necessary number of faculty members
or the diversity stipulated by regulation,will produce only failure.Likewise,the quest
for ever-larger numbers of students--irrespective of student quality, non-fee-based
financing,9 and physical infrastructure--can only lead to the continued decline of
academic standards, as has indeed been observed at public universities over the past
15 years or so. Efforts to foster cooperation with institutions very unlike the mother
institution in terms of their profile and priorities will surely backfire.No synergy can
be expected from purely administrative mergers between completely unrelated but
geographically close institutions forced into a formal union, as is the case with most
citywide and neighborhood-inclusive universities.
I N N OVAT I O N, I M I TAT I O N, A N D A DA P TAT I O N 105
The only promising solution, in line with industry and banking experience, is a
combination of consolidation and very gradual expansion of the lead institutions.Con-
solidation means slimming as well, focusing on basic competences and outsourcing
nonessentials in line with established principles of industrial organization.It means cre-
ating security for senior faculty combined with regular external assessment and other
forms of quality control, such as a requirement to publish a minimum number of aca-
demic books and articles in a given period of time. It also means regular turnover in
the faculty,quite in line with industrial practice,but quite opposite to the arrangements
enshrined in the current Law on Civil Service.Turnover means opening up mobility
pathways for young, talented faculty while relocating academically less able persons to
intellectually less innovative, though organizationally important, positions (such as the
university administration, as distinct from the academic senate). Being promoted to
director of student affairs--or of procurement, disciplinary procedures, external rela-
tions,press relations,special operations,business relations,or the like--does not demean
a middle-aged colleague who will never publish a book or a cited contribution to any
academic journal but is still an asset to the college community. More reliance on open
advertising of jobs, prohibition of direct promotion to full professorship in the mother
university,and maintaining a contingent of foreign faculty may all contribute to bring-
ing about more mobility and quality control than currently exists.
Expansion should be very gradual, if for no other reason than because of the cur-
rent overexpansion noted above.This gradual approach may help avoid the indis-
criminate hunt for paying students, irrespective of their quality and orientation.
Rapid expansion can make it easier for insiders to thwart the inflow of new blood,
recreating the ossification that plagues much of the European university establish-
ment.Instead,the broadening of financing sources to include foundations,civic asso-
ciations,alumni,and (of course) foreigners would be important.Changing the overly
restrictive laws on inheritance and taxation to exempt donations channeled to higher
education could open up incalculable resources, as long as universities and academia
in general remain the most trusted social institutions across Europe.
Last but not least, there is an urgent need to seek closer cooperation with the
business community, including nontraditional forms of cooperation.This relation-
ship can be valuable on both the input and the output sides.With respect to input,
no amount of alumni support and civic initiative can replace the serious and long-
term commitment of business in leveraging the necessary levels of funding for a uni-
versity.This is less pressing in the area of economics and business studies than in, say,
the humanities or medical sciences, but the soaring cost of books, computers, and
office space nonetheless makes this inflow of resources an imperative.This form of
cooperation is easier to "sell" to the business community, so more effort should be
directed toward this end.
On the output side,the business community has an immediate interest in improv-
ing the quality and thus the employability of university and college graduates. In
addition to support for practical training, as noted above, a major injection of funds
for improving the quality of education can be expected if appropriate channels are
found and if tax provisions are favorable. Reforming the systems of public dues is
106 L � S Z L � C S A BA
high on the agenda in most of the EU countries, old and new, so this step is actually
more feasible than it might have appeared only a few years ago.
From the university's perspective, it is important to realize that the traditional
opposition to business interests--once considered the sine qua non for any intellec-
tual--is no longer sustainable. Indeed, such opposition is self-destructive in the con-
temporary context.One of the underlying problems of European education has been
the full nationalization and subsequent enforcement of uniformity in higher educa-
tion, a policy driven by ideological prejudices rather than by sound empirical, soci-
ological, and economic analyses.The outcome, in Hungary, has been a society in
which social status, inherited social capital, and other forms of tacit knowledge
derived not from formal education but from family circumstances and upbringing
together form the criteria for leadership in the Hungarian business world.10 In other
words,the social equalizing function of a university education has been undermined.
At the same time, the academic community is increasingly vulnerable to populist
political trends that have rendered university education and spending on research
legitimate objects of constant budgetary cuts. And while it is perhaps true that a
degree of marketization in the sphere is inevitable, this will take a long time, for both
structural and psychological reasons.11 Meanwhile, there is an urgent need to act.
This includes the pressing need to diversify funding as a way to secure academic
independence and quality control at the same time.
In my experience, working with "practical men" has been the best way to over-
come mutual prejudices, acquire first-hand knowledge of issues of mutual concern,
and develop the understanding and atmosphere of trust that strategic cooperation
requires.In this way,improvement of curricula may occur without introducing forms
of tutelage, and there may be increasing willingness to fund research and develop-
ment that does not yield immediate profits.This is,under Hungarian conditions,per-
haps more than a hope, but surely less than a certainty.
Notes
1. For further discussion see Pol�nyi and T�m�r (2001).
2. For further discussion see H�mori (2005).
3. For further discussion see Zalai (1990).
4. Tellingly, the publisher includes the volume in its Radical Economics series.
5. This is an intricate issue that I addressed in some detail in an extensive study published
several years ago (Csaba 2002). Many economists who trained in Hungary in the period
between World War I and World War II later became world-famous, although they invariably
left the country to complete their academic careers. Examples include the British lords Nico-
las K�ldor,Thomas Balogh, and Peter Thomas Bauer, and in the United States,Tibor Sci-
tovsky, B�la Balassa,William Fellner, and John C. Hars�nyi, the Nobel Prize winner.
6. At the time of writing, two such rankings have been published. One, compiled by the
Academy of Sciences in Vil�ggazdas�g (November 4, 2005), relies on self-evaluation and per-
ception by students.The other, published in the weekly HetiV�lasz (no. 43, 2005), relies on a
variety of factors such as parents'and employers'assessments as well as student opinions.None
I N N OVAT I O N, I M I TAT I O N, A N D A DA P TAT I O N 107
of the criteria measure academic accomplishment, not even the Financial Times's criterion of
annual earnings of graduates 5 and 10 years after leaving school For a more analytical critique
of international rankings, see T�r�k (2006).
7. All data are from the European Central Bank (ECB 2005, 41).
8. See, for example, Pol�nyi and T�m�r (2004, 1071).
9. It is usually impossible to raise fees high enough to cover the full cost of tuition, at least
at the undergraduate level. However, at the MA and PhD levels, with the availability of pub-
lic and private sponsorship and fellowships,this may become necessary for any institution that
cares about quality.Providing student loans has also developed into a viable business for banks.
10. See Laki and Szalai (2004).
11.It may be that this marketization is not as far-reaching as Bokros (2004,215�18) suggests.
References
Adler, J. 2005.Az oktat�skibocs�t�s �s a munkaerOEkereslet �sszef�gg�sei [Interrela-
tionships between Educational Output and Labor Market Demand in Hungary].
K�lgazdas�g 49 (Special Edition): 28�52.
Bokros, L. 2004."Competition and Solidarity." Comparative Economic Studies 46 (2):
193�219.
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tion in the New Economy. Competitio Books No. 4. Debrecen, Hungary: Univer-
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[Managerial University, Servicing University, Enterprising University]. In A
Gazd�lkod� Egyetem, ed. I. Hrubos, 14�33. Budapest: �j Mand�tum.
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Pol�nyi,I.,and J.T�m�r.2001.Tud�sgy�r vagy pap�rgy�r? [Production of Knowledge or
of Certificates?]. Budapest: �j Mand�tum.
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ut�n" [Labor Market and Education Policy in Hungary in the Posttransition
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(2): 47�55.
Capacity Building and Policy Impact
The Experience of the Global Development Network
RamonaAngelescu and Lyn Squire
This paper describes the approach to capacity building undertaken by the Global Development
Network (GDN) and the lessons learned during the six years of the organization's independent
operation. GDN, a "worldwide association of research and policy institutes, promotes the gen-
eration, sharing, and application to policy of multidisciplinary knowledge for the purpose of
development." GDN's approach to capacity building rests on five broad principles. First, its
proposed mission and structure were tested, before the network was officially set up, with a
thorough survey analysis of both the existing demand and the existing supply of the kind of
services GDN might offer. It was evident from this analysis that GDN would fill a significant
gap in the field. Second, GDN's organizational structure was designed to allow as much experi-
mentation and learning as possible. Third, it was decided to provide a menu of services rather
than rely on a single vehicle. The various activities (Regional Research Competitions, the
Global Development Awards and Medals Competition, Global Research Projects, the Web site
and online library of development resources, and the annual conference) incorporate different
capacity-building elements, including mentoring, cross-fertilization, and training, as well as
funds and resources for writing, presenting, and publishing research. Fourth, further research
activities would be undertaken on an ongoing basis to fill gaps in our understanding of capac-
ity building and policy impact. Finally, ongoing monitoring and evaluation of both the
capacity-building process and the outcomes was given considerable weight. The main lessons
learned include the need for balance between need and meritocracy of individual researchers or
institutes targeted for capacity building; the scarcity and critical importance of funds for any
capacity-building effort; and last but not least, the realization that policy impact is the goal
most difficult to reach, yet crucial in importance, if contributing to economic development
and poverty reduction are the ultimate aims of our work. In short, translating research into
policy remains the biggest weakness and greatest need at the same time.
ECONOMIC DEVELOPMENT AND THE REDUCTION OF POVERTY ARE UNIVERSAL GOALS
that can be pursued in a multitude of ways, through short- and long-term solutions.
Identifying the most pressing issues in a particular socioeconomic context and devis-
109
110 R A M O N A A N G E L E S C U A N D LY N S QU I R E
ing strategies to remedy the problems requires in-depth knowledge of both issue and
context, especially if viable, long-term plans for tackling underdevelopment and
poverty are sought.The crucial role of research--and within it the centrality of
capacity building--cannot be overstated."Strengthening people's capacity to deter-
mine their own values and priorities and to act on these is the basis of development.
Capacity building is an approach to development rather than a set of discrete or pre-
packaged interventions" (Eade 1999).
Empowering researchers in developing and transition economies to conduct
social science research independently is only the first step in achieving the goals of
economic development and poverty reduction. High-quality research that has little
or no impact on policy will ultimately fall short of the goals of economic develop-
ment and pro-poor growth."A fundamental goal of capacity building is to enhance
the ability to evaluate and address the crucial questions related to policy choices and
modes of implementation among development options" (UNCED 1992).Thus
research has to be relevant, current, credible, and comprehensible to policy makers.
Research capacity-building efforts need to incorporate these elements as well.
The Global Development Network (GDN) was formed in 1999 to support and
link research and policy institutes involved in the field of development with one
another and with policy makers.1 According to its mission statement, GDN, "a
worldwide association of research and policy institutes, promotes the generation,
sharing, and application to policy of multidisciplinary knowledge for the purpose of
development" (GDN 2000).Achieving these goals involves building policy-relevant
research capacity in developing and transition economies in order to generate and
sustain effective--and home-grown--socioeconomic policies. Capacity building, in
other words, is at the core of GDN's mission.The drive toward the production of
high-quality research in the developing world is supplemented, however, by a focus
on the policy impact of research as well.
Both research capacity and impact on policy are notoriously difficult to assess for
at least two reasons. First, improvements in researchers' skills in collecting and inter-
preting data, employing the most advanced methodologies and tools for analysis,
writing proposals and papers, as well as presenting findings are typically not easy to
measure.Policy outcomes are even harder to trace back to a particular research study.
The problem of measurement is virtually impossible to surmount in any definitive
manner.Even if capacity and impact could be easily measured,assessment faces a sec-
ond difficulty,namely,appropriate treatment of the counterfactual.Capacity building
is undertaken by a range of donors, intermediary networks such as GDN, and uni-
versities, most commonly working independently of one another.As a result, capac-
ity building carried out by one institution may simply displace the same or a similar
activity undertaken by another institution with no net increase in capacity.Alterna-
tively, two institutions' capacity building efforts may be complementary, but separat-
ing the net effect of each in terms of increasing research capacity is very difficult.
Identifying the areas most in need of capacity building and then surmounting the
measurement, counterfactual, and attribution problems when assessing the impact of
specific efforts on enhancing capacity are all extremely difficult tasks.
CA PAC I T Y BU I L D I N G A N D P O L I C Y I M PAC T 111
Starting with this realization in mind, GDN's approach to capacity building
adopted five broad principles. First, the proposed mission and structure were tested,
before the network was officially set up, with a thorough analysis of both the exist-
ing demand and the existing supply of knowledge generation, sharing and applica-
tion services of the kind GDN might offer. Second, GDN's organizational structure
was designed to allow as much experimentation and learning as possible.Third, since
different forms of capacity building have different capacity-building attributes, it was
decided to provide a menu of services rather than rely on a single vehicle. Fourth,
there was a clear recognition of the need to undertake specific research activities to
fill gaps in our understanding of capacity building and policy impact. Finally, the dif-
ficulties of evaluation notwithstanding, the importance of monitoring efforts care-
fully on an ongoing basis and learning from our own experience was given
considerable weight.The rest of the paper will describe in detail these five principles
in the context of GDN's own experience.The final section will draw out lessons for
other individuals and organizations involved in building development research
capacity with policy impact.
What Do Researchers Want? What Is Being Supplied?
In line with the first principle outlined above, the proposed mission, structure, and
service portfolio of the Global Development Network were tested in 1999, both in
terms of demand and supply.
Analyzing Researchers' Needs
To assess the needs of the research community in developing and transition
economies--GDN's target beneficiaries--the launch of GDN was preceded by a
survey of 512 research institutes throughout the developing world; this survey
revealed strong support for a global network focused on development research and
its translation into policy.(See GDN 2003a.)The survey's response rate was 39.5 per-
cent,with 202 research institutes participating.Nearly all of them rated an institution
such as GDN as "valuable" or "extremely valuable," while annual meetings, staff
exchanges and fellowships, and information on funding opportunities emerged as
the top-rated activities (table 1).
The survey also revealed that most respondents were electronically connected:
staff had their own e-mail in 55.1 percent of reporting institutions and used theWeb
regularly in 40.5 percent.2 In terms of research output, data, and information on
organizations and individuals, researchers expressed stronger preference for search-
able, online databases accessed through the Web. On a scale of 1 (not valuable) to 7
(extremely valuable),online databases received an average rating of 6.4,annually pro-
duced CD-ROMs received a 5.3 average score, and printed materials received a 4.9
average score.
The top two ranking activities--annual conferences and staff exchanges-
/fellowships--naturally require large expenditures. On the other hand, virtual com-
112 R A M O N A A N G E L E S C U A N D LY N S QU I R E
TABLE 1
Findings of 1999 Survey of Research Institutes
Issue Percent of respondents
GDN rated as valuable or extremely valuable 99.5
Strong support for
Annual meetings on global development 59.9
Staff exchanges and fellowships 58.4
Receiving information on funding opportunities 54.0
Source: GDN.
munication and an online depository of information on development research would
be relatively inexpensive, at least in per capita terms. In short, the more specific les-
sons that emerged from the 1999 survey were:
� Social science research is underfunded based on the indirect evidence gathered
in the course of the survey
� Global (as opposed to regional) provision of activities is cost-effective and
needs do not vary considerably across regions.
� GDN should focus on the limited, well-designed provision of high-demand,
high-cost activities (annual meetings, training, scholarships), coupled with the
widespread provision of online, low-cost services.
GDN would thus provide a cost-effective mix of services highly demanded by
the research community in the developing world.
Assessing Supply
Once demand for a particular service is estimated, the analysis always ought to be
supplemented by a current supply-side evaluation.The importance of providing
unique services and avoiding duplication is enhanced in the nonprofit sector where
funds are limited and needs abound.To maximize the impact on research capacity
building in the developing world, GDN sought to provide services not supplied by
others.Therefore, it was decided in February 2000 to undertake a study of the exist-
ing supply by other institutions of products similar to those supported by GDN.
Accordingly, a High-Level Committee was formed to oversee this work as well as to
evaluate the progress and effectiveness of GDN in light of its results.The main cate-
gories of analysis were:
� the levels and trends in the absolute amounts for research oriented funding,
including a breakdown into research projects, professional development, and
networking;
� the levels and trends in thematic coverage;
� the levels in regional coverage;
CA PAC I T Y BU I L D I N G A N D P O L I C Y I M PAC T 113
� the amount of funds going to core funding of research institutions;
� the importance of research-oriented funding in bilateral and multilateral agen-
cies, both absolutely and relative to foundations that specialize in research
funding; and
� the distribution of funding between country-specific, regional, and global
programs.
This report revealed an increasing gap between the demand for policy-relevant
research in the developing world and the supply of funds for this purpose, the need
for extensive mentoring and monitoring of research progress to ensure quality, and
the scarcity of institutions serving as intermediaries or brokers among donors,
research institutes, and policy makers.At the same time, the report expressed a con-
cern that much of the research agenda in the developing world is influenced by the
developed world and it emphasized the need for reducing brain drain by offering
research opportunities to scholars in developing and transition economies (GDN
2001: 15).
It is also interesting to note that,as can be seen in figure 1,most funding by donor
agencies has traditionally been targeted to projects that only involve one country.
Although 59 percent of funding goes to country-specific projects, only 16 and 25
percent go to regional and global projects respectively.
The key conclusions of the 2000 High-Level Committee analysis can be summa-
rized as follows. Funding levels for policy-focused research activities have been inad-
equate, especially in light of the demands that have arisen from researchers in newly
democratic and transition countries.A large part of funding to these countries in the
1990s has been earmarked for professional development activities, but the demand
FIGURE 1
Funding by Project Type
Project type breakdown of funding
Global
25%
Country
specific
F 59%
Regional
16%
Source: GDN.
114 R A M O N A A N G E L E S C U A N D LY N S QU I R E
for funding for research itself is likely to escalate in the future as a new generation of
researchers matures. Furthermore, the research agenda in the South is directly and
heavily influenced by the North, often by implementing agencies or electronic net-
works based in the North.The vast majority of funds are tied to a specific product,
typically of interest to the donors. One of GDN's alternative mechanisms for setting
the agenda is by using regional, bottom-up selections of topics for the annual
Regional Research Competitions, which will be described in detail later in the
paper.
With regard to capacity building and quality, one of the most important conclu-
sions of the study was that a project is more likely to succeed if it includes elements
of three main categories: adequate funding for research; sustained mentoring,
review, and training for professional development; and systematic use of net-
working for project preparation, implementation, and dissemination. Any of these
elements in isolation does not typically yield high-quality research at standards com-
parable to those expected of studies produced by Northern researchers.Where feasi-
ble,all these elements should be built into the projects from the onset.Once research
is completed,the committee also found that there is clearly a need for more work on
both measurements of policy impact and the types and strategies of dissemination
that are and are not working in different cultural, institutional, and political settings.
The Bridging Research and Policy project launched by GDN in 2002 aims at
addressing precisely these concerns.
The report also concluded that there is considerable concern about delivering
professional development products in a cost-effective manner while simultaneously
avoiding emigration or brain drain.The trend has been to move away from bringing
researchers out of their countries for long periods to, instead, bringing the training
programs to the regions or, more recently, delivering the program with information
technology.In this regard,GDN funds only researchers who are not only citizens but
also residents of developing or transition economies to avoid worsening the brain
drain problem many of these places are already facing. Last but not least, the High-
Level Committee found that this is still a largely uncrowded field.There are few
regional and global institutions that are attempting to perform an intermediary or
brokerage role between donors, research institutes, and policy makers.
Because of the priorities of the research community identified through the 1999
survey and the findings of the 2000 High-Level Committee report on the existing
supply of social science research capacity building services,GDN's mission,structure,
and menu of services were geared toward meeting researchers' needs by filling gaps
in the supply of such services.
Experimentation, Cross-Fertilization, and
Organizational Design
The difficulty of knowing exactly what instruments are most effective in building
capacity and achieving policy impact suggest the benefit--indeed, the necessity--of
having an organizational structure that allows experimentation and learning. Conse-
CA PAC I T Y BU I L D I N G A N D P O L I C Y I M PAC T 115
quently, GDN was set up as a global network with regional network partners span-
ning the entire world (table 2).
The regional network partners are legally separate entities that function inde-
pendently of GDN. Some were established by GDN while others have long served
their regional constituencies before becoming affiliated with the network. Even
though the regional network partners are interconnected through GDN and GDN
is involved in most of the regional network partners 'activities,these regional organ-
izations remain self-regulating bodies, thereby providing the environment for exper-
imentation. Their structure and governance vary across regions. The Economic
Research Forum (ERF), for instance, comprises individual researchers in the Middle
East, while the East Asian Development Network (EADN) is constituted of research
institutions.
GDN's network framework facilitates sharing knowledge and best practices
among the affiliated regional partners, piloting experimental approaches, and fine-
tuning operational models in order to adapt them to various contexts.The best illus-
tration of this concept is the universal adoption of mid-term reviews in the Regional
Research Competitions,following the positive and enthusiastic feedback the practice
received in the external evaluation report by Craig and Loayza.3 AERC, EERC, and
CERGE initially started implementing the mid-term review,a key capacity-building
ingredient, which results in better-quality papers as well. Given the positive effect on
research output produced through the Regional Research Competitions that incor-
porate a mid-term review, GDN decided to make it a requirement and institution-
alized the procedure for all of its regional network partners in developing and
transition economies.
TABLE 2
GDN's Regional Network Partners from Developing and Transition
Economies
Region Network partner Location
Commonwealth of Economics Education and Research Moscow,
Independent States Consortium (EERC) Russia
East Asia East Asian Development Network (EADN) Bangkok,
Thailand
Eastern and Center for Economic Research and Graduate Prague, Czech
Central Europe Education-Economics Institute (CERGE-EI) Republic
Latin America and Latin American and Caribbean Buenos Aires,
the Caribbean Economic Association (LACEA) Argentina
Middle East and Economic Research Forum for Arab Countries, Cairo,
North Africa Iran, and Turkey (ERF) Egypt
Oceania Oceania Development Network (ODN) Suva, Fiji
South Asia South Asia Network of Economic Research Islamabad,
Institutes (SANEI) Pakistan
Sub-Saharan Africa African Economic Research Consortium (AERC) Nairobi, Kenya
Source: GDN.
116 R A M O N A A N G E L E S C U A N D LY N S QU I R E
GDN constantly fine-tunes its strategy in online and face-to-face consultations
with its members. Particularly extensive contacts are maintained between the
regional network partners, the Board of Directors, and the GDN Secretariat.Annual
business meetings held during GDN's annual conferences provide extensive oppor-
tunities to discuss the achievements of each regional partner, summarize lessons
learned from the most productive experiences, and suggest the best models of oper-
ation.This allows for horizontal learning among the networks as well as allowing the
Secretariat to incorporate and address concerns that arise at the regional level.
Interregional sessions at the 2004 GDN annual conference, jointly organized by
several regional network partners, should further enhance the cross-fertilization
effect. Similarly, global and regional research projects involving more than one
regional network partner encourage cooperation and mutually beneficial learning.
The Multidisciplinary and Intermediation Research Initiative, for instance, is man-
aged jointly by EERC and SANEI. Furthermore, the participation of senior GDN
Secretariat staff as reviewers in grant competitions held by the regional network
partners and their attendance at regional conferences and workshops allow for learn-
ing about best practices and their dissemination among all partners in the network
through brochures and other materials.The GDN Secretariat staff members thus
serve as intermediaries and repositories of valuable information,circulating their rec-
ommendations among all regional network partners and the Board of Directors.
Evaluations of common activities, such as the independent evaluation of the
Regional Research Competitions, pursue the same goal of sharing best practices.All
of the regional network partners have their own Web sites, which are mutually con-
nected through GDN's Web site. As a result of the sophisticated means of sharing
knowledge, the regional network partners have accumulated valuable know-how on
handling grant competitions as well as extensive databases of research and researcher
profiles.The high intensity and frequency of formal and informal exchanges, driven
by the goal of mutual enrichment, characterizes GDN as an effective networking
organization.The resulting learning and experimentation at the regional level help
alleviate to some extent the problems of assessing impact on capacity and of identi-
fying the tools with greatest effect on both research capacity and policy.
The Menu Approach
Similarly, at the global level, GDN had to find ways to compensate for the difficulty
of knowing exactly how to build social science research capacity and have impact on
policy.Measurement problems aside,it is known that different actions emphasize and
target different dimensions of capacity building.Therefore, GDN provides an array
of services with different capacity-building attributes.The Regional Research Com-
petitions,Global Research Projects and the Global Development Awards and Medals
Competition form the core of GDN capacity-building efforts. GDNet, the net-
work'sWeb site, and the Annual Global Development Conference also contribute to
knowledge sharing among researchers and facilitate interactions between researchers
and policy makers (GDN 2004a). Each of these activities offers opportunities for
CA PAC I T Y BU I L D I N G A N D P O L I C Y I M PAC T 117
professional development and advances knowledge through the mechanisms of com-
petition or commissioning of research. Capacity building is augmented by knowl-
edge sharing via interactions between the grantees and reviewers/advisers as well as
collaboration within research teams.By providing a menu of activities,each of which
emphasizes different capacity-building elements, GDN seeks to avoid the trap of
relying on a single vehicle and thereby missing critical capacity-building ingredients.
Local Ownership, Global Support
The Regional Research Competitions (RRCs) managed by GDN's regional net-
work partners (RNPs) in developing and transition economies provide a model of
how the diverse experiences of eight networks translate into best practices in capac-
ity building. In contrast to most grant competitions, which emphasize the applica-
tion stage but then leave grantees to struggle alone, the RRCs offer extensive
follow-up. The RRCs are based on both competition and cooperation.
Competition--selection of the brightest--is complemented by cooperation--
nurturing talents and helping them thrive (GDN 2004).There is an effective system
of mentoring grantees by experts, special training programs, and quality assurance
mechanisms to improve research results. Reflecting an intensive learning process, the
awarding of a grant is complemented by a thorough assessment of the research out-
put.The same project is often discussed in several rounds at successive research work-
shops or through peer reviews. Grantees receive extensive feedback from highly
qualified reviewers from around the world as well as academically advanced advisory
boards at all stages of their research--from the project's inception to its completion.
Some RNPs favor continuous advice from the same mentors throughout the grant
period.
Although Regional Research Competition grantees are constantly helped and
encouraged during the course of their research, they have the privilege of initially
choosing the subject and preferred methodology of their research. In contrast to the
widespread practice of following the donors' priorities, and in accordance with the
recommendation of the 2000 report of the High-Level Committee that the topics of
research be specified by grantees rather than by donors, GDN adopted a decentral-
ized model for the RRCs.The regional network partners--not the donors or the
GDN Secretariat--determine the competition themes for each region. Moreover,
individual grantees or research teams select the topics of their projects within these
broad themes and also choose the research methods.Thus, while taking advantage of
external advice, the grantees enjoy a considerable degree of freedom and can also
produce highly relevant studies for the particular economic and political context in
their country or region (GDN 2004a).
The establishment of a reliable and effective grant-giving infrastructure consti-
tutes yet another strength of the RRCs. . Announcements for the competitions, as
well as their results, are featured on each regional network's Web site. GDN requires
all working papers from GDN-funded research to be posted on the Web for public
access.Each of the almost 650 research proposals funded by GDN since 1999 through
118 R A M O N A A N G E L E S C U A N D LY N S QU I R E
the RRCs has already produced or is expected to culminate in a working paper, if
not in a publication. Researchers from developing (and developed) countries can
access one another's papers online, exploring new topics, alternative hypothesis and
methodologies.
Interviews with RRC grantees conducted in Moscow in December 2002 and in
Cairo in January 2003 (during the Cairo conference) reflected their appreciation of
the program and its significant role in boosting their careers.The following state-
ments express widely shared opinions (GDN 2003b):
"Thanks to RRCs, young researchers benefit from the research fraternity in
the early stages of their careers."
--Mustafizur Rahman, Research Director, Centre for Policy Dialogue,
Dhaka, Bangladesh
"The contribution of the RRC reviewers to the grantees' research is invalu-
able:We learn state-of-the-art methodologies from them.We get a sense of
how to publish in respected scholarly journals.The advisors' guidance is very
important for our professional growth."
--Irina Tochitskaia, Senior Research Fellow, Institute of Economics,
Belarus National Academy of Sciences, Minsk, Belarus
An independent evaluation of the RRCs conducted by Barbara Craig (Oberlin
College,Oberlin,Ohio,United States) and Fernando Loayza (Servicios Ambientales,
La Paz, Bolivia) in May�December 2001 was favorable. Based on interviews, elec-
tronic surveys, on-site visits, and a review of the regional network partners' databases
and resources, Craig and Loayza concluded that the RRCs are an effective tool for
building research capacity and highlighted the standard RRC practices of competi-
tive grant competitions as a mechanism to ensure the high quality of research and its
policy relevance.The recommendations of this evaluation--to generalize the mid-
term reviews, for instance, which built on the successful experiences of the various
networks--have provided a vehicle for the further improvement of this grant-giving
operation.
In sum, the RRCs successfully strike a middle ground between an "affirmative
action" approach toward the neediest audiences and a meritocracy--awarding grants
on the basis of the research proposals' methodological soundness, originality, and
expected project outcomes. Capacity building involves measures to address the
underrepresentation of certain countries, regions within a country, institutions,
female researchers, and researchers from disciplines other than economics. The
RRCs are also successful in balancing high academic standards of research with a
consideration given to its policy implications.To bridge research and policy, the
regional network partners have taken steps to reach out to decision makers and affect
public opinion. For example, ERF has pioneered studies on governance, employ-
ment, education, and gender, which have important policy implications for address-
ing poverty. Policy forums organized by AERC--the GDN network partner in
CA PAC I T Y BU I L D I N G A N D P O L I C Y I M PAC T 119
Sub-Saharan Africa--have contributed to initiatives on long-term financing for
development and trade negotiations within southern and eastern Africa.
Cross Fertilization
The Global Research Projects (GRPs), representing a 30 percent total share of
GDN's budget, are designed and carried out by GDN to address the major chal-
lenges of development through the advancement of analytical methods and empiri-
cal global, country, and thematic studies. Thus far, four projects have been
implemented--Explaining Growth, Understanding Reform, Bridging Research and Policy,
and The Impact of Rich Countries' Policies on Poverty: A Global View. These projects
involve research teams in many different countries,typically between 30 and 80,pro-
viding an excellent vehicle for cross-fertilization.The same researchers are also paired
with experts in the field who provide mentoring and guidance through reviews of
proposals, as resource persons at global workshops held in conjunction with the
Annual Global Development Conference, and through ongoing involvement with
the project in the case of the steering committee members.
Unlike the case of the Regional Research Competitions, the themes of the
Global Research Projects have traditionally been selected by GDN. Since last year,
however, the decision has been made to hold an open call for submissions of project
topics in order to enable researchers from the developing world to set their own
agenda and advance what they perceive to be the"hottest"global development issues
of the day.The theme of the Impact of Rich Countries' Policies on Poverty:A GlobalView
project was chosen through such an open call for submissions.The Global Research
Projects are also typically managed by Southern experts on the selected topic, exter-
nal to GDN. Autonomy of researchers and their ownership of projects is a critical
ingredient for the success of capacity-building efforts.
Within GDN's first global project, Explaining Growth--the goal of which was
to explain the growth experiences of seven regions over the past 30�50 years--
researchers from developing and transition economies partnered with internation-
ally recognized development experts to compile the most comprehensive
assessment of economic growth in existence. As an example of the cross-
fertilization effect, the joint EERC-CERGE Explaining Growth subproject in East
Central Europe and the CIS created extensive opportunities for mutually benefi-
cial cross-country learning for the two regional network partners.The 2003 inde-
pendent evaluation conducted by Fernando Loayza among participants of the first
phase of the Explaining Growth project revealed the effectiveness of partnerships
between economists from developed and developing or transition economies in
delivering regional thematic reviews that surveyed key regional issues on the
sources and determinants of aggregate growth,the influence of markets on growth,
the microeconomics of growth, and the political economy of growth. Capacity
building, however, did not come at the expense of quality: the International Eco-
nomics Association favorably evaluated this project's contribution to the literature
on growth.
120 R A M O N A A N G E L E S C U A N D LY N S QU I R E
Researchers from the developing world gain valuable international exposure at the
regional and global levels through their participation in GDN's Global Research Pro-
jects.They value highly this exchange of experiences and the constructive feedback
received in the workshops and conferences. Indeed, the participants in Explaining
Growth expressed their preference for the workshops and conferences over the standard
peer reviews. In addition, most researchers from the developing world acknowledged
that participating in the project has enhanced significantly the quality of their teaching.
Research partnerships were also instrumental in enhancing the capacity-building com-
ponent of the Global Research Projects.The most widespread type of partnership in
the developing world involved linking a national senior researcher experienced in his-
torical and institutional issues with a national junior researcher highly competent in
modern economic analysis.The evaluation showed important levels of joint learning
arising from this type of partnership. In the latest project launched in 2004, named
Impact of Rich Countries' Polices on Poverty, junior researchers were referred to a more
senior researcher with an outstanding research design on the OECD policies that affect
the outflows of foreign investment from the rich countries.These partnerships between
researchers in the developing world are further enhanced or complemented by support
received from resource persons acting as reviewers during the course of the projects.
As part of the Understanding Reform project, 10 background papers were prepared
on topics of general importance to understanding reform.These papers provided
guidelines to the authors of the subsequent country studies by highlighting key
issues, identifying unexplored themes, and suggesting ways to address yet-unresolved
questions. In an interesting departure from the usual pattern, most thematic papers
were prepared by teams of two or three researchers from different disciplines. For
example, economists from Croatia and Macedonia worked with a political scientist
from Bulgaria on the paper titled "The State, Public Goods, and Reform."
Building on the experience of the first GRP, an infrastructure for assisting the
country-studies authors in revising their research and papers was instituted: GDN
created an electronic library of literature on reform and negotiated a contract with
J-STOR--an electronic archive of leading scholarly journals in various disciplines--
to expand access to academic publications. In addition, project researchers also have
access to electronic help desks, staffed by established scholars of global recognition.
All Global Research Projects share important characteristics for capacity build-
ing.They involve established researchers mentoring their younger counterparts.They
provide opportunities for cross-country comparisons and sharing best practices in
conducting and managing research, since researchers from all around the world are
working on the same theme and under the common umbrella of GDN. Last but not
least, apart from addressing academic questions, the GRPs consider the policy impli-
cations of GDN-funded research.
Unearthing NewTalent
The GDNAwards and Medals Competition is a mechanism for funding research that
was established in 2000 by mutual cooperation between GDN and the government
CA PAC I T Y BU I L D I N G A N D P O L I C Y I M PAC T 121
of Japan.This competition is the largest international annual contest for researchers
on development.Awards for Outstanding Research on Development and Most Inno-
vative Development Project comprise US$75,000 cash payments to the winners and
US$10,000 to each of the two other finalists in each category. Medals carrying
US$10,000 and US$5,000 prizes are awarded to authors of the best research papers
on topics selected in accordance with the theme of each year's competition and
GDN's annual conference.The theme of the competition is thus different every year,
allowing researchers with different interests and specializations to participate.
TheAwards and Medals Competition helps discover and promote new talent on the
basis of merit alone.The competition is intense and extremely rigorous in its evaluation
of the research studies or development project descriptions submitted.Although details
vary for each category of the competition, typically the selection process involves a
three-tiered evaluation, at the end of which the winners are chosen during the Annual
Global Development Conference. Evaluators for the Most Innovative Development
Project Award have consistently included prominent development practitioners such as
World Bank President James Wolfensohn,Asian Development Bank President Tadao
Chino,and Japan Bank for International Cooperation Institute Executive Director Kei-
ichiTango.Nobel Laureates Joseph Stiglitz andAmartya Sen have been among the eval-
uators for the Outstanding Research on DevelopmentAward and the Research Medals.
The rigor of the selection process and the involvement of prominent scholars and insti-
tutions has ensured that the highest-quality submissions have been rewarded,while sig-
nificantly enhancing the prestige of the awards. Since 2000, 2,345 scholars representing
over 100 countries have participated,and approximately US$2.5 million have been dis-
tributed in awards and travel to finalists and winners (table 3).
In general, the Awards and Medals Competition has met and exceeded its initial
objectives. It has been an effective mechanism in encouraging high-quality research
in developing and transition economies.The competition has succeeded in attracting
researchers and development practitioners from every corner of the globe. Figure 2
provides information on the regional distribution of the competition finalists and
winners between 2000 and 2003.As evident from the pie chart, GDN has been suc-
cessful in attracting submissions from the entire developing world--including
regions traditionally underrepresented in academia, such as Africa and the Middle
East, which together account for more than 20 percent of the awardees.
The Awards and Medals Competition has rewarded and encouraged deserving,
often little-known researchers, and has helped recipients attract other research funds
TABLE 3
Participants in the GDN Awards and Medals Competition, 2000-04
Year 2000 2001 2002 2003 2004
Number of applicants 784 351 402 470 338
Number of countries represented 93 73 80 78 75
Source: GDN.
122 R A M O N A A N G E L E S C U A N D LY N S QU I R E
FIGURE 2
Regional Distribution of Finalists and Winners in the GDN Awards and
Medals Competition, 2000-03
12% 7%
CIS
6%
Central and Eastern Europe
10% Latin America and the Caribbean
Middle East and North Africa
25% North America
South Asia
29%
East Asia and Pacific
Sub-Saharan Africa
10%
1%
Source: GDN.
(GDN 2004). In addition to the cash prizes, all finalists in the Awards and Medals
Competition are invited to present their work at the Annual Global Development
Conference. By inviting the participants in the competition to the conference, GDN
affords them the opportunity to share their research, to network with other scholars
and policy makers,and in general ensure their entry into a larger research community.
There has also been wide dissemination,in many different forms,of the output of
the researchers and development experts involved in the competition. In particular,
award and medal winners have experienced considerable success in translating their
research into policy (GDN 2004a). Most of them have presented their ideas to rele-
vant stakeholders at seminars and workshops organized by their institutions, country
governmental bureaus, and even international organizations.
These efforts have had some very concrete outcomes in terms of policy decisions
and implementation, as some of the award winners have accepted government posts
that directly affect development, while others have been prominently involved in
legislative efforts in their home countries. For example, apart from holding an advo-
cacy workshop,Comfort Hassan's (Nigeria) institution produced a policy brief based
on her work and has started distributing 500 copies among relevant stakeholders.Jea-
nine Anderson's large research initiative (Peru) has published a "popular" version of
the award-winning research study in the book Leonardo Prado: su historia, su palabra
(Leonardo Prado:his history,his word),which has been widely used in meetings with
government representatives, particularly from the Ministry of Women and Social
Development. Joe Madiath's award-winning Gram Vikas project was invited by the
government of India to be part of the core group for sector reforms in water supply
and sanitation, thus enabling them to "significantly influence policies and imple-
mentation processes" (GDN 2004b: 9).
Despite differences in each year's specific topics, the underlying rationale for
holding the Awards and Medals Competition is to address the imbalance in the dis-
CA PAC I T Y BU I L D I N G A N D P O L I C Y I M PAC T 123
tribution of knowledge between developed and developing countries, the nontrans-
ferability of much knowledge within the social sciences, and the relative absence of
research efforts that adopt a multidisciplinary approach (GDN 2004a). Researchers
have the opportunity to express their concerns and views about the issues that, after
all,directly affect them.The awards and medals are also a primary vehicle for enhanc-
ing young researchers' visibility among peers around the globe and co-nationals
involved in development issues.
"The GDN award was promoted in national newspapers and brought national
attention to my work....The comments provided by the referees and audience
at the Cairo Conference helped me revise my paper and submit it to a major
international journal in education."
--Santiago Cueto, First Place Medal Winner, 2002, El Grupo Analisis
para el Desarroll, Peru (GDN 2004b: 9)
In keeping with the principles that underline its foundation as outlined in the
introduction, progress and further development of a winning study or project is
monitored by GDN.The requirements for the winners of the large prizes in the
awards category include a stipulation that they have to return and present completed
research findings and project expansion outcomes at GDN's followingAnnual Devel-
opment Conference.Thus discovering and promoting the work of new talent are the
capacity-building features the Awards and Medals Competition add to the mix of
services provided by GDN.
Sharing Local Knowledge Globally
GDN's Web site and annual conference are the primary vehicles for sharing the
knowledge generated through the three types of activities described above.The study
undertaken by the High-Level Committee in 2000 did not find many Web sites
designed to support development research organizations at the global level. Most
sites focus exclusively on the research output of their own organization or on a small
number of issues. In a sample of 68 development researchWeb sites, only three were
found to provide a wide range of services covering a broad number of issues at a
global level,strongly suggesting that GDN's efforts in this area will provide an impor-
tant service to the global research and policy community (GDN 2000). As indicated
earlier, the 1999 survey of researchers had also found that there is strong interest and
need among researchers in developing and transition economies for online services
of knowledge generation and sharing.
In line with GDN's mission and focus on capacity building as well as networking
and bridging the research-policy gap, GDNet has three primary objectives:
� To enable institutes and researchers in developing countries to communicate
their knowledge more effectively to others by linking them into a global net-
work and showcasing their work.
124 R A M O N A A N G E L E S C U A N D LY N S QU I R E
� To help build the dissemination capacity of research institutes by providing
training,professional support,and other services to upgrade skills in knowledge
management and the use of new Internet-based services.
� To provide social science researchers in developing countries with access to
resources enabling them to improve their research.
GDNet has become an increasingly popular and comprehensive depository of
information on development issues, people, organizations, papers, and events.Traffic
on the Web site has quadrupled in just over two years (figure 3) and the numbers of
total working papers and profiles stored in the knowledge base (table 4) has also
steadily increased.
FIGURE 3
GDNet Web Site Traffic
Publications
18,000 16,989 and working
16,000 Months papers Organizations Researchers
14,790
14,003
14,000
12,371 June
12,000 2002 3,909 2,150 1,884
10,000 December
8,228
8,000 2002 4,486 2,306 2,310
6,000 June
4,206
4,000 2003 5,039 2,478 2,645
2,000 December
0 2003 7,375 2,570 3,128
`02 `02 `03 `03 `04 `04
Feb�JunJul�Dec an�Jun Jul�Dec an�Jun Jul�Dec
J J
Visitors
Source: GDN.
TABLE 4
Knowledge Base
Months Publications and working papers Organizations Researchers
June 2002 3,909 2,150 1,884
December 2002 4,486 2,306 2,310
June 2003 5,039 2,478 2,645
December 2003 7,375 2,570 3,128
June 2004 7,787 2,658 3,487
December 2004 8,502 2,786 3,936
Source: GDN.
CA PAC I T Y BU I L D I N G A N D P O L I C Y I M PAC T 125
Respondents to the survey conducted by the GDN Secretariat during the annual
conference in Dakar (January 2005) perceived calls for competitions/proposals as the
most valuable information on GDN's Web site (mean score of 4.21 on the 5-point
scale),followed by conference/workshops announcements and materials (4.20),pub-
lications and working papers made available through the Knowledge Base (4.03), the
research proposal toolkit, and the Funding Opportunities newsletter (3.83). More than
half of respondents rated both the calls for competitions/proposals and the confer-
ence/workshops announcements and materials as "extremely valuable" (5 on the 5-
point scale).
In short,GDNet serves an important function in GDN's capacity-building efforts
by facilitating the sharing of knowledge among GDN's primary beneficiaries and
providing researchers with some of the necessary tools to design, conduct, and dis-
seminate their research studies.
Face-to-Face Networking
The annual GDN conferences provide a global forum for exchanging ideas on sus-
tainable development and poverty alleviation. Researchers from developing countries
and transition economies have the opportunity to showcase their research in an inter-
national forum as well as to interact with other researchers and policy makers from
around the world. About 500 participants annually include researchers, government
officials, representatives of international organizations, and research sponsors. Six con-
ferences have been held since GDN's inception: Bonn (1999),Tokyo (2000), Rio de
Janeiro (2001), Cairo (2003), New Delhi (2004), and Dakar (2005) (see table 5).
In a survey of the Cairo conference participants, the respondents rated GDN's
annual conference as the most valuable of its activities.It received a mean score of 4.5
on the 5-point scale, where 1 indicated "not valuable" and 5 "extremely valuable."
FIGURE 4
GDN's Program Ratings
GDN Website and Newsletters
Fellowships and Employment
3.82
Opportunities
Funding Opportunities Newsletter 3.83
Research Proposals Toolkits 3.83
Knowledge Base Publications 4.08
Conference and Workshops
4.20
Announcements
Calls for Competition and Proposals 4.21
3.60 3.70 3.80 3.90 4.00 4.10 4.20 4.30
Source: GDN.
126 R A M O N A A N G E L E S C U A N D LY N S QU I R E
TABLE 5
Annual GDN Conferences
Number of
Number of countries
Theme Date Location participants represented
Developed and
Developing Worlds:
Mutual Impact January 2005 Dakar, Senegal 499 99
Understanding Reform January 2004 New Delhi, India 673 102
Globalization and Equity January 2003 Cairo, Egypt 596 104
Blending Local and
Global Knowledge December 2001 Rio de Janeiro, Brazil 400 95
Beyond Economics:
Multidisciplinary
Approaches to
Development December 2000 Tokyo, Japan 464 73
Bridging Knowledge
and Policy December 1999 Bonn, Germany 532 100
Source: GDN.
Excluding non-response cases, 48.7 percent of the respondents considered GDN's
annual conferences"extremely valuable"and no respondent chose the option of"not
valuable" (GDN 2003c) These findings of the 2003 Cairo survey were recently cor-
roborated by the Dakar survey results, in which the annual conference received
excellent marks again.
Networking is complementary to the research competitions and projects under-
taken by GDN.The combined effect of all the services provided by GDN as part of
its menu is likely to be greater than the individual effect of each activity taken in iso-
lation. Overall, GDN's core activities have received positive endorsements from par-
ticipants, independent evaluators and observers, its board of directors, and donor
representatives. In summarizing their report, external evaluators Peter Muth and
Frederick Gerlach have concluded that "GDN's programs and activities meet a clear
demand of a global market for development-relevant knowledge and are designed to
build research capacity in those countries where it is most needed.These programs
and activities must continue"(Muth and Gerlach 2004).GDN strives to maintain the
high quality of research outputs generated through its activities, enhance the
capacity-building elements built into its projects and competitions, balance various
constituents' demands, and continuously improve its menu of activities.
Filling Knowledge Gaps
Assessing the policy impact of research is the most onerous task of all.There is little
systematic knowledge available on the topic of effectively linking researchers and
policy makers, especially in the developing world.A broad survey of past and current
CA PAC I T Y BU I L D I N G A N D P O L I C Y I M PAC T 127
initiatives that examine the link between research and policy reveals that only a lim-
ited amount of work on this topic is taking place.While available resources focus on
research and dissemination on the one hand, or the policy process on the other, lit-
tle attention has been devoted to the link between the two. GDN's third Global
Research Project,Bridging Research and Policy, seeks to fill gaps in the existing knowl-
edge of the links between researchers and policy makers and the levels and methods
through which the former can influence the latter.
The Bridging Research and Policy project has been designed by leading develop-
ment researchers and policy makers from both developed and developing countries
over the last two years to address three key questions:how policy makers can best use
research and move toward evidence-based policy making; how researchers can best
use their findings in order to influence policy; and how to improve the interaction
between researchers and policy makers.The project seeks to improve understanding
of the research-policy nexus in order to produce and provide valuable practical
advice to both researchers and policy makers.
The main outputs of the project will be:
� increased awareness among policy makers of the value of research;
� an international coalition of policy makers, researchers, and communicators
interested in collaborating to improve linkages between research and policy;
� enhanced understanding of how to improve research-policy links and impact;
� lessons, recommendations, and practical tools for researchers and policy mak-
ers; and
� a cutting-edge Web site "learning platform" for researchers and policy makers.
The three-year, US$3.1 million project has been managed by the director of
EERC,our regional network partner in CIS.Thus far,the research conducted as part
of the project's first two phases revealed the major importance of the following four
issues: political and institutional context, the quality of research evidence (its rele-
vance and credibility), the nature of the relationships between researchers and policy
makers, and external influences-- particularly on the part of bilateral and multilat-
eral donors. Reflecting the broad appeal of the Bridging Research and Policy project to
development researchers, GDN's June 2003 call for proposals resulted in 367 appli-
cations. Consistent with the network's multidisciplinary agenda, this project involves
scholars from all the disciplines of social science.
The most relevant and innovative aspects of the project are the capacity-building
efforts,such as training programs,not just with social science researchers but also with
regional policy networks and advocacy coalitions, research institutes, and policy mak-
ers in developing and transition economies. Specific training courses will be designed
for each target group to enhance researchers' capacity to conduct policy-relevant
studies along with policy makers' ability and inclination to call on the research com-
munity for input into the policy making process.The ongoing Bridging Research and
Policy global project should therefore greatly facilitate the accomplishment of GDN's
last objective:to apply the knowledge generated through research to development and
128 R A M O N A A N G E L E S C U A N D LY N S QU I R E
poverty reduction policies.The findings of the country studies and the training courses
developed in the last phase of the project will likely have a much larger impact on the
research-policy nexus than what has been planned as part of the project itself. Many
stakeholders beyond GDN will likely find great value in the information generated.
Learning by Doing and Monitoring
The fifth and last principle guiding GDN, as mentioned in the introduction, is that
ongoing monitoring and evaluation is key to successful capacity building. Even
though measuring impact on capacity, and in turn on policy, is notoriously difficult,
well-chosen and clearly defined quantitative indicators and subjective judgments can
jointly paint a fairly accurate picture of an organization's activities.
Used properly, surveys of knowledgeable individuals can be very informative.To
be truly effective, however, the sample must be chosen to ensure an appropriate bal-
ance of knowledge and independence among the respondents. Unfortunately, the
most knowledgeable are typically participants in the activities they are supposed to
evaluate and hence are not totally independent.GDN has used both quantitative and
qualitative indicators to evaluate its progress in meeting researchers' needs, recogniz-
ing the strengths and inevitable weaknesses of both.Aside from external evaluations
of various activities conducted since the inception of GDN, a comprehensive inter-
nal evaluation was completed in 2004.A systematic method of reporting at the end
of the year by each regional network partner was also set in place in 2003 and imple-
mented every year since then.
The next internal evaluation, to be conducted in 2007, will pay particular attention
to GDN's progress in involving researchers from all social sciences and in supporting
policy-relevant research and achieving at least moderate policy impact.These targets,
however, require careful interpretation.The intention is not to pursue exclusively the
broadening of the disciplinary scope of GDN-funded research and articulating its pol-
icy implications, but instead to encourage both where appropriate.Thus the disciplines
represented in any team of researchers should be those best suited to address the research
issue in question.Under this approach,the use of methodologies from a single discipline
is not prohibited, but a triangulation of various methodologies is welcomed. It is also
assumed that even if the results of the project are assessed as"policy-relevant,"their trans-
lation into policy can be beyond the prerogative and the ability of researchers and may
also take a long time. Moreover, targets must be realistically set with respect to GDN's
starting position--in particular, with respect to the starting position of GDN's regional
partners, most of which have historically emphasized economic research and academic
credentials.That said,some indicators of demonstrable progress toward policy relevance
of research in all social sciences are required.
Quantitative Indicators
A set of basic quantitative indicators have and will be used for all core activities to
measure the following elements:
CA PAC I T Y BU I L D I N G A N D P O L I C Y I M PAC T 129
� Reach: the number of participants in GDN's activities.
� Composition: the number of participants in GDN's activities by location, dis-
cipline,gender,age,and language.These data will be used to test whether GDN
is involving new participants every year or serving the same clients; whether it
is encouraging research from all disciplines of social science;and whether GDN
is reaching underrepresented groups,such as female researchers and researchers
from the periphery institutes.
� Quality: the number of papers (within the Regional Research Competitions,
Global Development Awards and Medals competition, Annual Global Devel-
opment Conference, and GRP programs) that are subject to professional refer-
eeing and peer review and the number of papers accepted for publication.
� Policy influence: the number of GDN-supported research projects and papers
that are cited in government policy statements, presented in forums attended
by policy makers, or published as policy briefs.
Subjective Judgments
Subjective judgments of GDN's impact and progress will be based on targeted sur-
veys of specific aspects of performance (quality) or specific programs (GDNet) and
general surveys to obtain a broader review of GDN's performance with respect to its
objectives. In the most general terms, GDN plans to broaden its regional and disci-
plinary scope and extend its outreach to policy makers by at least 10 percent,increase
the GDNet Knowledge Base by 50 percent, and increase involvement in GDN of
researchers whose primary language is not English to around 10 percentage points.
The GDN Secretariat conducted a survey of the participants in the 2003 and
2005 annual conferences in order to monitor its beneficiaries'evolving priorities and
receive their feedback on GDN's performance to date (GDN 2003c).The surveys
showed that the value attributed to GDN's activities basically matched the needs of
the respondents4 (figure 5).
FIGURE 5
Respondents' Needs and Value Attributed to GDN's Activities
Employment and training
Access to data, research, journals, and IT
Outreach to policymakers and researchers
Funds for research and other activities
0 0.5 1 1.5 2 2.5 3 3.5 4 4.5
Value Needs
Source: GDN 2003c.
130 R A M O N A A N G E L E S C U A N D LY N S QU I R E
The 2005 Dakar survey reveled the same general correspondence between
respondents' needs and the value they attribute to GDN in helping them meet those
needs. In terms of individual activities supported by GDN, the annual conference
was perceived as most valuable, with a mean rating of 4.41 on the 5-point scale (it
should be noted, however, that the questionnaire was conducted during one of the
annual conferences).Almost 63 percent of respondents gave GDN's annual confer-
ence the highest possible rating of "extremely valuable." Global Research Projects
followed with a mean rating of 4.29, and the Regional Research Competitions with
4.22 (see figure 6). It should be noted all our major activities received average ratings
above 4.0 on a 5-point scale, which is indeed a remarkable achievement. Respon-
dents thus appear to value the mix of activities provided by GDN--both the major
networking event and the larger capacity-building ones.
In addition to the survey of conference participants, the GDN Secretariat con-
ducted a similar survey of its regional network partners from transition and develop-
ing economies.The overall assessment of GDN on the part of the regional network
heads was very favorable. Half of them gave GDN the highest score of 5, while the
other half evaluated it as 4 on the 5-point scale,where 1 indicated"not valuable"and
5 "extremely valuable."
Lessons for the Future
Four major lessons emerge from GDN's experience in building capacity thus far.
Lesson One:A Menu Approach
GDN has established a positively evaluated program of activities and a cost-effective
delivery mechanism. Internal and external evaluations of beneficiaries have demon-
strated that the menu of capacity building and networking activities provided by
GDN is highly effective in meeting the self-reported needs of the research commu-
FIGURE 6
GDN Activities Rated by Conference Attendees
GDN activities
4.50 4.41
4.40
4.29
4.30 4.22
4.20 4.15 4.13
4.10
4.00
3.90
Conferences Awards Regional Global GDNet
Research Research
Competitions Projects
Source: GDN 2005.
CA PAC I T Y BU I L D I N G A N D P O L I C Y I M PAC T 131
nity in the developing world.The various activities (Regional Research Competi-
tions, Global Development Awards and Medals, Global Research Projects, GDNet,
and the Annual Conference) incorporate different capacity-building elements
including mentoring, cross-fertilization, and training, as well as funds and resources
for writing, presenting, and publishing research.The chances of having an impact on
research capacity are thereby greatly increased by the menu approach of comple-
mentary activities provided by GDN, even where needs vary or the effectiveness of
individual tools is difficult to asses.
LessonTwo:The Need for Balance
If the research funded by GDN is to make valuable contributions to the literature on
growth and ultimately affect policies as well, there needs to be a balance between
need and meritocracy of individual researchers or institutes to which GDN allocates
funds--between a focus on quality and capacity building per se. Donors and inter-
mediary organizations such as GDN cannot and should not sacrifice the quality of
the research they support and focus exclusively on capacity building. Mentoring--
both from more experienced researchers in the developing countries and from
experts in the North--can also help achieve the two sets of goals simultaneously.
Achieving this balance may require modifications in some of the activities set up
or in the criteria laid out for participation.The ability versus need principle has
guided GDN's selection of participants in the Global Research Projects and it will
now also be extended to the allocation of funds among the regional network part-
ners. Some portion of the funds for the Regional Research Competitions will likely
be allocated to the regional network partners on a competitive basis starting from the
2007 fiscal year to provide a financial incentive to work actively toward achieving
GDN's objectives.The balance of the funds for the regional network partners will
still be a function of need for capacity building and will be allocated accordingly.
In a similar vein, GDN has made significant progress in achieving a balance
between breadth and depth of reach in the research community.Although tradition-
ally GDN has attracted submissions and participation mainly from economists, steps
have been taken to target underrepresented groups among our beneficiaries:
noneconomists (political scientists and sociologists), women, non�English speakers.
The analysis of participants' profile in the recent annual conference in Dakar reveals
that the attendance of these groups at the conference and their general involvement
in GDN activities have significantly increased in the last two years.
LessonThree:Adequate Funding
Ultimately,capacity building revolves to a large extent around the availability and use
of funds.The issue of underfunding for social science policy-oriented research was
apparent during the 1999 survey that preceded GDN's launch."Funds for research"
has been among the top two most urgent needs expressed by respondents to the sur-
veys conducted in Cairo (2003) and Dakar (2005). GDN now has the administrative
132 R A M O N A A N G E L E S C U A N D LY N S QU I R E
mechanism and the menu of programs to serve the community of researchers in the
developing world,but none of the network's objectives can be reached in the absence
of adequate levels of funding.
Lesson Four: Policy Impact Is Key
The last pertinent lesson arising from GDN's experience with capacity building has
been that policy impact is the goal most difficult to reach, yet crucial in importance,
if contributing to economic development and poverty reduction are the ultimate
aims of our work. In short, translating research into policy remains the biggest weak-
ness and greatest need at the same time. GDN has placed the research-policy nexus
at the top of its agenda and taken steps to address it.The Bridging Research and Policy
global project and the more recent Multidisciplinary and Intermediation Research Initia-
tive, which both include practical training workshops for all stakeholders, should take
us some distance in narrowing the gap between the two communities of researchers
and policy makers. GDN will continue to pursue this challenging goal by encourag-
ing, and in some cases requiring, authors funded by GDN to submit nontechnical
policy briefs, to network with policy makers in their countries, and to participate
proactively in the process. Capacity building will indeed have the greatest impact if
it ultimately translates into pro-growth and anti-poverty policies in the developing
and transition economies.
Notes
1. For descriptions of GDN's early history, see Stone 2001 and Clark and Squire 2004.
2. One can safely infer that these numbers have considerably increased in the last five
years, thereby enhancing the relevance and appropriateness of online services for the research
community.
3. Independent evaluation of the RRCs (Regional Research Competitions) was con-
ducted by Barbara Craig (Oberlin College, Oberlin, Ohio, United States) and Fernando
Loayza (Servicios Ambientales, La Paz, Bolivia) in May-December 2001.
4. The respondents rated their needs and value of GDN's activities on the five5-point
Likert scale,where 1 stood for"not urgent/valuable"and 5 indicated"extremely urgent/valu-
able."
References
Clark, Sarah and Lyn Squire,"Creating the Global Development Network:An Exer-
cise in Institutional Theory and Practice," in Diane Stone and Simon Maxwell,
eds., Global Knowledge Networks and International Development (Routledge,
Oxon, 2005).
Craig, Barbara and Fernando Loayza,"An Evaluation of GDN Supported Regional
Research Competitions." Available at www.gdnet.org/pdf2/evaluation/2002_
RRC_Evaluation.pdf
CA PAC I T Y BU I L D I N G A N D P O L I C Y I M PAC T 133
Eade, Deborah, Capacity Building:An Approach to People-Centered Development,
(Oxfam, Oxford, 1997).
GDN (Global Development Network). 2000."Donor Support for Policy Research
in Developing Countries." Report of the High-Level Committee, November 21,
2000.Washington, DC.
------. 2000. Statement on the Governance of the Global Development Network,
final report of theWorking Group, December 2000, available at www.gdnet.org/
about_gdn/history/statement_gov.html.
------. 2003a."Researching the Researchers: Establishing Priorities" survey under-
taken under auspices of the International Economic Association and the World
Bank for presentation at Bonn, 1999, available at www.gdnet.org/pdf2/surveys/
researching_researchers.pdf.
------. 2003c. "Cairo Survey Findings." Washington, DC. Available at
www.gdnet.org/pdf/Fourth_Annual_Conference/Survey/Cairo_2003_Survey_
Findings_FULL_TEXT.pdf.
------. 2004a."Internal Evaluation of the Core Activities Supported by the Global
Development Network." March 16, 2004, available at http://gdnet.org/
pdf2/evaluation/GDN_Internal_%20evaluation_FINAL.pdf.
------. 2004b. GDN Annual Report 2004. Washington, DC. Available at
www.gdnet.org/pdf2/annual_reports/GDN_2004_Annual_Report.pdf
------. 2005. "Dakar Survey Findings." Washington, DC. Available at
www.gdnet.org/pdf2/evaluation/Dakar_Survey_Results.pdf
Muth, Peter, and Frederick Gerlach. 2004."Global Development Network Indepen-
dent Evaluation." GDN,Washington, DC. Available at www.gdnet.org/pdf2/
evaluation/GDN_IND_EVAL_REPORT.pdf.
UNCED, 1992. Capacity Building - Agenda 21's definition (Chapter 37).Available
at http://www.gdrc.org/uem/capacity-define.html.
The Experience ofAERC in
Research,Capacity Building,and
the Development of Collaborative
Training Programs
William Lyakurwa
African governments face the task of making informed policy choices with limited resources.
To be effective, policy makers require both accurate information and the skills to apply it
properly. The African Economic Research Consortium (AERC) was established in 1988 to
enhance the capacity of locally based researchers to conduct policy-relevant economic inquiry,
to promote the retention of such capacity, and to encourage the application of the capacity in
the policy context. The approach involves three primary strategies: building capacity, con-
tributing to knowledge, and informing policy. The key challenge is to build a network of indi-
viduals and institutions capable of tackling Africa's current problems, ultimately helping to
raise its people out of poverty. The networking concept is particularly important to AERC
because of its unique contribution to strengthening the economics profession in the conti-
nent. "Products" of the AERC process--the people in the network--are found in policy institu-
tions and universities across Africa.
AERC is well regarded for its responsiveness to local conditions through its two interlinked
program components: building capacity through learning by doing research and facilitating
postgraduate training in economics. As suggested in external evaluations, a particular aspect
of AERC's success is the esprit de corps it generates. This is evident in AERC's thematic
research, which is driven by a peer review mechanism, and in the unique Joint Facility for
Electives of the collaborative graduate programs. By bringing together professionals from
across the continent these two activities can be considered to be among the first steps toward
building a bona fide "African union."
A second critical impact has been the retention of good professionals in the region
through attention to process, confidence in local expertise, and use of material and profes-
sional incentives to build the profession. A management philosophy that authority is conferred
while leadership is earned enhances responsiveness to the network of funders, researchers, and
policy makers.
135
136 W I L L I A M LYA K U RWA
This paper outlines the African Economic Research Consortium (AERC) experi-
ence in the design and implementation of an effective network for building human
and institutional capacity in Africa. It should be stated at the outset that AERC inter-
vention is limited primarily to addressing capacity building for economic policy
research and graduate training in economics.The lessons learned are important,
however, and perhaps this conference could look at these lessons with a view to
replicating them in other areas and disciplines.
AERC's vision is of sustained development in sub-Saharan Africa, grounded in sound
economic management and facilitated by well-trained, locally based professional
economists.
African governments are faced with the task of making policy choices while fac-
ing limited resources. Policy makers have to make informed decisions on the basis of
the sometimes conflicting flows of information from the electorate, the research
community, and other sectors of the economy. To do their job effectively, they
require both accurate information and the skills with which to apply it properly.
AERC was established in 1988 as a public not-for-profit organization with the spe-
cific intention of developing both the information and the skills. Its purpose then
and now is to advance economic policy research and training.The consortium's
mandate is threefold: to enhance the capacity of locally based researchers to conduct
policy-relevant economic inquiry, to promote the retention of such capacity, and to
encourage its application in the policy context.
AERC's track record as a successful capacity-building endeavor was not achieved
without overcoming a number of challenges along the way. Among the major puz-
zles is how to retain the built capacity in Africa and in African institutions for its
effective involvement in both policy analysis and advice, as well as for its cascade
effect whereby those people and institutions that AERC develops go on to build
other capacities and thus attain a critical mass of individual researchers and institu-
tions. If the built capacity is retained in African institutions, the next challenge is to
identify the channels through which that capacity communicates to policy makers,
in what we call transferring the results of research and training to policy making.
Moreover, to keep this capacity alive and active, there have to be ways to create
an appropriate incentive system so that research can thrive. In sum, the task is noth-
ing less than trying to build a network of individuals and institutions capable of tack-
ling Africa's current problems and ultimately getting the majority of African people
out of poverty. From our experience, several interesting aspects can be emphasized
that keep the network alive.These derive from the interrelationship of the consor-
tium's mission and its structure.
The mission of AERC rests on two premises.The first is that development is more
likely to occur where there is sound,sustained management of the economy;the sec-
ond is that such management is more likely to happen where there exists an active,
well-informed group of locally based professional economists.AERC is well regarded
T H E E X P E R I E N C E O F A E R C 137
within the research community for its effective support of research by African econ-
omists, as it is seen to combine responsiveness to local conditions and building a
community of professional economists with programmatic integrity and demon-
strated prudence in resource management. Furthermore, the networks of African
economists and institutions formed through its research and training programs have
facilitated or spun off other useful initiatives.Among these have been the revival of
national and regional professional associations and the encouragement of various
research activities outside the consortium.
The organizational structure was deliberately designed to foster both the inde-
pendence of the research agenda and the transparency and accountability of resource
management. The structure is composed of three interlinked but independent
organs: the Board of Directors, the Programme Committee, and the Secretariat.The
board of directors, appointed by consortium members, approves policy directions,
multi-year strategies, and annual programs of work and budget.The role of the pro-
gram committee is to set the agenda and the goals of the research and training pro-
grams as well as to monitor and evaluate the programs.A small secretariat, based in
Nairobi, Kenya, and headed by an executive director, manages the consortium's
activities.The separation of powers of these organs, governed by the consortium's
bylaws, has built a credible three-pronged structure that allows for the ownership of
AERC's activities by the network of local researchers,an independent determination
of the research agenda, and a program of activities that responds to local needs even
as it ensures accountability to funders.
The three governing bodies support an organizational focus and network of insti-
tutions and researchers on a clearly defined mission and objective. A management
philosophy that authority is conferred while leadership is earned enhances responsiveness
to the network of funders,researchers,and policy makers.A value-for-money culture
guides resource management, and the use of performance management guides pro-
gram implementation.
The presence of and continuous pursuance of innovative topical issues for research
maintains the research relevance to policy applications and enhances the visibility of
the network.This is particularly evident in AERC's thematic research,which is driven
by a peer review mechanism (and peer pressure),thereby enhancing the quality,deliv-
ery,and strength of research networking.Research networking is a key motivator,and
it is also self-reinforcing, as the act of sharing research and training outputs at either
the national level or across countries strengthens the desire for networking and shar-
ing experiences.This is often considered to be among the first steps toward building
a bona fide"African union" as AERC builds a community of professionals with com-
mon ideals and objectives and a strong incentive for networking.
The use of information and communications technologies (ICT) in implement-
ing AERC's programs has grown hand in hand with the tremendous explosion of
ICT worldwide. A key feature of the consortium's communications strategy is the
expanded use of the AERC Web site as a dissemination tool. Besides giving the
AERC network a higher profile worldwide, the Web site also serves as a channel for
disseminating the products of AERC research.At present, there are over 240 AERC
138 W I L L I A M LYA K U RWA
publications available online, and more will continue to be uploaded for the greater
ease of researchers, students, and economists worldwide.
Although the foregoing information may seem general,it offers important lessons
for trying to understand how capacity building has succeeded in some instances and
generally failed in several other cases in Africa. Perhaps we have less successful net-
works in Africa because of poor design and weak implementation, coupled with a
number of prohibitive factors. A few of these prohibitive factors can be listed as a
weak human and financial resource base, and the frequency of civil strife. Perhaps
most commonly in Africa, there has been lack of policy receptivity, although this
aspect has changed in the recent past.
This paper first presents an overview of the AERC research and training pro-
grams, then zeroes in on the details of the training component. It subsequently sum-
marizes the experiences and challenges of the implementation of the programs, and
briefly considers their impact.A glimpse into the future contemplates what the con-
sortium will look like in five years, while the conclusion ties the pieces together.
The AERC Programs: Focus on Capacity Building
Donor governments, private foundations, and African and international organiza-
tions support the AERC capacity-building program, which has two primary com-
ponents:research and postgraduate training in economics.These are described briefly
in the following sections.
Building Capacity through Research
The Research Programme was the original raison d'�tre of AERC.The key elements
of the research strategy are threefold.The first is to offer small grants to groups of
individuals drawn from both academia and policy institutions to conduct research on
topics within designated themes.The second is to establish a support system for
research in the form of peer review, access to literature, and methodology workshops
that aim to sharpen research skills and expose the network to relevant methodolog-
ical developments.The third is to monitor and provide a peer review mechanism
afforded by biannual research workshops at which research proposals and results are
presented.
Within that framework, the program has four principal objectives:
� To build a credible local capacity for policy-oriented research
� To generate research results for use by policy analysts and policy makers
� To promote links between research and policy
� To encourage retention of high quality researchers
With a strong emphasis on quality and policy relevance, the program is carried
out in two major ways: thematic research and collaborative research.The bulk of
AERC's research support is for thematic studies undertaken by informally consti-
tuted teams with members generally drawn from academia and the policy commu-
T H E E X P E R I E N C E O F A E R C 139
AERC Research Themes
� Poverty, income distribution, and labor market issues
� Macroeconomic policies, investment, and growth
� Finance and micro/sectoral issues
� Trade, regional integration, and political economy
nity on the continent.Collaborative research,for its part,teams upAfrican researchers
and their counterparts in other parts of the world for research on a mutually agreed
upon topic. Collaborative research has helped to sustain interest in African research
outside the region, to build the competence of both African and non-African
researchers through interaction,and to create self-sustaining arrangements for financ-
ing research outside of AERC.
Dissemination of the results of AERC-supported research has been targeted
toward decision makers within African governments as well as toward professional
economists and academics within Africa and in the diaspora.The results of all AERC
thematic research,once they have been reviewed and approved by anonymous exter-
nal assessors, are published as AERC Research Papers.To date, 148 Research Papers
and numerous collaborative and other studies have been published and disseminated.
Abstracts of Research Papers aid cataloguing by libraries, while nontechnical execu-
tive summaries--also translated into French--are targeted for use by policy makers.
Studies emanating from collaborative research projects,which are more extensive,are
often published in joint ventures with eminent academic presses.
AERC's thematic research cycle encompasses a number of actions,from the receipt
of a proposal to the dissemination of results in various formats to professional econo-
mists, policy makers, and the informed public. Most promising research proposals are
received from individual researchers, who are encouraged to find partners to ensure
continuity, facilitate the involvement of younger scholars, and broaden the range of
research skills and subspecialties.Where possible,academic economists are encouraged
to involve professionals working for public agencies and the private sector, who may
introduce different perspectives,facilitate access to data,dispel sensitivities concerning
research motives, and--most importantly--offer a channel for introducing the results
into the policy process.Although informal and not applied rigorously to all proposals,
these guidelines are reflected in the composition of the resulting research teams of two
to four economists:about a third of all AERC-supported research has involved at least
one nonacademic professional economist.
The biannual research workshops, which consider work in progress and final
reports as well as the initial proposals,lie at the heart of the thematic research process.
These workshops foster and facilitate peer review--a process essential to the contin-
ued growth of any profession--in a region where such conditions do not exist in any
single location or institution.Although the process is elaborate and total costs are sig-
nificant, the workshops have proven very effective in facilitating access to a variety of
resource persons and materials.
140 W I L L I A M LYA K U RWA
From a single session involving all researchers at the consortium's inception, the
workshops have expanded to four concurrent sessions held over a four-day period.
To elicit active participation by francophone economists, all four sessions offer
simultaneous interpretation as well as the translation of plenary papers and abstracts
in both English and French.The workshops are preceded by a one-day plenary
meeting to consider commissioned studies of broader interest.The growth of the
workshops reflects not only an increase in the number of presentations, but an
intensification of effort along subthematic lines. A recent meeting, held in Nairobi
in December 2004, featured 59 presentations of proposed research, work in
progress, and final reports.
The workshops represent a major logistical effort. The December 2004 gather-
ing involved 89 researchers among the 150 participants from sub-Saharan Africa and
the rest of the world. It was the largest biannual research workshop ever convened by
AERC.The secretariat staff successfully coordinated travel, insurance, accommoda-
tion, catering, interpretation, and photocopying requirements. Provision of docu-
ments, for example, entailed the production and timely distribution of 125 copies of
over 50 papers of approximately 40 pages each. Smooth management of the work-
shop, usually interspersed with other smaller gatherings, and followed immediately
by a meeting of the Programme Committee, is possible only with highly trained and
dedicated staff.
In effect, most other AERC work must be put on hold for the fortnight preced-
ing the workshop, the period of the workshop itself, and the week immediately fol-
lowing it.This high opportunity cost can be justified in terms of its benefits, namely
a tangible improvement in the quality and relevance of economic research in a region
characterized by wide variations in experience and skills.The format of four con-
current sessions over four days thus probably represents the upper limit on the size
and duration of the biannual meetings and hence on the overall number of thematic
grants that can be supported at any given time.
Significant efficiency gains were noted in an evaluation of the research program
conducted in 2004.These included streamlining the research process, with a marked
reduction in the review lag for proposals from 8 months in 1997 to 6.2 months in
2002, and for final reports from more than 19 months to 4.4 months over the same
period.The overall cost of biannual research workshops,AERC's biggest event, was
found to have dropped significantly--by about 25 percent--in the period 1997 to
2004 (Wuyts 2004).
The strategic focus on maximizing electronic communication to disseminate
research products was heightened as AERC formally launched its revamped and relo-
catedWeb site during the May 2004 Biannual ResearchWorkshop.TheWeb site has
"The thematic research programme has shown itself to be very effective in impart-
ing technical competence to junior researchers."
Source: Wuyts (2004, 51)
T H E E X P E R I E N C E O F A E R C 141
been lauded for its accessibility,attested to by a total of 1.4 million"hits"or visits reg-
istered during 2004�5, translating to a monthly average of 118,000 hits.TheWeb site
currently boasts a wide variety of AERC publications, announcements of events,
and--most importantly--the availability online of research papers and other studies,
which will in the long run reduce printing and publication costs significantly.
Building Capacity through PostgraduateTraining
As the AERC Research Programme matured, it was evident that there were compar-
atively few qualified African professionals capable of undertaking rigorous, original
research in economics.With the exception of Nigeria,in most countries represented in
AERC's group of researchers,there were fewer than ten--frequently fewer than five--
professionals able to participate meaningfully in thematic research. Indeed, it was this
sobering observation that prompted the Advisory Committee (now renamed the Pro-
gramme Committee) to recommend a study of graduate training in economics for
Africans.This study concluded that a sound master's degree program comprises the
essential foundation for the doctoral-level training of the next generation of
researchers.
For African and external agencies anxious to strengthen economic management
through research and training in economics, AERC now constitutes a proven mech-
anism that can use externally sourced funds in a very cost-effective manner and yet
remain attuned to the needs of local professionals and academic institutions.The
paucity of such agencies, in particular those with a regional mandate, became appar-
ent to AERC itself in 1993 when it looked--without success--for an agency that
might implement a collaborative MA training program on behalf of 17 public uni-
versities in 13 anglophone African countries.
It should be noted,however,that direct involvement in training was not envisaged
when AERC was established in mid 1988. Support for a study of graduate training
in economics was prompted by the observation that the number of qualified
researchers in economics was small and possibly dropping because of the problems
affecting systems of higher education in the region as well as the absence of high-
quality MA degree programs.
AERC essentially played a catalytic role, facilitating a process whereby qualified and
committed African professionals studied the issue, debated possible solutions, devised
operational plans, and mobilized the requisite financial and human resources.This
process resulted in the establishment of the Collaborative Master's Programme for
Anglophone Africa (CMAP). The decision to assume responsibility for the implemen-
tation of CMAP during an initial three- to five-year phase was made only after consid-
erable deliberation.It was observed at the time that the absence of a suitable mechanism
was not sufficient reason for transferring various responsibilities to AERC if it was not
equipped to carry them out, and that it might have in the process destroyed what had
been built. Nevertheless, no other option was available and AERC took charge.
It is today a credit to AERC that CMAP is run in 21 universities from 17 coun-
tries that collaborate to offer a high-quality master's degree in economics.The pro-
142 W I L L I A M LYA K U RWA
gram has also led to the commencement in 2002 of a doctoral program, the Collab-
orative PhD Programme (CPP), based on the CMAP model.With CMAP and CPP
in place, some employers, particularly central banks and university departments of
economics, no longer see a need to send staff abroad to obtain postgraduate training
in economics, as the CMAP programs are significantly cheaper and more attuned to
local realities than those offered by overseas universities.
The experience of AERC's research process is reflected, albeit often subtly and
indirectly, in the design of these two collaborative training programs. Both are locally
driven and designed to strengthen the participating economics departments, rather
than to remove and consolidate the programs within a few self-styled "centers of
excellence." Process rather than procedure is emphasized. Less stress is placed on
departments meeting various criteria for offering their degree under the program
than on maintaining their status through continuous monitoring of their students'
performance.The programs are also sensitive to the material and professional needs
of individual academics.They offer selective material support through the engage-
ment of guest lecturers,thesis supervisors,external examiners,and the like.Of greater
importance are the professional incentives deliberately built into the programs in
order to motivate and retain highly qualified staff.Among these are opportunities to
develop curricula, to help teach one's subspecialty, to supervise thesis research, and to
prepare instructional materials. AERC's catalytic role is also reflected in the peer
review function,in this case through the respective academic boards that monitor the
performance of the departments offering the degree.
How the Collaborative Training Programs Work
Several studies on postgraduate education in economics--among them Fine (1992,
1997), Fine and others (1994), and Ajayi and others (1995)--arrived at two major
conclusions.The first was that graduate education in economics in sub-Saharan
Africa had systemically collapsed from the impact of a combination of factors and
was thereby unable to provide a steady throughput of well-trained professionals.The
second was that AERC's strategic response should be the establishment of, initially, a
rigorous master's-level program, and later a PhD program, to create and enforce a
transparent set of standards by which African university departments of economics
could reform their undergraduate courses.
The Collaborative Master's Degree Programme for Anglophone
Africa
CMAP was and is designed to strengthen the MA programs of universities in sub-
Saharan Africa. It was envisaged that collaboration among these programs would
entail the more intensive use of then-existing ties such as external examinations, and
foster new ones such as the joint teaching of elective subjects. Aside from encourag-
ing a more efficient use of resources, in particular qualified teaching staff, the aim of
CMAP was a structured exchange of people,ideas,materials,and methods that would
T H E E X P E R I E N C E O F A E R C 143
reduce professional isolation and stimulate a continued improvement in quality. These
goals have by and large been achieved, as evaluations and review reports of the pro-
gram attest.
Of the 21 universities participating in CMAP, 7 are classified as category B.They
participate in all aspects of the program: curriculum development, staff exchanges,
external examinations, and representation in the program's governing body, the aca-
demic board, and its various committees. These 7 universities offer their own
degrees under the collaborative program.The other 14 universities are classified as
category A. They send their students to the category B institutions for MA studies.
The academic board, drawn from all participating universities (A and B), is largely
responsible for the academic substance of the program.AERC facilitates curriculum
development and joint enforcement of standards. Key elements of AERC assistance
to the universities are the building of capacity of the departments, support for
library and computer facilities, and the enormously successful Joint Facility for
Electives (JFE).
CMAP Universities
Category B
University of Addis Ababa
University of Botswana
University of Dar es Salaam
University of Ghana
University of Malawi
University of Nairobi
University of Zimbabwe
Category A
University of Cape Coast, Ghana
Kwame Nkrumah University of Science and Technology, Ghana
University of Sierra Leone
Makerere University, Uganda
Egerton University, Kenya
Moi University, Kenya
Kenyatta University, Kenya
University of Swaziland
University of Namibia
National University of Lesotho
University of Zambia
Eduardo Mondlane University, Mozambique
University of Mauritius
University of Liberia
Source: AERC.
144 W I L L I A M LYA K U RWA
"Participation in the CMAP has been a very positive experience for the alumni for
most of whom the experience is simply transformational. Going through the CMAP
opens opportunities for moving up the professional ladder and aligning the alumni
with more rewarding professional tracks. The programme prepares them well for the
job market, and alumni employers confirm they are competitive."
Source: Kimuyu (2003).
The program itself comprises three components to be completed over an 18�24
month period.The first consists of core courses in microeconomics, macroeconom-
ics, and quantitative methods, which are taught between September and June at the
university awarding the degree.The students thereafter undertake elective courses
that are taught on an intensive basis at a common facility (the JFE) between July and
September annually.The final stage involves thesis research, which is conducted at
the university offering the degree during the second year.The success of CMAP has
demonstrated that an interuniversity program can work very well and give students
a solid grounding in advanced theory and methods, exposure to a number of field
areas, and some experience in independent and original research.
More than 1,200 MAs have graduated from CMAP, which has become estab-
lished as a quality degree, with employers identifying it as a recognized product in
the market.The program has expanded its outreach from the initial 17 universities to
21, with country representation increasing from 13 to 17. Student enrollment also
grew from 58 in 1993 to more than 140 in 2004.The additional four universities thus
increased the spread of countries and improved the participation of students from
underrepresented areas. Of particular interest was the first-time participation of two
previously underrepresented countries in the network, Sudan and the Democratic
Republic of Congo, in the 2004 Joint Facility for Electives.
Women represented 19.5 percent of the CMAP enrollment in the period 2000�4
and 25 percent of CPP students during 2002�4.Though encouraging, these figures
fluctuate annually as a result of a variety of factors beyond the consortium's control.
The consortium maintains close links with collaborative master's programs in Nige-
ria (under the umbrella of the Foundation for Economics Education, or FEE) and in
francophone Africa (run by the Programme de Troisi�me Cycle Inter-universitaire, or
PTCI). Of note is that these initiatives also stemmed from the AERC research into
graduate training in the continent.The francophone program is modeled on the anglo-
phone program, the only difference being the language of instruction.
The Collaborative PhD Programme in Economics for
Sub-Saharan Africa
AERC has since its inception supported PhD thesis research to speed up the comple-
tion of doctoral studies and has been providing fellowships for doctoral studies abroad
since 1993.The Collaborative PhD Programme (CPP), launched in December 2002,
T H E E X P E R I E N C E O F A E R C 145
was therefore a natural progression in further strengthening teaching and research capac-
ity in sub-Saharan Africa.The CPP aims at building individual capacities in Africa
through the production of high-caliber,marketable PhD degree-holders with advanced
analytical skills.The program also targets the building of institutional capacities through
staff development,improvement of facilities and equipment,and enhanced networking.
Even as CMAP was launched in 1993, AERC convened an international confer-
ence in the same year to discuss the need for and possible modalities for the training
ofAfrican economists at the doctoral level.The conference noted the marked decline
in external support and opportunities for doctoral training in Africa, both of which
left large gaps for qualified staff and hindered the development of capacity for
research and analysis of economic issues. Most importantly, there was a notable dis-
juncture between the quality and relevance of existing doctoral training and the
more specific needs for skills and contextual relevance of such training in Africa.
Further,a study commissioned by the secretariat in 1995 revealed an output of 15
doctoral graduates from local and overseas universities, in contrast to a demand for
over 160 PhDs annually. Local universities produced graduates of relatively inferior
quality as a result of the absence of structured course work and poor thesis supervi-
sion.Overseas doctoral training,while of higher quality,was not consistent with local
needs and did not deal with Africa-specific issues.The study recommended a model
for PhD training in Africa akin to the model pursued at the master's level.
A feasibility study on a regional collaborative doctoral program in 1997 recon-
firmed the demand and need for such a program,and more importantly the necessary
support and will among African academic institutions and staff to run such a program.
A review of existing collaborative models in Central and Eastern Europe and the
Nordic countries was undertaken to construct an Africa-specific model that would
address the main deficiencies of African universities while taking into account African
imperatives.The review was conducted in the context of preparing an operational
plan for a collaborative PhD program for sub-Saharan Africa modeled on the CMAP
experience.The operational plan recommended a course work�based program with
thesis preparation rooted in the AERC workshop modality and drawing on African
empirical realities.
Deciding that four regionally based centers would alleviate professional isolation
and form a basis for enhancing integration,AERC launched the Collaborative PhD
Programme (CPP) in 2002 at four host universities: the University of CapeTown, the
University of Dar es Salaam, the University of Yaound� II, and the University of
Ibadan.Four other participating institutions,the universities of Cocody,Nairobi,Benin
(Nigeria), andWitwatersrand also award degrees in the program.
"AERC's training at masters and PhD levels is making significant contribution to
development policy in Africa. Many policy ideas are now available in the continent
on account of the programmes and the capacity for continued generation and appli-
cation of policy ideas continues to grow with every graduating cohort."
Source: Kimuyu (2003).
146 W I L L I A M LYA K U RWA
The PhD program is designed as a four-year course and is expected to produce
at least 400 high-caliber PhD holders over its projected 15-year life span.The inno-
vative nature of the program lies in its combination of course work and thesis prepa-
ration and defense, with the teaching of electives at a common facility and periodic
workshops that bring all the students from the universities together for experiential
learning.The program thereby complements and enhances, rather than substitutes
for, existing doctoral programs.The CPP academic board enforces quality control.
In line with the CMAP model,the four-month JFE residential training for second-
year students brings together a high concentration of eminent economists to provide a
broader scope of electives and research materials than would be available at any single
university.The facility enables access to a wide range of lecturers from all over the
world with diverse experiences and competencies, providing high-quality instruction.
The high caliber of the CPP students was manifested in the results of the 2004
African Development Bank Essay Competition, which awarded the top prize to a
CPP student, Mr. Sheshangai Kaniki, a Tanzanian national at the University of Cape
Town.
Currently 70 students are participating in the CPP. It is noteworthy that the pro-
gram design forecast a total of 32 students in the first two years of the CPP, thus
demand for the program has resulted in student admissions that have far surpassed this
target.The 70 students span 18 nationalities, with 22 from eastern Africa, 15 from
anglophone westernAfrica,18 from francophoneAfrica,and 15 from southernAfrica.
Sixty-one of the students are fully sponsored by AERC; one has a partial sponsorship,
and nine are privately sponsored.
CPP students are required to present work related to their theses at three work-
shops: one to review thesis proposals (the PhD thesis proposal workshop), one to
review work in progress,and another to review draft theses.Each workshop is attended
by the students, their supervisors, and resource persons in various areas.The inaugural
PhD thesis proposal workshop was held in Nairobi in December 2004, immediately
after the AERC biannual research workshop.The 18 pioneer students presented their
proposals in the presence of their thesis supervisors, resource persons, and AERC
researchers. Not only did the students gain from comments by the supervisors and
resource persons on their presentations, but they also benefited from the researchers
and other participants at the biannual research workshop.At the workshop,the synergy
between the research network and support for graduate training was evident.The
enthusiasm of the students as they looked forward to joining the network as researchers
was evident from their expressions and those of their supervisors (one of whom said,
"I wish I had the opportunity to go through this myself!").
As the training program matures, synergies are growing between it and the
research program, and between the CPP and CMAP. The 2004 JFE accommodated
students from both training programs for the first time,bringing together 131 CMAP
and 25 CPP students, along with a combined teaching team of about 40 lecturers.
The training facility was reserved for exclusive use by the students,providing a favor-
able atmosphere for maximum concentration,synergy,and collegiality between mas-
ter's and doctoral students.The combined group is perhaps the best concentration of
T H E E X P E R I E N C E O F A E R C 147
graduate training in economics in SSA today, and significant savings are expected in
the convening of joint CMAP and CPP activities.
Experiences in Implementation
Capacity building through learning by doing research and graduate training were
innovative ventures when AERC embarked on them back in 1988.That innovation
has grown and matured in response to the challenges of a changing environment and
in anticipation of change. One outcome has been a body of economists with the
capability to undertake research that has international recognition. In addition,
through its support for graduate training in economics, AERC has created a cadre of
economists who are capable of training future economists, who in turn can con-
tribute effectively to policy debate in the continent.These and other results of the
AERC experience are delineated below.
A Growing Pool of Able Researchers
To date (2005), AERC has supported more than 450 thematic research projects
involving over 1,000 researchers.The number of participating researchers has grown
from 40 in 1988 to some 60�80 per year, while the number of participants at bian-
nual research workshops has increased from 60 in 1988 to over 150 at the present.
The geographic coverage expanded from 7 countries to the current 21 involving
three linguistic groups--anglophone, francophone, and lusophone. More than 150
researchers have participated in technical workshops in the last five years, on topics
including time series econometrics, survey methodology, economic modeling, and
methodologies for poverty analysis. Top scholars in their respective fields are engaged
to run these workshops, which are another means AERC uses to build research
capacity.
Of great significance has been the impact of thematic research on the quality and
relevance of AERC�supported research. Peer pressure, expressed by accolades or
opprobrium, has proven extremely effective in stimulating good research and its
timely presentation.This pressure has allowed the research director to devote propor-
tionately more time to weaker but promising professionals, and to provide strategic
leadership to the group as a whole. Objectivity in reviewing proposals is ensured
without a competition or recourse to a committee that must necessarily operate at
arm's length from the community of researchers. An evaluation of the AERC
Research Programme in 2004 cited as one of the most noticeable and commendable
achievements of AERC its ability to create a network--or, better still, a commu-
nity--of African economic researchers across the continent,including across the lan-
guage divide.
The biannual research workshops are characterized by an atmosphere of profes-
sional camaraderie, where work is assessed primarily in terms of the potential of the
researchers.This situation provides considerable latitude for gradually raising norms
for performance in line with improvements in researchers'knowledge,skills,and self-
148 W I L L I A M LYA K U RWA
"Thematic Research participants enumerated a number of direct benefits, including
their personal advancement in conducting research and the value of interacting
with economists from other African countries and beyond. Increased self-confi-
dence and improved presentation skills were also listed."
Source: Hassan and Rempel (2004, 3).
confidence.Francophone economists are well catered to through simultaneous inter-
pretation and translation of plenary papers and abstracts in both French and English.
The equivalent of 40 new grants per year are currently handled by one research
grants administrator. Substantive monitoring occurs in a transparent manner through
the presentation of an interim and then a final report at predetermined, six-month
intervals.
Nonetheless, most attention has been directed toward what may be termed "pro-
fessional" incentives, including opportunities to engage in intellectually attractive
research, to interact regularly with peers, and to publish research results in appropri-
ate scientific formats. The generally positive assessment of AERC's activities,in terms
of both their cost-effectiveness and their contribution to the profession's stature and
morale in the region, have inevitably aroused interest in an expanded thematic cov-
erage within economics and, more generally, the applicability of the approach to
other disciplines and policy issues.
Contributions to International Issues
The advent of greater political pluralism has led to growing responsibility on the part
of local professionals to inform discussions on economic issues conducted by other
groups within civil society, including parliamentarians, women, trade unions, cham-
bers of commerce,and professional associations. This trend suggests an emerging role
for AERC in facilitating effective communication by local researchers of their find-
ings to these groups as well as to decision makers in government.
As a result of various research projects on global trading systems, AERC network
members were well placed to contribute to the conference of African Trade Minis-
ters in Abuja (September 2001), which deliberated on a set of common African posi-
tions for the 4th Ministerial Conference of the World Trade Organization (WTO)
held in Doha in 2001. Similar workshops in Mauritius (October 2001, November
2001), in Oslo (June 2002), and in Geneva (September 2002) provided the opportu-
nity to present and discuss some of the project results with African trade negotiators
and policy makers. A set of five background papers was prepared to assist African
countries to prepare for the 5th WTO Ministerial Conference in Cancun, Mexico,
in September 2003. Dissemination workshops were held in seven countries to share
the results of the research.
Similarly, it is no exaggeration to state that without the AERC Collaborative
Research Project on Poverty, Income Distribution and Labour Markets (the Poverty
T H E E X P E R I E N C E O F A E R C 149
"Collaborative projects provide an important `outlet' for senior and experienced
researchers to become involved in policy-relevant quality research."
Source: Wuyts (2004, 4)
Project), African countries would not--without significant external help--have
been in a position to prepare the poverty reduction strategy papers increasingly
required by the donor community. The project built an indigenous capacity to pre-
pare these plans as it aimed to build general analytical capacity in poverty analysis in
Africa.Among other collaborative research projects that address evolving policy are
the projects on Managing the Transition to Less Aid Dependence in Sub-Saharan
Africa,Africa and the World Trading System, African Imperatives in the New World
Trade Order, and Explaining African Economic Growth Performance.
Policy Support
During the last five years policy makers themselves were directly targeted for capacity
building through three short-term courses conducted in partnership with the World
Bank Institute: Strategic Poverty Analysis, Basic Poverty Measurement and Diagnos-
tics, and Advanced Poverty Analysis for Trainers. Participants were drawn from 16
countries in total and included policy analysts and government officers involved in
the development of poverty reduction strategy papers in their respective countries.
Some AERC researchers also took part, to nurture the research�policy nexus.
A particular feature of the research and training programs, rooted in a series of
evaluations of AERC activities, has been enhanced outreach to policy makers and
underrepresented groups.The aim is to sharpen the tools AERC uses for outreach
and policy relevance in order to make them more valuable to policy makers and
more accessible to the wider society. Among these tools are AERC Senior Policy
Seminars, which provide a forum for the discussion of policy-oriented syntheses of
AERC research and for obtaining feedback from policy makers on the AERC
research agenda.
There have been seven such seminars to date: Exchange Rates, Fiscal and Financial
Policy (Nairobi, Kenya, 1995); Financial Sector Reform (Abidjan, C�te d'Ivoire,
1996); Fiscal Policy (Accra, Ghana, 1997); Revenue Mobilization in Sub-Saharan
Africa (Gaborone, Botswana, 2000); Poverty Reduction and Macroeconomic Man-
agement in Africa (Dar es Salaam,Tanzania, 2002); Mobilization of Resources for
Financing Pro-Poor Growth in Africa (Kampala, Uganda, 2004); and Growth,
Poverty and Institutions (Cape Town, South Africa, 2005).Typically, 25�40 African
financial policy makers, researchers, and individuals from the private sector and aca-
demia participate, engaging in frank exchanges on the latest research findings, their
application to individual country contexts, and the specific experiences of the differ-
ent countries. It is significant that the last three seminars have related to poverty
reduction, which is directly responsive to a policy issue that confronts the continent.
150 W I L L I A M LYA K U RWA
AERC-supported national economic policy workshops are also useful tools for
promoting policy dialogue. In some countries these have become permanent annual
national events and are largely self-financed.Internationally,the network increasingly
serves as a sounding board for major policy considerations by the multilateral finan-
cial institutions--for example, the World Bank and International Monetary Fund
(IMF), and more recently the United Kingdom's Commission for Africa. AERC
researchers have to date been invited as witnesses to four hearings before the U.S.
Congress on matters pertaining to African development and the operations of the
international financial institutions affecting it.
Maintaining the Focus on Quality
AERC research and training programs are consistently lauded for the quality of their
output as well as the effectiveness and efficiency of the process. CMAP, for example,
is widely recognized for its high quality; and the program's history of very positive
reports from external examiners and high-grade achievements in the courses formed
part of the rationale for establishing the collaborative PhD program.The regional
interaction among students and teachers at the JFE sets the stage for future collabo-
ration not only among the participating universities but also--and perhaps more
importantly--among future policy makers and policy-making institutions.
AERC is also building an electronic network among the universities participat-
ing in the collaborative PhD and MA programs.This is aimed at facilitating infor-
mation sharing and improved access to world resource centers. It should almost go
without saying that the impact of the AERC network of researchers and institutions
depends crucially on the continued strengthening of its professional stature, the
members' enhanced credibility with policy makers, and their active, professional
involvement in their respective countries.
Proficient Management of Resources
The consortium has generally been successful in mobilizing resources. At its incep-
tion it raised an income of US$1,126,279 during the 1988�9 financial year and
expended US$654,366 in the same year.For fiscal year 2004�5,AERC annual income
had reached US$10.5 million against an annual expenditure of US$10.9 million (with
the deficit financed by carryover funds).In a show of increasing confidence inAERC's
activities, a number of donors increased funding over the 2000�5 strategic planning
period, while the French government came on board as a new donor.
Implementation Challenges
We noted earlier that the success of the AERC program was not achieved without
meeting--and to a large extent overcoming--a variety of challenges. Beyond the
simple fact of how to go about setting up an effective network, the day-to-day chal-
T H E E X P E R I E N C E O F A E R C 151
lenges highlighted here include dissemination issues and the sustainable management
of the training component.
Research and Dissemination Activities
AERC's intensive and highly specialized approach toward research inevitably limits
thematic coverage as well as the overall number of projects and researchers that can be
accommodated at any given time. An additional challenge is the coordination of
external peer reviews of final thematic research papers, including requested revisions
by the authors. Some authors fail to follow through to meet peer review require-
ments. A successfully completed research report may not necessarily be in a form suit-
able for publication in a journal or book.Therefore, the existing process is only
partially successful in generating one aspect of the preferred outcome--an expanded
publication record for network members in recognized journals.
Management of the Training Program
The program continues to face difficulties in attracting quality instructors for the JFE,
given the opportunity cost for such individuals.This has been the case for CMAP for
some time, but it is now especially true for CPP, because of its longer time spans and
intensity. Some universities also face constraints in recruiting lecturers to teach core
courses; such constraints are likely to persist until the program generates enough grad-
uates to boost the teaching of the courses in future.The joint CMAP and CPP JFE
sessions also presented a challenge in coordinating the different cohorts of students
and diverse profiles of trainers. As the number of CPP students continues to grow, it
is anticipated that the supervision of PhD theses will become difficult as well--par-
ticularly for subjects such as health economics and financial economics, in which
there are not many senior academicians teaching and researching on the continent.
The demand for the CPP has thus far outstripped the supply of available scholar-
ships from AERC, with more than 80 qualified students applying annually for the 21
scholarships AERC is able to provide for the whole continent. To target the best stu-
dents with these limited resources, all the participating universities are required to
advertise widely the availability of the scholarships and the stringent selection crite-
ria. It is encouraging to report, however, that nine applicants--four in 2003 and five
in 2004--successfully sourced for external funding and are thus able to participate in
the CPP. Some universities in the region (Botswana, Makerere, and Malawi) and a
number of organizations are also sponsoring students to the program, thereby allevi-
ating some of the pressure.
Although the CPP thesis review workshops are a significant aspect of the synergy
between training and research,holding them concurrently with the biannual research
workshops as originally planned will prove to be a major challenge as the program
matures because of the increasing numbers of students.There are now more than 70
students at various stages, which means that more than 70 supervisors and over 10
resource persons will be required at thesis workshops--eventually totalling nearly
200 participants, which is the equivalent of an entire biannual function.The PhD
academic board and the secretariat are working to design the PhD thesis workshop
152 W I L L I A M LYA K U RWA
modality to maximize the synergy between training and research without over-
whelming AERC resource persons and the biannual research workshop.
What Is the Impact?
Building capacity is only part of the equation--and perhaps the easier part at that.
AERC's mandate insists that, once built, the capacity must be retained in positions
and areas that contribute to the economic management of the continent.That this is
happening can be seen from a few selected examples.
Members of the AERC network occupy high-level positions in governments and
regional bodies across sub-Saharan Africa. In C�te d'Ivoire, for example, the minis-
ter of finance, the permanent secretary in the ministry of finance, and the economic
advisers to both the president and the prime minister are all products of the AERC
system. So are the governors of the central banks of Nigeria and Kenya and the gen-
eral manager of the Bank of Mozambique. Recognizing the quality, cost-effective-
ness, and Africa relevance of AERC training programs, the Bank of Tanzania and the
Bank of Uganda routinely send staff members to the Collaborative MA Programme
and the Collaborative PhD Programme for studies rather than sending them abroad.
In Kenya, the chief economist and the permanent secretary in the ministry of
finance are both AERC people; while in South Africa the same is true of the deputy
director of budget in the ministry of finance, the economic adviser to the govern-
ment of Kwazulu-Natal, and the director general of NorthWest Province.The com-
missioner for economic affairs at the African Union is a member of the AERC
network, and so are the director, Economic and Social Policy Division--who is a
former AERC research director--and the senior economist at the United Nations
Economic Commission for Africa.
Two AERC people are senior economists at the African Development Bank,
another is the manager of the African Capacity Building Foundation's new thrust on
knowledge management, and still others--including a former AERC executive
director and another former research director--occupy senior positions at theWorld
Bank.The IMF has AERC network members, also including a former executive
director, who are advisers to its African executive directors. In Mali, Cameroon,
Kenya,Tanzania, Ethiopia, and Chad, AERC researchers have been leaders in the
development of their respective countries' poverty reduction strategy papers.
A number of other governments involve AERC senior researchers as advisers
instead of bringing in personnel from outside. Indeed, the international financial
institutions underwrite the salaries of some of these advisers, rather than imposing
"A majority of the research alumni in seven countries expressed confidence that
their ideas and their research findings were becoming evident in policy documents
and policy decisions in their respective countries."
Source: Hassan and Rempel (2005, 39).
T H E E X P E R I E N C E O F A E R C 153
"Professors in universities and research institutes, directors of research in central
banks, and other senior economists gave credit to their earlier thematic research
involvement for setting them on a research career within the economics profession
to their current positions."
Source: Hassan and Rempel (2005, 3).
their own staff, which itself is a tribute to the quality AERC has helped to make
available on the continent.
Capacity building is more than training, and AERC's effort to build institutional
capacity goes beyond training teachers.The training program helps to build a satisfy-
ing working environment with access to computers, the latest journals, and other
amenities that were previously unknown on participating campuses.Many university
departments of economics would in fact have collapsed without AERC support, but
with that assistance and the culture of accountability engendered by the association
with AERC, they have been able to attract resources from elsewhere that contribute
to their sustainability and allow them to maintain an attractive professional milieu.
The AERC network stretches beyond the continent to reach members of the
African diaspora wherever they are. Since the very beginning, it has been the policy
of the consortium to seek out African scholars as resource persons to advise young
researchers at the biannual research workshops and to participate on collaborative
research projects.Members of the diaspora are routinely engaged as lecturers for both
CMAP and CPP, as well as being engaged as external examiners, curriculum devel-
opers, and reviewers of AERC research reports.
AERC has thus contributed to a professional esprit de corps that did not exist
before.The biannual research workshops,the Joint Facility for Electives,the Senior Pol-
icy Seminars, and other AERC activities bring economists together from across the
continent to exchange views and explore common problems.Research grants available
to network members afford the opportunity to make a contribution to knowledge and
to share professional camaraderie.The training program challenges people to stay
involved, providing opportunities in high-quality academic programs as lecturers,
examiners, and curriculum developers. Over 98 percent of CMAP graduates, many of
whom worked for policy-making bodies before their studies and returned to their
posts afterward,remain in Africa;some who have gone abroad have mostly done so for
PhD studies (before the advent of CPP), but only a few have remained overseas.As a
result of participation in either the research or the training program,network members
are distinguished by the quality that marksAERC,and thus have access to international
consulting opportunities.In all these ways,the association with AERC means that par-
ticipants are able to apply their expertise as economists--and to make a living doing so.
This alone contributes to professional pride and independence.
Whether the product of AERC activities has yet reached the critical mass neces-
sary for improved economic management is not yet clear. But it is certainly an
impressive beginning, and the changes in countries across the continent indicate a
154 W I L L I A M LYA K U RWA
growing acknowledgment of the importance of sound economic expertise and
research. In the coming strategic planning period,AERC will redouble its efforts to
ensure the retention of built capacity and its involvement in the policy process in
sub-Saharan Africa.
Future Directions
One mark of AERC's maturity is the implicit recognition in its strategic plan for
2005�10 that the consortium has moved beyond "phases" and has evolved into an
institution. Over the coming period, it is expected that the pace of activities will be
fine-tuned to meet the growing demand for AERC programs in a region that
remains in dire need of well-trained, locally based professional economists to facili-
tate sound economic management.The consortium is poised to meet this challenge
with a well-structured implementation strategy backed by a supportive board of
directors and a continentwide network of experienced economists.
Continuity and Innovation
Building on past experiences, new approaches to AERC's traditional capacity-
building activities have been adopted. The reorganization of thematic groups in the
period 2005�10 will enable the research program to keep abreast of changing
demands and anticipate policy needs--as well as to attract hitherto underrepre-
sented groups, such as women.To enhance the currency of policy-relevant research
as a framework for capacity building, the management of collaborative research
projects will be revised with a view to providing more concrete contributions to
policy debate. In line with steps to improve efficiency, the training program will
revise the CMAP governing structure with a view to streamlining and enhancing
the operations of this key element.
AERC will go a step further in the period 2005�10 with two new strategic
directions aimed at engaging new frontiers in the rapidly changing environment.
The first is an emphasis on institutional partnerships in response to the need to
enhance greater application of research results in the policy context. The second is
a recognition of the need to apply sound marketing principles to the consortium's
operations in response to advances in ICT and the competitiveness of resource
mobilization.
AERC's experience with building the capacity of individual researchers and of
university departments of economics has clearly shown that the latter activity is one
of the preconditions for the success of the former. This experience yielded the fol-
lowing strategic objective: fully incorporate economic policy research institutions
and university departments of economics into the AERC network.This objective
renews emphasis on enhanced support for and networking with national policy
research institutes, university departments of economics, and government research
institutes as vehicles for cooperative ventures during the period 2005�10. This con-
curs with the results of recent AERC studies that point to the critical role of institu-
T H E E X P E R I E N C E O F A E R C 155
2005�10 Strategic Objectives
� Scale up the development of African capacity to conduct policy relevant eco-
nomic research in a rapidly changing environment
� Fully incorporate economic policy research institutions and university depart-
ments of economics into the AERC network through innovative partnerships and
support
� Consolidate CPP and dovetail CMAP into it to enhance synergy between the
research and training programs
� Foster recognition of "Brand AERC" in Africa and beyond
Source: AERC.
tions in economic growth.The objective will also, to a lesser extent, harmonize sup-
port for institutional activities, thereby reducing duplication and enhancing synergy
between these institutions and the AERC.
Resource allocation worldwide is increasingly skewed to respond to geopolitical
and security considerations, with a marked bias in recent times favoring Pan-African
institutions. Leading foundations supporting development activities in Africa are
much more engaged, sophisticated, and networked, thus increasing competition for
resources and, by implication, increasing the need for greater awareness of AERC
and its products. This need is implicit in the objective to foster recognition of brand
AERC in Africa and beyond, which recognizes the importance of building on the
consortium's reputation for excellence, quality research, and graduate training as a
resource mobilization tool.The objective will, more importantly, promote formal
recognition of AERC and its products.
WhatWill AERC Look Like in 2010?
AERC is inspired by a long-term vision of a future in which all populations live in
a state of dignity and well-being. In Africa, AERC anticipates that struggling
economies will steadily progress toward breaking the bonds of poverty and low
growth, assisted by the adoption of diverse, sound economic policies that are
grounded in frontier research results.
In the short term, however,AERC will adopt a two-pronged approach toward the
achievement of that vision--both the deepening and the broadening of its research and
training programs.The network concept links individuals and institutions in a knowl-
edge-sharing,experience-sharing framework,and it will remain the key strategic instru-
ment for implementing AERC's activities and creating professional esprit de corps.
In the period 2005�10,AERC research and training programs will be deepened:
quality in all aspects will be significantly enhanced as the consortium consolidates
the gains achieved since its inception and accelerates progress toward its goal of
strengthening local capacity. The consortium, by 2010, will also have expanded the
research and training programs to be broader in outreach and coverage in terms of
156 W I L L I A M LYA K U RWA
the linguistic and other divides that govern the African continent, thereby spanning
more countries and featuring more-balanced gender participation.
Over these five years AERC will have awarded approximately 160 more thematic
research grants to budding economic researchers, and supported 180 more senior
researchers in other projects.The quality of research will become significantly higher,
having continuously been enforced through the biannual research workshop and
external review modalities. Enhanced quality of research implies that in the dissem-
ination of research output, a larger number of final reports will find outlets in inter-
national journals. The tandem effect will be a higher caliber of researchers,renowned
for their output, with a larger number of them posted to senior government posi-
tions or working with African governments and regional bodies.Many will continue
growing in the AERC network,"graduating" to become resource persons and a few
to become program committee members.The most visible impact will be that a
majority of resource persons will be senior African researchers, a major achievement
from the consortium's initial operations that will naturally have a positive impact on
the "African-ness" of research direction, thereby increasing the policy relevance of
AERC research in providing unique solutions to the continent's endemic economic
problems.
The quality of training will be enhanced through the continued rigorous screen-
ing of students joining the collaborative graduate programs, particularly as demand
trends continue to far outstrip allocated resources for the program. It is noteworthy
that between 2005 and 2010, CMAP plans to have trained approximately 800 grad-
uates. CPP, spanning the four regions of the continent, will, by 2010, have supported
at least 100 graduates of the program and will have another 80 students in the
pipeline,while a target of 60 graduates will have succeeded through support for PhD
thesis research grants. This will directly and indirectly affect the quality of training
for similar initiatives at the MA level in francophone countries, in South Africa, and
in Nigeria that are based on the AERC concept, with the anticipated result that by
2010, the format of AERC collaborative graduate programs will have been adopted
by the majority of universities in sub-Saharan Africa. A key anticipated outcome of
these high-quality collaborative training programs is a rejuvenated culture of research
in African universities, with enhanced linkages to policy research institutes.
Outreach activities, particularly on the African continent, will be accelerated in
the short term for both research and training programs, with the expected end result
of a larger number of policy makers participating in the AERC network, thus pre-
cipitating greater formal and informal interactions between researchers and policy
makers. It is further anticipated that by 2010 the AERC Web site will be the pre-
ferred tool for access to and dissemination of information on economics, as well as
for communication on developments in economic research and graduate training in
Africa.
These outreach initiatives will have one major impact--a better-known AERC
in the continent and beyond. The resulting benefit is a larger number of African eco-
nomic researchers and policy makers being aware of and attracted to the consor-
tium's products and services. In 2010, it is expected that there will be heightened
T H E E X P E R I E N C E O F A E R C 157
interest and larger numbers of African policy makers contributing to the policy
debate who will be better informed by research results.
The synergies between the research and training programs will be further
strengthened as senior researchers and resource persons participate as teaching fac-
ulty in the CPP, thereby boosting the numbers of thesis supervisors, external exam-
iners, and policy practitioners.The collaborative training programs will continue to
produce first-class researchers, policy professionals, and academics, who will simulta-
neously participate in the research program activities.
The programs will in the period 2005�10 be supported by a keen, performance-
based management team.Well before 2010, the team will be leading a coherent and
professional workforce with clear lines of succession in place.The anticipated result,
after years of careful nurturing and guidance, is a motivated, high-performance staff
complement, with each member striving to achieve his or her fullest potential. Fol-
lowing management's focus on diversity and enhancement of resources in the period,
a modest increase in African government and private sector contributions to the
consortium is expected by 2010.The end result is a focus on supporting more under-
represented countries in the network, with proportionately less support for the more
amply endowed countries.
In the longer term, AERC, with its increasingly solid reputation as the premier
economics research and training network in the region and possibly internationally,
will evolve into the "think-net" for the African Union (AU) and the New Partner-
ship for Africa's Development (NEPAD). It is additionally expected that the demand
for AERC's products and services will, more and more, elicit greater demand inter-
nationally from multilateral institutions, which will in turn support AERC activities.
The global view of AERC in 2010 is of resolute, configured synergy between the
consortium's research and training programs, with all outputs feeding into and sup-
porting one another.With AERC's continued efforts toward its vision of the collec-
tive, concerted action of informed policy makers and researchers, it is expected that
the full potential of Africa's resources will be harnessed to contribute to poverty
eradication.
Conclusions
AERC's support for research as well as its huge involvement in graduate training
comprise a significant contribution toward strengthening the economics profession
in sub-Saharan Africa.As suggested in external evaluations of AERC, the most tan-
gible indication of the consortium's impact has been the retention of good profes-
sionals in the region. Much of the evidence is anecdotal insofar as individuals have
indicated that the AERC has played a significant role in inducing them to persist in
teaching and research under very trying circumstances. Although the consortium
itself can provide only limited financial support through token honorariums for
research and prospective emoluments for various activities relating to graduate teach-
ing under the CMAP and CPP, it facilitates access to other remunerative activities,
in particular consultancies financed by local and external agencies.
158 W I L L I A M LYA K U RWA
"A proven track record in both capacity building and research provides AERC with
credibility. Increasingly, this experience and reputation is being drawn upon, both
within African countries and in international forums."
Source: Hassan and Rempel (2005).
Assigning primacy to process requires an inductive and heuristic approach as
opposed to the deductive and determinist thinking typifying recent attempts at
"capacity building." Estimating the volume of "output" is less important than setting
in motion the processes needed to achieve it.
In the case of AERC, for example, the collaborative graduate programs are condi-
tioned by one overwhelming fact: they are limited interventions that must somehow
overcome constraints primarily systemic in origin. It is this basic consideration that has
shaped these programs--specifically the efforts to exploit potential externalities and
scale economies,to insulate the activity from political and economic vicissitudes,and to
introduce and sustain pecuniary and professional incentives. Of lesser importance is the
prior determination of quantitative targets, be they graduates or institutions. Such tar-
gets cannot be ascertained precisely and will undoubtedly change substantially over
time.They are also less essential for a successful outcome than a clear grasp of the insti-
tutional topography that conditions the strategy and the processes the strategy sets in
motion. Indeed, processes centering on peer review and the promotion of excellence
will probably prove to be the program's most durable and important outcome.
Attention to process,confidence in local professionals,and the use of material and
professional incentives to foster institutional reform are key elements of the success
of AERC's approach to its three primary activities: building capacity, contributing to
knowledge, and informing policy.
References
AERC [African Economic Research Consortium]. 1992. "Operational Plan for a
Regional Collaborative Master's Programme in Economics for Anglophone
Africa (Except Nigeria)." AERC, Nairobi, Kenya.
------. 2002."Operational Plan for a Collaborative PhD Programme in Econom-
ics for Sub-Saharan Africa."AERC, Nairobi, Kenya.
------. 2005."Continuity and Innovation:A Strategic Plan for April 2005�March
2010."AERC, Nairobi, Kenya.
Ajayi, S. Ibi, H.J. Pegatienan, and M. Mukras. 1990."Graduate Training in Econom-
ics for Africans:A Joint Report." Special Paper No. 5.AERC, Nairobi, Kenya.
Fine, J.C. 1990."A Strategy for Graduate Training in Economics for Africans." Spe-
cial Paper No. 9.AERC, Nairobi, Kenya.
------. 1992."Could Success Destroy the AERC?"AERC, Nairobi, Kenya.
T H E E X P E R I E N C E O F A E R C 159
------. 1997. "An African Based Doctoral Programme in Economics: Summary
Report." Special Paper No. 26. African Economic Research Consortium,
Nairobi, Kenya.
Fine, J.C.,W. Lyakurwa, and A.G. Drabek.1994."PhD Education in Economics in
Sub-Saharan Africa."AERC, Nairobi, Kenya.
Hassan, R. and H. Rempel. 2005."Building an Economics Profession in Africa:An
Evaluation of PhaseV of the African Economic Research Consortium." Report
of a consultancy commissioned by AERC, Nairobi, Kenya.
Kimuyu, P. 2003."Impact of the AERC's Training Programme." Report of a con-
sultancy commissioned by AERC, Nairobi, Kenya.
Wuyts, M. 2004."An Evaluation of the AERC Research Programme: 1997�2003."
Institute of Social Studies,The Hague, the Netherlands. Report of a consultancy
commissioned by AERC, Nairobi, Kenya.
The Economics Education and
Research Consortium
Robert Campbell
The Economics Education and Research Consortium has conducted two programs aimed at
building capacity in modern economics in the former Soviet Union. A two-year economics pro-
gram in Kiev, Ukraine, taught in English--mostly by visiting faculty from abroad and using
English-language texts--has graduated some 300 MAs with an education in modern econom-
ics. About 60 percent of the graduates of the program have gone directly to jobs in Ukraine;
the others have gone abroad to further their education at the PHD level. The challenge now is
to "Ukrainianize" the program, by shifting instruction to newly trained PhDs returning to
Ukraine, and by transferring responsibility for administration and financing to local institu-
tions and sources. This process is well under way, though serious challenges remain. The sec-
ond program, based in Moscow, has supported the development of research skills and projects,
first in Russia, then in other countries of the former Soviet Union as well. Some 400 persons
have received support through participation in methodological and mentoring workshops and
through grants for individual research projects. The next step for this program is to institu-
tionalize it and to integrate its resources with those of other foci of excellence in economics
in the Commonwealth of Independent States. To this end, it is evolving into a system provid-
ing networking and information and dissemination services for economic research in addition
to research support. These programs, now in their 10th year, have earned a reputation for
quality and have demonstrated that the model works. The paper describes some lessons
learned in the process regarding the requisites for quality and some pitfalls to be avoided. It
also offers suggestions for extending similar programs to new areas and to a broader clientele.
THE PURPOSE OF THIS PAPER IS TO DESCRIBE THE WORK OF THE ECONOMICS EDUCA-
tion and Research Consortium (EERC) in building capacity for economics training
and research in the former Soviet Union. It also summarizes some lessons learned
about what does and does not work as we contemplate building on the base already
created to achieve additional results and extend these capacity-building efforts to
other institutions and countries.
161
162 RO B E RT CA M P B E L L
Origins of EERC
EERC began in the mid 1990s as the result of extensive discussions among people
at theWorld Bank and at the Eurasia Foundation about the need for improving eco-
nomics education and research in Ukraine and Russia.1 The proposed program
responded to different needs in Russia and in Ukraine. Ukraine offered a virgin field
for some form of improved economics education at the graduate level, but there was
little in the way of resources there on which to base support of modern economic
research. In Russia an economics MA program was already in operation in the form
of the New Economic School (NES),which suggested a model for a similar program
in Ukraine. And in fact many of the features of the EERC program in Ukraine were
based on the NES model. But there was not in Russia any institution or program for
incubating a modern research capability in economics.The EERC program thus
envisaged an economics MA program in Ukraine and a program to stimulate eco-
nomics research in Russia. I will review these two efforts in turn.
The MA Program: Ukraine
The long-range goal guiding the design of the MA program in Ukraine was "to cre-
ate a new generation of economists for Ukraine." It was well understood this would
be a long process.The first step would be to establish a two-year MA program meet-
ing international quality standards. It was envisaged that its graduates would follow
two kinds of paths.Some would put their skills to work immediately in Ukraine,and
some would go abroad to continue their study and earn PhDs.The program would
assist in placing students going abroad for more advanced work, but--in addition to
gaining admission to PhD programs abroad--these students had to win financing as
well.The vision was that ultimately these newly trained economists would return to
Ukraine, providing a skeleton resource base for a broader transformation of eco-
nomics education and research.
The program began in 1996. It was financed by an international consortium of
donors that originally included the Eurasia Foundation (with money ultimately from
AID), George Soros's Open Society Institute (OSI), the Starr Foundation, and the
World Bank). Responsibility for managing the program was assigned to the Eurasia
Foundation,reporting to a governing board representing the donors.Eurasia also estab-
lished an international advisory board for the program with responsibility for oversee-
ing its academic quality.2 It was thought best to find a host university with which to
partner rather than to try to set up a completely new institution. A team from EERC
looked at several candidates, and in the end chose the National University of Kyiv
Mohyla Academy (NaUKMA), a new postcommunist university that shared our goals
of modern, internationally oriented education, and was prepared to provide some
resources. Designing and administering the program was put in the hands of a resident
director, and I was recruited for this job in the spring of 1996. I went on the payroll in
May 1996,set out to design a curriculum,recruit administrative and teaching staff,buy
textbooks, recruit the first cohort of students, and so on. It was a hurried process, but
we were able to inaugurate the program in September of that year.
T H E E C O N O M I C S E D U CAT I O N A N D R E S E A R C H C O N S O RT I U M 163
Having settled on NaUKMA as our partner institution, we negotiated an agree-
ment with the university administration that,in retrospect,was quite foresighted.The
agreement gave EERC the degree of freedom and control that permitted us to
design a high-quality program.The university agreed to be responsible for obtaining
certification and accreditation for the program from the Ukraine ministry of educa-
tion. Such approval is important since it means our graduates receive state diplomas.
An important provision was the university's agreement not to have a competing MA
program of its own. It provided some resources in kind--that is, facilities for offices,
classrooms, and dormitory space, and some faculty. From the beginning it provided
significant input into the process of selecting students for the program, though the
final choice remained in the hands of the EERC director.
The administrative structure of the program was as follows:the Eurasia Foundation
was the overall manager,a resident academic director was responsible for managing the
program and maintaining quality,overseen by an international advisory board,meeting
semiannually.The director was assisted by a program assistant and several local staff per-
sons for such functions as academic record keeping,accounting,admissions,public rela-
tions, computer and Internet facilities, the library, and so on. A person was designated
by NaUKMA to serve as liaison between the program and the university.
The academic year,running from the beginning of September to the end of June,
is divided into five 8-week miniterms. This arrangement allows for considerable
flexibility in hiring and in curricular offerings. It has enabled us to take advantage of
the differences in academic years in various countries in recruiting faculty. Some vis-
itors have come for a single miniterm, others for longer periods. Many of them have
been repeaters. Overall we have had gratifying success in finding excellent faculty,
though we have had a few disappointments.
Since this conference is intended partly as a "how-to" report for new initiatives
in areas where such programs are still to be established, it may be appropriate to pro-
vide more detail about nuts and bolts than might otherwise interest a casual reader.
In setting up a more or less autonomous program it is necessary to take responsibil-
ity for many details that in a normal university would be taken care of by existing
infrastructure, procedures, and traditions. A short checklist of the main considera-
tions to be kept in mind may be useful.
The main ingredients for a successful program are
� talented students,
� an able faculty thoroughly conversant with their fields and committed to good
teaching,
� quality and rigor in curriculum and instruction, and
� creation of an appropriate student culture.
Let me say something about each of these.
Students
With a very large pool of newly graduated BAs in Ukraine from which to draw we
have found it easy to select good students.The size and quality of the applicant pool
164 RO B E RT CA M P B E L L
has varied, but we have managed to recruit a very able group each year. A few drop
out of each cohort before graduation, some for personal reasons, a relatively few for
inadequate performance. The admissions process involves exams in English and
Ukrainian languages, mathematics, and economics, plus an interview. In the begin-
ning our main goal was to admit talented students with adequate English and math
abilities. Many of these applicants had backgrounds in fields other than economics,
but we concerned ourselves less with how much economics they knew than with
their general "smarts." As undergraduate economics education has improved in
Ukraine, more of the applicants have an economics specialization, and the econom-
ics exam has become more important in the selection process.
Each year's admission cohort was about 50 people. Since there is normally some
attrition over the two-year period of the program, there are something under 100
students in residence. It is necessary to be about this large to keep the cost per grad-
uate down. Operating the program with significantly fewer students would not be
economical.This scale was also consistent with the size of our two markets--the
pool of highly talented candidates we might attract to such a program, and the num-
ber of graduates we could expect to place in jobs that utilized their training.
We subsequently broadened the regional reach of the program to include Belarus,
Moldova, and (beginning in 2004) the Caucasus. Applicants from these areas go
through the regular admission process,including Ukrainian language exams,but have
been given some assistance in meeting that requirement in the form of a two-week
intensive preparatory course in Ukrainian, and some forbearance on the timetable
for meeting the requirement.The preparatory course in Ukrainian is important not
only for applicants from countries outside Ukraine, but also for those Ukrainians
whose native language is Russian.The decision to include other countries was taken
partly at the request of donors--the Swedish and Norwegian governments have pro-
vided special funding for this aspect of the program. Our experience with non-
Ukrainians has been spotty. The Belarus students have generally performed
excellently, the Moldovans somewhat less so.This year's first-time experiment with
students from the Caucasus has been disappointing.
Curriculum
Ours is a two-year program, taught in English, using international textbooks and lit-
erature. In the earlier years we provided students with the necessary textbooks and
let them retain the texts for their personal use, but that decision is very expensive. As
time has gone on, we have been less generous in this area, and have relied more on
articles and other readings that we reproduce for students' use.The first year of work
consists of year-long sequences in the core subjects and skills--microeconomics,
macroeconomics, statistics/econometrics, and mathematics for economists. Help in
English has also been offered for those who require it. In the beginning the faculty
consisted basically of visitors from abroad, though the course in mathematics for
economists has been taught from the beginning by a NaUKMA faculty member
using a standard English-language textbook.
T H E E C O N O M I C S E D U CAT I O N A N D R E S E A R C H C O N S O RT I U M 165
The second year consists of more applied courses--in international trade, bank-
ing and finance, public finance, labor economics, and so on.We have added some
electives and the possibility for a student to specialize to some extent. In the second
year something like a quarter of each student's time is devoted to participation in a
research workshop and the preparation of a thesis. At first the thesis requirement
seemed to be a very daunting task. No graduate program in the United States that I
know of would attempt to generate, supervise, and evaluate 40 or so MA theses each
year with a staff of four full-time equivalent faculty. But after some experimentation
we developed a system of workshops and a procedure for supervision that has worked
out well.The quality of the theses has improved over time, and each year there are a
few that the examiners consider publishable pieces of work.The thesis process has
also become an important experience for helping students develop presentation
skills.
Curriculum issues have been handed over increasingly to the faculty, which now
has a curriculum committee working under the academic director.
Faculty
Until recently (see below regarding indigenization) most teaching was done by vis-
iting faculty from abroad. Over the years we have had more than 50 visiting faculty
members teaching in the program.They have come from 11 different countries,
including Poland and Czechoslovakia, with the majority from the United States and
Canada.They have come from a variety of backgrounds.There is a surprisingly large
number of people who make a career of teaching abroad, but for the most part we
sought visitors who held or had held regular appointments in universities and were
active in the graduate programs of their institutions.This helps recreate the atmos-
phere of a university environment. Our goal has been to have at least some teachers
from well-known institutions and with established reputations. But we always con-
sidered good teaching an indispensable requirement, and effectiveness of teaching
was an important consideration in whether a person was invited back as a repeater.
For the most part faculty members have found the experience very rewarding, and
they especially appreciated the ability and enthusiasm of the students. On the whole
they had no trouble putting up with the rather Spartan living conditions that were
all we could offer in the first years. In offering advice to anyone starting a new pro-
gram of this kind, however, I would emphasize that an adequate level of comfort in
living accommodations is not to be neglected.
Culture and Standards
The effectiveness of the program depends importantly on developing a sense of
identity for the students, a feeling that they are participating in a unique opportunity
that deserves their best effort.In our experience,the students found the requirements
of the program quite demanding--they had not previously experienced the degree
of commitment and the rigor of standards to which we aspired.
166 RO B E RT CA M P B E L L
In the climate of bribery for grades and admissions and rampant cheating that
often exist in the local university world, special attention has to be given to creating
a commitment to academic honesty. We established our own grading system (though
it was reasonably assimilable to the system used in the host university) and set rules
for continuing in the program in the form of a cumulative GPA.We have succeeded
in maintaining this standard and have dropped students who did not meet it, though
with some flexibility in the form of probation.The rules against plagiarism are care-
fully spelled out in the student code of conduct, and some students have been
dropped for plagiarism. Maintaining normal standards of academic integrity in a
society that is riddled with corruption in higher education is a question that any such
effort as ours must face, and it has been a great help in maintaining those academic
standards to have NaUKMA as a host that is adamant against corruption in admis-
sions and grading.
From the beginning we have taken as one of our givens that the students must
become members of the international community of economists.They need to be
able to communicate in English, to be acquainted with world economics literature,
to be in touch with the international community through the Internet, and so on.
Having graduates of the program now studying abroad facilitates this sense of
involvement, and our students and alumni form a close-knit community.
The program started off with virtually nothing in the way of a library.We had
only a few computers to start with, essential for the statistics/econometrics courses,
but no good Internet connection. Since then both the library and the computer
facilities have been continuously improved.There are now plenty of computers and
an excellent Internet connection.The Web is an essential complement or even sub-
stitute for library resources; and we have not made a particularly large investment in
books and journals. A fast and reliable Internet connection is both a source for
teaching and research material and a means for making our students feel themselves
part of the worldwide economics community.
Ancillary Activities
In addition to their work in the classroom, we have sought to give most of our stu-
dents some practical work experience in apprenticeships, and have placed them in a
variety of such positions--in the private sector, often with foreign firms, in banks,
some in government agencies, and some in parliament. It turned out to be quite dif-
ficult to find paid apprenticeships, and so program funds were used to provide
stipends for some, and we have sought other sources for financing such stipends.The
apprenticeship program serves several important purposes. It helps students form
connections that may lead to employment on graduation, it showcases the skills of
our students to the public,and at times it may lead to research topics that can become
the subject of a thesis.
The program undertakes to assist our graduates both in finding jobs locally and
in gaining admission to programs abroad. By now we have a good set of connections
for finding jobs in the Ukrainian market,through alumni,apprenticeships,and so on.
T H E E C O N O M I C S E D U CAT I O N A N D R E S E A R C H C O N S O RT I U M 167
We had wondered at one time if that market might not become saturated, but
employer satisfaction with our graduates helps support it,and the overturn of the old
system with the "orange revolution" seems certain to mean a general opening up of
employment opportunities for people with the skills of our graduates, in both the
private and public sectors.
Application to PhD programs at Western universities involves considerable
expense--GRE exams,application fees,and so on,and we have helped finance those
costs.The director and faculty members have made an intensive effort to counsel stu-
dents about their best chances for getting accepted and have written innumerable
supporting letters.
Another ancillary activity has been annual student research conferences.These are
designed to showcase our own students, to engage with students from other institu-
tions, and to give our students added incentives for professional development and
practice in public presentations.The conferences have been very successful in all
these dimensions.The students have come to show quite a professional degree of
polish in making their presentations.Over the years we have been inviting more par-
ticipants from other Commonwealth of Independent States (CIS) countries.
We have now finished nine years of the program. Over the first eight years we
produced 262 graduates,and will add another 40 or so in June 2005.3 Of these about
40 percent have gone abroad to do further graduate work.They have generally been
placed in top-quality institutions in North American andWestern Europe, though it
took us several years before we began to get them placed in the highest ranked (top
10) institutions.The rest are working in Ukraine, mostly in jobs that put to work the
skills they learned in the program. Of those who went abroad about 10 have com-
pleted PhDs, and another large group will finish over the next couple of years. It is a
source of pride to us and a measure of success that only three graduates have been
dropped from their PhD programs for one reason or another.
To sum up, I believe it is fair to say that the proximate goals of creating a model
program, establishing a reputation for quality, producing a cadre of students with
good educations in modern economics, and demonstrating that our students can
compete worldwide has been achieved. But with that work behind us, we are now
seeking to move on toward the longer-range goals of the original vision.We want to
entice back the new PhDs, to enlist them in teaching in our program and to dissem-
inate modern concepts of economics and its teaching to other institutions in Ukraine
as well.We want to see our new PhDs combining research with teaching in the tra-
ditional Western pattern.We want to see them assume the role of inculcating mod-
ern economics education and research in Ukraine that has up to now depended on
outside initiative.
Indigenization
From the beginning the expectation was that responsibility for the MA program
would ultimately be transferred to a Ukrainian institution.The donors did not envis-
age financing the MA program indefinitely, and hoped that it would sooner or later
168 RO B E RT CA M P B E L L
become self-sustaining, with the responsibility for its continuance shifting to local
institutions. At the inception of the program, however, we had no set timetable.
EERC has now begun the process of this shift in earnest. Ukrainianization has
involved two steps: moving the administration of EERC from Washington to Kyiv
and gradually transferring responsibility for its operation to Ukrainians.
Moving the administration of the program from Washington to Ukraine reduces
costs, gives Ukrainian staff experience in administration, and helps overcome the
impression that EERC is an alien institution.This move is now complete. EERC is
now set up as a nonprofit U.S. corporation (EERC, Inc.), but its main embodiment
is a representative office in Ukraine that administers the program.Though based in
Kyiv, EERC, Inc. is also responsible for the EERC-Russia program. It has a board of
trustees, whose members are William Maynes and Anders Aslund (co-chairs); Fran-
cois Bourguignon,World Bank;Vyacheslav Briukhovetsky, President of NaUKMA;
Robert Campbell, Indiana University; Ulrich Hewer,World Bank; George Logush,
Kraft Foods, Ukraine; Sten Luthman, Swedish government; Volodymyr Moronets,
NaUKMA; William Newton-Smith, ISU; Victor Pinchuk; Lyn Squire, Global
Development Network (GDN); andYuriyYekhanurov, prime minister of Ukraine.
Down the road, as indigenization proceeds and administration of the program
shifts to NaUKMA, EERC, Inc. will probably be turned into a charitable founda-
tion. At that point EERC's function will be to raise money for the program and to
continue some degree of oversight though sharing a board of trustees with the new
Kyiv School of Economics (see below). Choosing a form for incorporation is a
tricky business that creators of new programs need to investigate thoroughly. It
involves the specific laws of any given country, and is something that has to be care-
fully studied and negotiated in each specific instance.
From the beginning the expectation was that in time responsibility and control
for the MA program would be fully transferred to NaUKMA, the host institution. It
would have responsibility for all aspects of the program but would work closely with
a rump EERC in whatever form we manage to incorporate it for purposes of fund-
raising and oversight.
Though our explicit indigenization effort got underway only in the last couple of
years, there has been some effort from the beginning to involve NaUKMA in the
program.The mathematics-for-economists sequence of the first year program has
been taught by Ukrainian faculty from NaUKMA from the beginning.We also used
teachers from NaUKMA to teach English and Ukrainian. From fairly early on we
hoped to recruit local faculty who could meet our teaching standards through "cer-
tification," and established a procedure for certifying Ukrainian faculty to teach in
the program. Requirements for certification included teaching experience, together
with exposure to Western teaching practices and an ability to teach in English, a
record of research and publication, and so on.Two members of the NaUKMA fac-
ulty (Larisa Krasnikova and Irina Lukyanenko) have gone through a process of
apprenticeship to receive certification as regular faculty members. Early on, the pro-
gram supported their attendance at a summer course at Boulder, Colorado, in the
United States.They then went on to team teaching with regular faculty in the pro-
T H E E C O N O M I C S E D U CAT I O N A N D R E S E A R C H C O N S O RT I U M 169
gram. A third person has recently been certified as well. Once certified, Ukrainian
faculty members are eligible to be considered on the same basis as expat faculty for
teaching courses in their specific field.
Indigenization began intensively in the 2003�4 academic year, under a three-year
business plan approved by the donors for shifting responsibility to NaUKMA.This
was bound to be a difficult process. From the point of view of EERC, it is difficult
to relinquish autonomy in matters that seem crucial to maintaining quality, such as
library management, control of the computer and Internet facilities, and policy on
grading and retention. From the other side, the university administration is not espe-
cially eager to take on the burden of fund-raising and of absorbing into their own
structure a program that excites envy for the resources it has enjoyed. But because of
the reluctance of the donors to continue support of the program without an end-
point in sight, and because we had accomplished the possibility for handing teaching
over to Ukrainians, it seemed that the time had come.
When the program began, we knew that the university's economics faculty as it
then existed would not be capable of taking responsibility for this program.We had
hoped that the university might be able to upgrade the personnel and leadership of
the economics faculty to qualify it to do so.We sponsored visits to institutions in the
West to familiarize the university administration with what would need to be done
in this regard, but we were not successful in that effort.The strategy we are now fol-
lowing is to create a new unit in the university--the Kyiv Mohyla School of
Economics--to provide a home for the program and other graduate training and
research in economics.The university has approved the creation of such a school,and
some of the steps for making it operational have been taken.The problem now is to
find a director for the school, a daunting challenge.
One of the prerequisites for the indigenization process is to find Ukrainian econ-
omists who can staff the new school and maintain the quality standards of the pro-
gram.We have had some success in finding locals whom we could certify as qualified
to teach in the program, but that approach cannot be the main solution.The only
way to meet this requirement is to recruit Ukrainians with western PhDs, and those
will mostly be graduates of our program who went on to earn PhDs abroad.
There has always been great deal of concern about whether those students could
be enticed back. By and large, newly graduating Ukrainian PhDs have career oppor-
tunities abroad equal to those of other new Western PhDs entering the job market.
There is a terrible disparity between the two situations, both financial and profes-
sional. It is difficult to turn down starting salaries of, say, US$70,000 in the West to
teach in a Ukrainian university where professors are paid US$100 per month. Both
among the outside financial sponsors of the program and among Ukrainian policy-
makers, there was a strong fear that sending EERC graduates abroad to earn PhDs
would do more to promote brain drain than to create a new generation of econo-
mists who would devote themselves to participating in the modernization of
Ukraine.
This issue is now being tested, and we have had encouraging success so far.We
hired the first Ukrainian with a new Western PhD (though not a graduate of the
170 RO B E RT CA M P B E L L
EERC program) in the 2003�4 academic year. In the academic year 2004�5, there
were 14 Ukrainians teaching, not including the NaUKMA faculty.They accounted
for over 80 percent of the total of 87 courses taught. No one has yet returned to
teach in another Ukrainian institution.And so far only one returnee seems to have
really committed to making a permanent career in Ukraine. Some are clearly only
testing the waters and are not taking permanent jobs. One approach to attracting
them back has been the system of Alumni Fellows,through which we bring back our
graduates now at the ABD stage in Western universities to teach mostly first-year
courses.Though some see using such junior persons as a dilution of faculty quality
compared with relying primarily on seasoned foreign visitors, it is our assessment
that they do a fine job.They are much less expensive than regular faculty, they pro-
vide useful role models for students currently studying in the program, and it is our
hope that some of them will find a satisfaction that will lead later to their return.
There are many motivations for the new Ukrainian PhDs to teach in our pro-
gram.We try to palliate the financial sacrifice--they are paid less than they could get
in the North American or European market, but still they are paid well above usual
Ukrainian levels.The cost of living in Ukraine is obviously much lower than it is
abroad. Also we try to make it possible for them to have the kind of professional life
in Kyiv they would expect if they had remained abroad to make a career.We give
time off for research, provide research assistance, finance travel to international con-
ferences, and so on. For some, family ties and the desire to raise their children in a
Ukrainian environment are important.We have found a few who see the advantages
of being early entrants in what now promises to become a market that will value
their skills highly. It is our great good fortune that just at the time many are emerg-
ing from the pipeline,a great transformation is occurring in Ukraine:serious reforms
can be expected to create openings for our graduates in government, in a thriving
private sector, and in university teaching. Serendipity is validating the chutzpah of
the original faith that we would be able to attract them back.
It should be no surprise that this experiment in skill and knowledge transfer has
worked. It worked for many nations afterWorldWar II. It worked for the New Eco-
nomic School in Russia. And it is a process with deep historical roots--this is not the
first time modern economics has been introduced into this region. I have been
working on a history of economics in Russia (in its changing form as an empire, the
USSR,and now as a collection of successor states). At the end of the nineteenth cen-
tury Russia went from being a backwater in world economics to a country with a
fully respectable economics establishment by the Western European standards of the
time. It could boast of a number of figures of renown, such as M. I. Tugan-
Baranovskii.The process by which this transformation took place was that Russians
(and Ukrainians) went abroad for the advanced study of economics at the main cen-
ters of Western Europe, and came back to apply their skills in Russia.The Russian
economist who most often gets mentioned in Western textbooks--Evgenii
Slutskii--followed this pattern. Moreover, some of these returning economists went
on to found or teach in new institutions that provided instruction at what was then
the international standard. Examples are the economics division of the St. Petersburg
T H E E C O N O M I C S E D U CAT I O N A N D R E S E A R C H C O N S O RT I U M 171
Polytechnic Institute, the Moscow Commercial Institute (which later became the
Plekhanov Institute), and the Kiev Commercial Institute.These institutions began to
turn out a homebred generation of economists who gained world-class reputations
and made important contributions to world economic science--N. D. Kondratiev (a
student of Tugan-Baranovskii),V. K. Dmitriev (who studied at the St. Petersburg
Polytechnic Institute),V.V. Novozhilov (who studied under Slutskii), A. A. Konius,
among others. Unfortunately, Stalinist repression put an end to this achievement,
turning economics in the former Soviet Union into a wasteland.
Now a century later, the process of transferring world economic science to Rus-
sia and its successor states is recurring; and we should expect the same result--the
creation of a highly talented generation of economists of a new kind.We see it
already in the youngest generation of economists.There seems something histori-
cally natural and inevitable about the process, but with our help it is proceeding
much more rapidly this time round.Tugan-Baranovskii started working in the British
museum in 1892,but his student Kondrat'ev emerged as a major contributor to eco-
nomics only three decades later, in the 1920s.
Indigenization is the most difficult part of the transfer process. Since the new rela-
tionship between EERC and NaUKMA is still under negotiation, I have to leave the
details of issues and solutions somewhat vague.There is sincere agreement between
EERC and NaUKMA on the desirability and general outline of the transition, but the
devil is in the details.Our program really is an alien transplant in the structure of the uni-
versity, which operates under all kinds of bureaucratic rules imposed on it by the min-
istries of finance and of education, and of its own making.The university has less strict
rules for dropping a student for poor performance than we have thought necessary. It
faces numerous restrictions on how money can be spent.The task is going to be to pre-
serve some degree of exceptionalism for the program within the university, even when
the university comes to own it.Disputes over these matters are the flip side of the inde-
pendence in the start-up stages that enabled us to establish a reputation for quality.
One of the most serious obstacles to indigenization lies in the disparity between
the existing salary levels within universities in the region and the salary level required
to attract the able and well-trained faculty needed to maintain an international level
of quality.This is true whether we are talking about returning PhDs or the leavening
of visiting faculty that it would be desirable to continue for several years.This is cer-
tainly true in the EERC case, and it will plague all efforts at indigenization.This dis-
parity presents not only a problem of continued subsidization, but it also creates
tension and ill will within the host institution. Such tensions make it hard to gain
acceptance for the program among the rest of the faculty, and thus making it difficult
for a university administration to support it.This is true not just for salaries but also
for other kinds of resources as well, such as libraries and Internet connectivity.
Lessons Learned,Tradeoffs, and Pitfalls
What can we learn from EERC's experience regarding the ingredients necessary for
success, pitfalls to be avoided, and guidelines for extending it to more institutions
172 RO B E RT CA M P B E L L
within each country and to more countries? I remind you that this conference is a
revisitation of the issue of capacity building in former communist countries, echoing
a discussion at a meeting of the Association for Comparative Economic Systems
(ACES) in December 1999.4 At that point it seemed that several things were already
perfectly clear, and I summarized the lessons that I saw in that experience in six
points.
1. To meet the hoped-for quality goals, there needs to be a high degree of pro-
gram autonomy in establishing curriculum, course content, and standards of
instruction.
2. The basic strategy aiming at ultimate self-replication must be seen as a sus-
tained effort with clear goals and a commitment to be in business for a decade
or more.
3. A greenfield approach in which the sponsors work with or set up new institu-
tions as a venue for the effort is best.
4. Implanting modern economics is a kind of technology transfer;and it is impor-
tant that the new knowledge be embodied not just in curriculum, materials,
and so on, but also in people as an active agent--in this case in foreign faculty.
5. Instruction must be in English
6. To create a significant pool of PhDs, the assistance of Western universities is
needed to accept them for PhD work and support them financially.This can
happen only by building a very strong reputation for quality .
With the benefit of more experience I would stick with these points, but add a
few more to round the list out to a kind of "10 commandments" for a successful
program.
7. A fast and reliable Internet connection is indispensable.
8. It is important to have a dedicated academic advisory board or council whose
members are committed to the success of the program and are willing to put
in some effort on its behalf.
9. Managing these programs needs strong leadership.It is crucial to recruit a good
director, and give him or her a lot of freedom.
10. It is important to keep the indigenization goal in mind from the beginning,
and let that task influence all decisions as you go along.
It is more difficult to elaborate a systematic list of "don'ts, but I will note some
issues and tradeoffs, on which others might want to make choices different from
those we made.
� There is a tradeoff between stability and maintaining diversity in teaching staff.
It takes about four full-time faculty to staff a program of four offerings in each
of the first and second years of the program.When electives are added, and the
second-year cohort is divided into smaller-sized groups for the workshop
experience, the total rises to maybe five or six full-time faculty members.The
staffing strategy can vary between (1) relying mainly on a changing cast of
T H E E C O N O M I C S E D U CAT I O N A N D R E S E A R C H C O N S O RT I U M 173
short-term visitors (present for one or two miniterms) and (2) going for more
full-year hires and repeaters.Variant (1) means an increase in recruiting effort,
fewer chances to keep those who turn out to be effective, and more supervi-
sion by the director to keep the course sequences coherent.Variant (2) eases
those problems, but at the possible cost of getting stuck in a rut and creating a
situation where the faculty members or a group of them may come to think
they own the program. Some turnover is useful to keep things fresh.We had
some difficulty with balancing these two approaches.
� There is a tricky balance between guidance from headquarters and relying on
the initiative of the resident director and local faculty. As Henry Rosovsky
famously said of Harvard--the students are there for four years, the faculty for
a career, but Harvard goes on forever.The EERC program got into trouble on
a couple of occasions in trying to sustain a broad vision in the face of local con-
cerns. Directors can misunderstand their mandate and take initiatives that are
inconsistent with program goals. And at one point we had a semipermanent
cadre of visiting faculty who came to feel that they owned the program and
resented any direction from above.
� Is the program to involve full-time study or is there room for part-time study?
In our program all students are expected to give full time to their studies.All
are required to take a full load, and classes are scheduled only in the daytime. It
quickly became part of the student consciousness that the demands of the pro-
gram required full-time effort.This of course is much different than most grad-
uate training in the region, where postgraduate (aspirantura) students typically
study and work on their kandidat dissertations only part time while supporting
themselves with an outside job.To ease the pressure, we have given students a
stipend during most of the history of the program, though we have gradually
become less generous in that regard. But the pressure for our students to earn
outside income is still strong. Some of them provide partial support to their
families.The pressure is even greater now that many of them have to pay
tuition.We waffled on this issue of outside work, allowing students to work
part time but in jobs that were related to their training, such as apprenticeships
or assistantships, and with a limit of 20 hours per week.This practice was aided
by the fact that all classes were scheduled for Monday, Wednesday, and Friday.
� It is a recurring point of debate whether to design a terminal MA program that
prepares graduates to go to work in the local economy, or to set the content
and rigor of the curriculum to prepare graduates for PhD study abroad. Dif-
ferences on this point are often associated with the fear that the PhD recipients
will not return, and that local employers don't want people who are too theo-
retical. Our line has generally been that both purposes are served by essentially
the same curriculum, and we have strongly resisted suggestions that we intro-
duce more business-oriented content into the curriculum.Our experience has
been that our students are valued for the skills that the economics-oriented
training gives them.Their skills in analyzing problems, in bringing broad per-
spectives to bear on an issue, in writing, and in using English comfortably are
174 RO B E RT CA M P B E L L
rare and much appreciated. And if modern economics education is ever to
make its way in the society, it will have to get into the curriculum as a disci-
pline distinct from the old Soviet concept of "economics," which was over-
burdened with highly applied subjects. Moreover, designing the curriculum
with an eye to preparing students to be able to compete for admission to the
best foreign programs provides a rigorous test of the quality of both the stu-
dents and the program. Unless some of them actually have to pass that test, you
don't really know whether you are meeting world-quality standards.
� Given the importance of reputation to the success of the program,some redun-
dancy in quality review is not out of order. In addition to the semiannual
reviews by the international advisory board, the program commissioned an
outside review in the third year,theWorld Bank did its own periodic review of
program quality when it considered renewing its support, and the Swedish
government asked for a review when it was considering an extension of sup-
port for indigenization.
� Choices have to be made about how much outreach to attempt, how open to
be to the rest of the system. In the early years of the EERC MA program we
were too intent on trying to establish a quality MA program to give much
attention to outreach.
� I think we might well have made more of an effort to build coalitions with
other institutions for improved curricula,to create some kind of associates pro-
gram, to offer other institutions some access to our resources (as in using our
library, attending classes, and sharing our syllabi), to involve other institutions
in research conferences, and to find local faculty who we could certify to teach
in the program. Also we did not make a persistent enough effort to enlist more
allies in our host university--especially among the personnel of the econom-
ics faculty. Part of the reason for this is that it was not a very inviting environ-
ment for eliciting such cooperation. But I believe that as efforts are made to
introduce such graduate programs elsewhere, more outreach should be incor-
porated in the effort from the beginning.
� The issue of tuition payments is now on the table in a way that it was not when
we started.There is a clearer-headed understanding that these programs are not
worth doing unless they can be sustained, and donors now insist on planning
for greater reliance on tuition than they did when we started. Introducing
tuition raises the issue of student quality versus ability to pay. There is the threat
to quality of relaxing standards to fill the incoming cohorts.There is also the
danger of freezing out some very high-quality candidates who cannot pay
tuition.The details of how tuition will figure in financing in specific situations
is complex and changing. It depends on such factors as how the rules about
free tuition versus contract study works in each country, and it depends also on
whether one is talking about state or private institutions.The general prospect
is that tuition payments will grow in importance in financing such programs,
while ability of students and their families to pay will lag behind.The obvious
T H E E C O N O M I C S E D U CAT I O N A N D R E S E A R C H C O N S O RT I U M 175
need is for some more general program of providing fellowships for tuition.
Various proposals for subsidized loans or revolving funds have been mooted,
but a system for meeting this need does not yet exist.This is one of the most
urgent problems that needs to be tackled in thinking about "scaling up."
� There is an issue of how much to be dependent on a host, versus keeping
options open. Establishing a program or institution without a local partner is a
formidable task, so most efforts have chosen to go the partnership route.
(American University in Armenia and the American University in Central Asia
[AUCA] are exceptions.) Unfortunately there is an inherent difference
between the perspective of outside sponsors and the perspective of a host insti-
tution.These programs are an intrusion into the normal functioning of institu-
tions of higher education, even progressive ones. It is one thing for a host
institution to sponsor such a program as a kind of adjunct activity, for which
the university has no responsibility but can gain some reputation by associa-
tion.The closer a program moves to indigenization, the more this balance of
burden and benefit shifts in the eyes of the host toward the burden, and toward
reluctance to accept exceptionalism for the program.The only way to keep
from being captive is to keep open the possibility of changing partners or set-
ting up independently.
� Be wary of overburdening the resident director--it is a high-pressure job, sub-
ject to burnout. In the nine years of the EERC-Ukraine's operation, we have
exhausted five directors.A program has to be carried out on a broad enough
scale to tap synergies between teaching and research and engagement with
institutions of the society. But it is important to provide clear priorities when
the director is faced with more desirable opportunities to follow up than are
possible to manage.
Research: Russia
EERC-Russia began operations in 1996, through an office in Moscow, directed by
Erik Livny. In managing the program he has the help of an advisory board.5
Description of the Program
The EERC's program in Russia for supporting research has evolved over time, but
from the beginning its core has been a competitive grant-making program for indi-
vidual research projects. It was discovered early that the passive approach of selecting
and financing projects that came in over the transom was not enough. Hence the
grant-making program is supported by a variety of efforts to build professional
research skills among its potential clientele and to use highly qualified outside econ-
omists to mentor the development and execution of research projects.
The centerpiece of the system for financing research is a system of semiannual
competitions and workshops that work as follows. Four priority research areas have
been identified for support: enterprises and goods markets, labor markets and social
176 RO B E RT CA M P B E L L
policy,macroeconomics and financial markets,and economics of the public sector.The
competition is conducted twice yearly. Applicants--either as individuals or small teams
of researchers--submit a research proposal according to a well-defined set of
guidelines.
The proposals are given a preliminary screening, and those meeting the guidelines
are reviewed by specialists on the research advisory committee, with feedback to the
applicants for revising and improving the proposals.The applicants are then brought
together with the outside specialists in a set of workshops for each of the main sub-
ject areas.The resource persons evaluate the projects within each group and make rec-
ommendations for funding. In the last step, the recommendations from the various
workshops are reviewed and combined to make a final selection.Successful applicants
receive research grants within the range of US$8,000 to US$15,000. Some applicants
whose proposals do not win approval for regular funding may be given a development
grant to do the work needed to strengthen their proposal.Projects that are funded are
monitored as they progress, with the researchers coming back at a later workshop for
midcourse review and suggestions.In addition to funding,network members are pro-
vided with ample opportunities for professional growth through participation in
international research workshops, conferences, and methodological seminars.
The grant competition is supplemented by a set of research skill�building activi-
ties for the less-experienced scholars from the Russian periphery and other CIS
countries. In particular, a special research development program was launched in
2001 to integrate capacity-building activities into a year-long cycle of summer
schools, methodological seminars, and research internships at the leading academic
institutes in the region--NES, CEFIR, and EERC-Kyiv.
A third block of EERC networking activities provides access to scholarly
resources.Through its Library Online, EERC offers network members free access to
valuable databases of full-text academic publications such as JSTOR, ScienceDirect
(more than 70 Elsevier journals in economics), and a large and growing collection of
discussion papers, including those of the National Bureau of Economic Research
(NBER) and the Centre for Economic Policy Research (CEPR). The library
includes a search engine for the entire collection of working papers.Negotiations are
currently underway with the Interuniversity Consortium for Political and Social
Research (ICPSR) at the University of Michigan regarding members' access to data
held in the largest social-science data archives in the world.Through the GDN Web
site, EERC network members already have access to theWorld Bank'sWorld Devel-
opment Indicators database.
A third element in the program is a dissemination process for publishing the
results of the research done under EERC grants. Dissemination tools include a
twice-annual Russian-language newsletter Economics Education and Research in the
CIS (jointly published with NES and CEFIR),a bilingual working paper series pub-
lished on the Web site (www.eerc.ru), and several e-bulletins:
� "Focus on Policy" (publishes policy briefs based on results of funded research
in English and Russian; holds policy roundtables)
� "New EERC Projects"(abstracts of new studies undertaken with EERC support)
T H E E C O N O M I C S E D U CAT I O N A N D R E S E A R C H C O N S O RT I U M 177
� "Research News" (abstracts and links to full texts of papers published in the
EERC, NES, and CEFIR Web sites)
In recent years EERC has made a consistent effort to develop the capacity of aca-
demic researchers to address policy questions and deliver their findings in a user-
friendly and nontechnical format. Special "Focus on Policy" awards were established
in 2004 to create incentives for scholars who complete a full cycle of research to pro-
vide their results and policy recommendations for the general public and policy
makers. EERC also organizes policy roundtables to facilitate professional exchange
and policy dialog among policy makers and network members who have developed
expertise in areas that are relevant for current policy concerns in Russia.
The program has been extended geographically.The grant-making competition
has long accepted applications from people not only in Russia but in other Russian
Federation countries as well. In fact, however, potential participants in its research
program were heavily concentrated in Moscow and St. Petersburg, with other areas
showing much less response and capability. So EERC has made a point of spreading
its influence further afield within Russia and across the CIS. Since 2004 geographic
expansion is following the "network of networks" approach whereby EERC either
transfers its networking know-how to partner organizations in individual CIS coun-
tries and regions (for example,the EROC center in Kyiv and the Caucasus Research
Resource Center [CRRC] in the Caucasus) or establishes a subregional network
with the support of a local consortium of donors and implementing agencies (such
as the Applied Research Network�Central Asia).
Beginning in 2000 EERC took on the role of regional representative of theWorld
Bank�sponsored GDN,serving as the regional representative in Russia and the succes-
sor countries. In this role it has extended its core activities to all the CIS countries and
it now functions as a CIS-wide research network.As a GDN institution it has partici-
pated in a number of global research projects in areas such as "explaining growth,"
health care,understanding reforms,and the impact of rich country policies on poverty
in developing and transition countries. EERC is currently managing one of these
global projects: "Bridging Research and Policy."
With these changes the program has come to see itself as having an important
networking function as well as a research support function. As explained on its Web
site, EERC "has created a vital professional network that enables young economists
to produce sound, policy-oriented research and connects them to a network of their
peers and an audience of policy makers.Originally founded as a research network for
Russian economists,EERC's network now includes economists from across the NIS,
and works to incubate centers of excellence in economic research and higher edu-
cation throughout the region."
Evaluation
At the end of nine years of operation,it is useful to look back and review the accom-
plishments of EERC-Russia's program and consider what has been learned about
the requirements for an effective program of stimulating research. EERC's accom-
plishments can be summarized as follows:
178 RO B E RT CA M P B E L L
� The program has supported more than 300 researcher teams, comprising more
than 400 individual researchers.
� Approximately 450 original research projects have been involved in the the
EERC research program.
� It has created a permanent cadre of international "resource persons" who par-
ticipate in the review process, serving as faculty at the research workshops and
collaborating with program alumni in joint research projects.
� It has provided professional development opportunities to more than 300 CIS
economists through research workshops, methodological seminars, and sum-
mer schools.
� It has inaugurated a series of targeted methodological seminars to bolster the
analytical skills of CIS economists involved in policy-oriented research.
� It has launched a range of bilingual professional publications, including a semi-
annual newsletter and a working paper series, delivering results of sponsored
research for economists and policy makers both within and outside the region.
� It has initiated a series of policy seminars to reach out to the CIS policy-
making community.
As we did above for MA training, we summarize some lessons learned that are
relevant for initiating new efforts at capacity building in economic research, consol-
idating the capacity EERC-Moscow has created, and leveraging those resources to
deepen and extend its impact.
� It does not work just to elicit proposals and finance those that are the most
promising. It takes a more proactive approach with a hands-on effort to gener-
ate proposals and guide research.
� It is necessary to develop research skills if one expects to be presented with
proposals that are methodologically sophisticated.That is,it is necessary to train
people do to research, which means teaching them in classes, workshops, and
mentoring sessions.
� It is not easy to reach the policy research bodies and a government audience.
� As with MA training, the GDN faces the problem of how to institutionalize
the research effort for sustainability.The network has gone through a series of
proposals to integrate it with a larger, more complex institution that can
achieve scope and synergy for its activities.
� At one point the goal was to create,on the basis of the GDN Secretariat,a Dom
Ekonomiki, (house of economics)--that is, an umbrella organization for the
New Economic School (NES) and the Center for Financial and Economic
Research (CEFIR)--two Moscow-based centers of excellence. According to
this initial vision, Dom Ekonomiki was to serve as a networking nexus for
economists engaged in research and be in charge of fund-raising and outreach.
� A later suggestion was to merge the GDN Secretariat within the unified
NES/CEFIR structure, but this approach was too difficult to negotiate; in
T H E E C O N O M I C S E D U CAT I O N A N D R E S E A R C H C O N S O RT I U M 179
mid-summer 2005, the parties went back to the Dom Ekonomiki scenario of
integration.The goal is to co-found an independent Russian NGO that is in
charge of networking, capacity building, and research support on behalf of
EERC, NES, and CEFIR for the benefit of social scientists and economists
based in the outlying regions of Russia and CIS. According to this scenario
EERC,Inc.,will maintain its representative office in Moscow,which will work
in close cooperation with the new Russian organization so as to preserve tax
and legal benefits related to grant making, facilitate business administration
outside Russia (in CIS and globally),conduct fund-raising in the United States,
and coordinate with other centers of excellence in the CIS region, in particu-
lar the Kyiv MA program.
Research: Ukraine
As indicated earlier, EERC's work in Ukraine was originally focused on training
rather than research. But there has been a modest attention to developing research
skills and producing research via the thesis element of the MA program. Also, from
its very first year, EERC sponsored a student research conference. As time went on
this conference became more extensive, involving more ambitious papers, more sen-
ior researchers, and more effort to connect the conference to important public pol-
icy issues.
In 1996 EERC received some special funds from USAID that were earmarked to
begin a research and outreach effort. Unfortunately, that first effort did not lead to
serious results.We lacked a strategy, adequate leadership, and enough money to
accomplish much, and the resources got frittered away.
Subsequently a substantial three-year grant of about US$900 thousand from the
World Bank (coinciding more or less with the beginning of the 2003�4 AY) has per-
mitted us to make a serious start on a program of research and outreach.To manage
the use of this grant we set up a Research and Outreach Center (EROC) within
EERC. As an early step in indigenization, EROC was also established as a structure
within NaUKMA.We were fortunate to recruit an excellent person to direct the
center--Tom Coupe.The center has its own research advisory committee, separate
from the international advisory board of the MA program.6
Description of the Program
On the research side, EROC has a multidirectional program. One direction is sup-
port for multiperson research projects.We were very fortunate in being able to col-
laborate in financing and staffing one such project--a household survey (the
Ukrainian Longitudinal Monitoring Survey or ULMS), under a former EERC fac-
ulty member, Hartmut Lehmann, who brought financing from outside.This project
has spawned a number of individual projects, some of them involving EERC stu-
dents and graduates. EROC's contribution has been to help finance the survey, clean
the database,support individual projects using it,and help with conferences. An anal-
180 RO B E RT CA M P B E L L
ogous venture under John Earle and J. David Brown deals with "Enterprise Behav-
ior and Economic Reforms in Ukraine." This project uses the data from the ULMS
together with an enterprise database.
A second direction in EROC's activity is financing time off for research for return-
ing PhDs. A potential recruit for the teaching staff might be offered a miniterm off
without teaching, the help of research assistant, funds to attend a conference abroad,
and so on.This can let the prospective recruit feel that she or he is still in contact,work
on publication of thesis research, help develop a research agenda that extends thesis
work to a Ukrainian application, and so on. It is an important incentive.
A third direction is an open competition for individual research support.Here we
work closely with the EERC-Russia program, essentially as a partner in its grant-
competition program, described above. EROC puts some effort into encouraging
the development of projects to be submitted to the general competition, does some
prementoring, and preselection of projects to be submitted to the general competi-
tion. In addition, members of the EROC research advisory committee participate in
the workshop process described earlier.There is some division of responsibility in
funding the successful projects.The summer 2004 meeting of the workshop was held
at in Kyiv at EERC's premises, as the summer 2005 session was as well.The cooper-
ation has worked smoothly, in part because Ukraine has been able to contribute
some good applicants and projects for the competition, many of them from among
our MA graduates.
Outreach
The major vehicle for EERC's outreach function so far has been conferences engag-
ing teachers of economics in a dialog with EERC personnel and with each other on
issues of improving economics courses and curricula, teaching materials, and teach-
ing methods. 7
Under the World Bank grant, EROC has organized two conferences--on "Eco-
nomic Theory, Innovative Instruction and Research-Based Teaching"--in spring
2004 and spring 2005. Some 40 people participated in the first conference, from
Ukraine, Belarus, and Moldova. Over 50 attended the second, including participants
from Georgia. As part of the agenda the conferences provided participants with gen-
eral information of professional interest--descriptions of research resources on the
Web, examples of syllabi and other teaching materials (including CDs of testbank
materials), educational opportunities abroad, manuals on how to teach economics
(such as relevant chapters of the Saunders/Walstad book on Teaching Undergraduate
Economics translated into Ukrainian), and so on. But most of the time was spent in
demonstrations and discussions of teaching methods--case studies, classroom games,
incorporation of research projects into course work--and discussions of curriculum
content. An important goal of the conferences has been to generate active participa-
tion by the attendees.In effect,the price of admission was a contribution in the form
of a paper at a session, a syllabus, or other such contribution. Participants had a
chance to familiarize themselves with the resources of EERC's library. Another
T H E E C O N O M I C S E D U CAT I O N A N D R E S E A R C H C O N S O RT I U M 181
rationale for the conference was to identify institutions and individuals with whom
we might work more closely on a continuing basis.
The conferences demonstrated an encouraging potential for improving econom-
ics instruction in Ukraine.There is a large audience for such efforts, eager to share
ideas and experience. Participants were pleased with what they got out of the con-
ferences, and generally took home ideas they want to put into practice. Unfortu-
nately, judging from the list of attendees, we have so far been more successful in
engaging individual teachers than deans and heads of economics departments, who
in the end will be the ones to preside over curriculum change.
The conferences are a strong stimulus to networking--participants find others
with similar interests, trade e-mail addresses, and so on.They thus help build a com-
munity of those who are interested in new approaches to teaching economics and
will work at it on their own. At one time there was an Association of Ukrainian
Economists, which had gone moribund. It has now been revived, and will be an
important vehicle for networking among those interested in improving economics
education and research. EERC is playing a leading role in reviving the association,
and its 2005 meeting was held back-to-back with EERC's April research conference.
The work of the two conferences held so far will be continued through a three-
year sequence of seminars financed by the Higher Education Support Program
(HESP).The first took place in the summer of 2005. As participants, we invited a
group of young economists whom we identified as demonstrating an active interest
in modernizing their teaching and research qualifications.The theme of the seminar
was the "economics of the firm," but the approach was to apply to this theme new
methods of study and teaching--case studies in industrial organization, experiments,
computer-based analytical techniques, and so on. It was taught by EERC faculty and
outside resource persons.Through this program of conferences and workshops we
hope to maintain a focus on a core of individuals and institutions open to improve-
ment, and to sustain the effort for long enough to have a serious impact.
The other main dimension in outreach is to act as a kind of curriculum infor-
mation center.Through the EERC library,we are assembling curriculum materials--
such as reading lists, materials on how to teach economics, syllabi of the courses
taught at EERC and elsewhere, and so on--that we make available to anyone
interested.
To conclude,EROC is compiling an impressive record of research and publication
along with a productive effort in outreach that we expect will justify a request for
renewal of funding from theWorld Bank when the current three-year grant runs out.
In the meantime,the cause of stimulating research in Ukraine has received a signif-
icant boost from a substantial investment that the Swedish government is making in
research in Russia and Ukraine via the Stockholm Institute of Transition Economics
(SITE).This new initiative is outside the EERC framework as it now exists, but both
sides are well attuned to the need for cooperation to get the synergy from this enlarged
base. Just how the collaboration will work is still being discussed, but it is clear already
that the new effort will make substantial use of EERC graduates in its research pro-
gram, and may provide some staffing resources for the EERC MA program.
182 RO B E RT CA M P B E L L
Scaling Up
There is an ironic point in this experience--that is, the success of programs to build
capacity in economics education and research implies not a need to cut them loose,
but rather to expand the effort to exploit the base they have built.What kind of ideas
can one garner from this experience that will help in going on to the next step of
scaling it up across the countries in which we already work, across the region, and
across the world?
I reiterate my belief that the EERC's MA in Ukraine program has been an out-
standing success in terms of its goal of creating a center of excellence in economics
education in Ukraine and in setting a standard for future efforts.These goals had
been achieved even earlier for the New Economic School in Moscow. But one has
to see that this is only a drop in the bucket.We have grown and harvested seed for "a
new generation of economists for the Ukraine," but this is only the tiniest start.
Against the background of the general status of economics education,discussion,and
research in Ukraine,or against the research and policy analysis on Russia and Ukraine
carried out by outsiders, what we have created is barely discernable.We now need to
reach out in a serious way to help upgrade economics education, research, and pol-
icy dialog in the country as a whole.
Economics Education within Ukraine
It seems clear that it is not possible simply to replicate a program like the EERC's
MA program on a larger scale. It is too expensive. Rather we should leverage the
resources and capabilities already created for a larger impact.
Consider first improving economics education at the undergraduate level. Eco-
nomics is widely taught in Ukrainian higher education, generally badly.The strategy
I see for scaling up in this area is for EERC (or its indigenized successor institution
at NaUKMA) to build a constituency of economics faculty and officials at other
major universities who want to improve what their institutions are doing, and then
to work with them to modernize curricula and instructional materials. EROC has
been doing some of this with help from theWorld Bank grant and the Soros Higher
Education Support Program (HESP). But that effort is underfunded, too small, and
always in competition with EROC's research effort and with EERC's main goal of
maintaining its own MA program at a high level of quality.
We are at a point where over the next few years EERC could expand these activ-
ities, absorb some more staff, reach out to more institutions.There is a much bigger
potential than we have been able to tap so far. I recently spent some time looking
over the kind of instructional materials produced by local authors in Ukraine.There
are now available significant resources of Ukrainian textbook material, in Ukrainian,
at the introductory level in micro, macro, money and banking, international eco-
nomics, and a few other subjects.This material is much better than what was avail-
able when I first looked at the field nine years ago.These textbooks are somewhat
schematic, virtually unsupported with Ukrainian cases and illustrations.The macro
books I looked at, for instance, never cite actual Ukrainian macro data.We need to
T H E E C O N O M I C S E D U CAT I O N A N D R E S E A R C H C O N S O RT I U M 183
encourage Ukrainian authors to produce the kind of instructional materials that
enables students to see the relevance of the course material to Ukrainian economic
issues.But the point is that,to the extent that these textbooks reflect what some eco-
nomics teachers are doing in their courses,there is a widespread effort to teach mod-
ern economics. The situation at the level of the economics curriculum is less
encouraging.There is still a great deal to be done to complete the differentiation of
the economics curriculum from the business skills curriculum.
It is less clear what ought to be done at the level of graduate education.There
is a serious dilemma here. In my view anyone who emerges from higher education
into Ukrainian society claiming an advanced degree in economics (whether kandi-
dat, master, or doctor of economics) ought to be oriented to the international
community of economists.They should have some exposure to the world eco-
nomics literature (most of which is in English), be able to feel at ease with that
community in terms of conceptual and methodological approaches, and be able to
communicate effectively in English or some European language.The graduates of
the EERC MA program meet that standard very well, but it is unrealistic to think
of replicating the EERC MA model as a program taught in English and based on
English-language literature in very many institutions.We will see what happens to
the degree system as the program of the new government unfolds, but it seems
likely that many institutions and departments will stick with the system of aspiran-
tura leading to a kandidat degree as their form of graduate training.Whether the
situation evolves this way or toward an MA, we need to find some kind of upgrad-
ing model that relies more on existing domestic personnel and institutions. And
inevitably such a model will rely more on instruction in Ukrainian, and on domes-
tically produced textbooks.
A second desideratum is that anyone seeking credentials as a graduate-degree
economist must conduct a serious research and writing exercise,subject to some ele-
ment of methodological vetting by highly qualified economists.When possible this
exercise should be written in English.
Those elements can hardly be universal, but there should be some assistance for
institutions that aspire to these standards. Right now aspirants do not get good pro-
fessional guidance and training. For one thing they do not work at aspirantura full
time.Where aspirantura and the kandidat system is retained, or where domestic MA
programs are started, there could be things such as a panel of foreign experts to be
called on for committee work, financing for aspirants to spend some time in research
workshops,and for time off to do research.The whole mind-set of foreign-sponsored
programs has been to work outside the system (until now strongly controlled by a
ministry of education), but it is conceivable that in the new Ukrainian conditions
there will be a reform of higher education that might permit the external commu-
nity to work directly with ministry officials to change degree systems, curricula, and
degree and staffing requirements for graduate economics education nationwide.
A big issue in consolidating and extending this effort is whether we should now
move on to try to establish domestic PhD programs. In Eastern Europe, PhD pro-
grams have been a part of the effort for quite a few years, for example, at CERGE.
184 RO B E RT CA M P B E L L
Pressure for such a move in Russia is bound to come--if for no other reason than
that the newly trained economists will want to take this step.EERC's host NaUKMA
has proposed creation of a PhD program in economics within the next five years. In
Kazakhstan some institutions have been tasked by the ministry of education to pro-
ceed to develop PhD programs in economics. I think the outsider community ought
to be very cautious about taking on the creation of PhD programs as the next step.
Extending Efforts to Other Countries of the Region
There are still parts of the former Soviet Union that have scarcely been touched by
serious efforts at modernizing economics education. Some, such as Moldova and
Belarus, are not very promising venues, and the strategy so far has been to try to deal
with them by letting their citizens participate in MA programs in Russia or Ukraine.
In the CIS, two areas barely touched thus far by this kind of effort are the five coun-
tries of Central Asia and the three countries of the Caucasus. Initiatives are now
under way for establishing graduate economics programs in these regions.
What have we learned from experience so far that will help in designing
approaches that can work in these countries? My experience is only with Ukraine,
but I suspect that the experiences of the other CIS countries suggest more or less the
same conclusions.
First, it is impossible just to replicate the NES/EERC model there. One prob-
lem is the issue of scale--all the countries of Central Asia and the Caucasus have
much smaller populations than Ukraine's 50 million, not to mention Russia's 144
million.The populations are as follows: Armenia: 3 million; Azerbaijan: 8 million;
Georgia: 5 million; Kazakhstan: 15 million; Kyrgyzstan: 5 million;Turkmenistan: 5
million;Tajikistan: 6 million; and Uzbekistan: 25 million.
Most of these countries are just too small to support an MA program that admits 50
new students each year. Kazakhstan and Uzbekistan may be large enough. It is unlikely
even there, however, that one could recruit a talented class of 50 students, and it is diffi-
cult to imagine that those economies could absorb anything like 40 to 50 new gradu-
ates each year.But on a scale much smaller than that,the effort becomes uneconomical.
Nor is an identical formula likely to be applicable to all of these areas. It needs to
be adapted to the situation in specific regions.There are important differences in
country size, the human resource base, availability of local partners, the stance of the
ministry of education, and so on.
A possible solution is some kind of regional program, serving several countries in
a region and drawing on several potential candidate pools.That approach raises dif-
ficult issues.Without mutual recognition of degrees across country borders, which is
likely to be difficult to accomplish, there will be a disincentive for students to get an
MA in another country.There are issues of regional enmity and turf consciousness.
In the Caucasus it would be very difficult to have a program serving both Armeni-
ans and Azerbaijanis,whichever of the two countries hosted it.In Central Asia,Kaza-
khstan and Uzbekistan each fancies itself in a leadership role,and it would be difficult
to persuade either to cede that role to the other.
T H E E C O N O M I C S E D U CAT I O N A N D R E S E A R C H C O N S O RT I U M 185
One possible way is to have a consortium of partnered institutions, with a divi-
sion of the courses offered at each and some visiting of students and faculty between
institutions. Distance learning might be part of the program. A simpler model might
be a more lopsided arrangement that did not aim for a full-fledged regional program,
but rather chose a lead institution in one country with "affiliates" elsewhere, each of
which has varying degrees of participation. At the end of this spectrum is an arrange-
ment in which you pick an institution considered to have prospects for making it and
establish a program there, open to students from the other countries and with an
aggressive recruiting effort in several countries. As the program began to build a rep-
utation its graduates could probably find jobs in their own countries even without
having local state diplomas. Remember that NES does not give a state diploma.
Issues such as mutual recognition of degrees would need to be worked on as you
went along.
I am still of the opinion that one of the essential ingredients of success in the ear-
lier models is independence and considerable control over admissions, faculty, cur-
riculum, and quality control. And that would be hard to achieve in any proposed
partnership arrangements.
Research
It seems unnecessary to say much about scaling up the research effort.The main
directions for expanding the research program of the EERC-Russia program and its
partner EROC are already set--geographic extension, facilitating access to data, and
enhancing policy relevance and impact.What is needed now is more of the same.
In Ukraine the main thing we would like to do is to follow through on a hope,
heretofore disappointed,that EROC could initiate partnership research projects with
government bodies combining personnel, data resources, and policy access from the
two sides.
Changing Environment
In thinking about increasing impact in countries already served and about extending
this impact to other countries, we ought not to be too bound by the lessons of the
past.The environment may be changing. As of 2005 in most of these countries one
would be creating such a program in an inhospitable environment.There would be
hostility from the ministry of education, little help from the tax authorities, resent-
ment by other institutions of higher education, and so on.This environment would
probably be more hostile in Central Asia than it was in Ukraine. In some ways the
the EERC program in Ukraine survived because it was flying below the radar and
was too insignificant to excite effective enmity.
But the recent transformations in Ukraine, Georgia, and Kyrgyzstan suggest that
the environment can change to one much more welcoming to modernizing eco-
nomics education and research. Recognition of the worth of such models will
increase, educational reform may make it easier for the non-state sector in education,
186 RO B E RT CA M P B E L L
the dead hand of the ministry of education on issues of curriculum and certification
may be lifted, and so on.There is thus a trade-off here between over emphasis on the
lessons of the past and an opportunistic willingness to try something new as the envi-
ronment changes.
Finance
In thinking about scaling up we need to keep financing in mind.What has it cost to
operate one of these programs? The budget for EERC-Russia started out at three-
quarters of a million U.S. dollars, but grew and stabilized at about 1 million U.S. dol-
lars per year.The MA program started at US$850,000 dollars in the first year, grew
as enrollment increased, and peaked at a little over US$1.5 million dollars in
1999�2000, when we were investing significantly in rehabilitation of premises. It has
since fallen to about US$1 million.These figures do not include the overhead admin-
istrative costs in Washington, which have declined sharply in the last couple of years
as a result of moving the management out of Eurasia inWashington and setting it up
locally in Kyiv. Costs depend partly on how much must be invested in space. In the
case of EERC-Ukraine we had significant extra expenses for investment in facilities.
The space the university was able to provide us for classrooms and offices was quite
skimpy, and we were ultimately able to get adequate space and suitable classroom
facilities only by a sizable investment in rehabilitation.The costs for other programs
will be comparable. Anyone contemplating replicating these kinds of programs else-
where should think in terms of about a million dollars per year, plus the administra-
tive costs of whatever management structure is set up.
These outlays are quite small if we compare them with the total of the many
piecemeal efforts that have been made to improve economics education in the
region, or if we compare them with total budgets of aid organizations operating in
the area. But they are large amounts for a typical foundation or program, and have
been covered only by tapping a whole set of organizations--private foundations, the
World Bank, governmental economic assistance organs, and so on.
On the one hand, we have developed an approach to upgrading the capability of
economics education and research that has proved successful in achieving its goals,
with a relatively small absolute cost and a high benefit-cost ratio. On the other hand,
this model requires a long-term commitment, amounts that are large for any indi-
vidual organization, and follow-on efforts to realize the full benefit from the foun-
dation that has been laid.
So we need two things. First, we need a communitywide understanding that the
programs are valuable and that this is an experiment that has worked. For EERC
there was a formal consortium, and for the group as a whole a more informal com-
munity in which various organizations participated in supporting a group of pro-
grams and institutions that were identified as having solid potential.This history
shows that financing needs to tap into as wide a circle of sources as possible, and the
circle of donors needs to be continually renewed. Now is an opportune time to
widen this circle. In the climate of hope for progress spawned by the Georgian and
T H E E C O N O M I C S E D U CAT I O N A N D R E S E A R C H C O N S O RT I U M 187
Ukrainian revolutions, the prospects are greatly improved for programs to succeed in
places where earlier there seemed little hope.
Second, the community should understand that success requires a long-term
commitment--it is no use pretending that the job will be done in five years, or ten
years. Programs will not have to be financed indefinitely, as our success in indige-
nization is beginning to show. But despite the progress that has been made in indig-
enization, keeping programs going and scaling up the effort still requires substantial
funding from outside. In none of these countries are state support of education, the
institutions of philanthropy, or the capacity for paying tuition adequate to finance
quality education.
The development banks should probably play a significant role in this.They have
generally shied away from financing higher education, preferring loans and invest-
ment in more material projects. But a strong case can be made for assistance to
higher education as well, because of its relevance to creating the cadres for a market
economy and long-term growth. Economics education is especially important in
this respect. A recent study by the World Bank's Task Force on Higher Education
and Society, Higher Education in Developing Countries: Peril and Promise (2005) notes
that on the basis of some studies of the return to education at different levels, the
World Bank at some early point drew the conclusion that its lending strategy should
emphasize primary education, relegating higher education to a relatively minor
place on the development agenda (p. 39).The study, however, disputes that conclu-
sion as based on faulty calculation, and suggests that arguments for a higher prior-
ity for higher education in development programs are gaining acceptance. And,
especially since we are talking about Central Asia, in my view a serious effort should
be made to get the Asian Development Bank (ADB) involved. So far as I know, the
ADB has not made assistance to higher education an element in its strategy for any
Central Asian country. Indeed, the ADB may be able to make a distinctive contri-
bution in the Central Asian region since one aspect of its activity is encouraging
regional cooperation.
Finally, it is probably time to try to build some ties among these programs and
educational institutions abroad. Once indigenized, they will still benefit from
interactions with economics departments abroad for an outside perspective on
issues of curriculum and quality, a place to send professors and graduate students
for research in a stimulating environment, apprentice roles for their graduate stu-
dents, and a source of visiting faculty. Universities are in a better position to play
this role than are the aid institutions that have been the major donors and spon-
sors so far. During the years since the breakup of the Soviet bloc many exchanges
and ties among economics departments of universities abroad and CIS institutions
have occurred. It is my impression, however, that these have often been too short-
lived and one-sided to have much impact on the CIS institution or to benefit the
Western partner. Once centers of modern economics training and research
become established at the level of quality for which we are aiming, however, they
become weightier partners who can offer substantial benefits to institutions
abroad.
188 RO B E RT CA M P B E L L
Notes
1. A detailed history of the EERC program and its origins is still to be written, and this
is not the place to attempt it. One source for the beginning of EERC is an article by Gregory
Ingram (1999). I should note here, however, that a crucial turning point was the drafting of a
"Proposed Strategy to Address Critical Economics Education and Research Needs in Russia
and Ukraine," (Ingram et al. 2000) presented in the name of the World Bank and the Eurasia
Foundation,inWashington,DC,in March of 1995.The proposal had been preceded by exten-
sive discussions with potential funders and experts knowledgeable about the situation of eco-
nomics education and research in the area. It laid out the rationale for the program and
strategy for carrying it out. Boris Pleskovic of the World Bank took the lead in drafting the
proposal, and William Bader of the Eurasia Foundation worked on recruiting additional
members of a consortium to finance it.The creation of EERC followed closely the blueprint
laid out in the proposal.
2. Current members of the International Advisory Board are Robert Campbell, Indiana
University, Chairperson; Anders Aslund, Carnegie Endowment for International Peace;
Robert Baldwin, University of Wisconsin; Charles Becker, Duke University; John Earle,
Upjohn Institute; Paul Gregory, University of Houston; Peter Kennedy, Simon Fraser Uni-
versity; Larysa Krasnikova, NaUKMA; Josef Pelzman, George Washington University;Adonis
Yatchew, University of Toronto.Though the board members have shown remarkable dedica-
tion to the program, they are busy people with many commitments, and we need a moder-
ately large board to succeed in getting a group of adequate size together for twice-a-year
meetings.
3. A list of EERC graduates and their current positions may be found on the EERCWeb
site.
4. Association for Comparative Economic Systems (2000).
5. Members of the advisory board are: Richard Ericson (Columbia University), Chair;
Erik Bergloef (Stockholm Institute ofTransition Economics);WojciechW. Charemza (Uni-
versity of Leicester);Viktor Polterovich (Central Mathematics and Economics Institute,
RAS, Moscow);Vladimir Popov (Carleton University, Ottawa, and New Economic School,
Moscow); Mark Shaffer (Heriot-Watt University, Edinburgh); Judith Thornton (University
of Washington, Seattle); Shlomo Weber (Richard B. Johnson Center for Economic Studies,
Southern Methodist University, Dallas). In addition to overseeing the program, most of
these advisory board memberes serve as "resource persons" for the workshop process.They
are supplemented in that function by additional experts, both international and Russian,
who have included over the years a long list of distinguished economists too numerous to
name here.
6. The committee consists of Iryna Akimova (UNDP-Ukraine); Roy Gardner (Indiana
University); Erik Pentecost (University of Loughborough); Chris Waller (Notre Dame); and
Diana Weinhold (London School of Economics).
7. Since most of what EROC has done in outreach is a common-sense, almost banal, set
of activities, I will focus only on the highlights. It is perhaps more to the point to emphasize
that success in any of these endeavors turns crucially on getting a good person to carry out
common-sense ideas.We were fortunate to be able to recruit Professor Joyce Gleason to
organize these conferences. She has long been active in improving economics education, has
extensive experience in Ukraine, and has a personal dedication to this mission.
T H E E C O N O M I C S E D U CAT I O N A N D R E S E A R C H C O N S O RT I U M 189
References
Association for Comparative Economic Systems.2000."Symposium:Teaching Mod-
ern Economics in Transition Economies." Comparative Economic Studies XLII (2).
Ingram, Gregory. 1999."Origins of the EERC." Research inTransition 5 (December).
Ingram, Gregory, Boris Pleskovic, and Kathryn Witneben. 1995."Critical Econom-
ics Education and Research Needs in Russia and Ukraine."World Bank,Wash-
ington, DC.
World Bank,Task Force on Higher Education and Society. 2000. Higher Education in
Developing Countries: Peril and Promise. Washington, DC:World Bank.
Comment on Lyakurwa,
Angelescu and Squire,and Campbell
Tom Coup�
THE THREE PAPERS PRESENTED IN THIS SESSION HAVE ALL BEEN WRITTEN BY, AND
present the view of, people who administer the programs that were established to
improve economics education and research--Ramona Angelescu and Lyn Squire as
representatives of the Global Development Network (GDN),William Lyakurwa as
executive director of the African Economic Research Consortium (AERC), and
Robert Campbell as president of the international advisory board of the Econom-
ics Education and Research Consortium (EERC). My discussion is written from
the other side: most of my comments are based on my three years as assistant pro-
fessor at EERC-Ukraine. Some of my comments are based on my experience as a
participant in the research competitions of GDN. I will also refer to what I think
we can learn from the African experience described by Dr. Lyakurwa
Despite the fact that it is now almost 15 years since the Soviet Union collapsed
and Ukraine became independent,and despite the fact that EERC-Ukraine has now
existed for almost 10 years,the state of economics education and research in Ukraine
is still far from what it should be. Every year during the admission exams we see that
many students of the so-called economics departments have no clue about what eco-
nomics really is.They still confuse economics with marketing, accounting, and man-
agement.The few who have had econometrics have often studied some theoretical
concepts but never had any practical exercises.And students still think that cheating
on exams is acceptable and that you write a research paper by copying and pasting
from material available on the Internet.
The above-mentioned problems are structural problems that are unlikely to be
solved quickly.Two examples will illustrate this: I proctored an exam for undergrad-
uate economics students at a university that enjoys the reputation of being one of the
best universities in Ukraine. Despite this, the professor was did not intervene when
students were talking or looking at their neighbors' papers. Even more striking, stu-
dents were allowed to leave the classroom during the exam in groups, to have a
smoke in the corridor. Second, a "candidate NAUK" (the local version of a PhD)
190
COMMENT ON LYAKURWA, ANGELESCU AND SQUIRE, AND CAMPBELL 191
told me that during the defense of her thesis, one of the jury members told her that
she should not report the standard errors of her regression estimates. Both examples
point to the core of the problem: the average professor has neither the skills nor the
attitudes that one would expect and require at a Western university. As a conse-
quence, the young aspirants have bad role models and old problems linger on.
MA programs such as those at NES and EERC-Kyiv are successful in training
their students in modern economics and in changing,to a large extent,their attitudes
toward cheating and unprofessional behavior. In that way, these MA programs have
some influence on the business environment where their graduates work.They have
been very successful in influencing the think tanks in Kyiv, which are dominated by
EERC graduates.To what extent the think tanks have been able to influence the pol-
icy makers, however, is more difficult to determine.Another way that EERC gradu-
ates influence policy is through their jobs at the offices of international institutions
such as the World Bank and the International Monetary Fund (IMF). Direct influ-
ence through graduates working for the politicians in parliament or in the govern-
ment is the exception, not least because of the low pay in the public sector. But even
those who--for patriotic reasons--decide to work for the government are unlikely
to use the more advanced methods they study during the course of their MA pro-
grams. Government ministers so far don't require regressions; summary statistics will
do as well for them.
The low pay for public-sector workers also affects the success of the MA pro-
grams in placing their graduates as teachers at local universities. Of the students who
graduated from EERC-Kyiv and decided not to study for a PhD abroad,five at most
are teaching at a local university.For those who do decide to go on to get their PhDs,
the only place in Ukraine to go to when they have the advanced degree is EERC-
Kyiv, because all the other economics departments pay their faculty members only a
few hundred dollars a month.
The low salaries paid by the universities make the existence of grant competitions
such as that of GDN or EERC crucial. One of our alumni told me he would quit
his job at a university if he had not been successful in a grant competition.Thanks to
a grant that our EROC research center obtained in the framework of the GDN
Global Research Project "The Impact of Rich Countries' Policies on Poverty" we were
also able to employ two recent MA graduates--each rejected a place in a PhD pro-
gram offered by a Western university, preferring to stay in Ukraine and work as a
researcher.
Grant competitions are thus important for maintaining capacity.They are also
important for increasing capacity once one exists--the review by senior economists
of the draft papers stimulates further development of many young economists. I
think, however, that grant competitions and "basic capacity building" should be sep-
arated as much as possible. If we have a regional competition, quality should be the
only factor to determine who gets and who does not get a grant--it is not a good
idea to give a grant to a mediocre proposal of a citizen of country A, a country that
has no capacity,when there's a better proposal written by a citizen of country B,even
when that country already has some capacity built up. Such a policy creates anger,
192 TO M C O U P �
discontent, and a feeling of unfairness among the participants of the grant competi-
tion.If one wants to build capacity in country A,I believe it's better to organize extra
training sessions for country A's researcher so as to make them competitive in grant
competitions. One specific way to build capacity is through master's programs:
alumni from the master's programs in Kyiv and Moscow typically do very well in the
grant competitions.
Because of the low number of MA graduates opting for a career in academia, the
MA programs probably have had much more impact on their countries' economics
education through their outreach efforts than through their graduates. Student con-
ferences, outreach conferences, seminars, and summer schools have an impact on
those who have already self-selected into the profession of teachers and are likely to
continue teaching. In contrast, MA graduates who are interested in teaching go to
the West for a PhD.Therefore, one should not expect that creating a local PhD pro-
gram will lead to a substantial improvement in the level of economics education in
a country. Indeed, if the level of such a local PhD program were of the same quality
as programs in the West, its graduates would compete with Western graduates for
Western jobs and Western pay. Just like the MAs graduates, they would not become
low-paid professors at local universities.
What would be the advantages of a localWestern-style PhD? It would strengthen
the research environment; professors would have an opportunity to teach more
advanced courses, and the graduates of MA programs would have an opportunity to
get a good PhD degree in their own country. But if these people want to work in
academia after obtaining their PhD, going abroad would still be the most likely
option. Rather than starting a Western-style PhD program with PhD courses I am
more in favor of upgrading the existing aspirantura education.The "Joint Facility for
Electives" of the AERC seems to me an excellent example, bringing aspirants from
different regional universities together and teaching them up-to-date contents and
techniques. Combined with research workshops where thesis proposals are pre-
sented, progress is monitored, and theses are defended--again as in the African
model--you get a model that will revolutionize the level of educators.That there is
a demand from local educators to increase their knowledge can be illustrated by the
application statistics for two summer schools we will organize in July, together with
EERC-Moscow and the European Economic Association. For each available place,
we had almost three applicants.
Rather than starting up a PhD program some might consider scaling up the
efforts to build capacity in economics education and research by opening more MA
programs in other regions. Here are some thoughts on this.
First, the existing MA programs have been successful in creating centers of excel-
lence in economics education and research in Ukraine and Russia.Without doubt
similar centers of excellence can be created in other countries.However,none of the
existing centers in the former Soviet Union have reached the stage where they are
sustainable without the help of foreign donors. EERC-Ukraine has been successful
in obtaining some funds from local oligarchs.The ironic thing here is that the oli-
garchs that now support EERC are the oligarchs who were opposed to the Orange
COMMENT ON LYAKURWA, ANGELESCU AND SQUIRE, AND CAMPBELL 193
Revolution.The orange government,in contrast,so far has not shown any interest in
funding graduate education and research in economics.
The local funds so far, however, are not enough to sustain the program: for the
next two years, about a third of EERC-Kyiv's budget will come from local donors.
If, in order to support the new centers, the existing donors decide to shift money
from existing centers to the new ones, I fear that we will get more economics edu-
cation and research in, say, Georgia and Kyrgyzstan but (much) less in Ukraine and
Russia.
Second,if the donors decide to create new centers,they should seriously consider
giving endowments to these centers rather than providing them with yearly, three-
year, or even five-year grants. None of the existing centers in the CIS has been able
to grow out of donor support and it would be very optimistic to hope that new cen-
ters would do better. In Europe, master's programs are mainly financed through gov-
ernment support; in the United States, mainly through government support or
through endowments.The Central European University (CEU) in Hungary has an
endowment from Soros; the Center for Economic Research and Graduate Educa-
tion (CERGE) gets quite a bit of government support. Nobody, however, expects
much financial support for graduate education from governments in the CIS in the
near future, and philanthropy is still scarce and very random--definitely not some-
thing one would want to count on.1
The only way for donors to be sure to have a long-lasting impact is by providing
an endowment to these institutions. Such an endowment would focus life at these
centers on quality and growth rather than on survival.The annually returning ques-
tion of "do we have enough money for the next two years so we can enroll a new
class rather than start shutting down the program?" could then be replaced by the
question "how do we improve the quality of our teaching and our research?" Focus
on the second question would make it much easier to attract, retain, and motivate
faculty and staff.
I wonder why donors are so reluctant to provide endowments.They seem to be
convinced that the problems they help to alleviate are temporary, that the projects
they start will solve the problems quickly, or they hope somebody else will take over.
I really would like to see some statistics on the survival chances of donor-funded
projects that have been started without an endowment. Recently, USAID and the
Soros Foundation gave US$15 million to establish an endowment for the American
University of Central Asia. I hope this is a first sign that donors understand the
importance of endowments for educational programs.
Endowments would make it easier to retain faculty members, which is especially
crucial since the faculty members are the ones who have to build the new institution.
People who come for just a single year have little incentive to invest time and effort
in the improvement of the program--by the time they know the program and see
how it can be improved, they are already thinking about their next job. And why
would they write grant proposals to get additional funding for teaching, research, or
outreach? By the time the grants gets approved,the applicant will already have left the
program. Longer-term stays indeed lead to a feeling of "ownership"--the faculty
194 TO M C O U P �
members become residual claimants, hence they have interest in strengthening the
program.
If donors prefer not to give an endowment, I recommend that the new centers
start as "cheaply" as possible--that is, combine some Western-educated PhDs with
"upgraded" local teachers.The latter, while not attaining the level of the Western
PhDs, can still provide a reasonable level of quality education.They can be paid a
wage that is high relative to local standards but low relative to international standards,
which makes long-run sustainability much easier to achieve. Moreover, donors
should be flexible in terms of how fast the money they give should be spent. Often
money has to be spent within a given period, which is the best excuse to waste
money.
To summarize: in my opinion, the efforts of donors to stimulate economics edu-
cation and research in the CIS have been successful. In Ukraine, for example, there is
now a pool of properly qualified economists available, who can supply government
and business with advice based on sound analysis.What remains to be done (besides
making the centers sustainable) is to put more effort into getting business and gov-
ernment to realize the importance of such advice and to try to increase the impact
that both donors and MA programs have on education at local universities.
Note
1. The support of the Kazakh government for an economics PhD seems to be an excep-
tion.
Comment on Lyakurwa,
Angelescu and Squire,and Campbell
Alan Gelb
IWOULD LIKETO FIRSTTALK ABOUTTHE AFRICAN ECONOMIC RESEARCH CONSORTIUM
(AERC) and the Economics Education and Research Consortium (EERC), then
about the Global Development Network (GDN), then raise the question of what
next. But first, a comment on the issue of capacity.We have had a lot of debate in the
World Bank about what exactly is capacity, this rather existential concept everybody
talks about,and how to understand it.I think opinion is swinging around to the view
that it makes no sense to talk about capacity in the abstract; one has to talk about
capacity for doing something specific--for delivering health services,for example,or
for managing public finances.We have to define what the outputs are so that we can
understand whether we are making progress.This is why it is important to be clear
on what these organizations are trying to do. And there are differences between
them--the concept of success is not always the same for all.
Considering the AERC and the EERC, the main thing that strikes me is their
similarity. Both of these institutions have an active engagement in research.Their
work is not mechanical; it is not hands-off. It has to do with a very people-intensive
mentoring process. Both institutions emphasize the quality of technical and profes-
sional expertise, or professional development, within the discipline of economics.
The focus on quality is important for the credibility of these institutions, both with
their funders and with their partner institutions abroad.
Keeping this level of professional expertise and quality is absolutely essential for
the credibility of the institutions.This means that, to some degree, they are elitist pro-
grams. I have heard that criticism from a number of quarters about the AERC, for
example.And my response has been,"Well then,what are you really saying?That there
shouldn't be any`world-class'or`respectable'or respected economists in Africa?" That
strikes me as really quite unsupportable.And if you agree with me,you have no choice
but to insist on a program with high standards.That usually quiets the critics.
The implications of this approach is that one is trying to develop good people
with good skills who will then be absorbed into government and perhaps into the
195
196 A L A N G E L B
private sector. Exactly what research they do is less important; research is a tool to
build the capacity of people. If this is the approach, you do not measure the outputs
by whether the research is directly relevant to policy. From this perspective, it is less
important what the subjects of the AERC thematic research are than the fact that the
research is being carried out.The question is whether, seven or eight years later, the
products of the AERC process are your counterparts, in the ministry of finance, in
the PRSP process, in the central bank. Are they raising the quality of analysis and
policy making in their countries? If they are, then the program is successful in influ-
encing the economic management of countries in Africa.One has to think about the
criteria for success very carefully.
As one measure of success, there is now a lot of interest from other disciplines in
our capacity-building ventures. I have spoken with people working in business and
in some of the sciences and mathematics about this model, and to what extent it is
widely applicable. Mathematics seems to be more difficult because mathematicians
don't work in groups--no one quite understands what networking would be about
in mathematics.
On the teaching side, there are again some interesting parallels.Things seem
straightforward at the MA level.With a good MA program and the right people, stu-
dents will come, and they will later be absorbed by the country and used.They may
not be absorbed exactly where you want them of course, but that is a secondary
problem. At the PhD level it becomes more complex, because there is the issue of
what happens to students once they have PhDs. There may not be an effective
demand in these students' countries of origin for experts at that level.
One major difference seems to be the nature of the environment, in particular,
the essentially hostile environment that the EERC faces in many of its countries.The
old system is threatened by this new methodology and approach; far more than it is
for the AERC, the EERC seems to be an "alien body" in the middle of the system.
There is a question of whether the transplant will be rejected or accepted.That is not
the problem of the AERC, which is helping countries move in directions in which
most of the university departments would want to evolve.
Now to the GDN.The GDN is different from the other institutions in a number
of respects. It is a network of networks, first of all. It is very new, and its impact is
going to be difficult to assess because the counterfactual is the networks without the
GDN versus the networks with the GDN, where as the scenario for the AERC, for
example, is what happens if you don't have it at all. Being one removed from the
frontline organizations complicates assessment and brings in the issue of subsidiarity.
What should be done at the global level, what should be done at the regional or the
local level,and where exactly do you get the capacity-building impact?These are the
issues that we will be struggling with as we think about the global architecture of
capacity building.
The GDN differs in focus and objectives in at least two respects.The first is its
more direct emphasis on the policy applicability of research. For the AERC and the
EERC, that comes later down the road when students move into the right positions,
although no one will, of course, argue against policy-relevant research.The second is
COMMENT ON LYAKURWA, ANGELESCU AND SQUIRE, AND CAMPBELL 197
the issue of multidisciplinarity. Here I differ a little from what Janos Kornai said in
the early session. None of us would argue against multidisciplinarity. But for better
or worse we are organized in professional groups; and professional communities--
whether they are in economics or sociology or anthropology--happen to be struc-
tured along disciplinary lines. If you are not credible in at least some of those profes-
sional disciplines, you can be as multidisciplinary as you like but, frankly, no one will
take much notice of your work.This raises a tradeoff regarding the professional stan-
dards that you are trying to maintain for the credibility of your organization and of
the graduates. I worry that an excessive focus on multidisciplinarity may be asking
some parts of the world to run before they can walk.
Now, briefly, on the way forward. Clearly, there is a funding issue.The AERC has
been going for 17 years. It will need at least another 17, even with good leadership,
to become self-sustaining.The longer-term funding problem arises because every
donor seems to view itself as catalytic.This is true for us and it is true for many of the
foundations. But in this area, catalytic requires a far longer engagement than two,
three, or four years.The World Bank's ability to support capacity building is limited
and sometimes misunderstood.We cannot use our regular budget for independent
capacity-building activities--we have in fact tried to do this and it has not been pos-
sible, except with an extremely tiny part of our budget--the "external research sup-
port budget"--whose main job is supporting research and not capacity building.
What more can we do? One area that could perhaps be developed is through our
financing. I was very interested to read the paper on East Asia, which set out some of
the higher education reforms that the Bank has been supporting and funding.The
pendulum is swinging back, away from a focus on purely primary education toward
higher education. Using the financing vehicle depends, of course, on whether the
countries involved are going to endorse this approach.We are not going to be able
to fund research on capacity building through Bank programs if the countries are
indifferent. Public relations efforts within the countries are therefore important.
We can also do a much better job in stimulating the demand for capacity in the
countries.There is no shortage of money for technical and professional services
related to development. In Africa alone, there is US$3 billion to US$4 billion being
spent every year on technical assistance.These funds are supporting a variety of activ-
ities, very few of which are actually performed by Africans.We need to work with
countries, to see how some of this effort can be turned around, and to create longer-
term research agendas for domestic researchers. Such a longer-term agenda will help
to deal with the demand problem.
Thank you.
Comment on Lyakurwa,
Angelescu and Squire,and Campbell
Sergei Guriev
DISCUSSING THIS CONFERENCE'S PAPERS IS A CHALLENGE NOT ONLY BECAUSE EVERY
author has done a perfect job in presenting his or her case but also because each
paper represents the author's life project. Every paper describes a true quest guided
by the author's deeply felt vision and principles. Moreover, there is a selection bias:
by definition, the conference includes only success stories.The approaches to capac-
ity building have been very different in all cases, and each case is different from the
one I know best--the case of the New Economic School.The differences between
these visions and their degree of success may be explained by different missions and
by different external factors.Yet I believe one can benefit from discussing these expe-
riences in a unified framework (which will inevitably be driven by my own convic-
tions on capacity building in economics).
It is also hard to discuss the three papers in this session as they describe the broad-
est range of capacity-building models: EERC is a school, AERC is a network, and
GDN is a network of networks.Also, I have a very different level of ex ante aware-
ness of each of the three projects. I have only attended an AERC conference once. I
have attended many GDN conferences, won two gold medals in GDN competi-
tions, and participated in GDN's very first Global Project. I have also completed
numerous questionnaires for GDN's internal and external evaluations, discussed in
the paper.And I probably know almost everything about EERC-Kyiv, as it is essen-
tially a sister institution of NES; I have also grown up in Kyiv and went to the same
high school as many EERC students and faculty members.
Given all these caveats, I will proceed with my comments as follows. I start with
presenting a framework describing my understanding of the economic rationale for
capacity building and then provide comments on each case in turn. I will conclude
by summarizing the lessons we learn from comparing these excellent projects.
198
COMMENT ON LYAKURWA, ANGELESCU AND SQUIRE, AND CAMPBELL 199
Why Capacity Building?
Building centers of excellence in economics has to do with the most fundamental
questions in our profession:Why are some countries rich and other countries poor?
Why have some poor countries managed to catch up with rich countries within one
lifetime, and others have been lagging behind even more? As Nobel Prize winner
Robert Lucas once wrote,"The consequences for human welfare involved in ques-
tions like these are simply staggering. Once one starts to think about them, it is hard
to think about anything else"(Lucas 1988).In recent decades,many great economists
have invested a lot of effort to answer these questions. However, the state of the field
is best summarized by the telling title of a recent book by one of the leading
researchers: The Elusive Quest for Growth (Easterly 2001).
Modern development economics research has produced many important results;
we know a lot more about non-OECD countries than we did just a decade ago.Still,
intellectual honesty makes us recognize that development economics has not yet
produced a universal panacea for growth and development. In particular, there seems
to be a consensus now that the previously praisedWashington Consensus has not met
the expectations (Stiglitz 2002).Although one should acknowledge that the problem
has mostly been with selective implementation of theWashington Consensus check-
list rather than with the Consensus per se (Williamson 2002), the fundamental ques-
tion is why the implementation was selective. I strongly believe that the answer has
to do with the resident capacity in economics.
Development economics has proven that the basic (neoclassical) economics par-
adigm "incentives matter" is as applicable (or even more applicable) to developing
economies as it is to established market economies. Protection of property rights,
contract enforcement, market competition, and sound fiscal and monetary policies
are crucial for development and growth. However, it is less clear how, in developing
countries,to implement these first-order economic principles.The development and
transition economies start their quest from a point where multiple market failures
and government failures are a rule rather than exception.Moreover,missing and fail-
ing markets as well as incompetent or corrupt governments decrease returns to insti-
tutional change, both at the level of an individual firm or worker and at the level of
policy makers.
One can therefore argue that designing a politically implementable reform pack-
age is the most important challenge in economic development. In doing this, one
needs a deep knowledge of both the state-of-the-art economics research and the
specifics of the particular country's institutional environment.The former is crucial
for understanding linkages among parts of the reform package and the characteris-
tics of the quest's destination.The latter is vital for understanding the relative impor-
tance of different market and government failures for the implementation of the plan
and incentives,both at the micro level and at the level of policy makers.This message
emerges strongly from Dani Rodrik's recent paper "Growth Strategies" (2005) and
the book In Search of Prosperity (2003).These contributions argue that successful
growth policies are exactly the ones that implemented the "first-order principles of
200 S E R G E I G U R I E V
neoclassical economics" listed above. On the other hand, there is no one-size-fits-all
solution: the feasibility of policy packages crucially depends on an initial set of insti-
tutions.Hence it is inevitable that different countries should pursue different policies
to promote growth and development.
This argument emphasizes the vital need for economics capacity building.There
is no other way to ensure the design and adoption of adequate policies than to cre-
ate a resident economics profession whose members will be part of the global eco-
nomics community, and who will be permanently based in the country so they
would have a first-hand knowledge of their country's institutions and incentives to
promote its economic welfare.The latter point directly follows from the discussion
above, so let me elaborate on that discussion.
Academic quality and involvement in first-class economics research is important
because development economics is a rapidly growing field. A major lesson from
recent research is that successful policy packages have to be comprehensive (to ensure
political feasibility), hence capacity building cannot be limited to a field of develop-
ment economics, or to transition economics. Growth-promoting policies need first-
class capacity in political economy, public economics, labor economics,
macroeconomics, industrial organization, financial economics, international eco-
nomics, and so forth.The greatest mistake would be to exclude economic theory, or
at least applied theory. Good economic theorists can provide a broader view of how
incentives interact in an environment different from ones where the other disciplines
have originated (that is, different from the institutional framework that is present in
OECD countries), and they can extend the standard models wherever needed.
Integration in the global economics profession also provides a crucial ingredient
of the resident economists' incentives: career concerns.This is especially valuable in
the environments where interest groups reign unconstrained. Career concerns and
the respect of foreign colleagues will ensure independence of research and policy
advice, and will prevent the cooptation or buyout by the vested interests.
Integration into global academia also insures local economists from downside
risks. Given the economic and political volatility in developing countries, it is not
impossible that the economists will have to exercise their outside option and leave
the country.Although this is unfortunate ex post,such insurance is crucial for ex ante
incentives to move to the country.
AERC
Among other capacity-building projects, AERC stands out as an undertaking with
the greatest challenges but also with the highest returns.As Sub-Saharan Africa has
lagged behind the world economy for decades, the value of good economic policy
in that region is much higher than it is in other countries.And AERC's achievements
to date are great, especially given the short time span since its beginnings.
It is truly amazing that AERC has managed to launch a research competition, a
master's program,and even a PhD program--and that it did so as a cooperative effort
among several universities crossing national borders in a continent where borders still
COMMENT ON LYAKURWA, ANGELESCU AND SQUIRE, AND CAMPBELL 201
matter a lot.Yet the very same strategy raises concerns for the issue of a critical mass,
which I see to be crucial for the next step. Indeed, full integration into global eco-
nomics would require not only retention of a cadre, but a two-way mobility: send-
ing best talent to Western PhD programs and bringing them back to work in the
master's and PhD programs. In order to create centers of excellence that would
include world-class faculty, one should create a department or departments with 20
to 30 academic economists who have Western PhDs and publish in journals outside
Africa.It is much harder to do this without focusing on one or two universities.Even
in most countries in continental Europe, each country can only afford one or two
centers like that.
GDN
GDN is the youngest of these three organizations, and yet it is also the largest. Being
a unique global network of networks, GDN is pursuing many activities and con-
stantly trying to design new ones as it becomes clear what can benefit researchers in
the developing countries. Unfortunately, the format of these comments does not
allow praising the multiple contributions of GDN to local knowledge generation, so
I will inevitably focus on areas for improvement. My major problem is that GDN is
more focused on retention rather than on reversing the brain drain.Although these
issues sound similar, the implications for capacity-building strategy are often differ-
ent.To retain existing researchers, the capacity builders should equip them with ana-
lytical tools,data,contacts,and pecuniary rewards for relevant research.To reverse the
brain drain, one should provide the returning PhDs with adequate long-term fund-
ing, create a critical mass of colleagues, and ensure that what matters is the quality of
research rather than topic.Mostly these are the same--access to data and journals and
travel funding are very valuable in both cases.However,occasionally these approaches
do not coincide. For example, research competitions with predefined topics provide
researchers with occasional but uncertain rewards, while risk-averse returnees would
rather have multiyear tenure-track-type contracts. Given the economic and political
instability in their home countries, one cannot blame them for being too cautious.
GDN has made multiple attempts to learn what activities should reverse the brain
drain, but by definition it has surveyed retained rather than returning economists.
Being in the shoes of a returning economist, I would suggest that one should pro-
vide tenure-track-type contracts for Western PhDs returning to non-OECD coun-
tries.This would greatly facilitate the development of the struggling individual
centers of excellence, most of which are being discussed in this conference: CCER,
CERGE-EI, CEU, EERC-Kyiv, and NES.
The research competition example that I know best--EERC Russia,GDN's rep-
resentative in CIS--has been highly successful for almost a decade. However, once
one evaluates the outcome of this project in terms of capacity building, one sees that
most of its participants have never made it to the level of international publications.
The only exceptions, who did publish and stay in Russia, are affiliated with NES;
there are also a handful of others who eventually went to the United States and pub-
202 S E R G E I G U R I E V
lished when they left Russia Even with very devoted staff and resource people from
all over the world,there is a limit to what a research competition can do.At this stage,
a world-class department of economics can emerge only through two-way mobil-
ity--sending people abroad and hiring back Western PhDs--and this requires a
focused approach and building a critical mass in the way the above-mentioned cen-
ters of excellence do.
EERC-Kyiv
EERC-Kyiv has been a great success. It was created in 1996, four years after NES,
and since then has been followed the very same path only few years later.It has estab-
lished a high-quality master's program, sent graduates to PhD programs in the West,
and even started to hire them back in the international job market. EERC has also
been successful in placing graduates in professional economist positions in Ukraine's
public and private sector.
Because I strongly believe in the NES model, I can express concern only about
two important deviations from this model. First, it is a model unlikely to establish
financial sustainability without resident faculty in place. Both foreign and local
donors are hesitant to provide capital funding to a school that does not yet have fac-
ulty. Only with faculty in place does the school acquire identity and can therefore
present a very specific case to prospective donors. Once the faculty is in place,
EERC-Kyiv will also be able to provide Ukraine with all the benefits of modern
economics: policy advice for the public sector and consulting for the private sector,
which will further advance visibility and fund-raising potential.Therefore it is cru-
cial to provide tenure-track and tenure contracts to the faculty rather than the one-
year contracts that have so far been the case in Kyiv.
The resident faculty are especially important for tackling my second concern:
EERC's indigenization strategy. As EERC was transforming into Kyiv School of
Economics (KSE) within a large public university, there were many obvious risks.
Even though this university is a new and progressive organization,it is hard to imag-
ine how it will be able to commit to KSE's independence and autonomy, especially
given that the university already has an economics department.NES has undertaken
multiple attempts to integrate with many Russian state universities, including some
very similar to EERC's partner, yet we have always backtracked because the bene-
fits never seemed to justify the risks.The major risk of integrating into the large
university is the risk of losing the program's quality and overall mission. However,
these risks are not there for good. Once the strong resident faculty is in place, the
situation may be quite different because mature faculty will be able to withstand
external pressure.
One thing that Bob Campbell's paper does not mention is the Orange Revolu-
tion of 2004. It has opened up a new window of opportunity for EERC in terms of
external funding,excellent visitors,and impact on economic policy in Ukraine.Even
the fact that the prime minister in place seems to pursue very unorthodox policies
may actually help to stimulate further the demand for good economic advice from
COMMENT ON LYAKURWA, ANGELESCU AND SQUIRE, AND CAMPBELL 203
the business community. I would recommend jumping on this opportunity and
establishing a policy research center.
Conclusions
The three papers provide a very good insight into the economics capacity building
universe: from a basic unit of economic department (EERC) to a network of such
departments (AERC), on to a network of such networks (GDN).All three institu-
tions have done a great job in a very short period of time.Yet much more is to be
done to make irreversible progress in building world-class economics capacity in
these countries.
References
Easterly,William. 2001. The Elusive Quest for Growth: Economists'Adventures and Mis-
adventures in theTropics. Cambridge, MA: MIT Press.
Lucas, Robert. 1988. "On the Mechanics of Economic Development," Journal of
Monetary Economics 22: 3�42.
Rodrik, Dani. 2005. "Growth Strategies." In Handbook of Economic Growth, ed.
Phillippe Aghion and Stephen Durlauf.Amsterdam: Elsevier.
------. 2003. In Search of Prosperity:Analytic Narratives on Economic Growth. Prince-
ton: Princeton University Press.
Stiglitz, Joseph. 2002. Globalization and Its Discontents. NY:W.W.Norton.
Williamson, John. 2002."Did theWashington Consensus Fail?" Outline of speech at
the Center for Strategic & International Studies,Washington, DC. November 6.
Regional Perspectives
Accelerating Poverty Reduction in
SouthAsia by Scaling Up Economics
Education and Policy Research
Shantayanan Devarajan,ManuelaV.Ferro,Shekhar Shah,
and Priya Shyamsundar
South Asia is enjoying the fastest growth in its history and making modest, if uneven, gains
in human development. The difference between continuing at this pace and reaching some of
the Millennium Development Goals, and attaining even faster growth-- thus making signifi-
cant gains in human development--lies in second-generation reforms. South Asian countries
are democracies, so the second-generation reforms will have to emerge from a domestic politi-
cal consensus. To build this consensus, the reforms will have to be tailored to local circum-
stances and developed and debated by domestic actors, and they will have to be underpinned
by credible economic policy research that shows what works and what doesn't in those local
circumstances. The paper reviews the situation in Sri Lanka and Pakistan, and then describes
SANDEE, a small but successful regional research network with the explicit goal of enhancing
capacity in the region to undertake research on the linkages between environment and devel-
opment economics and to strengthen teaching in environment and natural resource econom-
ics. SANDEE's experience suggests that regional networks are not inexpensive, but they are
cost-effective.
A program of policy research in South Asia can be scaled up by (1) building or strengthen-
ing research institutes in underserved countries and regions within countries, and (2) research
that will provide the foundations for second-generation reforms. The authors propose several
country-specific and regional initiatives needed for scaling up. The recommendation at the
country level is for building new economic policy research institutes in some of the countries of
the region, while strengthening existing institutes in others. For instance, in Pakistan there is
a clear need and potential for a new institute dedicated to research that supports second-
generation reforms; in Bangladesh, we would recommend instead that an existing institution--
for example, the virtual network called the Economic Research Group--be strengthened.
207
208 D E VA R A JA N, F E R RO, S H A H , A N D S H YA M S U N DA R
This paper proposes several initiatives at the country and regional level to scale up eco-
nomic policy research and education in South Asia. First is the proposal to hold a South-Asia-
wide workshop to go into greater depth about possible approaches to scaling up economic
policy research and education in the region. The second initiative is based on the sizeable
South-Asian diaspora, who have sent home remittances to the tune of US$24 billion a year
over the past three years. Establishing a South Asia Policy Research Foundation could pool the
funds donated by these individuals, and then allocate them, based on transparent and com-
petitive criteria, to research institutes and networks in the region. The orientation, organiza-
tion, housing, research priorities, and outreach of this foundation could be explored further at
the proposed South Asia workshop.
Such scaling up can promote sound policy making, accelerate growth and the delivery of
basic services to poor people, and help realize the dream of eliminating poverty in South Asia
in our lifetimes. Given where the region is currently in its growth and poverty-reduction
prospects, investments in economic policy research and teaching in South Asia can have
extremely high payoffs relative to similar investments in other parts of the world.
AMONG LOW-INCOME REGIONS,SOUTH ASIA HAS THE BEST CHANCE OF MEETING THE
UN Millennium Development Goals (MDGs) of moving the world substantially
closer to eradicating poverty. But it also has a good chance of not meeting the goals.
The difference between the two outcomes will depend on whether the region can
increase and sustain its GDP growth rate from around 5 percent to 8 percent per
year,and improve the delivery of basic services to poor people--in health,education,
water and sanitation,and other infrastructure--so that sustained higher growth trans-
lates into better human development outcomes.
The potential is massive--as is the challenge. On current trends, the region is off-
track on the MDG goals of primary education, child and maternal health, gender
equality,and preventing the spread of communicable diseases.And this aggregate pic-
ture hides the sharp--in some cases widening--disparities between and within
South Asian countries.
To meet the challenge, this paper argues that the countries of South Asia should
scale up economic policy research and upstream economics education so that the
policies required for such growth will be based on more solid foundations.The first
section discusses why the nature and depth of economic reforms that are now
being pursued require greater capacity for policy research in South Asia than is
now available. It also notes that the current environment of relatively rapid growth,
greater openness, and a large and active diaspora represent a historic opportunity
to scale up economics education and policy research in South Asia.The next sec-
tion describes some of the existing cross-country and national capacity-building
efforts, illustrating both their potential and their problems, and the large payoff that
can be expected in South Asia from such scaling up.The following section discusses
possible candidates for the type of capacity-building efforts that could be pursued
in the region as part of any scaling up. For example, it proposes and provides the
rationale for holding a regional workshop in South Asia--similar to the June 2005
global conference in Budapest for which this paper was written--that would allow
AC C E L E R AT I N G P OV E RT Y R E D U C T I O N I N S O U T H A S I A 209
a more in-depth discussion of the issues specific to South Asia and agreements on
next steps.
Why Scale Up Economic Policy Research in South Asia?
To meet South Asia's development challenge, economic knowledge and policy
research are critical--in stimulating public opinion and action, as a catalyst for
change, in understanding what works and what doesn't, and in benchmarking that
makes policy makers accountable for performance. South Asia is considered by many
to be the cradle of development economics.Yet many would hold that sound eco-
nomic policy research in South Asia--whether domestically sponsored or supported
by donors--does not make the same contribution to policy making as it does, say, in
Latin America. In a region with a long and rich tradition of knowledge creation, and
one where--for some countries at least--donors'financial resources are a drop in the
bucket;external assistance strategies must be underpinned by a creative,rigorous,and
results-oriented approach to knowledge assistance and helping build the domestic
capacity for such knowledge generation and sharing.
The need for greater evidence-based policy making and policy research in South
Asia stems from the nature of the reforms. Most of the countries of South Asia are
attempting second-generation reforms, strengthening public expenditures, and
public-private partnerships that complement such reforms.These reforms--aimed,
for example, at improving the delivery of basic services in health and education or
improving the investment climate--are far more complex and time consuming than
the stroke-of-the-pen, first-generation reforms South Asian countries have imple-
mented with reasonable success. Second-generation reforms attempt to shift institu-
tional incentives to bring about greater accountability in service delivery, such as by
separating the policy maker and the provider of such services. Focusing on strength-
ening the institutional accountability for services delivered by an urban water utility--
by introducing management contracts and similar public-private partnerships,
economic pricing of water, and institutional changes needed to underpin 24-7 water
availability--is substantively different from simply laying more pipes, building more
pumping stations,hiring more engineers,or opening a complaints cell.Policy making
based on evidence, and economics education and research that produce people capa-
ble of gathering such evidence and making sense of it, are essential ingredients in sus-
taining long sequences of reforms and avoiding costly mistakes.They are also vital for
building political support for such reforms.
These kinds of second-generation reforms require firmer domestic ownership
and deeper local knowledge.They require political leaders to think through how
they must prepare the ground for such reforms,which is often contentious;how they
sequence them; and how they evaluate them so as to be able to allow voters to judge
performance at the next elections. Knowledge of what works and what doesn't, and
why, is crucial for making these judgments. For instance, it is important to under-
stand whether and to what extent forestry reforms in one of the poorest countries in
the region, Nepal, have contributed to poverty reduction.What may be a binding
210 D E VA R A JA N, F E R RO, S H A H , A N D S H YA M S U N DA R
constraint in one setting may not be a binding constraint in another, and politicians
are particularly sensitive to wasting scarce political capital (or incurring expensive
political debts) on reforms that do not address genuine constraints to faster growth
or better service delivery. Bangladesh, for example, has grown consistently and at
increasingly faster rates, despite the general presence of factors such as poor gover-
nance and high levels of corruption. Sound economic research that helps sort out
what works and what doesn't can be immensely powerful in this one-size-does-not-
fit-all world
Second-generation reforms need a great deal of knowledge specific to local con-
ditions, requiring economic policy analysis to be carried out at the local level rather
than just at the national one.This is particularly important in South Asia for three
reasons. First, irrespective of the form of government, the region has some of the
largest countries in the world in terms of population size, as well as the largest con-
centrations of poor people.These are not homogenous populations by any stretch of
imagination.They require specific solutions to specific problems such as, for exam-
ple, in the delivery of education services or management of local watersheds.
Second, the federal nature of government in India and Pakistan, the largest coun-
tries in the region, shifts the locus of decision making and budgeting for many of
these second-generation reforms to state and provincial tiers of government below
the federal level. But these subnational tiers of government are precisely where the
capacity gap for economic policy analysis and informed policy debate can be large.
Third, several countries of the region are decentralizing to local governments to
increase the accountability of government to their citizens.This puts a premium on
knowing what works and what doesn't in terms of the investment climate and ser-
vice delivery,for example,at levels of local urban and rural government where on the
face of it the capacity for design,implementation,monitoring,and evaluation may be
the weakest.
The politics surrounding second-generation reforms are far more involved than
first-generation, stroke-of-the-pen reforms, and go beyond a simple matter of sort-
ing out winners and losers. For one thing, second-generation reforms take much
longer than their predecessors to show results. For another, they are extremely con-
tentious. Credible, objective policy research can play a large role in informing the
public and the media about the impact of reforms. Properly disseminated, such
research can help in bringing about greater alignment between narrow political
interests that are focused on patronage and clientelism and the broader development
objectives of providing services to the general public, particularly to poor people
whose voice may be the weakest.Objective research can also contribute productively
to the contestability of policy directions and allow a better sorting out of equity
issues across time and space. Building greater political awareness into economic pol-
icy research programs remains a major challenge.Without such awareness, policy
analysts can miss the political calculation (even if that calculation is self-serving and
narrow) that may underlie apparent policy blunders, as in the case of power subsidies
for farmers in India.When such political calculation is systematically ignored, policy
advice, whether donor driven or domestic, has poor traction.
AC C E L E R AT I N G P OV E RT Y R E D U C T I O N I N S O U T H A S I A 211
Finally, the economics profession is slowly rising to the realization that the poli-
cies it advocated in the 1980s and 1990s--stabilize prices, liberalize trade, privatize
industries--may have mattered less than the institutions that stand behind those poli-
cies. Knowledge about how these institutions work and can be reformed is best
located in domestic capacity to undertake economic and political analyses.Whether
as a legacy of their colonial past or the historical continuity of their traditional cul-
tural and social institutions,countries in South Asia have been more reluctant to cede
ground to outsiders in reforming their institutions. In such places, successful reforms
are likely to come only from a broad consensus that is based on domestic analysis and
debate.
Besides the need for scaling up policy research and the upstream economics edu-
cation that feeds such research, South Asia has many characteristics that promise a
high payoff from such scaling up.As already noted, the region has a strong and long-
standing tradition of policy research on development, particularly in statistical sys-
tems and in poverty and multigenerational investment analysis.There is a strong
legacy of development planning in each country in the form of national planning
commissions; these commissions still command respect in the national dialogue and
possess some of the strongest pools of analytical talent within government, even
though some of them do not have as clear a mandate, orientation, and technical
strength as they used to.
In almost all countries of the region, but particularly in the larger ones, the dias-
pora is a strong source of independent interest in economic policy analysis that can
and should be tapped. Members of the South Asian diaspora remain fully engaged
in researching and periodically spending extended periods of time in their coun-
tries of origin.These visits are often facilitated by local policy think tanks, which
themselves gain by their associations with visiting scholars and which provide a
gateway for the diaspora into the wider debate on policy issues carried out in the
media and in public discourse.This process is helped as well by the relatively free
and vibrant press in the countries of the region, including in the vernacular press,
which is far more important in carrying the debate to people bypassed by the Eng-
lish press. Finally, increasing access to the Internet and its rapidly widening use in
South Asia, combined with the region's relative strengths in information technol-
ogy, make for a greater impact of policy research.The relative technological strength
experienced by people at lower levels of income allow for readier access to infor-
mation on policy analysis, readier sharing of information around which coalitions
on important policy issues can be built, and capacity-multiplying solutions, such as
e-governance, that combine transactions efficiency with greater accountability.
National and Cross-National Policy Research Initiatives
in South Asia
In light of the need for economic policy research in South Asia, a natural question to
ask is:Who is filling this need? What types of economic research organizations are
212 D E VA R A JA N, F E R RO, S H A H , A N D S H YA M S U N DA R
there today? In this section,we briefly review the situation in Sri Lanka and Pakistan,
and then describe a small but successful regional research network.
Sri Lanka
There are few truly independent centers for economic analysis and research in Sri
Lanka. The most reputable universities (Colombo and Peradeniya) and the most rep-
utable think tank (the Institute of Policy Studies, IPS) depend heavily on govern-
ment funding and support. The IPS, established in 1988, is Sri Lanka's leading
economic policy research institute and the publisher of the annual Sri Lanka State of
the Economy Report.As the coordinator of the South Asian Association for Regional
Cooperation (SAARC) network of researchers,the Institute was also instrumental in
launching the South Asia Economic Journal in 2000 under the aegis of the SAARC
Secretariat.There are no private universities. In a highly politicized environment,
dependence on government support undermines the independence of these
institutions.
Pakistan
Pakistan has been unable to hold on to the majority of its trained economists, let
alone encourage the return of the large diaspora of highly trained economists back
to Pakistan. Partly this is the result of the succession of economic and political crises
over the past two decades, along with the rise of religious fundamentalism. Surpris-
ingly, there is little high-quality research on the relationship of monetary and fiscal
economics and policy, the financial sector, fiscal federalism, and the sources of Pak-
istan's past chronic instability. Research programs and economic analysis with a
longer time frame are even scarcer. Pakistan's crises have shortened the time horizon
of those engaged in policy making,and thus also in economics teaching and research.
As a result, many of Pakistan's highly trained economists either go to the private sec-
tor in Pakistan,or have successful careers abroad in the International Monetary Fund
(IMF), the World Bank, UN agencies, universities, or think tanks.
Because economic policy in Pakistan does not rely sufficiently on rigorous eco-
nomic analysis, there is limited demand for highly skilled economists. Pakistan's most
prestigious universities (Karachi's Institute of Business Administration and Lahore's
University of Management Sciences) focus on business administration rather than on
basic economic theory and public policy. Pakistan's few think tanks--for example,
the Social Policy and Development Center in Karachi and the Pakistan Institute of
Development Economics in Islamabad--depend heavily on government funding.
These think tanks also conduct surveys and produce applied economic research for
donors, but they tend to focus only on macroeconomic issues to the exclusion of
other problems.There are no think tanks of any stature that are truly independent of
Pakistan's ruling elites,whether these elites are the military or the government,or the
political and economic elites of Punjab and Sindh.
AC C E L E R AT I N G P OV E RT Y R E D U C T I O N I N S O U T H A S I A 213
Research Networks
Although South Asian policy research institutes enjoy differing levels of success, two
recent networks created specifically to build capacity in economics need further
mention.The two networks are SANDEE (the South Asian Network for Develop-
ment and Environmental Economics, http://www.sandeeonline.org) and SANEI
(the South Asia Network of Economic Research Institutes, http://www.saneinet-
work.net).We discuss SANDEE below to showcase how networks can contribute to
the policy research infrastructure in the region.
In South Asia in particular, but in many poor countries, the interconnections
among poverty, economic growth, and environmental change have long been
ignored. Development policy reforms in the past paid little attention to the resource
dependency of poor people and the impact of pollution and degradation on the
health and productivity of the poor. Second-generation reforms often need to focus
on institutional changes that may influence the way poor people use natural
resources.We also need to understand better how growth-enhancing environmental
policies can be made more effective, given South Asia's frail institutions and weak
enforcement capacity. SANDEE was founded five years ago to fill this gap in policy
research. It was started with the explicit goal of enhancing capacity in the region to
undertake research on the linkages between environment and development eco-
nomics and to strengthen teaching in environment and natural resource economics.
South Asian countries share common local, regional, and international environ-
mental problems.Yet these countries differ tremendously in their capacity to teach,
to undertake research on environmental concerns, and to influence policy formula-
tion.India,with its vast educational infrastructure,has an entire community of teach-
ers and scholars who work together.At the other end of the spectrum is Nepal, with
limited access to international knowledge, difficult language problems, and very few
educational institutes that can offer high-quality training. Bhutan is a case of reliance
on India for higher education--the only college in Bhutan, Sherbutse College, fol-
lows Delhi University curricula and engages faculty from India.The commonalities
among the problems faced and the obvious differences in capacity to manage these
problems present an opportunity for regional, cost-effective, capacity-building
research and teaching programs. SANDEE was created to take advantage of this
opportunity.
SANDEE undertakes a portfolio of capacity-strengthening activities to enable
South Asians to learn from each other and to exploit economies of scale in knowl-
edge development and dissemination. Its specific objectives are to:
1. strengthen the ability of researchers in South Asia to undertake policy-relevant
research on the economics of environmental and natural resource problems;
2. support the growth of rigorous policy-relevant literature on economic devel-
opment, poverty, and environmental change;
3. support the development of environmental and natural resource economics in
teaching and research institutes and think tanks; and
214 D E VA R A JA N, F E R RO, S H A H , A N D S H YA M S U N DA R
4. facilitate dialogue among economists, other social and natural science thinkers,
practitioners, and policy makers on environment and natural resource
concerns.
In order to meet these objectives SANDEE provides research funding and tech-
nical support, operates a training program, and ensures that research is widely dis-
seminated to the policy and academic communities. SANDEE's research support
starts with a biannual research competition that is widely advertised in Bangladesh,
Bhutan, India, Nepal, Pakistan, and Sri Lanka. After a rigorous process of peer
reviewing and commenting, a selected number of researchers are invited to share
their proposals with peers and SANDEE advisers at a research workshop.These
workshops, which are held every six months, bring together researchers in the
region with senior scholars from around the world. Rigorous peer review is one
part of the research infrastructure that tends to be rather weak in South Asia.Thus,
these research workshops serve as a mechanism to evaluate proposals, to provide on-
going guidance and mentorship to local researchers, and to monitor research
progress.They are also important for creating a vigorous South Asian professional
community of researchers.
SANDEE supports research that is primarily empirical and builds on the use of
household surveys. As we argue in this paper, second-generation reforms require
local, long-term, evidence-based analysis.To promote this type of research SANDEE
is now attempting to create a database of the information collected by researchers
with the goal of supporting repeat surveys in the future.
SANDEE's teaching programs include introductory courses in environmental
and resource economics, methods-based workshops, policy discussions, and so on.
Country-specific workshops introduce colleagues to simple issues such as "how to
write a research proposal"; more advanced regional workshops focus on topics such
as computable general equilibrium models. Environment and natural resource eco-
nomics is a new subject to many South Asian countries. Many universities in
Bangladesh and Nepal now teach this subject, but with teachers who have had no
prior training and who are simply unaware of the existing literature.Thus, SANDEE
is attempting to train at least one faculty member from each university that offers
environment and natural resource economics so that he or she is equipped with up-
to-date information and teaching tools.
Limited resources for research in South Asia essentially means that many
researchers do not have the luxury of spending years learning how to do policy
analysis and then figuring out how to inform the policy community. Consequently,
SANDEE also provides a "dissemination service" to researchers. Researchers con-
tribute policy news to SANDEE's newsletter and they learn to field questions about
the policy implications of their work throughout the research process. SANDEE
then uses professional journalists to convert academic research papers into brief pol-
icy notes that are widely disseminated.
SANDEE's experience suggests that regional networks are not inexpensive, but
they are cost-effective.For a vast region such as SouthAsia,which has diverse research
capacity, there are economies of scale in bringing professionals from several similar
AC C E L E R AT I N G P OV E RT Y R E D U C T I O N I N S O U T H A S I A 215
countries together to think jointly through the research needs for many second-
generation policy problems. Further, networks can facilitate research competition
and peer interaction and learning without large investments in infrastructure. Net-
works are not substitutes for research institutes in underserved regions. However, in
the absence of local research institutes, networks can create opportunities for teach-
ers and researchers in peripheral areas by linking them to the rest of their country,
region, and the world.
Scaling Up Economics Policy Research and Education in
South Asia
Given South Asia's need for,and payoffs from,scaled-up policy research and upstream
economics education, it is clear that the existing initiatives described in the previous
section, even if they were doubled or tripled in size, will fall short of meeting the
challenge. Most existing initiatives are focused on a few countries and in too few
regions of those countries. Furthermore, most research institutes concentrate on the
federal government, whereas--as pointed out in the first section--many of the next
generation of policy reforms will take place at the state or provincial level in India
and Pakistan, and even possibly in Bangladesh, Sri Lanka, and Nepal.
In addition, most of the existing institutes in the region have been dedicated to
research on first-generation reforms, such as trade and fiscal policy.The second-
generation reforms that South Asia needs to accelerate poverty reduction--such as
those in the public sector, including public-private partnerships, decentralization,
environmental management, and service delivery reform--will require a very differ-
ent research orientation to provide them with a solid base.The research will be long
term, very often involving analyzing household surveys (done usually only once
every few years) and rigorous impact evaluations. It will require strong participation
of stakeholders for several reasons:to tailor reform design to the local situation;to use
the information it yields more effectively; and to build distributional coalitions, since
these reforms are intensely political.Finally,because of the highly contested nature of
these reforms, it is essential that the research be credible and therefore that it be con-
ducted by scholars and institutes with a reputation for independence.
Taking all this together, we see at least two dimensions along which a program of
policy research in South Asia can be scaled up. First, there is a clear need for building
or strengthening research institutes in underserved countries and regions within
countries. For instance, there is currently no research institute in Pakistan that meets
the criteria spelled out above to support that country's quest for accelerated growth
and poverty reduction. Similarly, the smaller countries in South Asia--Nepal and Sri
Lanka--lack a domestic tradition of evidence-based policy making. In India, where
there is a long tradition of policy research, there are still major gaps in this area in
some of the states--particularly the poorer ones such as Bihar and Uttar Pradesh--
even though most of the responsibility for social service delivery has been devolved
to the states and lower tiers of government.The challenge here, as in the smaller
countries, will be twofold: to bring in and retain accomplished researchers and to
216 D E VA R A JA N, F E R RO, S H A H , A N D S H YA M S U N DA R
sustain the independence and financial health of any newly created or strengthened
research institutes.
Second, there is a need for research that will provide the foundations for
second-generation reforms.The research issues to inform these reforms are differ-
ent.The research involves the study of incentives in public organizations--such as
the effect of outcome-based bonuses on teachers--and the political economy of
reform.The research methods are also different. Results of household, investment-
climate, and public-expenditure-tracking surveys are examples of the kind of data
used for this research.The research may also be multidisciplinary, as, for example,
for tracking the economic implications of climate change in Bangladesh.And the
governance of research may be different, with a need for greater collaboration with
local stakeholders and more reliance on rigorous impact evaluations, both to know
what works and what doesn't and to build political support behind those reforms
that do work.
How can policy research and economics education in South Asia be scaled up
along these dimensions? Given the heterogeneous nature of the countries in the
region,we see several country-specific and at least two regional initiatives needed for
scaling up.At the country level we would recommend building new economic pol-
icy research institutes in some of the countries of the region, while strengthening
existing institutes in others. For instance, in Pakistan there is a clear need and poten-
tial for a new institute dedicated to research that supports second-generation reforms.
This institute should be financially independent of the government and--
importantly--of multilateral and bilateral donors,requiring endowment support and
some revenue sources of its own.The institute would have a small core of dedicated
staff, but would also be a focal point for locally based and expatriate Pakistanis, who
would cycle through on a regular basis to provide fresh ideas and stimulation. Such a
new institute in Pakistan should be part of a network, so that it receives peer support
and capacity-building advice.This network participation is particularly important to
ensure sustainability.
In Bangladesh, building a new institute may largely end up drawing talent from
existing research institutes.We would recommend instead that in Bangladesh an
existing institution--for example,the virtual network called the Economic Research
Group--be strengthened. Many, if not most, Bangladeshi economists are already
members of this network, but it is not now equipped to undertake long-term
research.In India,we would recommend focusing on two or three poorer states,such
as Bihar, Uttar Pradesh, and Orissa, and design the appropriate interventions only
after further analysis of existing institutes.We would propose a similar approach in
Nepal and Sri Lanka, both of which are underserved, and where the need is at least
as great as in the poorer Indian states.
So far, we have emphasized policy research. Economics education is at least as
important to providing a sound basis for policy making.And in South Asia, the qual-
ity of this education--except at a few elite universities--leaves much to be desired.
The challenge, however, is choosing the right entry point. Capacity and resources
can be major constraints, and both are unfortunately tied to deeper problems of fac-
AC C E L E R AT I N G P OV E RT Y R E D U C T I O N I N S O U T H A S I A 217
ulty incentives, the funding of higher education, and university autonomy. Universi-
ties are often highly politicized, and attempts to strengthen the curriculum to make
it more policy-relevant, say, are met with strong resistance.These complex problems
of university education need attention.Any attempts to promote economics educa-
tion cannot bypass them.Although it will take time to address these systemic issues,
we believe that progress is possible as we scale up economics research.We would rec-
ommend using the research institutes that would be built or strengthened as the plat-
form for developing a program of improving economics education. For instance, the
research institutes could begin by offering to teach a course at the local university in
policy economics.
Starting in this low-key manner, we would recommend garnering support for
greater collaboration between universities and research institutes. Such collaboration
should enhance the quality of both research and teaching. Stronger, more policy-
oriented research institutes working on local issues with local survey and other data
can become attractive destinations for visiting overseas researchers and faculty. As
part of their visiting arrangements, these visitors can also provide short-term, world-
class training in policy analysis for both advanced students and faculty.Such short but
intense policy workshops can help set up research partnerships between overseas and
local researchers, partnerships that can have a significant impact on the research out-
put and career development of the latter.
At the regional level, at least two initiatives are worth pursuing. First, to explore
and work out the details of which institutes would work in which settings,we would
propose to hold a South-Asia-wide workshop, similar to the global conference held
in Budapest in June 2005, to go into greater depth about possible approaches to scal-
ing up economic policy research and education in the region.The conference could
be held in 2006, with a view towards launching the initiatives as soon as possible
thereafter.The conference would explore the relative merits of building new research
institutes versus strengthening existing ones, including strengthening existing
research networks such as SANDEE or SANEI.
The second initiative arises from another set of common characteristics of the
South Asia region.The region is the world's largest recipient of remittances, to the
tune of $24 billion a year over the past three years.These are financed by the sizeable
South-Asian diaspora, many of whom are now successful professionals in their new
countries.These professionals in turn are often looking for ways of leveraging their
remittances to help improve the policy environment for reducing poverty in their
countries of origin. As we said earlier, accelerating growth and improving service
delivery based on second-generation reforms are powerful ways of reducing poverty.
We would propose that the collective-action problem of these individuals who are
anxious to contribute to their countries but lack the ability to coordinate their
actions, can be addressed by establishing a South Asia Policy Research Foundation
that would pool the funds donated by these individuals, and then allocate them,
based on transparent and competitive criteria, to research institutes and networks in
the region. In this way, the public money devoted to policy research and economics
education could be leveraged with private money, much like the Ford, Rockefeller,
218 D E VA R A JA N, F E R RO, S H A H , A N D S H YA M S U N DA R
and other foundations began doing in the twentieth century.The orientation,organ-
ization, housing, research priorities, and outreach of this foundation could be
explored further at the proposed South Asia workshop.
Concluding Remarks
South Asia is at a crossroads.After several decades of stagnation, the region is enjoy-
ing the fastest growth in its history, and making modest, if uneven, gains in human
development.It can continue at this pace,and reach some,but by no means all,of the
Millennium Development Goals. Or it can aspire to even faster growth, substantially
reducing the absolute number of poor people, and to significant gains in human
development, especially for the poor and excluded groups such as women and
minorities.The difference between these two paths lies in second-generation reforms
that will remove the bottlenecks to accelerated growth and significantly improve the
delivery of basic services, such as health, education, water, and sanitation, to poor
people.
South Asian countries are democracies, some of them long-standing ones.These
second-generation reforms will have to emerge from a domestic political consensus.
To build this consensus, the reforms will have to be tailored to local circumstances
and developed and debated by domestic actors. And they will have to be under-
pinned by credible economic policy research that shows what works and what does-
n't in those local circumstances.
While parts of South Asia have a long tradition in evidence-based policy making,
the location and kind of research needed to support these second-generation reforms
calls for a significant scaling up of economics education and policy research in the
subcontinent.The research needs to be done closer to where decisions are being
made--for example, at the state or provincial level in federal countries, and in some
of the underserved countries of South Asia.The research often needs to be long term
in nature and collaborative in style, and should be scrupulously independent of both
domestic and external political pressures. Given where the region is currently in its
growth and poverty-reduction prospects, investments in economic policy research
and teaching in South Asia can have extremely high payoffs relative to similar invest-
ments in other parts of the world.
This paper has proposed several initiatives at the country and regional level to
scale up economic policy research and education in South Asia. Such scaling up can
promote sound policy making, accelerate growth and the delivery of basic services
to poor people, and help realize the dream of eliminating poverty in South Asia in
our lifetimes.
Capacity Building in
Economics Education and Research
A Note on the Experience of LatinAmerica and the
Caribbean
Mauricio C�rdenas and Guillermo Perry
The economics profession has been extraordinarily dynamic in Latin America. Most countries
now have a significant number of professional economists who can handle complex analytical
problems. Central banks have been at the forefront in promoting professional expertise in eco-
nomics, followed by think tanks and universities (currently 131 think tanks are engaged in the
economic analysis of public policies in Latin America). Although university-based academic
research has played a significant role, one of the most relevant problems is the low-quality
peer review in local journals, mainly because the academic community is still too small or
close-knit to allow for objective review. A few finance and planning ministries have enhanced
their economic capability, but most government agencies continue to operate with a relatively
low level of economic expertise. Improving the technical capacity of the legislative branch is
also seen as a top institutional priority.
We propose a two-tier approach to graduate economics education. On the one hand, we
favor financial support (increasingly in the form of loans from multilaterals and nonprofit
organizations) to students who are able to pursue PhD programs in top schools in the United
States and Europe. On the other hand, regional universities that offer high-level master's pro-
grams should be strengthened, while local doctoral programs should be limited to universities
that have at least 15 full-time professors with PhD degrees from recognized institutions.
These programs should be targeted at students who are not able to pursue doctoral programs
abroad. Fiscal adjustment implies that universities have to charge competitive tuition fees,
provided that there is access to educational loans.
219
220 M AU R I C I O C � R D E N A S A N D G U I L L E R M O P E R RY
THE PURPOSE OF THIS NOTE IS TO PROVIDE AN OVERVIEW OF RESEARCH,TRAINING,
and practice of economics in Latin America, with special attention to those institu-
tions that attract high-quality professionals and graduate students and produce rele-
vant policy research. By research we mean "any systematic effort to increase the stock
of knowledge"(GDN 2004),while policy research is aimed at the continuity or change
of a practice (Crewe andYoung 2002).
Context
The economics profession has been extraordinarily dynamic in Latin America. Most
countries now have a significant number of professional economists who can handle
complex analytical problems. Many academic economists have been trained in for-
eign universities, particularly in the United States, which has had a strong influence
on the way the profession is taught and practiced.World-class economists work in
the academic institutions, government (especially in the larger countries), and the
private sector (especially banking institutions).
We want to address two main issues in this paper. First, we want to review the
successful experiences in economics education and policy research in Latin America
and the Caribbean in order to draw lessons on what has worked in capacity build-
ing. Second, we look at the region's strategies for scaling up its capacity building in
economics education and policy research. In this context, we discuss the main needs
and challenges that need to be overcome, and the role that international donors can
play in that process.
As Sebastian Edwards (2003) recently reminded us, 40 years ago two prominent
Chilean economists--Anibal Pinto and Osvaldo Sunkel--argued that it was a mis-
take for Latin Americans to study economics in the United Kingdom, France, and
the United States. According to these economists, training abroad was inadequate
because of the unique problems of Latin America.They argued in favor of develop-
ing graduate programs in the region, with a strong emphasis on development eco-
nomics, economic history, and history of economic thought. Their views were
particularly influential in promoting a graduate program for Latin American students
at the Instituto Latinoamericano y del Caribe de Planificaci�n Econ�mica y Social
(ILPES), the teaching arm of the Economic Commission for Latin America and the
Caribbean (ECLAC; the Spanish acronym is CEPAL). At the same time, and influ-
enced by the prevailing view on the need to initiate local graduate training in eco-
nomics, many universities developed their own master's programs.This was the case
of Universidad Cat�lica and the Universidad de Chile (both Econom�a and Inge-
nier�a Industrial) in Chile; at Pontificia Universidade Cat�lica do Rio de Janeiro
(PUC-RJ) and GetulioVargas Foundation in Brazil; at the Universidad de los Andes
in Colombia; and at El Colegio de M�xico in Mexico.These universities have excel-
lent programs, as do other universities that created their programs later--such as the
Universidad del Centro de Estudios Macroecon�micos, Universidad de San Andr�s,
and Universidad Di Tella in Argentina; and Instituto Tecnol�gico Aut�nomo de
M�xico in Mexico.
A NOTE ON LATIN AMERICA AND THE CARIBBEAN 221
The existence of high-quality master's programs in the region has allowed a
growing contingent of economists to seek doctoral training in the United States and
Europe, contrary to what Pinto and Sunkel expected (see figure 1). Many of these
students stay on in academic jobs at the faculties of major research universities in the
United States as well as in the United Kingdom,and other European countries.Mul-
tilateral agencies have also recruited many economists from the region throughout
the years. Some of those that return to the region are actively participating in inter-
national conferences, publishing internationally, and training very good professional
economists at local universities.Their research tends to be applied, and highly rele-
vant for the region.As mentioned by Edwards (2003), these important developments
FIGURE 1
Graduates in Social Sciences in Latin America and the Caribbean
(annual averages of years in parenthesis)
a. Master's level
Mexico (90�02) 6,124
Brazil (90�02) 1,571
Colombia (90�02) 1,039
Argentina (1996) 627
Panama (00�01) 581
El Salvador (99�00) 303
Chile (90�00) 181
Bolivia (96�02) 154
Honduras (98�00) 140
Costa Rica (90�98) 174
Guatemala (90�00) 72
� 1,000 2,000 3,000 4,000 5,000 6,000 7,000
b. PhD level
Brazil (94�96) 265
Mexico (90�02) 142
Cuba (90�02) 81
Argentina (1996) 60
Honduras (98�99) 10
Bolivia (1996) 9
Panama (00�01) 3
Colombia (01�02) 3
Paraguay (01�02) 1
� 50 100 150 200 250 300
Source: http://www.ricyt.edu.ar
222 M AU R I C I O C � R D E N A S A N D G U I L L E R M O P E R RY
contrast sharply with the situation described by Pinto and Sunkel in the early 1960s:
"[T]here is practically no possibility in the Latin American university ... to carry the
fundamental research that could serve as the base for a ... theory of development"
(Pinto and Sunkel 1966, 86).
In spite of the substantial progress of the economics profession in the region,
many problems remain. Political leaders have a strong bias in favor of applications
rather than scientific research, so public funding for theoretical research is quite lim-
ited. In recent years, however, although governments remain reluctant to support
basic research, they are supporting a selective group of researchers who can do out-
standing work.That is, rather than distributing resources as widely as possible, gov-
ernments are more willing to fund individuals and small groups that belong to
"centers of excellence." This practice is evident across the region.
For the scientific community, in general, one of the most relevant problems that
needs to be tackled is the low quality of the peer review in local journals.This problem
exists mainly because the academic community is still too small or close-knit to allow
for objective review. According to figures from the Science Citation Index (SCI),
which is produced by the Philadelphia-based institute that monitors scientific publish-
ing trends, Chile produces more international papers per 100,000 population than
Argentina, twice as many as Mexico, and three times as many as Brazil (see figure 2).
Even then, according to the Universidad de Chile, Chile is producing only 50 PhDs a
year in all disciplines.In terms of expenditures on research,Brazil tops the list.Figure 3
shows that researchers in the social sciences in Mexico are close to 60 percent of the
total number of researchers; in Chile and Argentina this figure is under 20 percent.
In the area of training, the most important challenge today is to consolidate and
guarantee the quality of a group of relatively young PhD programs in economics.
Some of the programs available today are located in Chile at the Universidad de
Chile, in Argentina at the Universidad Torcuato Di Tella, and in Mexico at the Insti-
tuto Tecnol�gico Aut�nomo de M�xico.The joint program of these three universi-
ties, described below, is called LADE.There are, of course, other doctorate programs
offered by Latin American Universities. Universidad de San Andr�s in Argentina and
PUC-RJ in Brazil are good examples.
Successful Experiences in Economics Education and
Policy Research in Latin America and the Caribbean
Several kinds of factors helped to enhance economics education and policy research
in Latin America and the Caribbean. Each has played a different role.
The Role of ThinkTanks
Think tanks have been a favorite vehicle for the advancement of the economics pro-
fession in Latin America.Although the term is intrinsically vague and elusive, think
tanks are organizations that undertake analysis of scientific and technical characteristics
related to public policies and that follow certain criteria related to the publicity of their
A NOTE ON LATIN AMERICA AND THE CARIBBEAN 223
FIGURE 2
Publications registered in the Science Citation Index per 100,000
population
(annual averages 1990�2002)
Chile 12.4
Argentina* 11.0
Trinidad and Tobago 8.0
Uruguay 7.9
Costa Rica 6.2
Panama 5.6
Brazil 5.2
Mexico 4.0
Cuba 4.0
Venezuela, R. B. de 3.9
Guyana 1.3
Colombia 1.1
Bolivia 0.9
Peru* 0.8
Ecuador 0.8
Paraguay 0.4
Honduras 0.4
0 2 4 6 8 10 12 14
Source: http://www.ricyt.edu.ar
Note: *Average 1990�2003.
FIGURE 3
Social Science Researchers
(as percentage of total researchers)
Mexico (94�95) 58.1
El Salvador (2000) 47.8
Venezuela, R. B. de (2002) 34.7
Paraguay (01�02) 26.3
Colombia (96�02) 23.6
Panama (98�00) 23.3
Chile (90�00) 19.7
Brazil (2000) 16.4
Argentina (97�02) 15.7
Bolivia (97�01) 10.0
Uruguay (2002) 7.0
0 10 20 30 40 50 60 70
Source: http://www.ricyt.edu.ar
224 M AU R I C I O C � R D E N A S A N D G U I L L E R M O P E R RY
work (Braun, Cicioni, and Ducoti 2002). Not all nongovernmental organizations
(NGOs) can be considered think thanks.A think thank should follow scientific crite-
ria: academic independence, peer review, and a commitment to high academic stan-
dards. However, think tanks are versatile in effectively targeting different particular
audiences with specific publications.Think tanks regularly use the press, mass media,
and newsletters aimed at policy makers, as well as seminars, conferences, and scientific
publications to disseminate policy research.
To be considered a legitimate think tank, there are also requirements regarding
the organization's relationship with interest groups. Because a think tank can easily
be captured by these groups,two basic preconditions must be met.On the one hand,
funding should be diversified among various sources, including foreign donors that
help developing a research agenda. On the other hand, research should be publicly
disseminated,which helps to draw the line between think tanks and consulting firms.
A precondition for a successful think tank is that it maintains research freedom and
not be beholden to any specific interest.According to Dickson (1971), for an NGO
to be considered a think tank, it should include the following characteristics
� Use scientific methods (but not limited to scientific themes)
� Be multidisciplinary
� Have strong connections outside the scientific community
� Have a sense of freedom in the elaboration of its research
� Be interested in overall (that is, general equilibrium) effects of policy actions
There are literally hundreds of think tanks in Latin America and the Caribbean.
They can be classified into four categories: (1) private research centers; (2) political
party foundations (the intellectual basis of the parties' political platforms); (3) advo-
cacy NGOs that do not produce research but act as sounding boards of certain ideas
and ideologies; and (4) policy implementation think tanks.Although the distinctions
are somewhat blurred, private research centers (PRCs) are the only type of think
tank closely linked with capacity building in the economics profession. Since the
1960s,PRCs have been used to link the academic,philanthropic,and political worlds.
PRCs arose as a solution to the researchers' need for academic and financial
autonomy (many universities had been subject to political interference and instabil-
ity).They facilitated this goal by allowing researchers to obtain better salaries while
providing independence. Several of the think tanks were also created with the spe-
cific goals of raising the level of public awareness of,and the quality of public debates
on, economic policy, and thus of economic policy itself. University institutes were
more academic than policy oriented, somewhat distant from the policy world. As
think tanks evolved, they gained importance in other roles such as the training of
government technical experts for key decision posts, which followed the "revolving
door" model--where people come and go from research centers to government--
that is common in the United States.
Think tanks have indeed changed significantly since the 1960s. Although they
remain key strategic actors of the policy process, political systems have become
A NOTE ON LATIN AMERICA AND THE CARIBBEAN 225
increasingly complex because many other relevant political actors have entered the
policy-making game.The channels of influence of think tanks are no longer the tra-
ditional and more direct ones (such as political parties) but other groups in society
that are decisive (the media, legislators, and so on). Moreover, think tanks are gener-
ally outside formal political arenas (Stone 1996), meaning that, although they are
political actors in the sense of producing ideas that influence decision making, they
play a role quite different than the role played by the state bureaucracy, legislative,
executive, judicial authorities, or political parties.
Although sources of funding may come from governments and the private sector,
research freedom is a prerequisite in the attempt of economists to influence policy
through analysis rather than lobbying.Their influence is limited to certain aspects of
the policy-making process,such as agenda setting,developing policy alternatives,and
shaping public understanding of issues. Of course, think tanks cannot be responsible
for the final implementation of their proposals.2
In a recent study, Miguel Braun and others (2004) underscore the factors that
explain why some think tanks are more successful than others in their ability to
influence policy. They look in detail at the experience of four Latin American
research institutes3 and eight from other countries in Africa and Asia.According to
their analysis, for think tanks to be influential,
they must conduct continuous, serious and accurate research with operational
outputs, political feasibility and validated research methodologies. We have
detected that, in Latin America, continuity over time, important budgets and the
existence of close relations between think tanks and the business sector,as well as
the existence of a window of opportunity due to a political, social or economic
crisis, or to the fact that research is demand-driven by the government, among
other factors facilitate the influence of think tanks on policy. Instead, in Africa,
age is not such an important factor, since most think tanks were created in the
1990s. In this region, funding coming from philanthropy as well as the presence
of stakeholders [on think tank] boards is a key and distinctive factor (2004, 3).
Recent research on the subject has emphasized a two-way relationship between
research and policy (see, for example, Garrett and Islam 1998; RAWOO 2001). Fol-
lowing Carol Weiss (1977), it is widely recognized that although research may not
have direct influence on specific policies, the production of research may still exert a
powerful indirect influence by introducing new terms and shaping the policy dis-
course.4 This view acknowledges that policy making is a complicated political
process, involving many actors, with outcomes that are hard to predict. In this con-
text, think tanks do not have a clear path to influence policy.Their role in society
cannot be compared with the formal arenas of political parties, legislators, and exec-
utives.The role of think tanks is much more informal, which gives rise to certain
skepticism about their real influence and policy impact.
However, influential think tanks continue to attract the attention of politicians
and the media.Although measuring impact is elusive, the proliferation of think tanks
226 M AU R I C I O C � R D E N A S A N D G U I L L E R M O P E R RY
suggests that the generation of ideas and knowledge is a source of power that cannot
be ignored.Policy and legislation needs to be grounded in solid theory and evidence,
and the role of think tanks is to provide such theories and evidence. According to
Braun and others (2004), there are two conflicting views on think tanks.At one end
of the spectrum, think tanks are seen as elite-ridden centers of power and gover-
nance behind the scenes.At the other end, think tanks are portrayed as independent
centers of objective policy research guilelessly pursuing public interest goals, their
influence counterbalanced by the competitive environment in which they operate.
Neither extreme adequately portrays the multifaceted roles of these institutes.
In line with most of the recent literature on the subject, think tanks are seen as
political actors with a strategic position in the decision-making system as mediators
between the cognitive and power fields (Belmartino 1999, 2�3). In order to exert
influence on policies, think tanks strategically interact with other key actors of the
political system.Their main role is to produce some practical,applied knowledge and
translate the outcomes of research for different audiences.Think tanks are con-
strained by the formal and informal rules of the policy-making game and by their
own organizational structure.These two factors make them more or less successful.
An Overview of ThinkTanks in Latin America and the Caribbean
Based on a project funded by the Global Development Network (GDN), Braun and
others (2004) built a think tank directory (available at www.researchandpolicy.org)
that includes 193 nonprofit organizations engaged in the analysis of public policies
in Latin America (68 percent of these think tanks are involved in the area of eco-
nomics). Research centers at universities were excluded on the grounds that they are
not organizationally independent (this, however, does not detract from their research
autonomy).The same is the case for foundations that are part of corporations or busi-
ness conglomerates.
Only 13 percent of these organizations have annual budgets in excess of US$1
million, suggesting that they are relatively small (44 percent have budgets between
US$100,000 and US$500,000, while 60 percent have fewer than 20 employees).
Although most of the think tanks have diversified sources of funding,"international
organizations" are the most important source (especially the World Bank and the
Inter-American Development Bank). Books and research papers--but not technical
journals--are the most commonly used vehicles of dissemination. Speaking at and
organizing public events are part of the activities of nearly 80 percent of the think
tanks in the region; these events are a clear channel of influence. Meetings with pol-
icy makers are also regularly used. Frequent contact with the media, in the form of
op-ed columns in newspapers, interviews, and the publication of research findings in
magazines and newspapers is a common characteristic.
Think tanks also derive their strength for influencing policy from hiring highly
qualified researchers, who usually have a PhD degree.Think tanks frequently incor-
porate external researchers or experts into their research teams when needed in
order to develop their research. In Latin America and the Caribbean, unlike Asia or
A NOTE ON LATIN AMERICA AND THE CARIBBEAN 227
Africa, think tanks in general do not include other stakeholders (such as the private
sector and government).A think tank in Latin America and the Caribbean typically
has between three and seven PhDs on its research team.
One key dimension that must be clarified to assess the role of think tanks is the
proportion of demand-driven to supply-driven research . Demand-driven research
facilitates influence (those that ask for research--including international agencies--
can be key actors in the political game). In contrast, think tanks with endogenous
funding are more inclined to supply-driven research.The drawback in this case is that
the research agenda can be influenced by the most important donors, which can
include business groups. Finally, the fact that there is a "demand" for research is com-
mon to all kinds of think tanks, regardless of their different organizational structures,
procedures, or interests.
The Cognitive Map of Applied Knowledge in Economic Policies
In a recent paper, Santiso andWhitehead (2005) provide a first attempt at measuring
the institutional density of research centers and the diffusion of applied knowledge
in relation to economic policies in Latin America and the Caribbean.They argue
that these centers provide adequate articulation between technical and political
rationality deliberation as well as arenas of interactions between "experts" and
"politicians."Centers of excellence host technopols that operate as traders or bridge-
builders.To use Hirschman terminology, they are trespassers of knowledge between
the technical rationality and the political rationality.
The dialog between technical and political rationality is a rather recent develop-
ment in many countries in the region. Santiso andWhitehead argue that even as late
as the 1980s, the pattern of elite formation encouraged generalists rather than spe-
cialists (the student leader�cum-journalist who subsequently became a legislator-
cum-lawyer). Political leaders tended to disregard intellectual or disciplinary
boundaries. More recently, those who have attempted to imitate this style ended up
with no political power--and no real field of professional competence, either. How-
ever, even today Latin American intellectuals have a taste for deep and fundamental
issues--such as internal conflicts, income inequality, and poverty--so they do not
limit themselves to "specialized" or narrowly "technical" areas of competence.
Central banks,perhaps because of their specialized functions and greater exposure to
the outside world,have been at the forefront in promoting professional expertise in eco-
nomics. Other specialized academic centers and think tanks have been able to attract
experts with an interest in national politics. Several ministries of finance have also
enhanced their economics capabilities--at least at the top levels of the bureaucracy.Some
governments, however, continue to operate with a relatively low level of economics
expertise even today.The case of Rep�blica Bolivariana deVenezuela is paradigmatic in
this sense,and not just as a result of recent political developments in that country.
Capacity building in economics education and research has not been restricted to
central banks and think tanks. Other institutions of knowledge--such as research
groups at international organizations and government agencies, private consultants
228 M AU R I C I O C � R D E N A S A N D G U I L L E R M O P E R RY
or research departments of banks, and university-based academic research centers--
have played a significant role. In particular, multilateral organizations have benefited
from ample funding and technical capacities, substituting in many cases--especially
in small countries--local capacities for the production, dissemination, and imple-
mentation of policies. Some of these multilateral organizations are based in Latin
America; examples are the Economic Commission for Latin America and the
Caribbean (ECLAC), the Corporaci�n Andina de Fomento (CAF), and the Facultad
Latino-Americana de Ciencias Sociales (FLACSO).The major organizations, in
terms of financial and technocratic resources,are,however,based inWashington,DC:
the International Monetary Fund (IMF), the Inter-American Development Bank
(IDB), and the World Bank.
The IDB not only has a large research department with world-class economists--
many of them Latin American--but it also promotes research throughout the region,
through its networks of research centers.5 Research at the IDB focuses on the most
prominent problems of the region, and the institution is truly a bridge between cen-
ters of knowledge in the industrial countries and local researchers throughout the
region.More importantly,research outcomes have been highly relevant for the design
of economic policies in various countries.6The Office of Chief Economist for Latin
America at the World Bank also conducts a research program--in addition to the
global one in the Bank's Development Economics Vice Presidency (DEC)--that is
highly influential in the region.The Bank has recently decentralized many of its cen-
ters of knowledge, basing its operational departments directly in the borrowing
countries.The chief economist for Latin America is based in Colombia, generating
positive spillovers into the local academic community.
At a more regional level, in the last decade CAF has increased significantly its
research and knowledge capacity. By 2006 its research department employed 14
economists, most of them with PhDs and all them based in Latin American coun-
tries.The technical capacity of this institution is becoming influential, especially in
the smaller countries that have greater dependence on its lending.
Turning to the role of government agencies, since the 1960s several countries cre-
ated high-profile institutions--many of them at the cabinet level, reproducing the
model of the Council of Economic Advisers in the United States--in order to attract
a growing number of technocrats and improve the quality of policies. Prototypical
examples are the Departamento Nacional de Planeaci�n (DNP) in Colombia (see
box 1) and the Instituto de Pesquisa Econ�mica Aplicada (IPEA) in Brazil,7 but other
examples abound (such as CORDIPLAN in Rep�blica Bolivariana deVenezuela).
Technical capacities at the legislative level have been typically weak (with the
possible exception of Brazil, where hundreds of well-trained economists are hired as
congressional aides). Legislatures lack an office dedicated to evaluate economic pol-
icy in a systematic way, while at the same time these legislatures do not enjoy advi-
sory services from multilaterals.As Javier Corrales (2004) has recently noted,". . . the
result is a major technical imbalance between the technical capacity of the Executive
branch and that of the Legislature. Ministers of Finance enjoy an informational pre-
mium that legislatures lack."
A NOTE ON LATIN AMERICA AND THE CARIBBEAN 229
One potential side effect of the lack of technical competence in congress is the
prevalence of ideological opposition rather than detailed discussion of technical mer-
its. Recent efforts at mimicking the role of the congressional budget office in the
region (with the help of multilateral institutions) have ended in failure (Rep�blica
Box 1
The Technocracy in Colombia
Long before John Williamson in his writings on the Washington Consensus coined
the term technopols to describe the key role played by U.S. or U.K. graduate�
trained economists in the policy-making process in Latin America, in Colombia,
since the early 1960s, technocrats was the term used for this new breed of
bureaucrats.
Technocrats made their first appearance in Colombia as a result of the creation
of the Monetary Board in 1963 and the powerful National Planning Department,
which became the landing place for the newly graduated foreign-trained econo-
mists. With rare exceptions, the head of the Planning Department (a cabinet level
position) has been a PhD economist with recognition in academic circles. The role
of the technocracy as a key player in the policy-making process was strengthened
under the Lleras administration in 1966�1970. The president made wide use of the
CONPES (Consejo Nacional de Pol�tica Econ�mica y Social) as a vehicle to formulate
policies that were based on documents prepared by the Planning Department. More-
over, the implementation of those policies was often delegated to the technocrats.
The role of the technocracy reached a high point during the L�pez administration
(1974�1978). Not only were the powers of the Monetary Board advisers and the
Planning Department enhanced, but--for the first time--a foreign-trained econo-
mist was appointed as finance minister. All significant posts at the ministry were
assigned to technocrats (some of them becoming ministers of finance years later).
More importantly, the leadership in the economic policy making was transferred
completely to the finance minister; notwithstanding some exceptional periods, it
has become a norm that finance ministers are chosen from among professionally
trained economists, most of them with graduate training in top foreign universities.
Another high point in delegating policy-making powers to technocrats was
reached during the administration of Cesar Gaviria (himself a professional econo-
mist and former finance minister). This point was the delegation of monetary policy
to an independent board, which has become a stronghold of the technocracy. Other
than this decision, it does not seem that there has been any enhancement in the
role of technocrats resulting from the 1991 constitutional.
Although technocrats have, on occasions, been appointed to other ministries,
their influence has been much less important than in the economic policy arena.
The career path of technocrats often involves academic work at independent insti-
tutions such as Fedesarrollo and the Universidad de los Andes, or international
organizations. Very few technocrats have embarked on successful political careers.
Source: C�rdenas and others (2005).
230 M AU R I C I O C � R D E N A S A N D G U I L L E R M O P E R RY
Bolivariana deVenezuela being an emblematic case). Many countries have opted for
a model where national audit offices (contralor�as) develop technical capacities, rather
than congresses.The results,however,have been not entirely successful,as these insti-
tutions are highly politicized and very rarely attract top-rated economists.
Improving the technical capacity of the legislative branch, as done in the past for
certain areas of the executive branch, is now seen as a top institutional priority. Leg-
islators need an independent and nonpartisan source of technical analysis on eco-
nomic affairs.This office should systematically analyze the economic impact of bills
coming from the executive and should generate studies of previously enacted laws.
In the 1990s, the IDB unsuccessfully attempted to create these offices across Latin
American legislatures. One of Rep�blica Bolivariana deVenezuela's most important
policy reforms of the 1990s, the 1998 oil-stabilization fund, occurred after this office
was created.The reform also boosted that country's congressional demand for tech-
nical knowledge.
Current Strategies for Scaling Up Capacity Building in
Latin America and the Caribbean
The Latin American and Caribbean Economic Association (LACEA) was founded in
July of 1992 in order to encourage greater professional interaction and foster
increased dialogue among researchers and practitioners who focus their work on the
economies of Latin America and the Caribbean.The idea of creating such an associ-
ation of economists was first put into action during the April 1991Washington, DC,
meetings of the Latin American Studies Association.At a meeting attended by close
to 40 participants, a seven-member organizing committee, led by Nora Lustig, was
appointed. LACEA has since grown to an organization with more than 400 active
members.
The Role of LACEA and Its Journal Economia
The organizing committee quickly obtained enthusiastic support for the idea of cre-
ating an association from a dozen leading scholars in the field.This early support was
critical to the success of the efforts to create the association. Soon after, the organiz-
ing committee identified the initial executive committee, drafted the association's
bylaws, and applied for membership of the Allied Social Science Association (ASSA),
officially launching LACEA.
Over one hundred prominent economists from throughout the region were
invited and accepted the invitation to be charter members of LACEA.The first exec-
utive committee was selected,andAlbert Fishlow--then professor at the University of
California, Berkeley--was invited to become its first president. Nora Lustig, then at
the Brookings Institution, was selected as vice-president.8 On July 1, 1994, the char-
ter members officially approved LACEA's bylaws and its first executive committee.
Under Albert Fishlow's presidency (1993�97), LACEA became a member of the
Allied Social Science Association (in January 1993) and soon began to host sessions
A NOTE ON LATIN AMERICA AND THE CARIBBEAN 231
at the annual meetings of the American Economics Association, the Latin American
Studies Association, and the Econometric Society/Latin American Meetings. In
1996, LACEA began to host annual international meetings of its own. Since then,
meetings have become an increasingly important gathering of economists.Thou-
sands of papers are submitted and strict criteria are applied in the selection proce-
dures. Between 200 and 400 papers are presented during the annual meetings.9
LACEA has already held two meetings outside Latin America (in Madrid and Paris),
with the purpose of strengthening links with the European academic community.
In the late 1990s, LACEA expanded its activities in several directions. In con-
junction with the IDB and the World Bank, LACEA formed the Network on
Inequality and Poverty in 1998. It also started the Network on Political Economy
(hosted by Fedesarrollo and Universidad de los Andes in Colombia) and a summer
camp on International Economics and Finance, a joint initiative with the Center for
International Economics at the University of Maryland. All these activities are car-
ried out in conjunction with academic centers in Latin America and the Caribbean.
LACEA's four thematic networks (Inequality and Poverty, Political Economy,
Regional Integration, and International Finance) have continued to thrive, provid-
ing excellent venues for high-quality professional exchanges focused on some of the
most crucial issues in the region. Each of these networks holds one or more aca-
demic meetings throughout the year in different countries in the region, providing
crucial feedback and guidance to junior and seasoned scholars, and allowing for fur-
ther intercountry and interinstitutional networking and information sharing as well
as for interactions among researchers and policy makers.
In 1999, at its Fourth Annual Meeting, held in Santiago, LACEA announced the
launching of a new academic journal, Economia, modeled on the Brookings Papers on
Economic Activity and Economic Policy. Its first issue was published in the fall of 2000;
since then, Economia has been established as a central reference point in development
discussions throughout the region. Also in 1999, LACEA was selected to be the
Latin American and Caribbean regional partner institution of the Global Develop-
ment Network, a World Bank�initiated network of research institutions around the
world that generates and shares knowledge about development.
LACEA has a tremendous range within the region and even outside it, reaching
economists, other social scientists, and development practitioners interested in Latin
American institutional, social, and economic development. LACEA has over 1,000
members spread over 18 countries, covering more than 300 research institutes in the
region. LACEA's professional standards are comparable with those of developed-
world academic associations.
To respond to growing membership, internal networking, activities, and interac-
tions with other networks, and in order to be able to exploit additional opportuni-
ties fully--including more effective partnering with GDN and other regional
networks--important steps have been taken to increase the operational capacity and
degree of institutionalization of LACEA. A new site for LACEA's secretariat, with
expanded responsibilities, has been chosen after an extensive review process.This
secretariat will be provided for the next six years by a joint venture of two solid and
232 M AU R I C I O C � R D E N A S A N D G U I L L E R M O P E R RY
prestigious institutions in Bogot�, Colombia: Fedesarrollo and Universidad de los
Andes.
Along with its successes, LACEA faces many challenges, especially in relation to
fund-raising efforts.To ensure the long-term sustainability of its current activities as
well as to be able to grow and advance in its objectives of coverage, quality, interac-
tion with other disciplines, and increased impact on the link from research to policy,
a secure source of funding is needed. New thematic networks (economic history has
high priority) also need to be developed while strengthening the existing ones.
Latin American PhD Programs
Figures from the Institute of International Education (IIE 2004) indicate that, of a
total of 279,076 international students enrolled in graduate programs in the United
States in 2004, 65 percent came from Asia and 8 percent from Latin America (figure
4).The fields of study are distributed as shown in figure 5,with the percentage of stu-
dents enrolled in doctorates in the social sciences is 10.9 percent and in business and
management is 15.7 percent.
According to the Institute of International Education report, India is the country
that has the most students enrolled in doctorate programs in the United States (17.5
percent), followed by China (14.5 percent) and Korea (9.7 percent).There are three
countries from Latin America and the Caribbean in the top 20 list: Mexico, which
ranks 8th, Brazil 15th, and Colombia 18th (table 1).
According to local ministries of education, the global enrollment rate in graduate
education (as a percentage of total population) is 0.64 percent in the United States,
0.11 percent in Mexico, and 0.02 percent in Colombia (figure 6).As a consequence,
the percentage of professors with PhD degrees teaching in undergraduate programs
FIGURE 4
International Students Enrolled in Graduate Programs by Place of Origin,
2004
North America Oceania
4%
Latin America 1%
Africa
8% 4%
Europe
12%
Middle East
6%
Asia
65%
Source: IIE (2004).
A NOTE ON LATIN AMERICA AND THE CARIBBEAN 233
FIGURE 5
Students Enrolled in Doctoral/Research Institutions by Field of Study,
2004
agriculture other
1.7% 13.9%
education
engineering
2.5%
22.4%
humanities
2.6%
health professions
3.9%
fine and applied arts
4.2% business and management
physical and life sciences 15.7%
9.6%
social sciences mathematics and
10.9% computer sciences
12.5%
Source: IIE (2004).
TABLE 1
Ranking of International Enrollment in Doctoral and Research Institutions
in the United States
(2004)
Rank Place of origin Enrollment (%)
1 India 17.5
2 China 14.5
3 Korea 9.7
4 Japan 4.6
5 Taiwan 4.6
6 Canada 4.3
7 Turkey 2.2
8 Mexico 2.1
9 Germany 1.6
15 Brazil 1.2
18 Colombia 1.1
20 Singapore 0.9
Source: IIE (2004).
Note: Percentages are of total international students.
234 M AU R I C I O C � R D E N A S A N D G U I L L E R M O P E R RY
in Latin America and the Caribbean is very low relative to those with PhDs teaching
in the United States: 3 percent in Colombia and 5 percent in Mexico (Chile, with a
figure similar to that of the United States, is an interesting exception) (figure 7). In
many cases in the region, university professors do not even have a masters� degree.
FIGURE 6
Global Rate of Students Enrolled in Graduate Programs, 2001
Colombia 0.02
Mexico 0.11
Chile 0.12
Korea, Rep. of 0.15
United States 0.64
0.0 0.1 0.2 0.3 0.4 0.5 0.6 0.7
%
Sources: Ministries of Education.
FIGURE 7
Professors with Advanced Degrees Teaching in Undergraduate Programs,
2001
a. Professors with PhD degrees
Colombia 3
Mexico* 5
Chile* 13
United States 40
0 10 20 30 40 50
%
b. Professors with Master's degrees
Colombia 16
Mexico* 36
Chile* 19
United States 38
0 10 20 30 40
%
Sources: Ministries of Education and World Bank (World Development Indicators 2005).
Note: *Data are for 1995.
A NOTE ON LATIN AMERICA AND THE CARIBBEAN 235
According to Convenio Andr�s Bello (CAB), which is an organization that gath-
ers information on cultural and educational programs in some Latin American coun-
tries, there is a total of 1,871 doctorate programs in different areas in its member
countries plus Brazil and Mexico.10 PhD programs in business and economics rep-
resent only 2 percent of this total.Table 2 shows the number of business and eco-
nomics PhDs offered by universities that belong to this association.
Given the few number of local doctorate programs in economics, PhD-level
training--to a large extent--depends on travel to developed countries.This implies
that there are issues related to financing that restrict the access of many Latin Amer-
icans to this type of education (see box 2 for a description of a model for financing
graduate education abroad). In addition, few PhD programs can offer specialized
training in the areas of most relevance for the key economic and social challenges in
Latin America.
As a response to this situation, in 2000 a group of world-class universities in the
region launched the Latin American Doctorate in Economics (LADE) program.This
program gathers the Instituto Tecnol�gico Aut�nomo de M�xico, Universidad de
Chile, and Universidad Torcuato Di Tella (Argentina). The goal of the program is to
train research economists who will carry out original research and contribute to the
field of economics in Latin America.These institutions (as well as others in the
region) currently offer MA programs that are very competitive (students are regu-
larly admitted to the top PhD programs in the United States and Europe after they
finish their local MA programs). However, not all students have the financial capabil-
ities and personal readiness to travel abroad.
The association of three universities will help to attain a critical mass of faculty
and students that will make the program feasible. Combined, these three institutions
have more than 50 academics with PhDs from the best U.S. and European universi-
ties.These professors are responsible for a significant portion of the research pub-
TABLE 2
PhD Programs in Business and Economics
(2003)
Country Number of PhD programs
Bolivia 1
Chile 1
Colombia 1
Cuba 4
Ecuador 1
Panama 0
Paraguay 2
Peru 13
Venezuela, R. B. de 1
Source: CAB.
236 M AU R I C I O C � R D E N A S A N D G U I L L E R M O P E R RY
lished in the region, which covers a wide spectrum of theoretical and applied fields
of economics.
The primary objectives of LADE are to enlarge the student population and to
expand the teaching and research capabilities in the region.A particular emphasis
will be placed in attracting candidates from universities that want to increase the
number of PhDs on their faculties. Currently only a handful of universities in
Latin America have a large share of PhDs their faculties. A similar effort will be
made to attract candidates from Latin American government bodies that need to
increase the technical qualifications of their staff, such as central banks, offices in
charge of social and health policies at the national and provincial levels, budget
offices, antitrust offices, and so on.To date, the three institutions have financed all
current costs, including tuition waivers and stipends for all students accepted into
the program.To sustain this initial effort in the future, additional resources will be
vital.
The program has been enrolling,on average,five students per year.Many students
come from smaller countries, such as Bolivia and Ecuador.The goal of the program
is to admit 10 students per institution each year. In Europe, the current enrollment
rates is between 12 and 15 students per institution for a doctoral program.
Funding Research in Latin America and the Caribbean
During the import-substitution era,direct and indirect public support for the devel-
opment of technological capabilities was the norm. Key players were the national
science and technological councils, which were in charge of formulating science
and technology policies and promoting scientific research and technological devel-
opment. As argued by Melo and Rodr�guez-Clare (2005), research and develop-
ment involved an array of public research institutes and laboratories, located both
outside and within public universities (see ECLAC 2002). In the case of the eco-
nomics profession, with few exceptions--such as the Brazilian (Conselho Nacional
de Desenvolvimento Cientifico e Tecnol�gico) (CNPq)--these public entities
played a minor role in funding training and research.The basic model was supply
driven and worked under the premise that it was sufficient for the state to organize
and subsidize the supply of scientific knowledge and technological know-how as
public goods.
The crisis of the supply-based approach to research in the 1990s resulted in the
adoption of a new model emphasizing demand-side incentives (ECLAC 2004).11
The basic idea is to promote the demand for technological innovation and techno-
logical transfer at the firm level. Demand subsidies are ideally allocated in a horizon-
tal and neutral way, making a clearer separation between funding for technological
modernization and funding for scientific research.This divide has increased the avail-
ability of funds for research,in part because the private sector has been more involved
than previously in providing financial support for technology funds, often as a coun-
terpart to public funds.
A NOTE ON LATIN AMERICA AND THE CARIBBEAN 237
Box 2
Initiatives for Financing Graduate Education Abroad:
The Case of COLFUTURO in Colombia
Latin American students have depended on government agencies and some interna-
tional organizations to fund their graduate education abroad. However, the size of
the scholarship programs has been relatively small relative to programs in other
regions of the world. In response to the need for high-level graduate education,
several nonprofit institutions have been created in part to correct the market fail-
ure associated with limited access to financial resources.a COLFUTURO, a privately
run nonprofit organization, supports Colombian professionals with high academic
performance to continue their studies at the master's or doctorate level. Through a
loan-based system, incentives are geared toward the return of graduates to Colom-
bia. Since its creation in 1991, COLFUTURO has helped a total of 1,319 students
from several disciplines and regions of Colombia. Figure 8 shows that applicants
grew from 193 in 2001 to 445 in 2004.
COLFUTURO's initial endowment was US$12.6 million (56 percent of this came
from the local private companies and 44 percent from the Colombian government).
Its net worth in 2006 is close to US$26 million, reflecting the effective repayment
of the loans given to students and the profitable investment of its portfolio. The
total support given to students has been US$36.6 million, of which US$12.6 million
are grants. The total number of supported students is 1,318 (360 of whom have
received PhD degrees). Top destination schools have been the London School of
Economics, Columbia, Harvard, Georgetown, MIT, and McGill.
COLFUTURO provides its beneficiaries with a maximum of U$25,000 per year for
up to two years. After returning, students must remain in Colombia for twice the
time they spent overseas with financial support from COLFUTURO, plus one year.
Beneficiaries have five years to pay the complete debt, which remains in US dollars.
Fifty percent of the loan is written off, provided that the student returns to the
country. For those who join the public sector or undertake teaching or research
activities, an additional 10 percent is forgiven.
COLFUTURO supports professionals in disciplines such as management, engineer-
ing, sciences, and the arts. Selection is carried out on an independent and anony-
mous basis, and is made on academic merit, the quality of the study program
chosen, and the student's second-language proficiency. Sixty-six percent of the stu-
dents have returned to Colombia (64 percent in the case of PhD training and 96
percent in the case of other graduate studies and diplomas). The organization has
created a program to facilitate the placement of its beneficiaries in the job market.
Finally, COLFUTURO plans to increase the number of beneficiaries from an aver-
age of 126 per year to 500 per year in the near future; it also plans to increase the
return rate to 88 percent by 2013.
Source: COLFUTURO (2004).
a. For example, INCE in Argentina, CORFO in Chile, FUNDAYACUCHO in Venezuela, INABEC in Peru, and
IECE in Ecuador.
238 M AU R I C I O C � R D E N A S A N D G U I L L E R M O P E R RY
FIGURE 8
COLFUTURO's Beneficiaries and Applicants
900
832
800
700
600
500 446 445
400
300
193
200 211 137
100 46 75
169
0
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Beneficiaries Applicants
Source: COLFUTURO (2004).
Conclusions
Economics education has advanced significantly in Latin America during the past
few decades.The region has a group of world-class universities that train students at
the undergraduate and master's levels. Above-average students are able to pursue
PhD degrees in the best universities of the industrialized countries, particularly in
the United States.Most of these students obtain some type of financial support,often
from government sources such as central banks. Some of them return to their coun-
tries of origin to work in academia, the public sector, or--increasingly--in the pri-
vate sector.Those who stay abroad are recruited by economics departments (the
number of Latin Americans in academic tenure-track positions has increased signif-
icantly in recent years) as well as multilateral organizations. Many of these individu-
als position themselves at the forefront of the profession, actively publishing in
academic journals and participating in international conferences.
It is important to mention that the number of academics from the region who are
actively engaged in the international academic scene has increased in recent years.
Think tanks have been a favorite workplace for professional economists, although
universities are become more independent and competitive,thus offering researchers
attractive working conditions.These trends are very strong in the larger countries,
such as Argentina, Brazil, Chile, Colombia, and Mexico, where affiliation with local
universities and think tanks is now compatible with high academic standards and
international exposure.
The smaller countries, however, have greater limitations in terms of economics
education.Although some of them have very good universities, there are still severe
restrictions for students who want to pursue high-level doctorate programs.These
restrictions are related to the financial cost of these programs as well as to the oppor-
A NOTE ON LATIN AMERICA AND THE CARIBBEAN 239
tunities for obtaining admission into U.S. universities. Countries in the region char-
acterized by highly variable quality in their educational systems are at a disadvantage.
To overcome this restriction, some Latin American countries have strengthened and,
in some cases,introduced PhD programs in economics.This has been possible in uni-
versities where already there is a critical mass of 15 or more full-time professors with
PhD degrees from recognized institutions.The alliance between three universities in
Argentina, Chile, and Mexico is a step in that direction. Unsurprisingly, many of its
students have come from smaller countries such as Bolivia and Ecuador.
A two-tier approach where two systems coexist seems appropriate. On the one
hand, the region should continue providing financial support (increasingly in the
form of loans or scholarships from multilaterals and nonprofit organizations) to stu-
dents who are able to pursue PhD programs in top schools in the United States and
Europe. On the other hand, the region should strengthen its universities, especially
those that offer high-level and master's-level specializations in areas such as finance,
industrial organization, and regulation where there is great demand. In turn, these
institutions can offer graduate training to students who do not want or are not able
to pursue doctoral programs abroad.
Apart from some exceptional cases, the academic and research community still
has difficulty in obtaining adequate funding mainly because fiscal adjustment has
meant large reductions in government budgets allocated to science and technology.
The system will continue to rely on universities that can charge competitive tuition
fees and think tanks that have some form of external support. Multilateral organiza-
tions and donor countries have an important role to play.
Notes
1. Prepared for the conference on Scaling up the Success of Capacity Building in Eco-
nomics Education and Research, Budapest, June 14-15, 2005, organized by the World Bank
and the Central European University (CEU).We would like to thank Carolina Ram�rez for
able research support, as well as conference participants for comments and suggestions.
2. See Acu�a (1995) and Acu�a and Tommasi (1999).
3. The Latin American Economic Research Foundation (FIEL) of Argentina, Group for
the Analysis of Development (GRADE) of Peru,Center of Public Studies (CEP) of Chile,and
Foundation for Higher Education and Development (Fedesarrollo) of Colombia.
4. See the Global Development Project "Bridging Research and Policy" http://www
.gdnet.org/rapnet/
5. The Latin American Research Network of the IDB is one of the most important in
terms of cognitive institutions support. Created in 1991, this network of nearly 300 research
institutes has proven to be an effective vehicle for improving the quality of the public policy
debate in Latin America and the Caribbean.More than 40 projects have been financed by this
network since 1991, and 130 working papers published.
6. See Lora and others (2004).
7. IPEA is probably one of the largest cognitive institutions in Latin America; it had 600
employees in 2005, half of them economists and analysts. Nearly 70 percent of the 300 econ-
omists and analysts in IPEA hold PhD degrees.
240 M AU R I C I O C � R D E N A S A N D G U I L L E R M O P E R RY
8. The other members of the executive committee were Edmar Bacha, Carlos Bazdresch,
Guillermo Calvo, Michael Conroy,Vittorio Corbo, Carmen Diana Deere, Sebastian Edwards,
Raul Feliz, Daniel Heymann, Ricardo Hausmann, Patricio Meller, and John Welch. Darryl
McLeod, professor at Fordham University, was invited to become the treasurer of the associ-
ation.
9. In 2004 the annual meetings were organized by the University of Costa Rica and
INCAE.Two hundred and thirty articles were chosen for presentation and discussion in more
than 70 contributed sessions. Such a successful conference held in one small country in the
region (and in a more challenged subregion) was a great step forward for LACEA.The previ-
ous annual meeting had been held for the first time in a location other than the capital city
of the major countries; it was organized by Universidad de las Am�ricas - Puebla, Mexico.
10. Chile, Cuba, Peru, Colombia,Venezuela, Ecuador, Bolivia, Paraguay, and Panama are
members of CAB.
11. For a description of the process that led to this outcome, see Melo and Rodr�guez-
Clare (2005).
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Supporting Capacity Building for
Economics Education and Research
inAfrica
Benno Ndulu,Michael Crawford,and Peter Materu
In 1990 the World Bank's Africa Region launched a major initiative to support capacity build-
ing in Africa. This paper reviews the results of that effort, looking first at three major regional
initiatives in response to urgent capacity needs for economics education and research in the
region: the African Economic Research Consortium (AERC), the African Capacity Building Foun-
dation (ACBF), and the African Virtual University (AVU).
Two examples of the way the Bank's Africa Region has supported the strengthening of
demand for both economic research and skills are then presented. The first example is that of
the national policy institutes: rapid change in Sub-Saharan Africa has rewritten the terms of
debate over the direction of public policy, resulting in tremendous pressure on governments to
implement policies that will pave the way to prosperity and democracy, thus increasing the
demand for policy-oriented research and analysis. With government ministries low on
resources, policy makers have been greatly assisted by the emergence--and ascendance--of
local public policy networks and institutes. National policy institutes, with a mandate to work
with government, have recently been established in more than 20 countries in Africa--one
such institute is the Economic and Social Research Foundation (ESRF) in Tanzania.
The second example of the way the Bank's Africa Region has supported the growing
demand for research and analytical capacity is seen in the growing demand for university
training, as evidenced by the innovations at Makerere University. A pilot project there partners
universities and local governments to create the skills needed for administration, financial
management, good governance, and other areas of service delivery.
The paper concludes with three main lessons learned: first, because capacity-building
needs in Africa far outstrip the resources available, there is need not only to be selective in
supporting particular projects but also to look for cost-effective approaches. The networking
approach adopted by AERC and other regional initiatives provides one such cost-effective
means. In addition, by not supplanting existing local institutions but rather strengthening
them, this approach enhances the sustainability of the whole system. Second, there is a major
emphasis in donor support of policy-oriented research. Finally, capacity-building support
requires a long-term commitment and flexible forms of financing. Capacity-building initiatives
243
244 B E N N O N D U L U, M I C H A E L C R AW F O R D, A N D P E T E R M AT E RU
take a long time to become self-sustaining. Given the public-good nature of capacity building,
sustainability is a matter of diversified funding of activities and sustained high demand for
the output from these initiatives than it is a matter of self-financing. Measuring and monitor-
ing impact and demand or use of the products has been a central requirement to show worthi-
ness of continued support.
IN 1990 THE WORLD BANK'S AFRICA REGION LAUNCHED A MAJOR INITIATIVE TO
support capacity building in Africa. It focused on capacity to analyze, adapt, and
manage change by building,over the long term,a critical mass of professional African
policy analysts and economic managers and by ensuring their effective utilization.
This focus reflected what were then major concerns over macroeconomic instability
and policy mismanagement (distortions). These were seen as the prime issues
obstructing the path to sustainable growth; it was thought also that a strong sense of
African ownership--empowerment--was critical for "policy sustainability" (World
Bank 1989).It was concluded that this sense of ownership can be supported and cul-
tivated through first-rate indigenous research and policy design. In addition to
enjoining the support that the Development Economics Department (DEC) pro-
vided toward setting up the African Economic Research Consortium (AERC) in
1988, the Bank's Africa Region facilitated the launch of a partnership based on a
common framework to support capacity building in Africa under the African Capac-
ity Building Foundation (ACBF).This framework provided for:
� a consultation forum for prioritizing capacity-building activities, along with
processes for coordinating actions (ACBF)
� an African Capacity Building Initiative Fund to finance activities for enhanc-
ing indigenous capacity for policy analysis and research at the regional and
national levels--for example, regional networks and centers of excellence,
national policy think tanks, universities, development management institutes,
and government policy units.
The second big push by the Bank and its partners in 1995�6 was spearheaded by
the African Executive Directors through an intensive consultation process with the
African development community.The process resulted in recommendations for a
Partnership for African Capacity Building (PACT) from which the Bank prepared
its own action program (1995�6) to implement these recommendations.Apart from
expanding ACBF's regional mandate to support capacity building in Africa, these
recommendations also called for adapting Bank policies, instruments, and opera-
tional practices at the country level to support capacity building in the region.The
latter action was partly aimed at strengthening the demand for using local policy-
analytical capacity and research--by shifting away from an approach in which the
Bank did things for African governments to one where the Bank and other partners
would support the development of capacities of these countries to do things for
themselves.
This paper, in line with the theme of the conference, will focus selectively1 on
initiatives supported by theAfrica Region of theWorld Bank that aim at (1) strength-
SUPPORTING CAPACITY BUILDING IN AFRICA 245
ening economics education and research capabilities; (2) providing training (aca-
demic and professional); (3) facilitating links among academics and between aca-
demics and policy makers; (4) increasing access to scholarly research, data, and peers
worldwide; and (5) investing in virtual infrastructure (via information and commu-
nication technologies) to enable the sharing of scholarly work and research findings
among institutions, countries, the continent, and globally (for example, digital
libraries, bandwidth consortia, and so on).
Regional Initiatives
Over the last 25 years, the Africa Region of the World Bank, in cooperation with
other departments in the Bank, has supported three major regional initiatives in
response to urgent capacity needs for economics education and research in the
region.These initiatives are:
� the African Economic Research Consortium (AERC), supported since 1988
� the African Capacity Building Foundation (ACBF), supported since 1991
� the AfricanVirtual University (AVU), which is a more indirect approach, sup-
ported since 1991
The guiding principles for the involvement of the Bank in all these initiatives
were that it is part of a coalition of development partners to support the initiatives,
to ensure Africa-based local ownership of these programs, and to make a long-term
commitment in providing financial and technical support to the initiatives.
The African Economic Research Consortium
Established in 1988, AERC is now a public not-for-profit organization devoted to
advancing policy research and training in Africa. Its principal objective is to
strengthen local capacity for conducting independent, rigorous inquiry into prob-
lems pertinent to the management of economies in Sub-Saharan Africa.
In response to special needs of the region, the AERC Research Program has
adopted a flexible approach in order to improve the technical skills of local
researchers. It allows for regional determination of research priorities, strengthens
national institutions dealing with economic policy research, and facilitates closer ties
between researchers and policy makers.
AERC has also launched a training program to augment the pool of economic
researchers in Sub-Saharan Africa by supporting graduate studies (master's and PhD)
in economics as well as by building capacities in economics departments of local
public universities.AERC currently runs a very successful collaborative master's pro-
gram in economics and has recently launched a collaborative PhD program in eco-
nomics.These programs and other AERC activities and their impressive results are
described very well in the paper prepared by Professor William Lyakurwa for this
conference and will not therefore be repeated here.
246 B E N N O N D U L U, M I C H A E L C R AW F O R D, A N D P E T E R M AT E RU
TheWorld Bank is a pioneer member of the consortium and played a key role in
leveraging other funders for AERC's programs. It continues to be one of a number
of international supporters and sits on the AERC Board of Directors.Although the
Bank is not at present the principal source of funding for the organization, it served
as an important catalyst in the early phases by bringing together international devel-
opment partners and member governments toward a common goal.By its continued
presence, the Bank signals its assessment of how valuable AERC service continues to
be in building Africa's capacity in economics education and research, and it brings a
wealth of knowledge and experience through networking and publications to bear
on policy and development management.
The African Capacity Building Foundation
ACBF was established as an independent organization in Harare, Zimbabwe, in 1991
through the collaborative effort of the African governments, the African Develop-
ment Bank (ADB), the United Nations Development Programme (UNDP), the
World Bank, and bilateral donors. ACBF provides grants to national and regional
institutions and programs aimed at strengthening economic policy analysis and
development management within African countries.The establishment of the organ-
ization was in response to observed capacity needs in Africa in the face of globaliza-
tion and the challenge to invest in indigenous human capital and institutions in
Sub-Saharan Africa.Membership in the foundation now comprises 21 African coun-
tries (Benin, Botswana, Burkina Faso, Cameroon, Chad, C�te d'Ivoire, Democratic
Republic of Congo, Gabon, Ghana, Kenya, Malawi, Mali, Mauritania, Mauritius,
Nigeria, Rwanda, Senegal,Tanzania, Uganda, Zambia, and Zimbabwe); 11 non-
African countries (Canada, Denmark, Finland, France, India, Ireland, the Nether-
lands, Norway, Sweden, the United Kingdom, and the United States); and four
multilateral agencies (the ADB, the International Monetary Fund, the UNDP, and
the World Bank). Six additional African countries (Djibouti, Equatorial Guinea,
Ethiopia, Guinea-Conakry, the Republic of Congo, and Sudan) and the European
Union will soon complete the necessary formalities for membership, raising the
membership to 39.
ACBF's mandate was further expanded in 2000 when the Partnership for Capac-
ity Building in Africa (PACT) was integrated into the foundation. PACT is a new
initiative started by African governors at the World Bank in 1999 to respond to the
continent's persistent development challenge. In essence, it represented a renewed
focus on the problem of inadequate capacity in all sectors of African economies,
despite earlier efforts in ensuring sustainable capacity. In 1999�2000 PACT objec-
tives were formally integrated into the ACBF program,thus expanding ACBF's man-
date to support capacity building in six core competence areas, with most resources
going to the three first-mentioned areas: (1) economic policy analysis and develop-
ment management, (2) public administration and management, (3) professionaliza-
tion of the voices of the private sector and civil society,(4) financial management and
accountability, (5) enhancement and monitoring of national statistics, and (6)
SUPPORTING CAPACITY BUILDING IN AFRICA 247
strengthening of policy analysis capacity of national parliaments.Under the expanded
mandate,ACBF's objectives are to:
� provide an integrated framework for a holistic approach to capacity building in
Africa;
� build a partnership between African governments and their development part-
ners that allows for effective coordination of interventions in capacity building
and the strengthening of Africa's ownership, leadership, and responsibility in
the capacity-building process;
� build a partnership at the national level among all stakeholders to facilitate an
inclusive and participatory approach to capacity building and national devel-
opment; and
� provide a forum for discussing issues and processes and for sharing experiences,
ideas, and best practices related to capacity building, as well as for mobilizing
higher levels of consciousness and resources for capacity building in Africa.
Since adopting this new mandate,ACBF has been striving to reposition itself as a
knowledge-based institution capable of supporting the emergence of knowledge-
based economies in Africa.The ACBF Strategic MediumTerm Plan (SMTP) for the
period 2002�6 focuses on the foundation's role in generation,storage,dissemination,
and utilization of both explicit and tacit knowledge in capacity building and the
management of economic and social policies and programs in the development
process. It targets knowledge generated by the foundation itself, the institutions it
supports, its development managers, its partner institutions, and its development net-
works.The plan also provides for the development of links to knowledge sources of
partner institutions and the knowledge warehouses of other development organiza-
tions that are relevant to its mandate.
As part of implementation of the SMTP, the foundation has established
knowledge-sharing networks at thematic and country levels to identify and docu-
ment best practices;to share ideas on policies,programs,and capacity-building strate-
gies that have worked or that should be avoided; to monitor and document
reflections by senior policy makers that would otherwise end up as tacit knowledge;
and to publish and disseminate the documented materials.
Over the period of about 14 years that it has been in existence, the ACBF has
provided long-term support to programs involved in developing human and organi-
zational capacity in the areas of development policy analysis and management (World
Bank 2003). It approved over 113 projects in 37 African countries, for a total of
US$197 million--a third of this amount was for regional projects, including the
AVU. The World Bank remains the major source of finances, its contribution
amounting to US$158 million (40 percent) out of US$397 million committed for
the 2001�4 period. The foundation has also emerged as one of the very few African
organizations that provide long-term funding for capacity building, covering not
only project costs but also the recurrent and administrative costs of recipient
organizations.
248 B E N N O N D U L U, M I C H A E L C R AW F O R D, A N D P E T E R M AT E RU
Recent independent reviews suggest that ACBF has been most successful in sup-
porting semiautonomous policy units--think tanks and funding of national and
regional graduate training programs. It also provides support to AERC's graduate
training programs in economics and more recently, the Programme de Troisieme Cycle
InterUniversitaire in West Africa.
The AfricanVirtual University
TheWorld Bank began work on the AfricanVirtual University (AVU), a satellite-based
distance education program,in 1995.At that time,access to the Internet in Sub-Saharan
Africa was virtually nonexistent;at the same time,the developed world was preparing to
move to the knowledge age.The objective of the program as it was then conceived was
to leverage the power of modern information and communication technologies (ICT)
to provide an opportunity to students and professionals in Sub-Saharan Africa to access
quality educational resources worldwide,and to sow the seeds of transformation toward
the knowledge age in African higher education institutions.The focus was on tertiary
and continuing professional education (particularly science and engineering, as these
were considered to be areas critical to economic development that were not adequately
catered to by existing institutions).The program's goals were to:
� train a large number of African scientists, technicians, engineers, business man-
agers, and employees in Africa;
� encourage the further development of scientists, technicians, engineers, busi-
ness managers, and employees; and
� provide an academic environment in which African educational institutions,
faculty, and students can participate in the worldwide community of learning,
research, and knowledge dissemination.
Economics education and research have also benefited from this initiative, and
with the expanding network of universities to be served by the ICT connectivity
(bandwidth component), the AVU will be a key facilitator of effective networking
among institutions of higher learning and researchers.The rationale for the AVU
concept is rather obvious.With over 50 percent of the region's population below 20
years of age, Sub-Saharan Africa had (and still has) by far the lowest gross enrollment
ratio (GER) at the tertiary level in the world (0.1�4 percent). Given high unit costs
(> 400 percent of per capita income on average in 1996) and overstretched govern-
ment budgets, further expansion of tertiary education using the traditional approach
is unsustainable.Yet the demand for highly skilled workers continues to be one of the
major constraints to investment, particularly foreign direct investment.
Following a successful pilot, the AVU was established as an independent inter-
governmental organization in Nairobi, Kenya, in 2002. From its modest beginnings
with six anglophone universities, the AVU now has a network of 34 learning centers
located in tertiary institutions in 19 Sub-Saharan African countries.Thanks to recent
developments in the telecommunication infrastructure and ICTs in Sub-Saharan
Africa, the AVU has now moved away from satellite broadcasting to a fully Internet-
SUPPORTING CAPACITY BUILDING IN AFRICA 249
based learning platform backed up by powerful servers resident in individual learn-
ing centers as well as various forms of multimedia.This move has led to a drastic cost
reduction, making its courses more affordable.
TheAVU currently offers undergraduate degree and diploma programs in computer
science in collaboration with the Royal Melbourne Institute of Technology in Mel-
bourne,Australia (English language) and from Universit� Laval in Quebec, Canada
(French language);and a business studies undergraduate diploma and degree program in
collaboration with Curtin University in Perth,Australia (English language).The AVU
also offers 8- to 10-week certificate courses in collaboration with overseas universities
such as Georgetown University, New Jersey Institute of Technology (NJIT), and Indi-
ana University of Technology.The ultimate objective is to have these courses delivered
by and for Sub-Saharan African institutions themselves,once the requisite capacity is in
place.To this end,the AVU has recently embarked on an aggressive program to develop
the capacity of its member institutions to design, develop, deliver, and support online
courses in a flexible learning mode. In addition to training staff at these institutions, the
AVU has distinguished itself as the leader in a continentwide effort to reduce bandwidth
costs for educational purposes. A recently completed survey conducted by the AVU
identifies availability and affordability of bandwidth as the critical factors to main-
streaming of online learning in Sub-Saharan Africa.
The AVU is funded by a number of multilateral and bilateral development part-
ners, as well as through revenue generated from the courses offered. Although the
World Bank was the sole source of funds when the AVU started, the Bank's financial
contribution is currently less than one-third of total commitments.The Bank has a
seat in the AVU's board of directors and continues to provide technical support to
the organization. Perhaps the most important achievement of the AVU has been in
catalyzing the ICT culture in institutions of higher learning. Most of the six univer-
sities that were the pioneers in the AVU pilot phase are today leading institutions in
ICT-enhanced learning in Sub-Saharan Africa. For some, such as Makerere and
Kenyatta Universities, the AVU learning center was the first and only place on cam-
pus where one could access the Internet during the AVU's first two years. But chal-
lenges remain. Unit costs remain high relative to traditional programs because of low
student numbers and the costs of bandwidth and the supporting ICT infrastructure.
The organization continues to rely heavily on donor funding; its own revenue con-
stitutes only a small portion of needed funding.
National Initiatives: Growing the Demand for Research
and Analytical Capacity
In this section we provide two examples of how the Africa region has supported the
strengthening of demand for both economic research and skills.
National Policy Institutes
Rapid change in Sub-Saharan Africa has rewritten the terms of debate over the
direction of public policy.2The process of democratization and devolution of author-
250 B E N N O N D U L U, M I C H A E L C R AW F O R D, A N D P E T E R M AT E RU
ity to subnational entities is raising pressure for more effective and accountable gov-
ernment.The adoption of market-oriented economic policies and more democratic
governance in a number of African countries has given groups from entrepreneurs to
trade unions a say in how they are governed.The region has also witnessed a new
openness in the media, with the number of newspapers and radio and television sta-
tions rising rapidly--this rise, in turn, subjects government policies to heightened
scrutiny.The upshot has been tremendous pressure on governments to implement
policies that will pave the way to prosperity and democracy.
Not surprisingly, these developments are increasing the demand for policy-
oriented research and analysis.With government ministries low on resources, policy
makers have been greatly assisted by the emergence--and ascendance--of local pub-
lic policy networks and institutes.As mentioned earlier, at the regional level,AERC
has worked for the past eight years to foster the development of policy research and
analysis throughout the region. Independent voices have risen to the challenge of
framing policies appropriate to Sub-Saharan Africa's new and more complex
conditions.
Most African countries urgently need to strengthen their policy-making
resources. Outside of government itself, capacity for policy analysis resides in univer-
sities, academically oriented research institutes, and, more recently, national policy
institutes.
Through the ACBF's core institutional support program, the Bank and other
partners have supported the establishment of a network of 40 national and regional
policy analysis units throughout the continent. National policy institutes have
recently been established in more than 20 countries in Africa.These institutes are dif-
ferent from the majority of African research institutes, which are usually associated
with universities and tend to have a strongly academic orientation. National policy
institutes have a mandate to work with government, and in many cases they receive
financial support in return. National policy institutes also encourage closer relations
between traditional research institutes and government and serve as a conduit for
bringing knowledge from research into the policy arena.
An example of the role of national policy institutes serves to underscore the
tremendous influence that they can bring both directly to the policy-making process
and indirectly to raising demand for research output. One of the key activities of the
Economic and Social Research Foundation (ESRF) in Tanzania has been to canvass
the public for its views on pressing issues and then to bring these findings to the pol-
icy debate.With its own small staff, ESRF responds to requests for policy analysis by
mobilizing local talent to carry out necessary research. It maintains its own policy
watch, comments on various policy issues, and reviews current performance. By
maintaining its own forward-looking research priorities, it seeks to proactively influ-
ence the policy agenda. Its close relationship with government, private sector, and
nongovernment entities appears to be very much in sync with the changing policy
environment and bestows upon it the credibility of an honest broker. One illustra-
tion of ESRF's integrative role is its effort to draw up a national development vision
for Tanzania through organized seminars and retreats.Another such illustration is its
SUPPORTING CAPACITY BUILDING IN AFRICA 251
recent hosting of the independent monitoring process for aid effectiveness and its
issuance of a local equivalent of theTransparency International report covering vari-
ation in the preponderance of corruption across sectors and a wide range of govern-
ment institution. The institute has greatly helped retain qualified economic
researchers in the country and doing research.
Growing Demand for UniversityTraining:
The Innovations at Makerere University
The Uganda: Decentralized Service Delivery:A Makerere University Training Pilot
Project (P074078) is an innovative approach to building capacity in key areas for
public administration.This project partners universities and local governments to
create the skills needed for administration, financial management, good governance,
and other areas of service delivery. Universities themselves are also investing in
research and curriculum improvement to enhance its relevance to training and pol-
icy. The project is cofinanced by the Rockefeller Foundation, and grows out of that
foundation's capacity-building experiences at Makerere since the mid 1990s.In addi-
tion to the US$5 million from a World Bank Learning and Innovation Loan (LIL),
the Rockefeller Foundation has contributed US$6 to the project to date.
The LIL is unique in addressing long-term training needs of individuals who
work in local governments by providing some of them with the opportunity to
obtain degrees in one of six priority areas while they retain their positions as local
government employees. In six pilot districts, the project has worked with district
human resource officers to identify candidates for sponsored full-time studies in mas-
ter's and undergraduate degree programs in one of six priority disciplines--health,
agriculture, education, engineering, financial management, or governance/account-
ability/administration.Ninety master's students have been sponsored,along with 120
undergraduates, at an average of 15 and 20 per district respectively. Most officials
have become full-time students at Makerere, with a few at partner institutions. All
students have returned to their positions during academic recess; the first master's
degree students finished their two-year degrees in December and have returned to
their full-time positions in local government. Early evidence from project monitor-
ing and evaluation indicates that this increase in skills and experience is bringing
positive results.The program is very popular because the participants receive some-
thing of concrete economic and personal/social value--a university degree. As
degree recipients return to their jobs in large numbers, the impact their skills make
on the complex tasks of local government service delivery will rise, as should the
quality and efficiency of the services delivered.
Another aspect of the project concerns the restructuring of curricula within uni-
versities to improve course quality and especially relevance to challenges of local gov-
ernment service delivery.In some cases,the project has nurtured radical changes in the
way faculties organize education: the faculty of medicine, for example, has completed
abandoned"chalk and talk"instruction in favor of a new curriculum organized around
"problem-based learning." Students acquire their general knowledge of medicine
252 B E N N O N D U L U, M I C H A E L C R AW F O R D, A N D P E T E R M AT E RU
through a process that highlights how that knowledge will be used to solve the partic-
ular problems that they will face with their patients. Satisfaction with the new cur-
riculum is very high.The faculties of agriculture and technology (engineering) are
going through similar transformations that are growing out of internal assessments of
how best they can fulfill their mandate. Other academic staffs, the faculties of which
may not have embraced these types of full transformation, have the ability to compete
for funds for renewing or restructuring of academic courses (or creating new courses)
relevant to local government needs,and/or for research resources for related problems.
All academic staff have access to courses on pedagogy,meant to improve general teach-
ing/lecturing practices.
The project is also changing attitudes of students, faculty, and most importantly,
local government officials and society at large about the usefulness of Makerere
and other universities. Before the project, Makerere and other institutions suffered
from a sense of distance and isolation from national problems--the classic aca-
demic aloofness. People generally viewed these institutions as completely irrele-
vant to national needs and as only a drain on public resources. Now an increasing
number of informed government (local and national) officials view universities as
potential partners for solving their problems. Consciousness of the need to be rel-
evant has also risen among a significant portion of students and professors.The
project sponsors a student summer internship that supports degree candidates in
supervised summer jobs with local governments in the six priority areas. Close to
3,000 students have participated.They report having a greater understanding of
challenges of local service delivery, but especially how their own education is rel-
evant, and how it can be made more relevant by taking greater account of the prac-
tical problems they may face as graduates. It is likely that some will choose careers
in local government based on their experiences, although we do not yet have reli-
able data on this.The internship program is one of several activities that are lead-
ing to this change in attitude.
The training is very cost-effective because of its reliance on local educational
institutions governed by local price structures. Although definitive data are not yet
available, it is also likely that the cost-per-classroom hour of "training" is very low
compared with other training courses. It is also likely that there are spillover effects
of being in a degree program rather than in one or a series of discrete,short-duration
training courses.
Conclusions: Lessons from Experience
The World Bank's role in capacity building in Africa has been not only financial but
also (perhaps more importantly) that of an honest broker--with its ability to bring
together development partners, governments, and the civil society to focus on a
common capacity need. In all the examples discussed in this paper, theWorld Bank's
Africa Region partnered with others to support four types of interventions to
strengthen economics education and research: regional facilitators of capacity build-
ing, such as ACBF; regional networks for policy analytical research, such as AERC;
SUPPORTING CAPACITY BUILDING IN AFRICA 253
national and subregional policy capacity and management institutes; and tertiary
education institutions, such as Makerere.
Three main lessons can be drawn from these experiences. First, given that capac-
ity building needs in Africa far outstrip the resources available, there is need not only
to be selective in supporting particular projects but also to look for cost-effective
approaches.The networking approach adopted by AERC and other regional initia-
tives in training economists and conducting research, as discussed earlier, provides
one such cost-effective means. In addition, by not supplanting existing local institu-
tions but rather strengthening them, this approach enhances the sustainability of the
whole system. ICTs present another potentially valuable way to provide increased
access by Africans to global knowledge resources and enhance cost-effectiveness in
the delivery of economics education. However, existing technical and financial con-
straints need to be addressed before the full potential of ICT-enhanced programs can
be unleashed. In this regard, the AVU is a long-term and futuristic initiative, which
is now turning into an effective networking instrument that supports the adoption
of an ICT-based learning architecture.It builds on the comparative strengths of exist-
ing tertiary education institutions while also supporting capacity development in this
approach to the delivery of higher education.With the adoption of the open, dis-
tance, and e-learning (ODe-L) methodology, this learning architecture holds great
promise for enhancing the capacity of higher education institutions to meet the large
demand in a cost-effective manner.
Second,although long-term original research is deemed valuable,there is a major
emphasis in donor support of policy-oriented research. And often there is a fairly
high degree of impatience to see policy impact. Policy think tanks are playing a par-
ticularly important intermediary role in improving the accessibility of research to
policy and channeling demand for research in the other direction. Building on the
accomplishments of the national policy institutes and regional think tanks, four
measures appear to be key to forging links between research and policy across Africa
and worthy of support:
� Enhancing the credibility of research as a means to increase policy influence
through production of high-quality, accurate research
� Improving the usefulness of research for policy purposes by ensuring relevance
and accessibility as well as responsiveness to current and prospective policy
concerns
� Nurturing closer relationships between researchers and the broader policy
community through policy seminars to bridge the gap of suspicion between
academics and policy makers and to showcase local talent in policy analysis
� Involving the media to bridge another divide that separates researchers and
journalists.As the press continues to increase its influence on policy making in
the region, access to the work of independent policy institutes will become
even more important. It is vital that research institutes and networks tap the
press as an avenue for disseminating their findings and raising the profile of
their recommendations.
254 B E N N O N D U L U, M I C H A E L C R AW F O R D, A N D P E T E R M AT E RU
Finally, capacity-building support requires a long-term commitment and flexible
forms of financing. Pooling resources, flexibility in funding both investment and
recurrent costs, and using a common framework for accountability substantially
reduces transactions costs of receiving institutions.A major lesson learned from the
experience to date is that capacity-building initiatives take a long time to become
self-sustaining. Given the public-good nature of capacity building, sustainability is
not simply a matter of self-financing; it is rather more a matter of diversified funding
of activities and sustained high demand for the output from these initiatives. Mea-
suring and monitoring impact and demand or use of the products has been a central
requirement to show worthiness of continued support.
Notes
1. Several training initiatives that are shorter term and targeted to policy analysts, for
example offered jointly with WBI, are not include in this paper.
2. Much of the discussion in this section updates Ndulu (1996).
References
Ndulu, Benno. 1996."Africa's New Realities Challenge Policy Institutes." Economic
ReformToday [No.3]: Ideas into Action,ThinkTanks and Democracy.Center for Inter-
national Private Enterprise,Washington, DC.
World Bank. 1989. Sub-Saharan Africa: From Crisis to Sustainable Growth. Washington,
DC:World Bank.
------. 2003."Strategy Update Paper for FY04�06: Implementing theWorld Bank's
Strategic Framework." World Bank,Washington, DC.
Economics Education and Research in
the EastAsia and Pacific Region
Experience and Directions
Homi Kharas
This brief review presents observations on the status of higher-level economics education and
economic research in the developing countries of the East Asia and Pacific Region. It is based
on two main sources of information. First, it summarizes the experience of the World Bank in
building or strengthening capacities in these fields. Second, it draws upon information pro-
vided by staff members of the World Bank who collaborate extensively with local academic and
research institutions, individual experts, and the consumers of economic research in the coun-
tries in which they work--policy makers, business leaders, and technocrats.
The review is in three parts. The first section describes some important characteristics and
issues in the East Asia region that provide a frame of reference for the assessment contained
in the second section. The third section presents some options for the future, embracing both
regionwide and country-specific approaches.
The Regional Context
Economic growth in East Asia (excluding Japan) reached a cyclical peak of 7.2 per-
cent in 2004, from which it is expected to slow only moderately to about 6 percent
in 2005 and 2006. Over a longer time period, and despite the Asian Financial Crisis
of 1996�8, this region has recorded the fastest sustained growth record in the world.
Although there are substantial country differences in rapidly growing East Asia, a
common thread is a tradition of consultation with,and deeper involvement of,econ-
omists in decision-making processes.This showed, for example, in the role of Uni-
versity of the Philippines' economists who have moved in and out of successive
policy-making positions in the Philippine government. In Vietnam, economists at
both theVietnam Academy of Social Sciences and the Central Institute of Economic
Management played critical roles in establishing policies to open the economy to
market forces and foreign investment. Indonesia's post-1970 economic liberalization
and management was largely in the hands of a well-trained cadre of mainly foreign-
255
256 H O M I K H A R A S
trained economists (the so-called Berkeley Mafia and others). But the pool of econ-
omists in general, and homegrown economists in particular, that provides inputs into
decision-making processes is small.There may, indeed, be some truth to the claim
that a country's economic performance is negatively related to the number of its
practicing economists! But until this is established more credibly using,of course,the
entire range of powerful quantitative tools developed by economists in the service of
their profession, there are several reasons to be concerned about the small pool of
economists and about the state of economics education and research within East
Asia. Some stylized facts about the present situation are presented below.
The existence of indigenous capacities to design and evaluate economic policies,
programs, and institutions is generally limited. One consequence of this is that there
is usually only a very small group of economists--generally they are Western-
trained--advising governments on their policies. Often, governments call upon the
same group of economists to provide advice on subjects well beyond their special-
izations, across the board on all economic issues.The absence of other nodes of
expertise,or of alternative qualified views,is a persistent vulnerability that sometimes
has seriously adverse effects.1 It makes the process of consensus building even harder
than in pluralistic environments.2
The Asian Financial Crisis conspicuously exposed this weakness when, with the
exception of Malaysia, both problem-identification and crisis-mitigation policies
were driven largely by external experts. Interestingly, one positive effect of that cri-
sis has been to promote a new and welcome interest in building research capacities
in economics in East Asia, both through reforms in higher education and associated
research,and through increasing support from within and outside the region for eco-
nomic think tanks, research institutions, and the creation of regional knowledge net-
works.3 However, much of this interest has manifested itself in support for broad,
aggregative analysis (for example,fiscal-monetary-exchange rate coordination) rather
than in microeconomic and sectoral research, where the main lacunae exist.
The volume of more recent applied economic analysis from within the region has
tended to be small and, generally, at a level that has not always proven useful to pol-
icy makers in guiding longer-term recovery strategies.The weaknesses in this area are
threefold:
� National databases are inadequate for many research purposes.4 Useful empir-
ical research tends to flow mainly from small-scale surveys, but these are often
too scanty to support economywide or sectorwide policy formulation. Capac-
ity shortages in assessing multisector linkages undercut the usefulness of eco-
nomic research to policy makers.
� Related to the above,very little research is conducted on the microfoundations
of growth strategies, and even less on institutional designs that fit specific
national and regional circumstances.The latter is a pernicious gap in indige-
nous research, as the relative advantages of local researchers and long-term
observers should be strong in this area. Instead, this crucial "missing middle" of
research effort--which bridges between theory and practical policy and proj-
ect design--has confined local economists largely to the fringes of economic
E A S T A S I A A N D PAC I F I C : E X P E R I E N C E A N D D I R E C T I O N S 257
advice and decision making or, when involved, to recommending imitative,
sometimes unsustainable, models imported from abroad.
� There is virtually no tradition of systematic and scientific monitoring and
evaluation of economic policies, programs, and projects.There is little impact
evaluation--as opposed to several forms of organizational reviews, process
monitoring, and a few reflexive ("before and after") comparisons.This has
meant that the broader community of local economists is not just on the out-
side at the outset of programs and policies.These local economists are too sel-
dom engaged in the main decisions on whether to eliminate, modify, or
expand the programs and policies, or in determining public policy priorities
for the future. Indigenous learning, not only for policy makers but also within
higher education institutions in the region's countries, is severely impaired by
the absence of involvement by the local economist community in impact
evaluation.
The early 1990s saw a large expansion of higher education in economics in most
of the region's countries, which in relative terms came at the expense of science and
technology education. Many observers have noted the sharp erosion of quality that
occurred as a result of increased enrollments and overcrowding.5 However, by the
end of the decade, rising interest in business management studies resulted in a flat-
tening of demand for economics at the level of master's degrees, reducing the cur-
rent and future throughput of students at the doctoral levels.Nevertheless,the quality
(and usefulness) of economic graduates has improved because of sharp improvements
in higher education administration (as, for example, in Indonesia), recruitment, and
curricula in several East Asian countries, most notably in China and Korea (as well as
in Japan and Australia,which began to attract large numbers of postgraduate students
from the region).
Moreover, better financial support from official and private sources and higher
international mobility resulting from the globalization of knowledge services per-
mitted local institutions in most of the larger countries of the region (as well as in
Hong Kong, Special Administrative Region, and Singapore) to recruit a larger
number of their foreign-trained nationals into local teaching institutions.Through
increased interaction with teaching and research institutions in other parts of the
world, many postgraduate institutions in East Asia are beginning to function as
organic parts of the international academic and research community.6 As a result,
graduate quality is expected to improve significantly, provided the East Asian
countries maintain appropriate policies to promote economics education and
research.
We turn in the next section to a brief evaluation of experience, in order to draw
some lessons for the kinds of support that would be most useful.
Lessons of Experience
Three nodes of experience are discussed in this section--those that relate to general
capacity-building efforts that support better-quality economics education and
258 H O M I K H A R A S
research;issues relevant chiefly to economics education and research;and,finally,spe-
cific research gaps that have been identified.
In the first group, at least three major lessons exist.
� In EastAsia,theWorld Bank's experience with single-country investment lend-
ing for higher education and university reform projects has been satisfactory.
Several projects have been implemented since the mid 1980s in the region, in
Cambodia,China,Indonesia,Korea,Malaysia,Thailand,andVietnam.Although
many components in these projects have focused on science and technology
training and research,the bulk of their success has been in modernizing systems
of higher education across the board, with positive effects on economics edu-
cation. In several projects, components related to economics education and
research were addressed directly; in others they were addressed through
improvements in university funding, standard setting, and management sys-
tems.7 Rates of return in such projects have also been judged to be high,related
no doubt to the high rates of return to tertiary education in the East Asian
countries.
� Fixing national statistical efforts has high payoffs. In the case of the transitional
economies of East Asia, such as China andVietnam, the process of moderniza-
tion and conversion from the limited communist-based systems to the UN sys-
tem has proved to be laborious, and is still far from complete. In many of the
other countries of the region, although harmonization with international sys-
tems has been achieved, inadequate resources and compartmentalization of
functions impair the production and dissemination of real-time, comprehensive
data that can be used to support economic research and be of use in economic
policy making.At the same time, a coherent program of international support
of national statistical efforts is yet to develop, despite (or perhaps because of) the
large number of international agencies involved in such assistance.
� The contribution of research networks--whether they are in-country, across
the region, or international--cannot be overestimated.The East Asia Develop-
ment Network (EADN) is a good example of the benefits to be had from for-
malizing networks of expertise and facilitating cooperative work programs
within them.The regional coordinator and 11 country coordinators represent
premier economics research and teaching institutions in East Asia, as does the
broader membership of 39 institutions. Research activities have been focused
largely on problems related to the Asian Financial Crisis and on broad macro-
economic management. Numerous other networks of economic expertise
have been built through the involvement of regional and extraregional aca-
demic, research, government, and international institutions.The experience
with such pluralism in promoting knowledge exchanges is generally good;
however, a common weakness is the inability of most research efforts under
such umbrellas to provide real-time assistance to policy making.
Although most of the middle and large countries of East Asia have suc-
ceeded in building national centers of excellence, recent attempts to establish
regional centers have generally floundered. Existing institutional programs
E A S T A S I A A N D PAC I F I C : E X P E R I E N C E A N D D I R E C T I O N S 259
for regional analysis have been more successful in business and technology
studies, and they are fertile ground for recruitment by national and multina-
tional firms rather than for core economic research and support of the for-
mulation of regional economic policies. In most cases, national policy
mechanisms have been cross-fertilized by expertise--both citizens and for-
eigners--imported from non�East Asian centers, rather than from any
regional center of excellence.
Turning to some specific experiences with economics education and research,
the following points are worth noting:
� The main transfers of teaching technologies, research methods, and economics
knowledge to trained personnel in the region has occurred through joint
work--that is, through carefully calibrated research and project collaborations
between high-quality experts and less-experienced local economists. Local
experts are usually able to bring deep institutional knowledge and access to
sources of information that may not be visible to researchers and academics
who do not belong to local institutions. However, local experts are often weak
in their standards of analysis, experience with scientific surveys and their statis-
tical/econometric analysis, and the ability to link analysis to policy judgment
and practical policy design.The value added from inserting high-level expert-
ise to impart or demonstrate such skills--usually through built-in seminars and
learning events while the work collaborations are underway--has produced
positive results in notching up the usefulness of research. Nevertheless, an
unfortunate offshoot of such collaborations has been the tendency of the best
local talent to be associated solely with such projects--local "brain drains" that
sometimes leave core academic institutions, research institutes, and core eco-
nomic agencies of the government without individuals who have the skills
needed to perform basic functions.8
� The support for research capacity building needs to operate on a logic of com-
mitment rather than one of exit.9 The time frame over which capacity building
is successful is much longer than the time horizon of the typical funding agency
and research grant administrator. Providing certainty about funding, research
collaboration, and technical assistance over a reasonable time frame is a key fac-
tor in supporting institution-building efforts, but is not always provided in the
interaction between external agencies and local institutions.10
� Conventional models for the locus of capacity-building effort do not address
the changed institutional settings of many of the larger East Asian countries.
Across the region, the rise of pluralism, the increased international trade in ser-
vices and flows of knowledge, a significantly higher level of private funding of
higher education and research in economics and business studies, and stronger
linkages between research/academic institutions and industrial and services firms
have led to the rise of nontraditional institutions operating in specialized nich-
es, often autonomously.As a result, the strategic selection of nodes for the deliv-
ery of capacity-building support has become more important than ever before.
260 H O M I K H A R A S
The importance of research networks, relative to brick-and-mortar centers of
excellence, is rising rapidly. However, unlike funding from corporate sources or
foundations, standard capacity-building support from official sources--local or
international--has been slow to recognize this change. Consequently, some of
the most powerful change agents in East Asia remain unutilized, including sev-
eral that exercise extensive influence at the policy level.11
In concluding this section, it is useful to provide a brief description of the major
gaps that exist in the current regional research needed to support the design and
implementation of economic policies, programs, and projects in East Asia.As men-
tioned earlier, improvements in national statistical databases and the transfer and
mainstreaming of impact evaluation methods are two areas with high payoffs to
research support for economic decision making. Beyond these areas, however, the
following are some identified gaps.
� Regional integration. East Asia is looking for win-win solutions to develop-
ment in the region, through regional cooperation.The East Asian countries
have historically pursued unilateral and nonpreferred approaches to liberaliza-
tion. Indeed, through the Asian Financial Crisis, market access was largely pre-
served. But the crisis also exposed significant gaps in the regional architecture,
in finance, in investment flows, and in macroeconomic coordination.The new
regionalism is being pursued on both the trade policy and financial sector
fronts. Success will depend ultimately on the consistency of approaches among
all elements of integration and across unilateral, regional, and multilateral
frameworks, and on placing regional integration in the broader global context.
Research findings can play an important role in helping achieve such consis-
tency.Within the broader program of work on regional integration, the fol-
lowing are some fruitful areas for research collaboration:
� China's adjustment to the phaseout of the Multi-Fiber Agreement (MFA).
For example, is China moving up the technology ladder in garments and
textiles? If so, is this happening in coastal areas, while low-cost low-quality
production is moving inland?
� Impact of MFA phaseout on East Asian countries--the challenges and
opportunities. For example, how are countries adjusting? Are they scaling
back or upgrading? How are they competing in China and in other mar-
kets? How do their products compare with those from China in terms of
quality and unit values?
� Association of Southeast Asian Nations (ASEAN) plus China. For example,
what are the likely outcomes, and how can East Asian countries leverage
their gains into more rapid and broad-based economic development?
� Trade in services. For example, what are the benefits and challenges of fur-
ther liberalizing trade in services in East Asia? What is the appropriate
sequencing of liberalization--first regionally, then globally?
� Production and trade in rice and other sensitive products.For example,how
feasible are self-sufficiency targets, given productivity trends and pricing
E A S T A S I A A N D PAC I F I C : E X P E R I E N C E A N D D I R E C T I O N S 261
policies?What regional mechanisms are possible to ensure adequate supplies
in the East Asian countries?
� Growth and inequality. The rapid growth of the East Asia region has
received a lot of attention,but significantly less consideration has been given to
the unevenness of recent growth processes within countries and, by extension,
among the different communities populating the region.12 Spatial divergence
in incomes and nonincome measures of well-being is one aspect of inequality,
but even within subregions,segments of economies and societies have been left
behind. Until recently, such inequality was tolerated as an unfortunate by-
product of growth, which was seen as generating leaders and laggards in differ-
ent parts of an economy. Lately, however, there is concern that the processes
that generate increasing inequality are malignant, resulting in outcomes that
perpetuate unequal opportunities and prospects.Apart from the direct human
and economic costs that this implies, the persistence of high inequality in the
context of heightened aspirations can reduce the societal tolerance of inequal-
ity, dampen support for growth-enhancing market-friendly policies, catalyze
social unrest, and ultimately threaten the sustainability of growth itself. Putting
in place the right mix of policies and institutions to ensure that the dual objec-
tives of sustaining growth and mitigating persistent inequalities are met is high
on the policy agendas of East Asian governments.There is need to robustly
establish the underlying facts, better understand the causal processes at work,
and translate this understanding into concrete policy priorities.Within this
framework, for the major countries in East Asia, the following research gaps
deserve attention:
� Profile of the "left behinds." For example, who are the people who have
been left behind? Where do they live? What are their economic, social
access, and demographic characteristics? What are the dimensions of their
disadvantages?
� Inequality-generating processes. For example, what factors lie beyond the
control of individuals,and are they amenable to public policy interventions?
� Impediments. For example, what restricts mobility and empowerment?
How are the acquisition of skills, security, and adequate health constrained?
� Policy alternatives. For example, what are the tradeoffs involved in labor
market and fiscal policies, or in making human capital investments? What
are the relative impacts of these tradeoffs? What are the distributional and
growth effects of alternative patterns of large-scale infrastructure provision?
� Monitoring and evaluation of service delivery.
� Asset markets. Most East Asian economies have high savings rates. However,
their household and corporate sectors have very limited scope for diversifying
assets in their domestic economies.Among financial assets, bank deposits dom-
inate, and the transfer of financial savings through the banking system has
resulted in very high leveraging among firms. Limited competition in many
countries' financial markets has retarded the development of new products and
262 H O M I K H A R A S
keeps the costs of financial intermediation high. Less-than-adequate standards
of prudential supervision in all but a couple of countries result in the costly
diversion of savings and raise overall risk in financial markets. Spillovers into
other major asset markets, such as real estate, have created speculative and
potentially destabilizing situations in several countries.Yet little is known about
the specific asset-holding behaviors within each country, their interlinkages,
and their implications for macro-financial management.There are two areas
that deserve significant research attention.
� Real estate markets.For example,what is the size of these markets?Who are
the players? What are the channels of financing? What is the potential for
asset bubbles? What policy and institutional reforms would promote the
orderly functioning of these markets?
� Technology needs of financial markets. For example, what is the cost struc-
ture of financial transactions and how can alternative technologies increase
efficiencies?What are the likely implications of new technologies for macro-
financial management, employment in the financial services industry, and
access to financial services by underserved segments?What kinds of compe-
tition and pricing models will deliver the desired technology adoption out-
comes?
Conclusions
This brief review of experiences, lessons, and challenges in the East Asia region pro-
vides a platform for tailoring future capacity building in research and economics
education to rapidly changing situations and needs.The general guideline for future
effort is that strategic research and investment-lending collaborations can have high
payoffs--provided that the modes of engagement recognize the new institutional
nodes that are being created in East Asia, many of them outside the traditional uni-
versities and research centers. Consequently, as demonstrated by the use of private
sources of funding, smaller packages of funding in the form of venture capital (but
with a logic of longer commitment) could play as useful a role as traditional modes
of support. In addition, as engagement with policy makers and inputs into policy,
program, and project design and implementation are the ultimate objectives of such
capacity-building efforts, the production and dissemination functions assume equal
importance.This equality of importance has implications for patterns of funding and
other support.
In specific terms, the World Bank's future support for capacity building in eco-
nomics education and research in the East Asia region will continue to cover a num-
ber of parallel initiatives. These comprise investment lending for the improved
functioning of government departments, institutions of higher learning, and special-
ized research institutions; technical assistance; research collaborations with individu-
als and institutions in the region; support for the professional training of economists
both at home and abroad; and a renewed emphasis on the creation of networks of
research.
E A S T A S I A A N D PAC I F I C : E X P E R I E N C E A N D D I R E C T I O N S 263
In this regard, it is worth noting two major initiatives that are underway.The first
is the possible intensification of the World Bank's interaction with the Boao Forum
for Asia, which could serve as a hub for coordinating a research effort on Asian
regional integration issues.The second is a program of research on the implications
of the rise of China and India on the regional and global economies. In collabora-
tion with research institutes around the world,and leading up to the annual meetings
of the World Bank and IMF in September 2006 in Singapore, a series of events was
organized around this central theme. Many of these events presented the fruits of
collaborative research. It is expected that this massive research effort will yield useful
outputs, but will also provide a platform for stronger research networks in the future.
Finally, there are important considerations with regard to the establishment of
centers of excellence. Alternative approaches suggest themselves. Clearly, the more
developed parts of the region--in particular Australia and Japan--have proved to be
strong magnets for national and international expertise on Asian economic issues.A
strategy that harnesses this expertise to build capacities elsewhere in East Asia is
bound to generate quick returns. Alternatively, or even in parallel, and using long-
term commitments, selected national centers of excellence--such as CCER at
Peking University (research) or the School of Public Policy at Tsinghua University
(applied economics)--can be targeted to develop as regional centers.This targeting
would involve the selective introduction of specialized programs of regional applica-
tion and interest--for example, monitoring and impact evaluation, institutional eco-
nomics, or governance--and technical assistance for modernized systems of research
administration and regional or international collaboration. A third approach would
be to go beyond the conventional institutions and, again, through long-term com-
mitments, build simultaneous programs of networking and research capacity build-
ing, as was proposed for the case of the Boao Forum for Asia. In this approach,
linkages to policy makers and the broader community of stakeholders need to be
direct and visible in order to ensure the continued relevance of the institutions and,
at least in the initial stages of capacity building, to develop brand names in specific
product niches.
Notes
1. For example, one can point to several examples of decentralization policies, regulatory
reform, and agricultural protection and rural development interventions in East Asia that suf-
fered from basic design flaws.These flaws were compounded during implementation by a lack
of capacity to monitor and evaluate program impacts and make appropriate midcourse cor-
rections.The costly experience of the Philippines with private participation in utilities is often
cited as an example of such weaknesses.
2. Dialogue between a small group of economists and a large group of noneconomists is
sometimes more difficult than among groups of economists themselves.
3. For example, the East Asian Development Network was established in 1998, and the
first research outputs were produced from the year 2000. Only recently has the output from
this network focused on issues related to the Asian Financial Crisis and expanded to cover
several other areas of economic recovery, shared economic growth, and cross-border issues of
harmonization and other regional arrangements.
264 H O M I K H A R A S
4. For example, even with the current data sets available at the global, regional, national,
sector,and firm levels,we are unable to identify how much of the rapidly increasing intra-East
Asia trade is accounted for by intrafirm trade--the same multinational firm putting a product
together at different locations in the region.Although microstudies exist for some individual
products,the total amount of information available is inadequate for informing discussions on
trade standards, harmonization, or even the topical trade and investment integration debate
among policy makers in East Asia.
5. For example, see Weifang (2004).
6. This is illustrated best by the case of Indonesia where, in addition to the interchanges
that have traditionally occurred among foreign institutions, University of Indonesia, and
selected think tanks, there is now a significantly larger volume of two-way flows with mofussil
institutions.
7. For example, the Environmental Research and Education Project (Korea), the Univer-
sity Research for Graduate Education Project (Indonesia), the Higher Education Project
(Cambodia),the Higher Education Reform Project (Malaysia),the Key Studies Development
Project (China), and the recent Higher Education for Relevance and Efficiency Project
(Indonesia).
8. The problem is exacerbated by external funding and the level of remuneration that is
usually found in such research projects, which can be several multiples of levels available in
locally funded projects.
9. For a description of the two logics and how they operate in knowledge capacity build-
ing--and for a definitive criticism of the World Bank's standard approach--see Ellerman
(2005).
10. A recent example is World Bank funding of the Chinese Center for Economic
Research (CCER) at Peking University, the recipient of a three-year grant to strengthen net-
works of expertise among Chinese economists located within China and abroad. Despite
good results, as evidenced by its research outputs, at the end of the three-year period a major
difference between funding agency and recipient was visible in expectations about the time
span over which capacity building would occur. Funding levels were reduced drastically, uti-
lizing the same exit-oriented logic that dominates most of us trained in market economics. It
is not evident that the strategy has worked, inasmuch as CCER's continuing successes stem
from finding more stable and reliable assistance, and not from any drastic structural change
that, it was argued, would come from greater self-sufficiency. Similar examples from China
include World Bank support to research institutes in Hainan and within the Chinese Acad-
emy of Social Sciences.The lessons from these efforts are being used to design future com-
mitment-oriented research capacity building support in China and the rest of East Asia.
11.A case in point is the Boao Forum for Asia (BFA), a multigovernment, heads-of-state
platform for promoting regional economic integration and economic development. BFA is
seeking to develop capacity to research, build coalitions, and disseminate findings on regional
integration,a major impulse in the future economic development of East Asia.BFA has estab-
lished a rudimentary network for sharing knowledge, but it still requires extensive technical
assistance, combined with small amounts of funding, to generate the quantity of research
required to support integration efforts across Asia.With its international and pluralistic yet
Asia-focused approach, BFA is well placed to develop capacity to deepen research.Although
corporate and national government sponsors have recognized its merits, BFA is largely invis-
ible to traditional financiers of capacity building in economics, who seem more comfortable
with the established and traditional institutions that house teaching and research.
12. The Gini coefficient that measures inequality in consumption has deteriorated during
the past decade for most countries in the region, and levels are often high (for example, it is
E A S T A S I A A N D PAC I F I C : E X P E R I E N C E A N D D I R E C T I O N S 265
49.1 in Malaysia, 45.7 in China, 44.5 in the Philippines, 42.2 in Thailand, and 37.5 in Viet-
nam). See World Bank (2006) for the latest available estimates.
References
Ellerman, David. 2005."The Two Institutional Logics: Exit-Oriented Versus Com-
mitment-Oriented Institutional Designs." International Economic Journal 19 (2):
1�22.
Weifang, Min. 2004. "Historical Perspectives and Contemporary Challenges:The
Case of Chinese Universities." Publication C-8, Center on Chinese Education,
Teachers College, Columbia University.
World Bank. 2006."East Asia Update: ManagingThrough a Global Downturn." East
Asia and Pacific Region,World Bank,Washington, DC.
Capacity Building in Modern
Economics in the Caucasus and
CentralAsia
Ulrich Hewer
SINCE THE BREAKUP OF THE FORMER SOVIET UNION,WESTERN GOVERNMENTS AND
foundations have invested in the creation of new institutions and capacities in the
former Soviet republics. Not surprisingly, such investment has focused on areas that
were underdeveloped or ideologically distorted under the Soviet system, and which
became crucial to the development of democratic, market-based societies:
� social sciences, especially those such as economics that have policy applications;
� managerial disciplines, such as business administration, public administration, and
education administration; and
� other professions such as law, journalism, and library science.
Generally, the focus of development has been on individual rather than institu-
tional capacities, although a few de novo universities are exceptions--most notably
our host today, the Central European University--as well as the other "centers of
excellence" under discussion. In developing capacities,Western donors have pursued
two chief strategies: (1) retooling opportunities for established Soviet-trained aca-
demics and professionals and (2) rigorous postgraduate training, usually at the mas-
ter's level,to create new academic and professional communities.Both strategies have
been implemented inside and outside of the transition countries, but they are gener-
ally more effective when conducted inside the countries themselves.
In the field of economics,retooling has had limited effect.Those of us working in
the field have encountered many Soviet-trained economists who have undertaken
research or training in Western countries, often lasting as long as an academic year,
but they often have only a superficial understanding of modern economics.1 Only in
exceptional cases have fellowships of this sort produced lasting new capabilities.The
EERC's Moscow-based research network and the existing centers of excellence (see
267
268 U L R I C H H E W E R
below), which retrain economists in situ and maintain long-term links with them
after their retraining, have had better results.
International initiatives providing rigorous graduate-level training have had a
much more profound effect on the economics profession in the transition countries
than retraining programs.Graduate training,usually resulting in a master's degree,has
been the approach of several international fellowship programs.Among these are the
U.S. government�sponsored Muskie and Freedom Support Act programs, their ana-
logues in the United Kingdom, and, to some extent, the European Union's ACE
Program (Action for Cooperation in Economics).These programs made an impor-
tant contribution to the development of economics,especially in the early 1990s,but
high-quality master's and PhD programs launched in the transition countries and
supported by Western donors have proven even more effective.
Western-supported centers of excellence have been created at four institutions in
former communist countries to provide graduate-level instruction in economics,
aspiring to and achieving international standards of academic quality. They are:
� the Center for Economic Research and Graduate Education/Economics Insti-
tute (CERGE-EI) in Prague;
� the Central European University (CEU) in Budapest;
� the EERC Master's Program in Economics at Kyiv-Mohyla Academy in Kiev;
and
� the New Economic School (NES) in Moscow.
These centers have had the following impact on the economics profession:
� They produce well-trained economists in much larger numbers and at a lower
per capita cost than the international fellowship programs.
� They offer an integrated master's curriculum, whereas Western universities
typically have PhD programs only, not master's programs per se. Students on
master's fellowships simply elect courses, too often without sufficient guidance
or a structured approach.
� The students remain in their countries.Through their studies, internships,
research projects, and so forth, they develop close contacts in their local pro-
fessional and academic communities and are much more familiar with regional
issues than their counterparts who have studied abroad. As a result, one finds
more graduates of the centers of excellence than graduates of foreign univer-
sities in economics-related positions.
The centers of excellence have been teaching advanced market-type economics
in Central and Eastern Europe and introducing modern research techniques for a
decade or more.Western donors have praised the centers for their success in creating
a new generation of economists for transition countries.The World Bank and other
key donors have long recognized the need for creating similar centers in Central
Asia, the Caucasus, and the Balkans. Nevertheless, graduate-level economics is
unavailable today in Central Asia or the Caucasus. It is not the purpose of this paper
CA PAC I T Y BU I L D I N G : CAU CA S U S A N D C E N T R A L A S I A 269
to investigate why modern economics has not moved farther south and east more
quickly, but we would like to suggest that the time for this expansion has now come.
It has now become urgent to replicate and scale up the existing training models into
the Caucasus and Central Asia.In doing so,the best results can be achieved by building
upon the experience of the existing centers in Central and Eastern Europe, including
an early emphasis on (1) creating local capacities for economics education and research;
(2) designing the programs as"regional centers of excellence"from the beginning;and
(3) eliciting significant government buy-in, above all in the countries where new cen-
ters will be established, but also in the neighboring beneficiary countries.
Regional Centers of Excellence in a Rapidly Declining
Learning Environment
In order to understand the magnitude of the challenge of creating local centers
with capabilities for self-perpetuation and self-improvement (an aspect Robert
Campbell has been emphasizing in his work on local capacity building) in Central
Asia and the Caucasus, it is worth summarizing the state of affairs in graduate eco-
nomics education and research in these countries:
� Old "economics" associated with central planning is still the predominantly
taught discipline in most transition countries.
� The average professor in many economics departments is over 60 years old,
unfamiliar with modern economics, and resentful of attempts to reform eco-
nomics education. Low pensions tend to prevent faculty from retiring.
� Empirical research is virtually unknown.
� Corrupt practices are widespread in university admissions and grading. Many
students not only pay tuition but also bribes for an education that does not pre-
pare them to enter either the local job market or to become part of the global
community of economists.
� Reforms in economics education have often translated into curricula of dubi-
ous quality taught by professors who often lack both teaching skills and the
required knowledge (reminiscent of the Liberman reforms in the former Soviet
Union during the 1960s: neither "market" nor "central planning" economics),
thereby discrediting modern economics.
� General budgetary support of universities is grossly inadequate, yet in some
cases governments have built modern and expensive facilities without paying
attention to academic quality.
� New program initiatives funded by outside sources are fragmented over many
small universities or centers,resulting in underfunded and unfocused programs.
� With rare exceptions, ministries of education and universities have not yet
acquired the ability to translate their vision of upgrading the human capital in
their countries into concrete action plans that would take into account domes-
tic and foreign resources.
270 U L R I C H H E W E R
� Program monitoring and evaluation capability remains weak, which con-
tributes to donors' reluctance to commit to stable medium- and long-term
funding, which in turn greatly jeopardizes sustainable capacity building.
� Coordination of donors sponsoring the scaling up of "centers of excellence"
needs to be improved.
Two New Regional Centers:
Central Asia and the Caucasus
The governments of Georgia and the Kyrgyz Republic have requested assistance
from the World Bank in creating graduate economics programs in the Caucasus and
Central Asia modeled after the NES and the EERC master's programs in Russia and
Ukraine.The World Bank's Europe and Central Asia Region has responded posi-
tively and made staff available to assist the governments and host institutions in
launching the programs and mobilizing the funds required to run them.
The NES in Moscow and the EERC master's program in Kiev have been offer-
ing world-class graduate economics instruction, in English, to some 100 first- and
second-year students each year since 1992 and 1996 respectively.2 By the summer of
2005, some 800 professional economists had graduated from the two programs.
Approximately two-thirds of the graduates find attractive employment in govern-
ment, private business, and think tanks, where governments are increasingly making
use of their expertise and skills.In the early years,foreign faculty fromWestern coun-
tries taught nearly all the courses; today most of the courses are taught by Russians
and Ukrainians with PhDs fromWestern universities. Most of them are actually MA
graduates of the centers of excellence in their home countries.
Several guiding principles underlie the success of the schools in Moscow and
Kiev; these principles will be applied to the new centers.They are: (1) strict adher-
ence to international quality standards based on (2) access to highly qualified faculty
and modern scientific literature, textbooks, and information technology; (3) inde-
pendent and transparent management; (4) strong partnerships with local institutions
and individuals; and (5) diversified financing from a broad range of revenue streams.
The Central Asia MA Program
The Central Asia MA Program will be based at the American University of Central Asia
(AUCA) in Bishkek because (1) theAUCA has a regional mission;(2) junior faculty with
graduate training from the United States are already teaching modern economics in Eng-
lish in the undergraduate program; (3) its student body is drawn from the target
countries--Afghanistan, Kazakhstan, the Kyrgyz Republic,Tajikistan,Turkmenistan, and
Uzbekistan; and (4) the university is introducing an international model of higher edu-
cation.The AUCA is the most modern university in Central Asia and the success of its
four-year undergraduate economics program has prompted its major sponsors--the
Open Society Institute (OSI) and the United States Agency for International Develop-
ment (USAID) to commit to the university's long-term development.Based in Bishkek,
CA PAC I T Y BU I L D I N G : CAU CA S U S A N D C E N T R A L A S I A 271
the program will be designed as a regional center of excellence serving the above-men-
tioned six countries with a total population of nearly 90 million. It is expected to pro-
duce some 70�80 MA graduates per year.The graduate economics program will help the
university to develop further in its stage of "early adulthood" (Ellen Hurwitz, president
of AUCA).
The Caucasus MA Program
The Caucasus MA Program will be based atTbilisi State University (TSU) and serve
Armenia,Azerbaijan, and Georgia (a combined population of approximately 17 mil-
lion), plus parts of Turkey, Iran, and Iraq as well as southern Russia.The program is
expected to graduate about 40�50 students per year.A high-level steering commit-
tee, appointed by the Georgian minister of economic development and headed by
Deputy MinisterTamara Kovziridze, after careful deliberations chose theTSU as the
most suitable host organization for the program.
The Choice of TSU
The committee recognizes that a large state university with all its bureaucratic and
administrative trappings may be slow in embracing fundamental change and replac-
ing the old with a new economics curriculum. Nevertheless, it decided to select the
TSU as the host institution for the program for the following reasons:
1. Georgia has embarked on a major reform of higher education, including an
association with the EU's Bologna curricular reform process.The TSU will be,
if it wants to recover its status as the major local and even regional university, at
the forefront of the reform process.The leadership of theTSU will use the MA
program as a vehicle and example for advancing the education reform not only
in economics but also in other graduate programs.The university is in the
process of consolidating its four"economics"faculties into a single faculty,com-
prising an economics department and a business administration department.
2. Parallel programs within universities and between universities will be consoli-
dated under the reform, and the TSU has a better chance than other universi-
ties to house such programs.One social sciences reform program funded by the
Carnegie Corporation of NewYork and managed by the Eurasia Foundation
has already expressed interest in moving to the TSU and cooperating with the
new MA program.Other modern programs at theTSU,such as those managed
by the OSI-supported Centre for Social Sciences, will offer additional oppor-
tunities for cooperation and for strengthening the reform process.
3. Fewer than half of Georgia's 240 licensed learning institutions met the basic
standards of a facilities inventory recently carried out by the government;
hence they will not be allowed to admit new students. Also, the number of
state-funded students will be significantly reduced,although more funding will
be made available for each student.The TSU is expected to emerge as one of
the five major universities in Georgia:two inTbilisi (the other being the Geor-
gian Technical University) and one each in the three other major cities.
272 U L R I C H H E W E R
Multiyear Cooperation with TSU
The rector ofTbilisi State University, the dean in charge of the university's reform of
economics and business instruction, the ministry of education, and a consortium of
donors will enter a multiyear cooperative agreement specifying their respective obli-
gations in launching and implementing the MA program at TSU.A draft agreement
specifying the partners'respective responsibilities has been elaborated and is expected
to be finalized shortly. Its main elements are as follows:
� An autonomous status of the MA program within TSU in the early years but
progressive integration into the university's academic,administrative,and finan-
cial structures as soon as possible on the basis of an agreed-upon business plan
with built-in benchmarks and incentives.
� Merging of the traditional economics graduate program at TSU and the new
MA program on the basis of an agreed-upon timetable.
� Modernizing the undergraduate instruction by having selected courses in the
undergraduate program taught by graduates of the new MA program, starting
in the fall of 2008--that is, by MAs from the first cohort.
� The government has donated an appropriate building and accommodations to
house the MA program.
Teaching, Research, and Outreach
The new centers in the Caucasus and Central Asia will pursue a three-pronged
approach:(1) teaching,(2) research,and (3) outreach.For the programs to achieve their
overall objective of creating a self-sustaining capability in economics education and
research, they need to be closely interconnected, though teaching will have to be
developed before research and outreach can be undertaken in a meaningful way.
Teaching
Following the example of the EERC at Kyiv-Mohyla Academy and NES, the mas-
ter's programs in Central Asia and the Caucasus will consist of a rigorous two-year
academic curriculum, comparable with that of leading Western universities and
taught in English on the basis of standard graduate-level textbooks by an interna-
tional faculty. The program of studies will culminate in the defense of a thesis, writ-
ten in English under the supervision of visiting faculty or a Western-trained PhD
from the region.Students will be encouraged to choose thesis topics relevant to their
countries' development.
During the first few years, the MA programs in Bishkek andTbilisi will, of neces-
sity, depend heavily on visiting faculty.The new schools will use the same modular
structure as the Kiev and Moscow schools (five two-month "mini-terms" per year)
as this will facilitate recruitment of international faculty, including economists from
the region who hold PhDs from Western universities.
CA PAC I T Y BU I L D I N G : CAU CA S U S A N D C E N T R A L A S I A 273
Research
Overcoming the traditional separation of teaching (universities) from research (acad-
emies of science) is essential for modernizing the economics profession. Following
the example of the EERC research network, NES in Russia, and the Economic
Research and Outreach Center in Ukraine, students and faculty will conduct high-
quality research in Tbilisi and Bishkek, and thereby contribute to the mutual rein-
forcement of teaching and research.Students will be encouraged to conduct research
at different locations,including partner institutions in neighboring countries,so as to
benefit from specializations and experiences.The research centers will play a crucial
role in providing an attractive home for returning PhDs.
Both the teaching and research programs will seek to establish "twinning"
arrangements with partner universities or institutes in Europe (including the centers
of excellence in Central and Eastern Europe) and the United States. At the AUCA
in Bishkek, long-standing cooperation exists already with Indiana University.
Outreach
The centers of excellence in Central and Eastern Europe each pursue a program of
outreach to universities, government, and think tanks. Each employs its own mixture
of seminars and conferences (both policy related and academic), summer schools,
faculty training and assistance with development of curricula and instructional mate-
rials, student internships in government agencies, and alumni networks.
The regional character of the new centers will make outreach even more impor-
tant and labor-intensive than those in Kiev and Moscow. For example, rather than
placing student interns in the city where the school is located,regional programs will
have to place interns in several national capitals.The Georgian and Kyrgyz govern-
ments have expressed their commitment to facilitating formal links with the gov-
ernments of neighboring countries.
Multiyear Funding
The costs of the two new regional centers in Central Asia and the Caucasus are pro-
jected to amount to roughly the same as those of the programs in Russia and
Ukraine, that is, approximately US$1 million per year, not including the research
centers. Funding will come from three sources: (1) a consortium of foreign public
and private sponsors;(2) domestic public and private sponsors;and (3) student tuition
fees, made possible by developing a scheme whereby students can borrow funds to
be repaid from the increased earnings that result from their advanced education. In
the early years, program costs are projected to amount to approximately US$10,000
per year per student, or US$20,000 for the two years. Costs will decline as the pro-
gram increasingly incorporates local faculty with Western-trained PhDs.
Sponsors from all countries benefiting from the regional MA programs are
expected to contribute to their funding. Initially, most of the funding is expected to
274 U L R I C H H E W E R
come from foreign donors, but over time funding sources from local donors and stu-
dents' families are expected to account for about two-thirds of total program cost.
The governments of the countries benefiting from the programs and the two host
universities,the American University of Central Asia andTbilisi State University,will
seek to establish an endowment of US$15 million.This endowment would generate
sufficient income to fund the programs.
As a second-best alternative, a minimum of US$5 million should be in place
before the programs are launched. It would not be advisable to initiate the programs
with less funding as too much time and effort would have to be spent on fund-
raising--at the expense of program implementation and academic development.
The government of Georgia has made available an appropriate building for the
TSU program and central budgetary funds for its renovation in 2006.The start-up
capital of US$5 million was secured by the end of 2005.
Cooperation Among Existing and New Programs
The creation of two new regional programs in the Caucasus and Central Asia would
not only help alleviate the shortage of trained economists in these regions; equally
important, it would enable governments and universities to acquire the capabilities
of building their own economics education and research programs.The launching of
the two programs would benefit considerably from strong cooperation with the
existing programs: teaching programs in Tbilisi and Bishkek could adopt what has
worked at NES and the Kyiv-Mohyla Academy, and the research centers should
make use of the experiences gained by the EERC research network in Russia. Fac-
ulty and student exchanges among the different programs, joint conferences, and
other forms of networking could result in cost savings. Formal networking among
the existing and new centers will help strengthen the new economics profession in
the region and raise its impact on the creation of functioning democracies.
Notes
1. For a preliminary stocktaking, see the Summer 2000 issue of Comparative Economic
Studies (42:2).
2. First-year courses include microeconomics, macroeconomics, statistics and economet-
rics, and mathematics for economists. Second-year courses cover all major areas of econom-
ics,such as industrial organization,law and economics,finance,game theory,and so on,as well
as transition economics. In their second year, students also receive advanced research training
and write and defend a thesis in English.
Developing Graduate
Economics Education Programs
Developing Graduate Economics
Education from Scratch
The Case of the Central European University
John S.Earle
This paper analyzes problems in capacity building in economics education and research, draw-
ing on experience from the special case of the CEU Department of Economics. Among the
problems discussed are the virtual absence of economics as understood in the West from the
countries of Eastern Europe; the inherited bias toward viewing economics as applied mathe-
matics rather than as an empirical science; the lack of preparation of the students; and diffi-
culties in developing a faculty, a research environment, and all the complementary
institutions that together raise the effectiveness of economics education and research. A par-
ticular issue that arises as the capacity-building programs mature is whether the economics
taught and practiced should be of the ultrastandard "plain vanilla" variety, or whether instead
it could be valuable to emphasize certain areas or styles of economics. One solution may be
found in "the relationship of the particular to the general," which in this context may be
interpreted as exploiting the specific problems and sources of intellectual inspiration of the
transition economies to draw lessons of broader interest to economists around the world.
THE CENTRAL EUROPEAN UNIVERSITY (CEU) WAS FOUNDED IN 1991 WITH THE
purpose of bringing the social sciences to a large group of ex-socialist countries
where these disciplines, as they are understood in theWest, hardly existed.This paper
considers the specific problems of capacity building in the field of economics,
describes some aspects of the teaching program and research activities at the CEU
economics department, and provides suggestions for further development organized
around the CEU theme of "the relationship of the general and the particular."
The emphasis throughout is on problems in building a PhD program, a much
more demanding task than building an MA program in terms of necessary resources,
faculty time and dedication, and complementary activities and infrastructure. My
perspective throughout is that of someone who has been a regular teacher and
researcher (and, to a lesser extent, an administrator) in a capacity-building program
since 1991; thus, the approach is much less macro than the "technology transfer"
perspective of Ofer and Polterovich (2000). Rather than taking the viewpoint of
277
278 J O H N S. E A R L E
someone organizing large fund-raising efforts or negotiating with governments, the
paper analyzes the behavior and characteristics of faculty, students, and university
administration--the micro actors in capacity building.
In broad terms, the condition of economics in Central and Eastern Europe and
the Russian Federation at the time the socialist regimes collapsed is fairly well under-
stood.1 Western economists arriving soon after to teach in the newly established
capacity-building organizations immediately gleaned from their students that there
was a virtual absence of any exposure to the neoclassical theories and empirical
methods standard at that time in theWest.Researchers from theWest who attempted
to find collaborators or speaking partners among the numerous and well-staffed
institutes of economics could not fail to be impressed by the stark differences in
questions and methods. Of course there were some very few exceptions, represented
chiefly by some highly motivated individuals who sought out and taught themselves
substantial parts of Western economics; and there was some cross-country variation,
particularly associated with the greater liberalization in some countries than others
during the 1980s.
A more interesting dimension of variation, because it is a systematic factor with
considerable inertia through the following transition, is the extremely wide gap in
the "level" (from aWestern standpoint) of different aspects or fields of economics. In
particular, mathematical theory was well developed at the best universities of Eastern
Europe and the former Soviet Union, and the concepts of neoclassical economics
were taught with such a thick mathematical patina under the guise of "economic
cybernetics" (at such places as Kiev, Novosibirsk, andTsEMI, in my experience) that
students could actually learn them without ever discerning that they were analyzing
the standard problems of bourgeois economics, such as consumer choice and profit
maximization.
This heavy mathematical emphasis represented a great strength in certain depart-
ments of the region, and teaching in the capacity-building institutions has exploited
the much stronger preparation of students in mathematics to move more quickly and
technically than they could in the United States.Yet in some cases the mathematical
strength may actually have made it more difficult to absorb economics as it is actu-
ally practiced in theWest.After all, only a tiny fraction of US economists spend their
days proving theorems, even if the profession (mistakenly, according to most
observers who take a step back from following the fashions) has accorded outsized
rewards and prestige to this activity. For examples, see the list of Nobel Prize win-
2
ners (but not John Bates Clark award winners), or the standard first-year graduate
curriculum at any US university (a subject to which we shall return). Most econo-
mists, by contrast, are primarily involved in the very useful attempt to try to under-
stand real-world phenomena through the analysis of data and (mostly) simple
empirical methods.3 But although mathematical theory may be relatively easy to
learn from a textbook, the highly idiosyncratic nature of empirical research renders
it less immediately conveyable. For all these reasons, the applied fields that account
for the vast majority of economic practice have proven much harder to inculcate in
the region than anyone had anticipated.4
DEVELOPING GRADUATE ECONOMICS EDUCATION FROM SCRATCH 279
This difficulty is also relevant for the new capacity-building organizations,such as
CEU, that have been set up in several countries of the region. Part of the problem is
that, even if the ventures were greenfield from a legal point of view, many of the
inputs were not. Faculty members, many of them well qualified, were drawn from
the region, and in some cases they tended to bring strong mathematical skills and
biases with them. Nor in terms of labels are the new organizations clearly differenti-
ated from the old: economics is a much misunderstood (and, some might say, abused)
term throughout Eastern Europe and Russia. Both from visits to many universities
in the region and from experience with our arriving students, a CEU instructor
knows better than to expect that someone with aa BA in economics from most area
universities has ever experienced even such basic concepts as utility maximization
and income and substitution effects.5 Instead, economics is confused with business
and management throughout the region, and the several hundred transcripts that the
CEU economics faculty must evaluate each year as part of the admissions process are
full of courses in marketing, accounting, and some other extremely practical-
sounding subjects that, however, are not part of economics as we define it.
The lack of preparation of students for graduate programs is probably a common
problem for all the capacity-building efforts, as it affects the quality of the basic
input--new students.6 This lack raises questions about the focus of international
resources almost exclusively on the graduate area, to the neglect of undergraduate
preparation and broader education in economics for noneconomists.7 It reflects the
limited effects of capacity-building efforts on other universities outside the new
institutions themselves: perhaps these externalities are necessarily slow to develop,
but one cannot help but notice how little an impact the effects of these efforts at
capacity building have on the universities compared with their apparently large
effects on the lives of the students graduating from the capacity-building programs.
Yet the goals of capacity building presumably involve more than the creation of new
ivory towers, insulated not only from the broader society--as are most economics
departments in the West--but also from other universities in the same region.
The problem of unprepared students is also related to the almost uniform hostil-
ity of most economics departments toward importing foreign skills and materials.For
instance, the Civic Education Program of the OSI has frequently had difficulty get-
ting state universities in the region to accept temporary appointments of Western-
trained scholars, even when they come at very low cost to the local university
and--from our perspective--would seem to have very high benefits for students.For
the most part, the local universities are loathe to hire new PhDs from theWest (some
of them CEU or other capacity-building institution MA graduates, exacerbating the
brain drain problem on the supply side; they are also reluctant to introduce substan
tial changes to their curricula). 8
Some other general problems of capacity building in East European economics
relate to the lack of complementary activities and infrastructure surrounding at least
some of these programs.A successful graduate program, particularly a PhD program,
requires a vibrant research environment in which students can participate and learn
as apprentices to more experienced scholars. Contrary to frequent practice in the
280 J O H N S. E A R L E
region (and indeed in Europe more generally,although not in the United States),this
does not mean that students get involved in a variety of money-making projects that
have little bearing on their development as researchers.Rather,it means that students
see that faculty members are actively engaged in scholarly research and that the for-
mer are able to draw upon the latter's expertise for help with dissertation ideas, and
with implementing and writing up those ideas. Other important aspects of infra-
structure include the library, student services, admissions office, placement services,
and alumni organization. It is very difficult in a new institution to have all these
working at an adequate level in just a few years and to run them professionally and
according to the espoused Western standards.
Finally, we come to what many perceive as the biggest problem of capacity-
building institutions, both for year-to-year management and long-run strategy: the
recruitment,retention,and motivation of faculty.The approach in most organizations
has been to bring in visitors, sometimes regular visitors, from Western universities to
deliver courses. Gradually, there have been some appointments resembling full-time
positions, mostly among young PhDs from the same country in which the organiza-
tion is located and sometimes through open searches on the international job mar-
ket (at least at CEU).The continuity of longer-term and more frequent presence is
clearly desirable for students, particularly for PhD students who benefit from regular
consultations on their research progress. Presence is also important for the develop-
ment of research environment, as we can see that physical proximity is a frequent
stimulus for researchers to work together.
But there are also some drawbacks to recruiting and retaining faculty:many of the
faculty coming from the same country decreases the international character of the
department. It makes the degree less valuable and the department less attractive to
students from outside the country and to some extent from inside as well, which
should be of great concern if the capacity-building goals encompass more than one
nation, as they certainly do at CEU."Returnees" may or may not identify with the
capacity-building goals of the organization, instead seeing the job as merely the best
available (usually by far the best available among academic positions) in their home
country.They may perceive their interest primarily as promoting an ultra-standard
approach to the discipline, since that is likely to garner the widest acceptance inter-
nationally even if it has less impact locally and regionally.Such junior faculty inWest-
ern universities are not usually given large responsibilities in PhD teaching,
particularly in the core courses, nor are they expected to do a great deal of disserta-
tion advising--the usual argument being that they are still so concerned to develop
their own research careers that it is difficult for them to share ideas with students.
They are also not burdened with administrative work nor are they put in positions
of authority; they may be consulted but they rarely have a vote on important curric-
ular issues,new faculty hiring,and department strategy.More senior visitors,although
more experienced in these functions and possibly at a better place in their careers to
exercise them generously, have other drawbacks.They are expensive, and they have
little personal interest in investing time and energy in the new programs.They are
almost never interested in a full-time, exclusive appointment, because of the partially
DEVELOPING GRADUATE ECONOMICS EDUCATION FROM SCRATCH 281
inherent uncertainty associated with new institutions in countries experiencing
instability and lacking reliable contract enforcement.The perceived job insecurity in
these positions is also related to the difficulty faced by the capacity-building institu-
tions in offering tenure, which CEU does not grant at all. So senior scholars are
loathe to give up the status and security of an appointment in theWest and very few
are interested in full-time appointments in new capacity-building institutions in
Eastern Europe or Russia.The possible strategy of motivating these people not
through compensating differentials but by encouraging them to identify with and
develop the goals of capacity building through their own research and teaching has
been neglected.
Economics at CEU
The CEU economics department shares some similarities with the other new eco-
nomics programs in Eastern Europe and Russia , including the goal of capacity
building, but there are also some important differences. Unlike most other programs,
and unlike its early years, the CEU economics department is now firmly embedded
in a much larger university, although it is the largest department in CEU. Many of
the functions that at other economics programs (and formerly at the CEU depart-
ment) are performed almost entirely by the department--student recruiting and
admissions, faculty hiring and promotion, student records, human resources, research
contracts, alumni relationships--are now almost entirely carried out by the univer-
sity.There are some disadvantages to this centralization, some of which are related to
the peculiarities of the way the economics profession operates--such as the aca-
demic job market and the credentialing role of the PhD degree for professional
economists--and some of which tend to be only poorly understood by those with-
out much experience in US universities. In general, the dominant role played by
United States departments in setting the standards for the profession is probably
greater in economics than in just about any other discipline, and a small, start-up
department with little reputation has to follow many established conventions.
The department also benefits in a number of ways from membership in the larger
university.Most obvious is the more secure funding due to the endowment given the
university by George Soros a few years ago. Less obvious are the possible scale
economies associated with centralizing certain functions.Also potentially quite valu-
able is the broader sense of shared mission that may come from bringing tegether not
only a single social science, but a whole package of related disciplines.The nature of
the mission is a topic that may be more frequently discussed when one convenes reg-
ularly together with a diverse group of philosophers, sociologists, legal scholars, and
gender studies specialists than when the possibly narrower perspectives of economists
receive little outside feedback.This benefit might be still much greater if economics
department faculty members engaged in more interdisciplinary research and dia-
logue, but the quest for such interaction seems to be as elusive at CEU as elsewhere.
Notwithstanding a number of arguments concerning the precise mission of the
university, the CEU economics department has organized its programs predomi-
282 J O H N S. E A R L E
nantly along standard "Western" lines. Focusing on the PhD program, which can be
much more easily compared to an international standard (there being few if any MA
programs like CEU's in the United States), application requires GRE general scores
(unlike other PhD and MA programs in Eastern Europe) in addition to the standard
application form, transcripts, statement of purpose, and two letters of recommenda-
tion. In practice, it appears that the quantitative GRE score plays a heavy role in
admissions decisions, as it does in the United States, and accepted students seldom if
ever have had a score below 700,with most much closer to 800.The acceptance pol-
icy is similar to most US universities in that there is no expectation of substantial
attrition: once students enroll, the department and the university do not try to elim-
inate a large fraction as a secondary screening procedure, the usual practice at a few
programs, such as the University of Chicago. Also, unlike the Chicago practice, all
students in good standing have the right to full financial aid. Part of the rationale for
these policies at CEU might be that they induce fruitful cooperation among stu-
dents.The program includes a substantial component of coursework, similar to US
PhD programs but dissimilar to the standard in Europe until recently.The list of
courses offered in the CEU PhD program since the first year in 2000�1 is shown in
Table 1, together with the course instructors each year.The first year of coursework
is devoted to core courses in micro, macro, and econometrics, as is standard in the
United States. At the end of these sequences, comprehensive exams are offered in
each, and students are required to pass these before continuing with the program
(generally, only two attempts are permitted). During the second year, students are
required to take a number of field courses in various areas of applied economics, and
they must submit a dissertation proposal.With the approval of the proposal, the stu-
dent is matched with an adviser and expected to participate in departmental semi-
nars and to make rapid progress on dissertation research.When the dissertation work
is substantially completed, but not yet finalized, the student takes an oral examina-
tion.Although as a formal matter, the oral examination committee votes on whether
the student passes or not, failure is expected to be rare, as the dissertation adviser
should not permit a student to take the exam if failure is a distinct possibility. More
importantly, the oral examination is intended to yield an explicit contract between
the student and the dissertation reading committee (which is a subset of the oral
examination committee) on what work remains before the dissertation can be
signed.
On first examination, this organization of the program appears very similar to
those at good universities in the United States. Admissions, financial aid, and other
procedures are designed on the basis of standard Western practice.The titles and con
tents of most courses offered differ trivially if at all from international standards.The
backgrounds of the faculty, who have PhDs from leadingWestern universities them-
selves, and the course workloads of the students are also similar.
But there are some important differences. Most significantly for the current stage
of the program, which is still in development, CEU coursework is actually signifi-
cantly shorter than in the standard US program. Currently, a total of 36 credits are
required for the PhD, with 1 credit implying 12 hours in the classroom. Of these 36
TABLE 1
List of PhD Courses and Instructors at CEU from 2000 to 2005
PhD Course Title 2000�1 2001�2 2002�3 2003�4 2004�5
CORE COURSES
Advanced Microeconomics 1 (4) L. Ambrus L. Danziger L. Danziger L. Danziger L. Danziger
Lakatos
Advanced Macroeconomics 1 (4) M. Gillman M. Gillman M. Ben-Gad (3) M. Gillman M. Gillman
M. Kejak M. Kejak
Advanced Microeconomics 2 (3) L. Danziger L. Danziger L. Danziger L. Danziger L. Danziger
H.Gintis
Advanced Econometrics (4) L.Matyas L.Matyas L.Matyas L.Matyas L.Matyas
Advanced Macroeconomics 2 (3) F. Coricelli F. Coricelli F. Coricelli F. Coricelli A.Dalmazzo (2)
Advanced Time Series Analysis (2) T. Terasvirta T. Terasvirta P. Siklos (1)
Advanced Applied Econometrics (2) C. Cornwell C. Cornwell C. Cornwell G. Kezdi
OPTIONAL COURSES
Contract Theory (1) U. Pagano U. Pagano U. Pagano U. Pagano U. Pagano (2)
Topics in Macroeconomics (1) F. Canova
Advanced Labor Economics (3) J. Earle J. Earle J. Earle J. Earle
Y. Weiss G. Pfann R. Sauer
Numerical Methods for Macro (1) M. Kejak M. Kejak M. Kejak M. Kejak
Applied Macroeconomics (2) A. Ratfai A. Ratfai A. Ratfai A. Ratfai A. Ratfai
Pension Economics (1) A. Simonovits A. Simonovits A. Simonovits A. Simonovits
Topics in Advanced Micro (1) T. Pietra P. Rey
Public Economics and Finance (2) B. Koszegi P. Benczur P. Benczur P. Benczur P. Benczur
Economic Development (1) I. Konya
New Economic Geography (1) G. Ottaviano
283 Corporate Finance (2) D. Mramor D. Mramor
(Continues on the following page.)
TABLE 1 (continued)
284
List of PhD Courses and Instructors at CEU from 2000 to 2005
PhD Course Title 2000�1 2001�2 2002�3 2003�4 2004�5
Monetary Theory (3) M. Gillman M. Gillman T.Monacelli (2) M. Gillman
Law and Economics (2) A. Dnes
Modeling Financial Markets (2) P. Kofman P. Kofman P. Kofman
Topics in Econometrics 1 (1) P. Siklos
Advanced Macro Theory and Policy (2) A. Cukierman
Topics in Economic Theory (1) S. Bowles
Advanced Int'l Finance (2) S. Plaut
Applied Microeconomics (2) L. Danziger L. Danziger L. Danziger
Investment (1) P. Sakellaris G. Pfann
Economics of European Integration (3) R. Vickerman (2) R. Vickerman R. Vickerman R. Vickerman
K. Dezseri K. Dezseri K. Dezseri
Advanced Game Theory (1) A. Ambrus
Advanced Macro Theory (1) R. Cooper T. Monacelli
Advanced Finance (2) Gy. Loranth Gy. Loranth Gy. Loranth Gy. Loranth
Topics in Econ. Theory (1) C. Carroll
Discrete Choice Models (2) R. Sauer
Exp. and Evol. Game Theory (2) H. Gintis
Behavioral Economics (2) B. Koszegi A. Falk A. Falk L. Goette
Advanced International Finance (2) S. Plaut
Bayesian Econometrics (2) W. Griffiths
Topics in Time Series Analysis (1) P. Siklos
Theories of Economic Growth (3) S. Gomulka
I. Bicanic
Advanced International Trade (2) B. Elmslie
Source: CEU.
Note: Only PhD courses (no MA courses) are shown. Number of credits for each course/instructor are in parentheses (1 credit = 12 classroom hours).
DEVELOPING GRADUATE ECONOMICS EDUCATION FROM SCRATCH 285
credits, 22 are core courses (7 in each of micro and macro and 8 in econometrics).9
Only 14 are optional field courses. Both the core and the optional requirements are
much less than the US standard. Students in the United States would normally have
at least 12 hours of core courses each week of the first year,for a total of 32�33 weeks
(based on two 16-week semesters or three 11-week quarters).This implies approxi-
mately 50 percent more core material in US universities, with the CEU shortfall
greatest in micro and macro (because these fields tend to receive more attention in
the United States).
The difference in course requirements is even greater for the optional field
courses. In the United States, students usually take two or three year-long field
courses plus some distribution requirements, altogether adding up to at least one
more full year of coursework.The CEU requirement is less than half that, although
there are plans to increase it slightly in the future.The CEU PhD program also has
no field courses, in the sense of particular sets of courses among which students must
choose; this could be partly because of the small number of field courses students are
required to take, although there are also some US programs where either there are
no such groupings or they vary regularly (or irregularly) from year to year.The CEU
faculty have been discussing whether to organize the coursework into fields, and
(with more heat) which fields should be chosen, but as long as students take so few
courses the question appears moot.
Another way in which the economics PhD at CEU does not follow standard US
practice is that CEU requires that applicants have received an MA before they enroll
in the PhD program. In the United States this would be unheard of--starting PhD
students rarely have an MA.The CEU policy is university-wide, and there seems to
be little that the economics department can do to change it. Because of this policy,
however, at least a few interesting candidates are turned away each year by the CEU
Admissions Office, without even having their applications considered. Given the
state of economics in the region,as discussed above,this would not seem to be a very
well-advised policy.
As a result, most PhD students at CEU are Hungarian graduates of the Budapest
University of Economic Sciences and Public Administration (renamed some years
ago from Karl Marx University, and recently renamed again as Corvinus University).
This university is certainly one of the best state universities in the entire region, so
the preparation is fairly good.The formal admission requirements to CEU are strin-
gent, and the students appear to perform very well; annex 1 contains a list of titles of
recent presentations of PhD student research. But the PhD program lacks the great
variety of nationalities and backgrounds found in the MA program, where a typical
entering class of 45 students represents about 20 different countries. It also lacks any
Western students, who could be interested in applying to the PhD program (partic-
ularly if it carved out a somewhat specialized niche--as discussed below), but who
rarely have an MA before proceeding to the PhD.
Another peculiarity of the student population in the economics PhD at CEU is
that there are few graduates of the CEU MA program.This result has been very dis-
appointing for CEU faculty members, who are exceedingly proud of the high qual-
286 J O H N S. E A R L E
ity of the MA students, 40�50 percent of whom go on to PhD programs each year.
Despite a number of conscious attempts to stimulate interest among them, including
offering ways to accelerate the PhD program (by offering waiver exams, combining
coursework,and permitting much to be accomplished during the two-year MA pro-
gram), most of the MA students nonetheless strongly prefer to go to US programs.
Sometimes they apply to the CEU PhD, but it seems to be mostly as a backup alter-
native. Of course, the CEU faculty can only wish them well and cheer them on
when they are accepted with full funding into top US and European schools,but this
pattern does point to a demand problem for the PhD programs in the region.
Although the workload in particular CEU courses is comparable to that in US
universities, CEU requires much less by way of assistantship work from their PhD
students.The CEU financial aid is a fellowship, and the work requirement is only
some minimal teaching assistance--not a halftime job, as is typical in the United
States.Although a low work requirement has many advantages, most obviously per-
mitting students to focus first on their courses and then on their research, it has the
drawback that PhD students do not have the same opportunities to interact with dif-
ferent faculty members each term as they receive different assignments. Indeed, after
a course is finished, it may be difficult for students to approach professors, and work-
ing as aTA (or RA) provides a natural way for people to start talking with each other.
A final difference is that most PhD students work outside of the university. Most
commonly they are employees of the Hungarian National Bank, but some teach
economics courses at local universities or work on government-funded projects.
Immigration rules prevent non-Hungarians from such outside work. Some of these
experiences may be valuable, but they further serve to undercut the development of
a vibrant research environment at CEU, together with other factors discussed below.
Only one explanation appears to account for all, or most, of these anomalies: the
university has a strict policy limiting any student's financial aid to a total of four years
(46 months,to be exact).Therefore,PhD students need to finish coursework quickly;
the university requires that they already have an MA to make sure they are prepared
for a rapid program; the MA requirement excludes many applicants from the region
and nearly all of those from other regions of the world;the current MA students have
already used up two of their possible four years and are afraid of exhausting their
funding; the CEU cannot demand much assistantship work as it needs to force a fast
pace; only Hungarians are able to get outside work in Hungary, making non-
Hungarians even less interested in CEU; and Hungarian students readily accept jobs
outside (even forgoing their stipends temporarily) because they see their financial aid
running out.
A problem that CEU has in common with most other institutions is how to build
a research environment that encourages individuals to carry out innovative projects
and to publish them well. Most CEU faculty members are, or have been, active
researchers.Annex 2 contains a list of faculty publications since 2002. But building a
research environment involves more than long faculty vitae. It requires regular sem-
inars with high levels of participation, social interaction among faculty and advanced
students, and regular and informal discussions taking place in the offices, halls, and
DEVELOPING GRADUATE ECONOMICS EDUCATION FROM SCRATCH 287
lunchrooms. Some of the particular problems in developing such an atmosphere at
CEU follow from the peculiarities of the admissions and financial aid policies, and
they are also related to CEU's hiring practices and the incentives offered to faculty.
A major problem, one which is quite common in Eastern Europe and Russia, is
that most faculty members have multiple affiliations.This is true not only of the non-
Hungarian visitors, but also of most Hungarian faculty members.And it is true not
only of the part-timers, but it is also true of some of those with full-time contracts.
The multiple affiliations might not matter much if people spent their time at CEU,
but many do not: the foreigners tend to come only when required by teaching obli-
gations (and even then it is sometimes in doubt, although when they do come, they
can be found around the department--usually 16 hours per day). But some of the
local faculty may show up only for office hours and to teach their classes.They may
run their research grants through other organizations (a practice sometimes
explained by those organizations' greater expertise in handling contracts), and effec-
tively their research energy may go elsewhere. Relatively few faculty hang around to
engage in regular research discussions with others.
Granting some license for the youth of the organization, however, a research
environment is clearly developing.The Budapest Economic Seminar Series (BESS)
meets frequently with both internal and external speakers.Annex 3 contains a list of
speakers in the academic year 2004�5.The CEU Labor Project,founded in 1994,has
produced academic articles as well as contract research reports over the years; many
students have been involved in these activities, some as assistants and others as coau-
thors.An increasing number of assistant professors withWestern PhDs are joining the
faculty, and more research-related conversations seem to be taking place around the
department.
Some research at CEU is closely related to policy--in particular,to policies in the
transition from socialist to market economies. Several faculty members have worked
closely with central banks in the region and with international organizations, and
Hungarian faculty members have worked on a variety of Hungarian government
contracts.The CEU Labor Project staff, including faculty, students, and MA gradu-
ates (some of whom are now in PhD programs) have participated in projects with
the World Bank, USAID, the European Commission, the OECD, and the govern-
ments of Moldova, Mongolia, Romania, and Russia.These latter projects focused on
issues such as privatization, corporate governance, enterprise restructuring, labor
market adjustments, unemployment, and education.
"The Relationship of the General and the Particular"
The mission of CEU was conceived as primarily one-way--that is, it was seen as
importing the finished goods represented by the received wisdom of theWestern dis-
ciplines.These products could be imparted in the classroom, and they could be used
to inform policy making in the uncharted waters of transition from a socialist system.
Somewhat neglected in the early plans, or at least not so clearly articulated, was the
source of inspiration represented by the potential benefits flowing in the other direc-
288 J O H N S. E A R L E
tion: the substantial lessons that studying the particularities of the region could have
for broader questions about economies, polities, and societies. Indeed, although sim-
ply being present during the momentous changes and the feeling of making some
small contribution to the process provided some initial compensation for those actu-
ally "on the ground" (as some funders were wont to call them), a continuing devo-
tion to the enterprise required either higher salaries than the organization was
prepared to pay or commitment to using the experiences of the East to inform the
disciplines of the West.The view that members of the community could be moti-
vated by studying the region is far from universal inside CEU, but the organization
eventually did give some lip service to the notion, in the form of the occasional slo-
gan "the relationship of the general and the particular." For the CEU Economics
Department, this concept could become more than just a slogan, and in this section
I discuss some arguments for the department to develop a clearer sense of intellec-
tual focus.Although the discussion concerns CEU, these reflections might be useful
to other capacity-building efforts also engaged in strategic planning for the future.
The initial efforts to develop the new programs were necessarily concerned with the
most basic requirements for economics education and research, but it may now be
time to consider the place of these institutions in the region and the profession. For
a number of reasons, it seems to make sense that the CEU Economics Department
adopt some focus. Clearly, the department cannot dispense with broad strengths in
the standard fields of economics as long as the university wants to offer MA and PhD
degrees in economics. But the department could strive for something more than--
or at least something different from--simply mimicking others in an attempt to join
the ranks of the top 50 or top 20 programs in Europe.A vision of something unusual
that the department may be able to contribute would help to create a stronger sense
of shared mission among faculty and students. It would guide strategic planning,
including decisions on hiring and course offerings.And it would help to build a rep-
utation for the department outside the university as a place with a high level of
research and teaching in general,plus a particular niche that differentiates the depart-
ment from the mostly "plain vanilla" economics departments with whom we com-
pete.The choice of focus is not arbitrary. In principle, the department could select
one or a few fields of economics at random, with the only requirement that the
field(s) be central to the discipline--because our ability to award economics degrees
requires that the programs have a certain breadth. Much better, however, would be a
choice
of focus that builds on our comparative strengths.A short list of CEU advantages
would include location in a region experiencing some very interesting economic
developments, outstanding students from all over the region who are deeply inter-
ested in those developments, faculty members who have built their professional
careers studying those same developments, and a university administration that pro-
fesses a strong interest in policy relevance and social service.
A focus that builds on those advantages would have to be careful to avoid being
pigeon-holed as a "regional specialization." Economists who study economies other
than that of the United States know all too well that the profession is dismayingly
DEVELOPING GRADUATE ECONOMICS EDUCATION FROM SCRATCH 289
Americo-centric and that overstressing the non-American source of their data low-
ers the probability of acceptance in the top journals. Hamermesh (2002) argues in
favor of much greater use of non-American data, on several grounds: the presence of
exogenous shocks,more variation in policies,and the larger size and better quality of
foreign data. All of these arguments apply at least to some extent to the transition
economies of Eastern Europe and Russia. But Hamermesh (2002) also shows that
few such papers are published in top journals: only 7 percent of all empirical labor
economics articles in the American Economic Review, the Journal of Political Economy,
and the Quarterly Journal of Economics used exclusively non�North American data, 84
percent used exclusively American data, and the remaining 9 percent used some
mixture. 10He also found that published papers using non�North American data
have much lower rates of subsequent citations (lower by a factor of about 3 within 3
years after publication).The inference he draws is that journal editors are reluctant to
publish such papers because they attract less interest in the profession.
It would therefore seem to be privately rational for economists in the capacity-
building institutions like CEU to devote their scarce research time to yet more
analysis--although at a considerable distance--of the U. S. economy. It may also be
socially efficient if the university takes a single-factor view of faculty quality and out-
put. For instance, CEU now evaluates faculty research by awarding points for publi-
cations, with articles in top journals getting 3 points, those in leading field journals 2
points, and all others 1 point; the required minimum is 2 points per year on average.
(In a similar vein, CERGE even provides financial bonuses for publications. ) This
policy might be the best one, and it probably is effective in raising consciousness
among some faculty members about the importance of publishing internationally,
and in the best possible venues.There may indeed be some tendency, out on the
periphery of the profession, for faculty members to give up on participating actively
in the big debates. Encouragement to remain involved, and to go through the steady
grind of paper submission and revision, is surely valuable.
From a less atomistic point of view, however, neither the private incentives nor
the points policy appears socially efficient.It encourages faculty members to abdicate
from actively participating in evaluating--and even in reading--each other's work.
Perhaps there is insufficient trust among the new faculty in a new university for
internal evaluation to play an important role, but building this social capital should
arguably be an important part of the strategy of the organization as it matures.The
points policy undermines the development of such social capital. 11 Moreover, the
individually rational solution ignores the potential complementarities of the depart-
ment with the factors of location, students, and university mission already discussed.
A possible encapsulation of an intellectual focus for economics at CEU could be
"the role of institutional factors in economic development, growth, and transition."
This rubric is broad enough to cover both macro and micro, and both theory and
empirical work. It avoids mentioning a particular region, and thus the "regional spe-
cialist" label; and it is open to inclusion of data and analysis from any part of the
world.At the same time,it expresses the possibility of reverse learning in the capacity-
building process: the hope would be that the location of capacity-building centers
290 J O H N S. E A R L E
benefits not only the particular students who pass through it, and not only the coun-
try and region in which the center is located (even if these externalities are far from
accomplished), but also the broader profession, as a result of the important lessons
that may be drawn from the regional economies. In this way, capacity-building may
be treated less as a missionary activity (Campbell 2000) than as a mutual benefit.
Moreover,this choice of focus would be associated with some of the fastest,if not
the fastest, growth areas in economics over the last 10�15 years: new institutional
economics,comparative institutional analysis,and the quasiexperimental approach to
identification problems in empirical research. Just about any modern economist,
with the exception of some of the most rigid "plain vanilla" variety, is likely to sym-
pathize with such an emphasis. Nor would it necessarily change or devalue the
research and teaching that the department currently carries out.But it might provide
some motivation for senior faculty members to remain involved with the depart-
ment and it would help students to understand that economics is relevant for their
countries, not only for an (idealized) market economy such as that of the United
States.And it could serve as a useful guide to future strategy about faculty develop-
ment, joint research products, and special course offerings.
Conclusion
The CEU Economics Department was founded in 1991, but during its first nine
years there was only an MA program; the PhD was started up only in academic year
2000�1.The department is therefore still young, but the PhD is barely a toddler. In
taking its first baby steps, it has raised many interesting questions about the nature of
capacity building and about the new organizations designed to effect the transfer of
Western economic expertise.No doubt,the other capacity-building centers are con-
templating some of those same questions.Yet the participants of the different organ-
izations meet exceedingly rarely, and in general there is little knowledge of the
others'activities. Much more cooperation among these special centers would be use-
ful, not only in continuing to provide good economics training to the students who
pass through, but in spreading the benefits to the larger societies of the region and in
becoming respected contributors to the larger discipline of economics.
Notes
1. See for instance Alexeev,Gaddy,and Leitzel (1992) or the symposium articles published
in Comparative Economic Studies (2000).
2. See, for example, the essays by Dierdre McCloskey (2000), who criticizes the tendency
of economics faculty members to mimic the axiomatic "theorem and proof " approach of
their colleagues in mathematics rather than the pragmatic "let's understand the world"
approach characteristic of the physics department.
3. The applied fields include several major fields of microeconomics (industrial organiza-
tion,labor economics,and public finance),as well as smaller subfields (environmental,financial,
regional, and urban economics; and economics of development, education, health, institutions,
DEVELOPING GRADUATE ECONOMICS EDUCATION FROM SCRATCH 291
law, and so on). Most U. S. economists, in fact, work in these areas, and all the applied micro
sub-fields share a common theoretical structure and approach to empirical research.
4. The same is true of applied econometrics: although econometric theory, which is also
highly mathematical, may be learned relatively easily from textbooks-and it has been thus
been relatively easily mastered in the region-the art of applying these methods to answer eco-
nomic questions has been far slower to develop.
5. As one example, I might relate the personal experience of teaching the first course (or
the few weeks of the first course) in microeconomic theory in the CEU MA program, which
I did in 1993 and 1994, and again from 2000 to 2003.The students in those first two years
came with essentially no background in microeconomics, but after the five-year gap in the
middle of this teaching experience, I expected that their preparation would have improved
(and indeed, while most of our students in the early years had backgrounds in engineering,
math,and physics,an increasingly large fraction of the incoming students had majored in eco-
nomics as undergraduates).To assess their backgrounds,on the first day of class in 2000 I asked
them to complete a short form listing previous courses in economics,and many indicated sev-
eral courses, including microeconomics. My experience in teaching them, however, was that
very few had even very basic knowledge of microeconomic concepts.The next year, there-
fore,I added yes-no questions on the first day of the form,"Do you know the meaning of X?"
where X represented some basic concepts (utility, elasticity, factor demand, and so on).
Although I was initially pleased to see that quite a few students claimed to know these con-
cepts, I was later dismayed to realize that their knowledge was much weaker than claimed.
Finally, in the more recent years, I have simply given a first-day quiz, which although exceed-
ingly unpopular with the students has revealed with greater reliability both the generally weak
condition of economics training in the region and the discrepancy between course titles and
what students actually learned in their previous universities.
6. Only if we think that economics is merely a branch of applied mathematics rather than
a social science does it make sense to equate preparation with mathematical skills.
7. CEU is evaluating a change in this strategy to include BA programs in the future. Ide-
ally, of course, the graduates of these programs wishing to pursue an MA or PhD should be
encouraged to do so at another university, but in this case the supply of students to the grad-
uate programs would not be affected.
8. The many new private universities that have sprung up around the region are probably
no better,and may even be significantly worse in this respect,as they are oriented toward busi-
ness studies and they do not even benefit from CEP instructors.
9. Almost all first-year PhD students are also required to take an additional preparatory
course in econometrics,"Intermediate Econometrics," which nevertheless does not count
toward their degree requirements; if included, however, it would raise the number of credits
in econometrics to 12.
10. The rate of non-North American data sources in the Journal of Labor Economics was
somewhat higher (14 percent), but the mixed rate was lower (2 percent).
11. Social capital is undermined as well when major hiring and promotion decisions are
handled by university administration without significant involvement of department faculty
members.
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Annex 1
List of PhD Student Presentation Titles, June 2005
Derivative Pricing With Symmetry Analysis Rational Choices or Behavioral Outcomes? A Study of
the Determinants of Voting Behavior in Post-Communist Romania 1995/2001
The Costs of Investment
Choice of Privatization in Romania. Evidence from a Comprehensive Panel
Firm Behaviour and Public Infrastructure: The Case of Hungary
Compatibility and Coordination Issues in Contracting with Network Effects: Screening and
Divide-and-Conquer Techniques
The Role of Endogenous Exchange Rate Pass Through in New Keynesian Phillips Curves
Revenue Generating and Behavioural Effects of the Simplified Entrepreneurial Tax in Hungary
Credit and the Business Cycle
Monetary Rules for Partially Dollarized Developing Economies
Time Consistency in Fiscal Policy
Early Retirement and Consumption Prospects - An Empirical Analysis
The Effect of Trade and Competition on Firms' Pricing: The Case of Hungary
Latent Decisions in Discrete Choice Models
Exchange Rate Behaviour Before Final Fixing
Technology Spillovers from Foreign Direct Investment
Source: CEU.
DEVELOPING GRADUATE ECONOMICS EDUCATION FROM SCRATCH 293
Annex 2
List of CEU Economics Faculty Publications 2002�05
(on the basis of posted CVs for faculty members teaching at least
3 credits)
Andrzej Baniak
2005 (with J. Cukrowski and J. Herczynski). "On Determinants of Foreign Direct Investment in
Transition Economies." In Problems of Economic Transition 48: 6-28.
2003 (in Polish, with L. Paizs). "Analysis of the Market Power in Electricity Industry of a Small
Central European Country." Materials of the Tenth Conference on Energy Markets (Lublin 2003),
53�62.
2002 (with T. Robinson). "The Volatility of Prices in the English and Welsh Electricity Pool."
Applied Economics 34 (12): 1487�95.
2002 (in Polish). "Comparative Statics in Ordered Spaces." Dydaktyka Matematyki, 3, 27�37.
Peter Benczur
2004. "Nomin�lis sokkok �tmeneti re�lhat�sa egy k�tszektoros n�veked�si modellben." K�zgaz-
das�gi Szemle, LI, 101�126, February.
2005. "Information revelation, liquidity shocks, the volatility and the level of bond spreads."
Economica 72 (285): 95�119.
2002. "A nomin�l�rfolyam viselked�se monet�ris rezsimv�lt�s ut�n."K�zgazdas�gi Szemle, XLIX,
480�497, October.
Leif Danziger
2005 (with S. Neuman). "Delays in Renewal of Labor Contracts: Theory and Evidence." Journal
of Labor Economics 23: 341�371, April.
2003. "Inflation, Costly Price and Quantity Adjustments, and Time Spent in the Keynesian
Regime." Economics Letters 80 (August): 161�8.
2003. "The New Investment Theory and Aggregate Dynamics." Review of Economic Dynamics 6
(October): 907�40.
2002 (with C. T. Kreiner). "Fixed Production Capacity, Menu Cost and the Output�Inflation Rela-
tionship." Economica 69 (August): 433� 44.
John S. Earle
Forthcoming (with U. Pagano and M. Lesi). "Information Technology, Organizational Form, and
Transition to Market." Journal of Economic Behavior and Organization.
Forthcoming (with D. Brown). "Job Reallocation and Productivity Growth in the Ukrainian Tran-
sition." Comparative Economic Studies.
2005 (with D. Brown and D. Lup). "What Makes Small Firms Grow? Finance, Human Capital, Tech-
nical Assistance and the Business Environment in Romania. Economic Development and Cultural
Change 54(1): 33�70.
2005 (with D. Andren and D. Sapatoru). "The Wage Effects of Schooling under Socialism and in
Transition: Evidence from Romania 1950�2000." Journal of Comparative Economics 33 (2):
300�23.
2005 (with C. Kucsera and �. Telegdy). "Ownership Concentration and Corporate Performance on
the Budapest Stock Exchange: Do Too Many Cooks Spoil the Goulash?" Corporate Governance:
An International Review, 13(2): 254�64.
294 J O H N S. E A R L E
2003 (with D. Brown). "The Reallocation of Workers and Jobs in Russian Industry: New Evidence
on Measures and Determinants." Economics of Transition, 11(2): 221�52.
2003 (with S. Estrin). "Privatization, Competition, and Budget Constraints: Disciplining Enter-
prises in Russia." Economics of Planning, 36(1): 1�22.
2003 (with S. Gehlbach). "A Spoonful of Sugar: Privatization and Popular Support for Reform in
the Czech Republic." Economics and Politics, 15(1): 1�32.
2002 (with A. Telegdy). "Privatization Methods and Productivity Effects in Romanian Industrial
Enterprise." Journal of Comparative Economics, 30(4): 657�82.
2002 (with K. Sabirianova). "How Late to Pay? Understanding Wage Arrears in Russia." Journal
of Labor Economics, 20(3): 661�707.
2002 (with A. Telegdy, C. Kucsera, and V. Kaznovsky). "Corporate Control: A Study of Firms on
the Bucharest Stock Exchange." East European Economics, 30(1): 96�133.
2002 (with H. Lehmann). "Microeconometric Studies of Russian Labor Markets: An Introduction
to the Symposium." Journal of Comparative Economics, 30(1): 91�5.
2002 (with D. Brown). "Gross Job Flows in Russian Industry Before and After Reforms: Has
Destruction Become More Creative?" Journal of Comparative Economics 30(1): 96�133.
Max Gillman
Forthcoming (with S. Benk and M. Kejak). "A Comparison of Exchange Economies within a Mon-
etary Business Cycle." The Manchester School.
Forthcoming (with S. Benk and M. Kejak). "Credit Shocks in the Financial Deregulatory Era: Not
the Usual Suspects." Review of Economic Dynamics.
2005 (with M. Kejak). "Inflation and Balanced�Path Growth with Alternative Payment Mecha-
nisms." Economic Journal 115(500): 247�70.
2005 (with M. Kejak). "Contrasting Models of the Effect of Inflation on Growth." Journal of Eco-
nomic Surveys 19(1): 13�136.
2004 (with M. Kejak). "The Demand for Bank Reserves and Other Monetary Aggregates." Eco-
nomic Inquiry 518�33.
2004 (with A. Nakov). "Granger Causality of the Inflation�Growth Mirror in Accession Coun-
tries." Economics of Transition 12 (4): 653�82.
2004 (with M. Harris and L. Matyas). "Inflation and Growth: Explaining the Negative Effect."
Empirical Economics 29(1): 149�67.
2004 (with D. Cziraky). "Stable Money Demand and Nominal Money Causality of Output Growth:
A Multivariate Cointegration Analysis of Croatia.". In Vol. 1 of From Transition to Development:
Globalisation and Political Economy of Development in Transition Economies, eds. D. Stojanov
and B. Culahovic, 95�129. Sarajevo: Univ. of Sarajevo.
2003 (with A. Nakov). "A Revised Tobin Effect from Inflation: Relative Input Price and Capital Ratio
Realignments, United States and United Kingdom 1959�1999." Economica 70 (279): 439�51.
2002. "On Keynes's Theory of the Aggregate Price Level in the Treatise: Any Help for Modern
Aggregate Analysis?" European Journal of the History of Economic Thought 9 (3): 430�51.
2002 (with M. Kejak). "Modeling the Effect of Inflation: Growth, Levels, and Tobin." In Pro-
ceedings of the 2002 North American Summer Meetings of the Econometric Society: Money.
Herbert Gintis
2005 (with S. Bowlels, R. Boyd, and E. Fehr). Moral Sentiments and Material Interests: On the
Foundations of Cooperation in Economic Life. Cambridge, MA: MIT Press
2005 (with others). "`Economic man' in Cross-Cultural Perspective: Behavioral Experiments in 15
Small-Scale Societies." Behavioral and Brain Sciences 28 (6): 795-815
2004. "Review of Why Men Won't Ask for Directions: The Seductions of Sociobiology," by Richard
C. Francis. Evolutionary Psychology 2: 47�49
DEVELOPING GRADUATE ECONOMICS EDUCATION FROM SCRATCH 295
2004. "On the Unity of the Behavioral Sciences." In Logic, Epistemology, and the Unity of Sci-
ence, eds. Dov Gabbay, Shahid Rahman, John Symons, and Jean Paul Van Bendegeme. New
York: Kluwer.
2004. "The Genetic Side of Gene-Culture Co-evolution: Internalization of Norms and Prosocial
Emotions." Journal of Economic Behavior and Organization 53(1): 57�67.
2004. "Towards the Unity of the Human Behavioral Sciences." Politics, Philosophy, and Econom-
ics 3 (1): 37�57.
2004 (with S. Bowles). "The Evolution of Strong Reciprocity: Cooperation in Heterogeneous Pop-
ulations." Theoretical Population Biology 61: 17�28.
2004 (with S. Bowles). "The Origins of Human Cooperation." In The Genetic and Cultural Origins
of Cooperation, ed. Peter Hammerstein. Cambridge, MA: MIT Press.
2004 (with S. Bowles). "Persistent Parochialism: Trust and Exclusion in Ethnic Networks." Jour-
nal of Economic Behavior and Organization 55 (1): 1�23.
2004 (with S. Bowles). "Prosocial Emotions." In The Economy As an Evolving Complex System,
III: Current Perspectives and Future Directions, L. Blume and S. Durlauf, eds. Oxford: Oxford
University Press.
2004 (with J. Henrich, R. Boyd, S. Bowles, C. Camerer, and E Fehr). Foundations of Human Social-
ity: Ethnography and Experiments in Fifteen Small-Scale Societies. Oxford: Oxford University
Press.
2003. "The Hitchhiker's Guide to Altruism: Genes-Culture Coevolution and the Internalization of
Norms." Journal of Theoretical Biology 220 (4): 407�41.
2003. "Solving the Puzzle of Prosociality." Rationality and Society 15(2): 155�87.
2003 (with S. Bowles). "The Global Inheritance of Inequality: Reply" Journal of Economic Per-
spectives 17(3) 203�6
2003 (with S. Bowles, R. Boyd, and E. Fehr). "Explaining Altruistic Behavior in Humans." Evolu-
tion & Human Behavior 24: 153�72.
2003 (with R. Boyd, S. Bowles, and P. J. Richerson). "Evolution of Altruistic Punishment." Pro-
ceedings of the National Academy of Sciences 100(6): 3531�5.
2002. "Some Implications of Endogenous Contract Enforcement for General Equilibrium Theory."
In General Equilibrium: Problems and Prospects, eds. Fabio Petri and Frank Hahn, 176�205. Lon-
don: Routledge.
2002. Review of Dawkins vs Gould: Survival of the Fittest by Kim Sterelny, Human Nature Review
2, 3ff.
2002. Review of Sense & Nonsense: Evolutionary Perspectives on Human Behaviour by Kevin N.
Laland and Gillian R. Brown, Human Nature Review 2: 208�9.
2002 (with S. Bowles). "Homo reciprocans: Altruistic Punishment of Free Riders." Nature 415
(6868): 125�8.
2002 (with S. Bowles). "Intergenerational Inequality." Journal of Economic Perspectives 16 (3):
3�30.
2002 (with S. Bowles). "Social Capital and Community Governance." Economic Journal 11 (483):
419�36.
2002. "Altruism and Emotions." Behavioral and Brain Sciences 25: 258�9.
2002 (with C. M. Fong and S. Bowles). "Reciprocity and the Welfare State." In Handbook on the
Economics of Giving, Reciprocity and Altruism, eds. J. Mercier-Ythier, S. Kolm, and L.
G�rard�Varet. Amsterdam: Elsevier.
Julius Horvath
2004 (with A. Ratfai). "Supply and Demand Shocks in Countries to Join the EMU." Journal of
Comparative Economics 32: 202�211
2003 (with G�nter Heiduk). "On Some Currency Regime Considerations for the Visegrad Coun-
tries." Duisburger Volkswirtschaftliche Schriften. Berlin: Duncker & Humblot.
296 J O H N S. E A R L E
2003. "Country Studies: The Case of the Slovak Republic." In Some Currency Regime Considera-
tions for the Visegrad Countries, eds. G. Heiduk and J. Horvath. Berlin: Duisburger Volk-
swirtschaftliche Schriften, Duncker & Humblot.
2003. "The Czech Currency Crisis of 1997." In Currency Crises in Emerging Markets, ed. M.
Dabrowski, 221--35. Boston/Dordrecht/London: Kluwer Academic Publishers.
2003. "Some Comments on Unilateral Euroization, " in Some Currency Regime Considerations for
the Visegrad Countries, eds. G. Heiduk and J. Horvath. Berlin: Duisburger Volkswirtschaftliche
Schriften, Duncker & Humblot.
2002. "Shocks and Monetary Integration Efforts. An Empirical Assessment of Slovakia." In Pro-
ceedings from the International Conference on the Anniversary of the 115th Birthday of Robert
Schuman, Bratislava, December 4�5, 2001. Bratislava: Ekonom Publishing House.
2002. "The State of Economics in Slovakia." In Three Social Science Disciplines in Central and
Eastern Europe: Handbook on Economics Political Science and Sociology (1989�2001), eds. M.
Kaase and V. Sparschuh, 168�87. Budapest: Social Science Information Centre and Collegium.
Gabor Kezdi
2004 (with J. Bound, J. Groen, and S. Turner). "Trade in University Training: Cross-State Varia-
tion in the Production and Use of College-Educated Labor. . ." Journal of Econometrics 121
(1�2): 143�73.
2002 (with J. Hahn and G. Solon). "Jackknife Minimum Distance Estimation." Economics Letters
76 (1): 35�45.
Laszlo Matyas
2004 (ed. with P. Sevestre). The Econometrics of Panel Data. Boston/Dordrecht/London: Kluwer
Academic Publishers, Third Edition.
2004 (with M. Harris). "A Comparative Analysis of Different IV and GMM Estimators of Dynamic
Panel Data Models." International Statistical Review 72 (3): 397�408.
2004 (with M. Gillman and M. Harris). "Inflation and Growth: Explaining a Negative Effect."
Empirical Economics 29 [[issue number?]]: 149�67.
2002 (with M. Harria and L. Konya). "Modelling the Impact of Environmental Regulation on
Bilateral Trade Flows: OECD 1990�1996." The World Economy 25: 387�405.
Ugo Pagano
2004. "Legal Positions and Institutional Complementarities." In Legal Orderings and Economic
Institutions, eds. F. Cafaggi, A. Nicita, and U. Pagano. London and New York: Routledge.
2004 (with M. A. Rossi). "Incomplete Contracts, Intellectual Property and Institutional Comple-
mentarities." European Journal of Law and Economics 18 (1): 55�76.
2003. L'Economia delle Istituzioni e le Economie della Scienza Economica. Economia Politica,
January.
2003. "Nationalism, Development and Integration: The Political Economy of Ernest Gellner."
Cambridge Journal of Economics 27: 623�46.
2003. "Posiciones legales y complementariedades Istitucionales." Revista de Economia Institu-
cional 5 (9): 17�54.
2003. "Mercato, Confronto di sistemi capitalistici." Enciclopedia del Novecento Italiana Treccani.
2003 (with S. Trento). "Continuity and Change in Italian Corporate Governance: The Institu-
tional Stability of One Variety of Capitalism." In The Italian Economy at the Dawn of the XXI
Century, eds. M. Di Matteo and P. Piacentini, 177�211. Ashgate: Aldershot.
2002 (with M. D'Antoni). "National Culture and Social Protection as Alternative Insurance
Devices." Dept. of Economics Working Paper No. 296, University of Siena, Siena, Italy.
DEVELOPING GRADUATE ECONOMICS EDUCATION FROM SCRATCH 297
Jacek Rostowski
2005 (ed. with M. Dabrowski). The Eastern Enlargement of the Eurozone, Boston: Kluwer Acade-
mic Publishers.
2005. "How to Reform the Stability and Growth Pact." In The Eastern Enlargement of the Euro-
zone, eds. M. Dabrowski and J. Rostowski, 185�98. Boston: Kluwer Academic Publishers.
2004 (with R. Ene). "Assessing Dollarization: an Application to Latin America and Central
Europe." In Beyond Transition: Development Perspectives and Dilemmas, eds. M. Dabrowski, J.
Neneman, and B. Slay. Aldershot, Hampshire: Ashgate.
2004. "Why Unilateral Euroization Makes Sense for (Some) Applicant Countries." In Beyond Tran-
sition: Development Perspectives and Dilemmas, eds. M. Dabrowski, J. Neneman, and B. Slay.
Aldershot, Hampshire: Ashgate.
2003. "When should the Central Europeans join EMU?" International Affairs, Royal Institute for
International Affairs, 79 (5): 993�1008.
2003. "Old Fashioned Solutions for Russia's Modernization." In Modernizatsiia ekonomiki Rossii,
itogi i perspektivy, ed. Yevgenii Yasin. Moscoe: Gosudarstvenny Universitet, Vysha Shkola
Ekonomiki.
2002 (with A. Bratkowski). "The EU Attitude to Unilateral Euroization: Misunderstandings, Real
Concerns and Ill�Designed Admission Criteria." Economics of Transition, 10 (2): 445�68.
2002. "The Eastern Enlargement of the EU and the Case for Unilateral Euroization." In Financial
Policies in Emerging Markets, eds. M. Blejer and M. Skreb. Cambridge MA: MIT Press.
2002 (with A. Bratkowski). "Unilateral Adoption of the Euro by EU Applicant Countries: The
Macroeconomic Aspects." In Transition and Growth in Post-Communist Countries: The Ten-year
Experience, ed. L. Orlowski. Camberly, Surrey: Edward Elgar.
Andras Simonovits
2004. "A Note on the Aging Populations and the Size of the Welfare State." NKFP (Hungarian
Research and Development Program), Budapest, Hungary.
2004. "Bevezet�s az optim�lis nyugd�j�szt�nz�s tervez�s�be." NKFP, Budapest, Hungary.
2004. "Designing Optimal Bilinear Rules with Flexible Retirement and Redistribution." NKFP,
Budapest, Hungary.
Almos Telegdy
2005 (with J. S. Earle and C. Kucsera). "Ownership Concentration and Corporate Performance on
the Budapest Stock Exchange: Do Too Many Cooks Spoil the Goulash?" Corporate Governance 13
(2): 254�64.
2003 (with G. Hunya). "Hungarian-Romanian Cross-Border Economic Cooperation." R�gion et
D�veloppment 18: 13�31.
2002 (with J. S. Earle). "Privatization Methods and Productivity Effects in Romanian Industry."
Journal of Comparative Economics 30 (4): 657�82.
2002 (with J. S. Earle, V. Kaznovsky, and C. Kucsera). "Corporate Control of Listed Firms: The
Bucharest Stock Exchange." Eastern European Economics 40 (3): 6�27.
298 J O H N S. E A R L E
Annex 3
Budapest Economics Seminar Series (BESS)
Speakers during Academic Year 2004�5
September 15, Gary S. Becker, University of Chicago and Hoover Institution: "The Quantity and
Quality of Life and the Evolution of World Inequality"
September 27, Michael Artis, European University Institute: "The Transmission Mechanism in a
changing world?"
September 29, Christopher Waller, University of Notre Dame: "Money, Credit and Banking"
October 15, Andras Simonovits, CEU: "Designing Neutral versus Redistributive Mechanisms"
November 5, Gianmarco Ottaviano, University of Bologna: "Testing the Home Market Effect in A
Multi-Country World"
November 12, Zolt�n Jakab, CEU: "Endogenous Exchange Rate Pass-Through with Imported
Intermediates"
November 26, Steven Plaut, University of Haifa: "The Demand for "Gatedness'"
December 3, Miklos Koren, Harvard University: "Technological Diversification"
December 13, Elias Khalil, Konrad Lorenz Institute for Evolution and Cognition Research, Aus-
tria: "The Political Nature of the Firm"
December 20, Eva Nagypal, Northwestern University: "Amplification of Productivity Shocks: Why
Vacancies Don't Like to Hire the Unemployed?"
January 21, Bartosz Mackowiak, Humboldt University: "Optimal Sticky Prices Under Rational
Inattention"
January 24, Peter Grajzl, University of Maryland: "Allocating Law-Making Powers: Self-Regulation
versus government Regulation"
January 25, Vladimir Hlasny, Michigan State University: "The Impact of State Restructuring and
Deregulation on Gas Rates"
January 26, Shlomo Weber, CORE, Universite Catholique de Louvain: "Language Disenfranchise-
ment in Multilingual Societies: The Case of the European Union"
January 27, Andrew Sfekas, Cornell University: "Physician Learning and Patient Outcomes: An
Empirical Study of Cardiac Surgery in Maryland and New Jersey"
January 28, Andri Chassambouli, University of Maryland: "Job Competition and Search External-
ities over the Cycle: Implications for Worker Reallocation and Unemployment Rates Across Skill
Groups"
February 11, Orsolya Lelkes, European Centre for Social Welfare Policy and Research, Vienna:
"Knowing What Is Good for You: Empirical Analysis of Personal Preferences and the "Objective
Good"
February 18, Roman Sustek, Carnegie Mellon University: "Plant Level Nonconvexities and the
Transmission of Monetary Policy"
February 25, Roderick McCrorie, University of Essex: "Identification and Estimation of Exchange
Rate Models with Unobservable Fundamentals"
March 3, Juergen Maurer, European University Institute: "Do the Joneses Really Matter? Peer
Group versus Correlated Effects in Intertemporal Consumption Choice"
March 4, Simon Loertscher, University of Bern: "Market Making Oligopoly"
March 7, Valeriu Omer, University of Minnesota: "Wage Growth, Search and Experience: Theory
and Evidence"
DEVELOPING GRADUATE ECONOMICS EDUCATION FROM SCRATCH 299
March 8, Tokhir Mirzoev, Ohio State University: "Limited Commitment, Inaction and Optimal
Monetary Policy"
March 10, Alexis Anagnostopoulos, London Business School: "Consumption and Debt Dynamics
with (Rarely Binding) Borrowing Constraints"
March 11, Alena Bicakova, Johns Hopkins University: "Unemployment Versus Inactivity: An
Analysis of the Earnings and Labor Force Status of Prime Age Men in France, the United King-
dom and the U. S. at the Turn of the Century"
March 18, Jean Imbs, London Business School: "Globalization, Competition and the Decline in
Inflation"
March 25, Volodymyr Bilotkach University of Arizona and EERC, Kiev: "A Tax Evasion-Bribery
Game: Experimental Evidence from Ukraine"
April 29, Valerie Lechene, University of Oxford: "On the Identification of the Effect of Smoking
on Mortality"
May 6, Lorenz Goette, University of Zurich: "Do Workers Work More When Wages Are High?"
May 13, Franck Portier, Toulouse [[should this be Toulouse University?]]: "Stock Prices, News
and Economic Fluctuations"
May 20, , CEU: "Nonrecoverable Wages, Learning, and Unemployment Duration of Displaced
Workers"
May 27, Maros Servatka, University of Arizona: "Carrot or Stick? An Experimental Study of Rep-
utation Effects in Dictator Games"
June 3, Miklos Koren, Harvard University: "Does Trade Improve Productivity? Evidence from Hun-
garian Firm- and Product-Level Data"
CERGE-EI
TheAmerican-Style PhD Program in Economics for
Transition Economies
Jan Svejnar
ASTHE FORMER SOVIET BLOC ECONOMIES STARTED SHOWING STRAINS INTHE 1980S,
I realized that there would be a great need in these countries for Western-trained
economists who could perform analytical research and formulate economic policy
in the postcommunist era.1 During a 1988 international conference inVienna, I had
an opportunity to discuss these issues with Josef Zieleniec, who was then a senior
researcher at the Institute of Economics of the Czechoslovak Academy of Sciences.
Josef Zieleniec was familiar with Western economic theory and shared my convic-
tion that there would be a great need for American-style PhD economists if and
when the centrally planned system collapsed.
When the collapse occurred at the end of 1989, Josef Zieleniec and I set out to
establish an American-style PhD program that would educate the next generation of
economic leaders for the former Soviet bloc countries,Yugoslavia, and Albania.To
establish an American-style program was a natural goal since at the PhD level Amer-
ican education had long dominated traditional programs in Europe and elsewhere.
Moreover, the one Western European economics institution that we both admired
for its excellence--the Center for Operations Research and Econometrics (CORE)
in Belgium--operated as an American-style economics department. CORE was
established and headed by an American-educated Belgian economist, Jacques Dreze,
who made it succeed largely because of its openness,use of English as a working lan-
guage and adherence to the standards of top U.S.institutions in terms of publications
of its faculty. I spent a formative year early in my academic career at CORE and
believed that a similar program could be established for Central and East Europe.
Josef Zieleniec and I exerted considerable effort on both continents to launch a
quality PhD program. We considered the options of launching the program in
Budapest,Prague,orWarsaw and finally settled on Prague.We were joined by Radim
Palous, the first postcommunist rector of Charles University, in establishing the pro-
gram at Charles University--the oldest and arguably the most renowned university
in Central Europe. From the very start, we were joined in this effort by Richard
301
302 JA N S V E J N A R
Quandt,a former professor of mine at Princeton University,who in the 1990s served
as a senior adviser to the AndrewW. Mellon Foundation in NewYork. Finally, Kevin
Sontheimer, the chairman of the Economics Department at the University of Pitts-
burgh, where I was then a professor, joined the team.
With a provisional home at Charles University, financial support from the Mel-
lon Foundation, and institutional support from the Economics Department at the
University of Pittsburgh, the team started in 1990 the arduous journey toward
launching the program.The result of the effort was the launching of the Center for
Economic Research and Graduate Education at Charles University in 1991, and of
the Economics Institute of the Czechoslovak Academy of Sciences, its sister institu-
tion, in 1992.
The Center for Economic Research and Graduate
Education
The Center for Economic Research and Graduate Education (CERGE) was
founded as an American-style PhD program and research center of the Faculty of
Social Sciences at Charles University in Prague on March 1, 1991. CERGE was
established with the technical assistance of the Department of Economics at the
University of Pittsburgh and financial assistance from the U.S. Agency for Interna-
tional Development (USAID), the AndrewW. Mellon Foundation, the Pew Charita-
ble Trusts, the University of Pittsburgh, and other institutions. In 1994, CERGE
officially became an autonomous center of Charles University, reporting to the rec-
tor and operating through the Faculty of Social Sciences of Charles University.
Missions
CERGE was founded with four interrelated missions.The first mission was to train
future public officials, university and college faculty, and researchers from the former
Soviet bloc countries in the theory, methods, and applications of modern economic
analysis.The second mission was to stimulate and support academic and policy-
oriented economic research.The third mission was to disseminate research and policy
information to a wider group of professionals (government officials, enterprise man-
agers, and economists from other national and international institutions) through
seminars,symposia,conferences,working papers,and publications.The fourth mission
was to transfer the modern Western standard of scientific work into the Czech and
Slovak environment and thus provide an example for the transformation of other aca-
demic institutions in the Czech and Slovak Republics and throughout the former
Soviet bloc.
Organizational Structure
Since its founding, the academic governance and supervision of CERGE has been
carried out by an international Executive and Supervisory Committee (ESC), oper-
C E R G E - E I : T H E A M E R I CA N - S T Y L E P H D P RO G R A M 303
ating under special guidelines agreed upon by Charles University, the University of
Pittsburgh, the Andrew W. Mellon Foundation, and the Pew Charitable Trusts. Josef
Zieleniec was a member of the ESC as well as the first director of CERGE.I assumed
the position of chairman of the ESC.The committee underwent several personnel
changes, bringing in top European economists as well as representatives of Charles
University and the Academy of Sciences of the Czech Republic. As may be seen
from table 1, as of April 2005, the committee was composed of external members
(Professor Philippe Aghion, Professor Richard Blundell, Professor Henry Farber,
Professor Randall Filer,Professor Roger Gordon,Miriam Klipper,Esq.,Professor Jan
Kmenta, Dr. Petr Nejedly, Professor Richard Quandt, Professor Gerard Roland, Pro-
fessor Avner Shaked, Professor Stanislav Stech, Professor Josef Stiglitz, Professor Jan
Svejnar, Professor MichelleWhite, and Professor Josef Zieleniec) and internal faculty
members who have received tenure (Jan Hanousek, Byeongju Jeong, Stepan Jurajda,
Lubomir Lizal, and Kresimir Zigic).
TABLE 1
Executive and Supervisory Committee of CERGE-EI
April 2005
Name Affiliation
Prof. Philippe Aghion Harvard University
Prof. Orley Ashenfelter Princeton University
Prof. Richard Blundell University College London
Prof. Henry S. Farber Princeton University
Prof. Randall K. Filer City University of New York
Prof. Roger Gordon University of California, San Diego
Prof. Jan Hanousek CERGE-EI
Prof. Byeongju Jeong CERGE-EI
Prof. Stepan Jurajda CERGE-EI
Prof. Lubomir Lizal CERGE-EI
Miriam Klipper, Esq. District Attorney's Office, NY
Prof. Jan Kmenta Emeritus University of Michigan
Prof. Petr Nejedl�y Academy of Sciences of the Czech Republic
on behalf of the Chair of the ASCR
Prof. Richard E. Quandt Emeritus Princeton University
Prof. Gerard Roland University of California, Berkeley
Prof. Avner Shaked University of Bonn
Prof. Stanislav Stech Charles University on behalf of the Rector,
Charles University
Prof. Joseph Stiglitz Columbia University
Prof. Jan Svejnar University of Michigan
Prof. Michelle White University of California, San Diego
Prof. Josef Zieleniec, Member of the European Parliament
Prof. Kresimir Zigic CERGE-EI
304 JA N S V E J N A R
I have served as the chairman of the Executive and Supervisory Committee
throughout the 1991�2005 period, during which the committee oversaw and eval-
uated CERGE's and later CERGE-EI's activities on an ongoing basis, set the direc-
tion in teaching and research, assisted CERGE--and later CERGE-EI�with
fund-raising, and selected all faculty and researchers.
In 1992, Josef Zieleniec became the minister of foreign affairs and Docent
Michael Mejstrik served as acting director of CERGE in 1992 and 1993. He was
succeeded by Professor Karel Kansky, who served as CERGE director in 1993 and
1994. During the 1994�8 period, Docent Frantisek Turnovec served as the director
of CERGE, followed by Docent Jan Hanousek in 1998�2003 and Lubomir Lizal
from 2003 to the present. Following the tradition established at the launching of
CERGE, directors of CERGE are also ex officio members of the ESC.
Economics Institute (EI)
From the start of its operations, CERGE was hindered in its development by the
scarcity of local faculty who could be rigorously retrained and assume teaching
responsibilities, severe space constraints and uncertainties in the building allocated to
CERGE, and the budgetary restrictions facing Charles University. From this envi-
ronment emerged the idea of integrating CERGE's activities with those of the newly
formed Economics Institute (EI) of the Czechoslovak Academy of Sciences in order
to create a powerful, self-sustaining entity--CERGE-EI.
In the spring of 1992, the Academy reviewed its own economic research, carried
out a background study of CERGE, and decided to reorganize its economics pro-
gram along the lines of CERGE.The Academy abolished its three institutes dealing
with economics and created a new Economics Institute (EI) that shared CERGE's
research and public service missions and whose activities would be gradually inte-
grated with those of CERGE to form CERGE-EI. In order to carry out this reori-
entation, the Academy appointed me as the first director of EI and appointed the
remaining members of CERGE's ESC as the international members of the Scientific
Council of EI.The Academy also provided a budget for EI and permitted CERGE-
EI to be located in the Academy building that housed the old Institute of Econom-
ics.The ESC consulted with the representatives of the principal sponsor institutions
and approved the de facto integration of CERGE with EI. From this point on the
ESC has set and maintained the same academic standard for both CERGE and EI.
The integration of CERGE and EI activities has been intentionally quite all-
encompassing, reflecting the fact that either institution alone would be too small to
have a chance of becoming a world-class institution of research and PhD education.
The two institutions have therefore been designed to have the same goals and share
the same building, library, and computer facilities. Moreover, virtually all
faculty/researchers and staff members have joint appointments and are subject to the
same criteria for hiring, evaluation, and extension of contracts.2 These employees
also receive substantial salary supplements so as to attract quality individuals and
reduce turnover.
C E R G E - E I : T H E A M E R I CA N - S T Y L E P H D P RO G R A M 305
Since the universities and academies of sciences were artificially kept apart in the
Soviet-type system,the CERGE-EI initiative has also constituted the pioneering project
of integrating the corresponding units of a university and an academy of sciences. Inso-
far as university-academy relations generally remain delicate throughout Central and
Eastern Europe,CERGE-EI represents a significant test case of how these barriers could
be eliminated in the Czech Republic and in the postcommunist countries in general.
Achievements of CERGE-EI
By adhering quite strictly to the U.S.-style PhD model with its major emphasis on
courses,examinations,and research,CERGE-EI has achieved considerable success in
fulfilling its principal missions.Each year,50 to 70 carefully selected students from all
over the former Soviet bloc enroll in a summer preparatory semester. Most of the
incoming students have a strong mathematics or engineering background, but in
general they know little economics. During the summer term, they are therefore
taught primarily intermediate micro- and macroeconomics.At the end of the sum-
mer term, the 25 to 40 best students are admitted into the CERGE PhD program.
During the first year of the program, they take U.S.-style PhD courses in micro- and
macroeconomic theory, statistics, and econometrics.At the end of the first year, the
students have to pass general (comprehensive) examinations in these fields. In the
second year of studies, the students select three areas of specialization and take two-
semester long (U.S.-style) courses in each of them.When they pass general (compre-
hensive) examinations in two of these fields, they receive an MA degree and are
admitted to the PhD thesis writing stage.
As the students launch their PhD thesis research, most of them become junior
researchers in EI.They are hence integrated into the CERGE-EI structure not only
by virtue of having been taught by faculty who have joint appointments in the two
institutions, but also because they produce their first substantial piece of academic
research under the heading of both CERGE and EI.
In view of the strict adherence to the U.S.-style program, CERGE-EI has suc-
ceeded in enrolling top students from throughout Central and Eastern Europe and the
Commonwealth of Independent States (CIS), bringing in renowned visiting faculty
from around the world, and retraining some of the existing economists who have
started co-teaching and gradually fully teaching the demanding PhD courses.As may
be seen from table 2,between 1991 and 2004 CERGE admitted 399 graduate students
into its PhD program. Of these, 96 have been Czech nationals, 66 have been from the
Slovak Republic,50 from Russia,40 from Romania,38 from Ukraine,and the rest are
from Albania, the formerYugoslav Republic of Macedonia, and the rest of the former
Soviet bloc.Women constitute more than 30 percent of the CERGE student body.
CERGE-EI produces 15�30 MA graduates and 5�15 PhDs each year.The first doc-
toral thesis was defended at CERGE in 1995; 58 had been defended by 2005.The
demand for the graduating students has been enormous. As may be seen from table 3,the
students have taken on exciting jobs in the government,the private sector,and academe.
(Text continues on page 321.)
306
TABLE 2
CERGE-EI Student Enrollment by Country
Total
1991�
Country 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2004
Albania 3 2 1 1 1 1 1 10
Argentina 1 1
Armenia 4 4 3 1 1 1 1 4 19
Azerbaijan 1 1
Belarus 2 3 1 4 1 1 12
Bulgaria 1 1 1 1 1 2 5 1 3 1 17
China 1 1
Croatia 1 1 2
Czech Republic 5 9 11 11 3 6 5 6 5 9 6 7 6 7 96
Estonia 1 1 1 1 4
Georgia 1 1 1 1 1 5
Hungary 1 1
India 1 1
Iraq 2 2
Italy 1 1 2
Japan 1 1
Kazakhstan 1 4 3 1 9
Kyrgyz Republic 1 1 1 1 4
Lithuania 1 1 2
Macedonia, FYR 1 1
Moldova 1 1 1 3
Netherland 1 1
Poland 1 1 1 1 1 5
Romania 1 1 6 6 4 6 5 4 3 1 2 1 40
Russian Federation 5 1 3 4 2 2 2 8 4 10 4 3 2 50
Slovak Republic 3 4 1 4 3 3 5 1 4 9 10 11 8 66
Tajikistan 1 1 2
Turkey 1 1
Ukraine 2 1 1 1 2 1 4 3 7 3 5 3 5 38
United States 1 1
Uzbekistan 1 1
Total 18 23 23 32 23 20 20 24 23 39 39 42 35 38 399
Source: CERGE-EI.
307
TABLE 3
308
Selected CERGE-EI Student Placements
April 2005
Name Affiliation
Jan Babetskii (Russia) Economic Analyst, International Economic Division, Czech National Bank
Ashot Baghdasarian (Armenia) 46 Economist, COWI, a.s.
Pavlo Blavatskyy (Ukraine) 56 Assistant Professor, Institute for Empirical Research in Economics, University of Zurich
Elena Bogacheva (Russia) 15 Strategic Risk Management Analyst, Altria Group, Inc.
Michal Bresk�y (Czech Republic)25 Junior Researcher, CERGE-EI
Nina Budina (Bulgaria) Economist, Europe & Central Asia Region, World Bank
Step�n C�belka (Czech Republic)
36 Analyst, Strategy and Analysis Section, Cesk� Pojistovna
Martin Cih�k (Czech Republic) 39 Research Economist, EU2 Department, IMF
Martin Cincibuch (Czech Republic) 49 Head, Research Dept., Czech National Bank
Pavel C�zek (Czech Republic)40 Assistant Professor, Tilburg University
Constantin Colonescu (Romania) 16 Assistant Professor of Economics, American University in Bulgaria; formerly, Research Director, EERC, Moscow
Jacek Cukrowski (Poland) 1 Millennium Development Goals Advisor, Central and Eastern Europe & the CIS, UN Development Program,
Bratislava
Aurelijus Dabusinskas (Lithuania)51 Senior Economist, Research Department, National Bank of Estonia
Petr Duczynski (Czech Republic) 14 Assistant Professor of Economics, University of Hradec Kralove, Faculty of Informatics & Management
Irena Dushi (Albania) 8 Research Analyst, U.S. Social Security Administration
Zdenek Dvorn�y (Czech Republic) 35 Czech National Bank, Prague
Michaela Erbenov� (Czech Republic) 5 Vice-Governor, Chief Executive Director, Czech National Bank; formerly, Economic Advisor to the Prime Minister
of the Czech Republic
Kamil Galusc�k (Czech Republic) 38 Czech National Bank, Real Economy Division, Prague
Dana H�jkov� (Slovakia) Young Professionals Program, OECD
Martin Hlusek (Czech Republic) 6 Emerging Market Currency Strategist, Standard Bank, London
Jan Hosek (Czech Republic) Research Department, Czech National Bank
Delia Ionascu (Romania) 54 Assistant Professor, Department of Economics, Copenhagen Business School
Karel Janda (Czech Republic) 3 Assistant Professor, Department of Microeconomics & Mathematical Methods, Charles U.; and Assistant
Professor, Department of Banking and Insurance, Faculty of Finance, University of Economics, Prague
Martin Jarol�m (Czech Republic) 29 Emerging Market Currency Strategist, Standard Bank, London
Tom�s Jel�nek (Czech Republic) Head, Prague Jewish Community; formerly, Economic Advisor, President of the Czech Republic
Narcisa Kadlc�kov�-Virlan (Romania) 47 Unknown
Tom�s Kadlec (Czech Republic) 44 Consultant, McKinsey & Co., Prague
Ella K�llai (Romania)23 Director, Economic Research, Marketing and Public Relations, Alpha Bank, Romania
Martin K�lovec (Slovakia) 41 Boston Consulting Group, Prague
Ivan Kompan (Ukraine) Director, Deloitte Touche Tohmatsu, Ukraine
Nevila Konica (Albania) 13 Economic Forecaster, Global Insight, London
Hana Krejc� (Czech Republic) 43 Citibank, a.s., Prague
Libor Krkoska (Czech Republic) 7 Principal Economist, Office of the Chief Economist, EBRD, London
Michael Kunin (Belarus) 53 Researcher, Max Planck Institute, Germany (pending Czech visa)
Radek Lastovicka (Czech Republic) Fund Manager, EU/PHARE Risk Capital Fund
Kristyna Lenkova (Bulgaria) 22 Senior Segment Manager, Medium and Large Enterprises, Komercn� banka, Prague
Ren� Levinsk�y (Czech Republic)21 Research Associate, Institut fur Verkehreswissenschaft und Regionalpolitik, Albert-Ludwigs-Universitat, Freiberg
Lubom�r L�zal (Czech Republic) 10 Director and Assistant Professor, CERGE-EI
Martina Lubyov� (Slovakia) 37 Senior Employment Specialist, EE & CA, International Labor Organization, Moscow
Elena Mielcov� (Slovakia) 42 Assistant Professor, Silesian University
Elena Mikulcov� (Slovakia) 31 Credit Administrator, Citibank, a.s., Prague
Daniel M�nich (Czech Republic) 9 Assistant Professor and Director of Development & PR, CERGE-EI
Daniel Narwa (Czech Republic) 18 Project Manager, Dept. of Strategy and Organization, Prague
Libor Nemecek (Czech Republic) 11 Assistant Vice President, Citibank, Prague
Narine Nersesian (Armenia) Tax Policy Advisor, Governments of Armenia and Egypt, BearingPoint International
Martina Pechov� (Czech Republic) Consumer Banking, Citibank, a.s., Prague
Inna Piven-C�belkov� (Ukraine) 28 Assistant Professor, Faculty of Humanities; Head, Department of Social Sciences, Charles University
Jan Planovsky (Slovakia) 28 Quality Control Manager, Kimberly Clark, Slovakia
Jiri Podpiera (Czech Republic)57 Research Department, Czech National Bank
309 Richard Podpiera (Czech Republic) 27 Economist, Monetary & Financial Systems, IMF, Washington, DC
(Table continues on the following page.)
TABLE 3
310 Selected CERGE-EI Student Placements (continued)
April 2005
Name Affiliation
Jana Radlov� (Slovakia) Social Policy Institute, Social Affairs and Family, Slovak Ministry of Labor
Ondrej Schneider (Czech Republic) 12 Assistant Professor, Institute of Economic Studies, Charles University; formerly, Chief Economist, Ministry of
Finance, Czech Republic
Dmitri Shemitilo (Russia) 4 Economist, Emerging Markets Strategy, Commerzbank Securities, London
Peter Sil�rsky (Slovakia) 34 Economic Consultant, Young Professionals Program, World Bank, Washington, DC
Vit Sorm (Czech Republic)
32 Chief Economist, Czech Post Office
Karel Souken�k (Czech Republic) 26 Consultant, McKinsey & Co., Prague
Emil Stavrev (Bulgaria) 19 Economist, EU2, IMF, Washington, DC
Ivana Studen�-Moravcikova (Slovakia) 48 Researcher, Slovak Academy of Sciences
Oleksandr Stupnytskyy (Ukraine) Research Analyst, Czech Ministry of Labor
Anita Ta�i (Albania) 24 Principal Economist, Office of the Chief Economist, EBRD, London
Andrey Timofeev (Czech Republic) 58 Research Associate, International Studies Program, Andrew Young School of Policy Studies, Georgia State
University, Atlanta, GA
Margit T�th (Hungary) 33 Senior Analyst, Research Department, Hungarian National Bank
George Vachadze (Georgia) 17 National Economic Research Associates, New Jersey
Juraj Valachy (Slovakia) 50 State Advisor, Financial Policy Institute of the Ministry of Finance of the Slovak Republic
David V�vra (Czech Republic) 45 Director, Division of Macroeconomic Forecasts, Czech National Bank
Galyna Vereshchagina (Ukraine) 55 Assistant Professor, Department of Economics, University of Iowa
Ondrej Vychodil (Czech Republic) Assistant Professor, Department of Institutional Economics, Charles University, Prague
Bruno Wertlen (Slovakia) 53 unknown
Kamil Yagizee (Czech Republic) 20 unknown
Constantin Zaman (Romania) Researcher, CASE, Warsaw; Senior Social Expert, WB Mission to Romania; Director, International Economic
Advisory Group, Moldova
Kresimir Zigic (Croatia)
2 Tenured Assistant Professor, CERGE-EI
Source:
Note: Superscript indicates the number of CERGE-EI PhDs.
C E R G E - E I : T H E A M E R I CA N - S T Y L E P H D P RO G R A M 311
Apart from recruiting some of the best CERGE-EI students as its own faculty
and researchers, CERGE-EI has been actively recruiting new PhDs on the world
market. Since 1997, CERGE-EI has in most years interviewed more than 20 PhD
candidates at the job market held at the American Economic Association Meetings,
and in most years it hired new PhDs as assistant professors.As may be seen from table
4,there are currently 16 full-time local and 5 part-time visiting faculty members.The
latter faculty visit regularly fromWestern universities.CERGE-EI also has 5 English-
language faculty members who ensure that the English proficiency of students and
faculty remains at a high level.
In fulfilling its mission of disseminating economic knowledge and information to
a broad group of professionals and policy makers, CERGE and CERGE-EI have
organized hundreds of outreach courses and several hundred seminars for the aca-
demic, government, business, and nonprofit sectors of the economy. Since the mid
1990s, CERGE-EI has regularly run three academic seminars a week.These have
been attended by CERGE-EI faculty and students as well as researchers and policy
makers from other institutions.Thousands of individuals have participated in these
events. Since most participants are educators or key individuals in their organiza-
tions, the second-round educational effects of these events have been considerable.
In terms of research,CERGE-EI has produced hundreds of discussion and work-
ing papers and hundreds of other studies that have been presented at conferences.A
number of these papers have been published in prestigious economics journals and
edited volumes around the world, thus testifying to the high quality of pure and
applied research at CERGE-EI. Numerous studies have been used by officials in the
Czech government,as well as in international organizations--such as the EBRD,the
World Bank, the IMF, and the OECD--to form and evaluate policies. Of the several
dozens papers presented each year by scholars from Central and Eastern Europe at
the annual meeting of the European Economic Association, over one-half were by
faculty and junior researchers of CERGE-EI.
A large number of CERGE-EI researchers have served as economic advisors to
the president and prime minister, ministers of the economy and of trade and indus-
try. Others have been advisors to policy-making officials at the national bank, min-
istry of finance, and ministry of agriculture.
The achievements of CERGE (and, since 1992, CERGE-EI) have been recog-
nized by external evaluators. In 1992, the European Community's Secretariat of the
ACE Program designated CERGE as its only "Recognized Centre of Excellence in
PhD Studies in Economics" in Central and Eastern Europe. CERGE was again the
only institution to win the title in the subsequent open competition in 1994.In 1992
CERGE entered the competition for hosting the Annual Meetings of the European
Economics Association, and in 1993 the European Economics Association selected
CERGE-EI as the host of its 1995 Annual Meeting. In 1993 and 1994 CERGE-EI
was officially recognized as one of the few Centers of Excellence in Economics Edu-
cation in Central and Eastern Europe by USAID. In 2005 CERGE-EI hosted a
major macroeconomic conference and in September 2006 hosted the Annual Con-
ference of the European Association of Labour Economists.
312
TABLE 4
CERGE-EI Faculty 2004�05
Permanent local faculty
Economics Department
Faculty member Education Citzenship Courses
Andrew Austin, Assistant Professor PhD in Economics, University of Pennsylvania, 1991 United States Public Economics
Radim Boh�cek, Assistant Professor PhD in Economics, University of Chicago, 1999 Czech Republic Advanced Macroeconomics
Libor Dusek, Assistant Professor PhD in Economics, University of Chicago, 2003 Czech Republic Public Economics, Law, and Economics
Jan Hanousek, Associate Professor PhD in Statistics, Charles University, 1990 Czech Republic Econometrics, Financial Markets
Byeongju Jeong, Assistant Professor PhD in Economics, University of Minnesota, 1997 Korea Macroeconomic Theory
Step�n Jurajda, Assistant Professor
PhD in Economics, University of Pittsburgh, 1997 Czech Republic Econometrics
Peter Katuscak, Assistant Professor PhD in Economics, University of Michigan, 2004 Slovak Republic Public Economics, Microeconomic Theory
Michal Kejak, Assistant Professor PhD in Cybernetics, Czech Technical University, 1993 Czech Republic Monetary Macroeconomics
Evzen Kocenda, Associate Professor PhD in Economics, University of Houston, 1996 Czech Republic Econometrics
Lubom�r L�zal, Assistant Professor PhD in Economics, CERGE, 1998 Czech Republic Economics of Transition
Daniel M�nich, Assistant Professor PhD in Economics, CERGE, 1998 Czech Republic Labor Economics
Jos� de J. Noguera, Assistant Professor PhD in Economics, SUNY Buffalo, 1999 Venezuela, R. B. de Financial Markets, Monetary Economi
Andreas Ortmann, Assistant Professor PhD in Economics, Texas A&M, 1991 Germany Microeconomic Theory, Game Theory,
Experimental Economics
Sergey Slobodyan, Assistant Professor PhD in Economics, Washington Univ., St. Louis, 2000 Russia Macroeconomics
Petr Zemcik, Assistant Professor PhD in Economics, University of Pittsburgh, 1997 Czech Republic Financial Economics, Econometrics
Kresimir Zigic, Assistant Professor
PhD in Economics, CERGE, 1996 Croatia Microeconomics, Industrial Organization
English Department
Laura Mentz, Lecturer MA in Rhetoric and Linguistics, Catholic University, United States English, Academic Writing
Washington, DC, 1994
Robin-Eliece Mercury, Lecturer M.Ed. in Education in Second Languages, Canada English, Academic Writing
McGill University, 1995
Sarah Peck, Lecturer MA in Anthropology, Temple University, 1991 United States English, Academic Writing
Lawrence Smith, Lecturer MA in Teaching English as a Foreign Language, United Kingdom English, Academic Writing
University of Reading, U.K., 1995
Richard Stock, Lecturer MA in Literature and Theory, University of Illinois United States English, Academic Writing
at Urbana-Champaign, 1998
Part-Time Senior Faculty with long-term commitments to CERGE-EI
Ronald W. Anderson, Professor PhD in Economics, University of Michigan, 1976; United States Financial Markets
also at London School of Economics and
Universit� Catholique de Louvain, Belgium
Jan Kmenta, Professor PhD in Economics, Stanford University, 1964; United States Econometrics
also at University of Michigan
G�rard Roland, Professor PhD in Economics, Universit� Libre de Bruxelles, 1998; Belgium Economics of Transition
also at University of California, Berkeley
Avner Shaked, Professor PhD in Economics, Hebrew University, Jerusalem, 1972; Israel Industrial Organization
also at University of Bonn
Jan Svejnar, Professor PhD in Economics, Princeton University, 1974; United States Transition Economics
also Executive Director of William Davidson
Institute and Everett E. Berg Professor,
University of Michigan
Source: CERGE-EI.
313
314 JA N S V E J N A R
CERGE-EI thus constitutes an important regional institution and is increasingly
recognized as a leading economics institution in Europe. If the development of
CERGE-EI is successfully completed, the institution will educate a significant share
of the next generation of Central and Eastern European and CIS economists, who
will in turn be influential in the academic and policy decision making in their respec-
tive countries. Since CERGE-EI places great emphasis on academic excellence;
exposes the students to the Western academic environment; and operates on the
principles of openness, academic integrity, tolerance, and nondiscrimination, it is
beginning to have a major impact on the quality of economic thinking as well as on
the socio-political culture in these societies.The fact that many of the top academic,
government, and private sector economists will have common professional roots at
CERGE-EI will also be conducive to more cooperative and coordinated policy
efforts at the regional level in the future.
The Financing of CERGE-EI
As might be expected, an initiative such as CERGE-EI requires considerable
resources. Indeed, to provide funds for CERGE-EI's 2005 consolidated budget of
more than US$3.6 million requires a major effort on the part of all the involved indi-
viduals and institutions. Charles University contributes about US$855,000 to the
total budget through CERGE, and the Academy of Sciences about US$1,160,000
through EI.3 The rest comes from earned income, income from endowment, and
donations that are chanelled either through CERGE-EI or through its two founda-
tions.The Executive and Supervisory Committee has from the start placed great
emphasis on fund-raising as a precondition for establishing and maintaining high-
quality education and research.
One of the most important institutional features of this effort was the founding
of the CERGE (later CERGE-EI) Foundation in the United States in September
1993.The mission of the CERGE-EI Foundation has been to raise funds to be used
to improve the teaching of economics and methods of economic research in the
former Soviet bloc countries.The Foundation has a board of directors, president,
secretary, treasurer, and executive director.The members of the board of directors of
the CERGE-EI Foundation are Orley Ashenfelter, Ray Batla, Alan Brown, Louis
Camilieri, Randall Filer, Miriam Klipper, Richard Quandt (Chair), and Jan Svejnar.
Equally important has been the establishment of Nadace CERGE-EI, the Czech
counterpart to the CERGE-EI Foundation.The Nadace has as its board members
Miroslav Singer (Chair), Josef Kotrba, Martin Kratochvil,Tomas Prochazka, and
Dipak Rastogi. Nadace CERGE-EI has been instrumental in raising funds for
CERGE-EI in the Czech Republic.
The establishment of the CERGE-EI Foundation and Nadace CERGE-EI con-
stitutes a conscious effort to place CERGE-EI's fund-raising effort on a solid and
independent footing.
C E R G E - E I : T H E A M E R I CA N - S T Y L E P H D P RO G R A M 315
Principal Challenges facing CERGE-EI
The principal challenge facing CERGE-EI is to maintain and further develop aca-
demic excellence and financial strength.The two goals are interrelated,since the sub-
stantial flow of funds from external sponsors in the 1990s and early 2000s was
conditioned by the academic promise of CERGE-EI and the ability and willingness
of the Executive and Supervisory Committee to enforce quality standards and vouch
for the quality of CERGE-EI's operations. Similarly, the flow of external funds is
essential for continued buildup of the CERGE-EI faculty.
There have been numerous challenges to the mission of CERGE-EI.In the 1990s
the main challenge was to obtain local recognition that CERGE-EI needs to be run
by the ESC; at present the greatest challenge is financial. For several years, the two
foundations have not been able to secure significant new sources of funding and
existing sources have been gradually withering away. My greatest worry is that the
CERGE-EI initiative could falter if this trend were not to be reversed.The lack of
financing could lower the quality of research and teaching at CERGE-EI, resulting
in the departure of the leading economists from the ESC and a further withdrawal
of resources by foreign sponsors. CERGE-EI would then face the prospect of losing
the best students and faculty, gradually becoming a standard local institution. Since it
takes enormous effort,time,and resources to build a quality institution while the loss
of quality faculty and students can be a rapid process, this threat must not be
underestimated.
On the positive note, I trust that the CERGE-EI initiative will continue success-
fully.The ESC, the two foundations, and CERGE-EI management have proved that
they could overcome the withdrawal of the first wave of Western sponsors from
Central and Eastern Europe and ensure adequate flow of funds for CERGE-EI's
development in the 1990s and early 2000s. Hence, after the primary initial sponsor
of CERGE-EI, USAID, terminated its activities in the Czech Republic in 1996, the
Sarah Scaife Foundation finished its successful three-year involvement with
CERGE-EI in 1994, and two other key sponsors--the Andrew W. Mellon Founda-
tion and the Pew Charitable Trusts--started gradually to conclude their operations
in Central and Eastern Europe,many predicted that this would signal the downfall of
CERGE-EI. Yet the ESC and the CERGE-EI Foundation have successfully
obtained support for CERGE-EI from other sources. In particular, they secured
multiyear support from a number of corporate foundations, including Citicorp,
Philip Morris, Coca Cola, State Street, IBM, Monsanto, Chase Manhattan, Boeing,
and the Page and Otto Marx, Jr. Foundation. Moreover, the Ford Foundation
awarded a three-year grant to CERGE-EI.This successful fund-raising,coupled with
the promising development of Nadace CERGE-EI in the Czech Republic,were key
while I headed the foundation from 1993 to 2000.The ESC was instrumental in
securing major World Bank grants in the early 2000s, but the current challenge is
clearly to find new sources of external funding.
316 JA N S V E J N A R
Notes
1. In covering the period 1989-98, the paper draws on Svejnar (2000).
2. The exception are several policy-oriented, senior researchers who were hired in EI at
the time of its establishment and who operate under separate rules.
3. The Academy has also made a major contribution by providing the EI building in
downtown Prague that hosts CERGE-EI in the Czech Republic. Its efforts to raise funds in
Western Europe have so far been relatively unsuccessful, but the situation may be changing.
Reference
Svejnar, Jan. 2000. "Economics PhD Education in Central and Eastern Europe."
Comparative Economic Studies 42 (2): 37�50.
Comment onWilliam Lyakurwa,
John Earle,and Jan Svejnar
John P.Bonin
TO PROVIDE A BRIEF INTRODUCTIONTO MY PERSPECTIVE ONTHIS ISSUE,I HAVE BEEN
a teacher and scholar at Wesleyan University for 35 years and the editor of the Jour-
nal of Comparative Economics for the last 10 years.Wesleyan University is primarily an
undergraduate institution; the Economics Department places at the top of all non-
PhD-granting departments ranked by citations to publications by faculty members
in economics journals (Bodenhorn 2003). Hence, even without a graduate program,
our economics faculty produces considerable scholarly research.About every decade,
we consider scaling up and adding a graduate program in the department. However,
we always decide against this proposal because of our commitment to providing
strong education in economics to students at earlier stages of their careers. Nonethe-
less, our curricular concerns are similar to those discussed in the three papers of this
part of the conference.
Only about 5 to 10 percent of our majors continue on to do graduate work in
PhD programs in economics.These students tend to go to top programs in the
United States and become solid professional economists, for example, David Lipton.
At least 50 percent of our majors obtain a master's degree from a professional school
or a public policy program. Hence, we must design a curriculum to meet the needs
of these two distinct groups of students and also to serve the other undergraduate
students taking our classes.This challenge is similar to the resource allocation prob-
lem faced by a developing PhD program.As the editor of the flagship journal in the
field of comparative economics, I have been involved closely with the research of
young scholars from submission to publication.This experience has taught me the
critical importance of clarity of presentation and of proper structure in a submitted
manuscript. From this editorial perspective, I will comment on the scholarly goals
and activities of these three programs, namely, the African Economic Research Con-
sortium (AERC), the Central European University (CEU), and the Center for Eco-
nomic Research and Graduate Education (CERGE-EI).
317
318 J O H N P. B O N I N
I focus on potential trade-offs faced by these programs in three areas: curriculum,
research, and funding. First, regarding curricular choice, a tradeoff exists in allocating
resources and student time between issue-oriented field courses and skill-based
courses. If the objective is to develop human capital that will apply state-of-the-arts
tools and techniques to issues of interest, no trade-off exists at the level of basic skills.
All three programs stress the acquisition of basic research tools and techniques. Sim-
ilarly, at Wesleyan, we require three calculus-based core courses in theory and quan-
titative methods for an undergraduate student majoring in economics. However, we
face a trade-off between offering more-advanced skill-based courses and a full menu
of issue-oriented field courses for majors and nonmajors.To address this issue, we
teach electives at two tiers at Wesleyan.
A course in the first tier requires only the introductory course; these courses are
policy-oriented and institution-based. A field or advanced-skills course in the sec-
ond tier requires at least two of the core courses. In these courses, we bring journal
articles into the classroom and require a major research paper. Although the vast
majority of our students do not continue on to do graduate work in economics, we
are convinced that exposure to professional research in which the tools and tech-
niques are applied to policy issues is an integral part of every undergraduate major's
education.The analogy to the PhD curriculum indicates the primacy of advanced
theory and econometrics courses independent of the career aspirations of the stu-
dents. In my opinion, the ranking in either a graduate or an undergraduate curricu-
lum is lexicographic with policy-oriented and issue-driven courses following the
skill courses and using these tools.
The second potential trade-off involves the type of research--that is, basic versus
policy-oriented research--pursued by the faculty and students. If the objective is to
apply human capital to pressing economic problems in the region, this trade-off is
less clear. Recognizing the need for informed public policy making in developing-
and emerging-market economies, the best human capital should be allocated to ana-
lyzing policy issues. However, my experience in tutoring honors theses at Wesleyan
suggests the presence of complementarities between basic research and applied work.
Hence, the overarching goal should be to produce dissertations that use state-of-the-
art techniques applied to timely issues so that they are publishable in reputable aca-
demic journals, such as a leading field journal.
The third potential trade-off for both students and faculty arises from the tension
between work for hire and academic scholarship.The objective should be to secure
the student's required financial support with minimum sacrifice in academic quality.
In my own contract work, I find complementarities--but these arose only after my
scholarship had matured. Good policy papers must be based, at least implicitly, on
strong economic fundamentals.In addition,thinking about the policy implications of
one's research enriches one's academic scholarship. However, this cross-pollination
takes time. Hence, students should be involved in contract research only in partner-
ship with a faculty mentor who supervises the student's academic research. In this
way, the cost of the trade-off is reduced and the student's academic scholarship is not
affected as adversely.
C O M M E N T O N LYA K U RWA , E A R L E , A N D S V E J N A R 319
These three papers present three distinct models for developing a PhD program
in economics. First,William Layakurwa details the development of an overarching
network--AERC--to support graduate education at local universities in several
African countries. Second, John Earle discusses how a PhD program is being built
upon a successful existing MA program at CEU. Third,Jan Svejnar presents the story
of building an American-style PhD program from scratch at CERGE-EI. A further
distinction among these programs is drawn by characterizing the first two programs
as creating centers of excellence and the last activity as building capacity in existing
graduate programs. Although no one size fits all, I find some points of comparison
among the three programs by considering their successes and the remaining
challenges.
Taking the network model first,AERC has been successful in economizing scarce
resources by developing a common facility for teaching elective courses to students
who have completed the core courses at a local institution and by providing support
and resources for student and faculty research.The network approach does benefit
from a scale effect, but challenges remain. First, monitoring and maintaining com-
mon standards in core courses taught at various institutions is crucial. Second, open-
ness to the international academic community is important if the goal is to produce
human capital that applies state-of-the-art tools and techniques to problems and pol-
icy issues in Africa.A network may look only inward for its resources and its mission;
thus, it may become insular and self-centered.To preclude this outcome, faculty
should be encouraged to publish in leading field journals and students should be
exposed to leading international scholars who are invited to teach in the program for
short periods.
Regarding the centers of excellence,CERGE-EI exemplifies the preeminence of
skill courses beginning with its summer preparation and continuing through the
required first-year courses. In addition, CERGE-EI employs lecturers in English to
assist students with their writing.The resulting dissertations have generated publish-
able research in top international journals. Eight of CERGE-EI PhD recipients have
published in the Journal of Comparative Economics (JCE) and I have chosen several oth-
ers to referee for me based on their publications in other journals. Of the eight JCE
authors, only two are in academic positions, both at CERGE-EI.The remaining six
work at the Czech National Bank, the Czech Post Office, theWorld Bank, the Inter-
national Monetary Fund, the European Bank for Reconstruction and Development,
and the International Labour Organization. Importantly, the young academics tend
to remain in the region; the CERG-EI has three of its own on the faculty in addi-
tion to three other faculty members who received a PhD from a U.S.institution hav-
ing some relationship, formal or informal, with CERGE-EI.This program has been
successful in training young economists who publish scholarly research and hold
either academic jobs or positions in the public sector.
In its formative years, CERGE-EI benefited from an informal relationship first
with the University of Pittsburgh and later with the University of Michigan because
of the affiliations of Jan Svejnar.These arrangements allowed some students access to
the resources of a U.S. institution and exposed all students to repeated visits by U.S.
320 J O H N P. B O N I N
economists who stayed in Prague for substantial periods of time.The challenge for
CERGE-EI is to maintain productive long-term relationships with U.S. institutions
while it replaces visiting faculty with newly minted PhDs from the region. In addi-
tion, the quality of research produced by the faculty must continue to be high so as
to maintain CERGE-EI's reputation for scholarly excellence. Finally, continuing the
diversification of enrolled students, which is reported in table 2 of Svenjar's paper, is
desirable. In this way, CERGE-EI can play an important role in educating students
coming from the east and south of Prague who have had limited or no access to U.S.
graduate programs.
Although the focus of John Earle's paper is on the PhD program at CEU, I
emphasize that the MA program in economics was established first and existed for
nine years before the PhD program began in 2000. As Earle's paper reports, almost
half of the MA graduates from CEU continue to pursue their PhDs at top U.S. or
European universities. Prior to this conference, I had the opportunity to observe an
afternoon of student presentations of research proposals and completed PhD
research.One of the PhD students has already published a joint paper in the JCE and
has served as a referee for me several times. Presentations by both MA and PhD stu-
dents were interspersed throughout the afternoon sessions.I was especially impressed
by the lively interaction among the students and by their constructive comments;the
students were equal partners with faculty members in these exchanges. Moreover, I
found it difficult to distinguish the comments of MA students from those of the PhD
students.The relevant point is that CEU already has a successful MA program that
prepares talented students from throughout the region to obtain a PhD from a top
U.S. or European university.
Earle's paper presents the challenges facing the CEU department as it attempts to
develop an equally successful PhD program.Before turning to these challenges,I will
make an observation about the MA program.The program is extremely valuable; it
should maintain its own identity and mission. By bridging the educational gap in
economics in the region, the MA program allows talented and quantitatively able
students to gain admission to, and complete successfully, PhD programs in econom-
ics in leading U.S. universities. Providing this added value in the educational chain is
at least as important as developing the capacity to offer the last professional link. If
building the PhD program at CEU causes its existing MA program to morph into
an MA degree obtained on the way to a PhD by students enrolled in an American-
style doctoral program, the loss would be substantial. Maintaining the separate exis-
tence of its high-quality MA program while at the same time building a PhD
program is the main challenge facing CEU today.
From the list of challenges in Earle's paper, I focus on the supply of students and
the supply of faculty.With regard to students, requiring an MA degree for entry into
the PhD program and limiting financial support at CEU to a total of four years
makes it difficult for students from the MA program to continue for their PhD at
that university. In addition, the MA requirement may be a deterrent for potentially
strong young students from the region. In its initial years, the PhD program has
enrolled mostly Hungarian students. If the objective is to attract and retain talented
C O M M E N T O N LYA K U RWA , E A R L E , A N D S V E J N A R 321
students from throughout the region, some of whom already come to CEU for the
MA, this tension must be resolved. If it is not, the new PhD program may turn CEU
into an institution that draws from only a limited pool of potential students.
With regard to the supply of faculty, hiring and retaining first-class scholars
requires a contract that is competitive with offers from U.S. and European universi-
ties.As someone who has spent his entire career at an undergraduate institution,I am
fully aware of the importance of compensating differences. Budapest is a wonderful
city and CEU provides an exciting,vibrant academic environment in which to work.
Nonetheless, the lack of a formal tenure contract and the use of only quantifiable
measures of evaluation limit the ability of CEU to offer attractive job contracts and
to motivate the long-term commitment required from faculty members in supervis-
ing dissertations effectively. Restrictions that adversely affect a faculty member's
tenure horizon and that do not account properly for the time and scholarly effort
allocated to dissertation supervision are harmful to the health of any PhD program.
In the economics department at Wesleyan, we attract high-quality young scholars at
the entry level even though we are unable to meet their alternative financial offers
partly because of a generous sabbatical program.The challenge for CEU in attract-
ing and retaining first-class scholars and teachers is to find the appropriate mix of ele-
ments from the standard package offered by U.S. institutions with its particular
compensating differences.
From the experiences reported in these three papers, I draw several modest pro-
posals. First and foremost, building and sustaining a successful PhD program requires
finding and developing a niche in applied economics.The resources necessary to
mount a PhD program that would be ranked among the top 20 programs in the
world and would have universal strength throughout all areas of economics are sim-
ply not available.Hence,these programs should pursue their own comparative advan-
tage and focus on topics related to their local situations. For AERC, development
economics is the obvious candidate and the program already takes this perspective.
For CEU and CERGE-EI, comparative economics is a natural niche.As the editor
of the JCE,I can document that comparative economics is a growing field in the dis-
cipline. Since the 1997�98 academic year, submissions to the JCE have increased by
more than 50 percent, to 204 in the 2003�04 year; submissions totaled 207 for
2004�05 and will be over 230 for 2005�06. In addition, the total number of articles
published increased from 28 in 1996 to 44 in 2004, which is again more than a 50
percent increase. I published 40 articles in 2005, which amounted to an increase of 3
percent in pages published, and I will publish 42 articles in 2006. Growth in quantity
has not come at the expense of quality.According to the 2005 ranking by the Insti-
tute for Scientific Information, the JCE places in the top quarter of 175 economics
journals: ranked in 41st place based on a two-year impact factor. Moreover, the aver-
age acceptance rate at the JCE fell from 22.9 percent between 1996 and 1999 to 16.3
percent between 1999 and 2004.Clearly,comparative economics is a vibrant,healthy
field that provides a natural niche on which PhD programs in the region can focus.
Second,to teach students to produce publishable research,mentoring is necessary.
Writing tutors who correct grammar and syntax are useful but not sufficient. Learn-
322 J O H N P. B O N I N
ing the idiosyncratic structure of a journal article in economics and the useful tech-
niques for engaging the reader requires mentoring by accomplished scholars.My 10-
year experience with referees' reports at the JCE convinces me that presentation
matters.The author of a manuscript must state clearly the motivation and frame the
results convincingly in the literature--otherwise, the referee may not be able to
judge properly the quality of the work and its contribution to the literature.A ref-
eree's report that does not engage completely the argument in the manuscript is,
more often than not, attributable to poor presentation by the author of the manu-
script. Mentoring by experienced scholars to teach strategies and techniques to pre-
pare articles for publication is a crucial, but often neglected, aspect of a student's
education in economics.
Third, creative partnerships are important. Linking a PhD program with a
research institute is a useful way to allow young scholars to interact with researchers
who are publishing in applied economics.This approach has proven effective at l'U-
niversit� de Paris;research scholars are situated in faculties at several campuses so that
PhD students have daily access to these young productive researchers. Each of the
three programs has some relationship with at least one research institute. However,
more frequent interaction should be encouraged. In addition, one or two years of
preparatory work for doctoral students could be undertaken productively at other
institutions, perhaps at a U.S. undergraduate institution.Although we have no formal
graduate program, the economics department can confer an MA degree. Recently,
two students from Ukraine and Bulgaria--have earned MA degrees in economics at
Wesleyan.
Fourth, sustainability of a high-quality PhD program requires the flexibility to
develop new,alternative sources of financing and also the stability of committed long-
term nonmarket funding. Once the niche is established, outreach programs such as
modular doctorates, exchange programs with U.S. universities, and professional
degrees can be considered as sources of market income. However, sustainability
requires a long-term commitment of sufficient resources so nonmarket funding
sources must be patient and persistent.Any attempt to subject the entire financing of
a PhD program to market principles is likely to be as unsuccessful as applying short-
term market evaluation to a long-term infrastructure development program.Building
a successful PhD program is like building a dam: it takes time and the benefits are not
fully appropriable by private agents. In conclusion, higher education is a public good
and its rate of return, although difficult to measure precisely, is likely to be high in the
region for the foreseeable future (Fleisher, Sabirianova, and Wang 2005).
References
Bodenhorn, Howard. 2003."Economic Scholarship at Elite Liberal Arts Colleges:A Cita-
tions Analysis with Rankings." Journal of Economic Education 34 (4): 341�59.
Fleisher,Belton M.,Klara Sabirianova,and XiaojunWang.2005."Returns to Skills and the
Speed of Reforms: Evidence from Central and Eastern Europe, China, and Russia." Journal of
Comparative Economics 33 (2): 351�70.
Comment onWilliam Lyakurwa,
John Earle,and Jan Svejnar
Mauricio C�rdenas
I HAVE BEEN GIVEN THE TASK OF DISCUSSING THE EXCELLENT PAPERS BY WILLIAM M.
Lyakurwa on the African Economic Research Consortium (AERC), John Earle on
the experience of the Central European University (CEU), and Jan Svejnar on the
Center for Economic Research and Graduate Education (CERGE) and the Eco-
nomics Institute of the Czechoslovak Academy of Sciences (EI).These papers are of
great interest to anyone thinking about the challenges of graduate education in eco-
nomics in developing and transition economies.
John Earle's paper on the experience of CEU is written with frankness and sin-
cerity, especially in relation to the challenges and problems that CEU is having with
its PhD program. Jan Svejnar's discussion on the experience of CERGE-EI is writ-
ten in the first person by someone who was actually leading this process. He reminds
me that academic initiatives do not happen in a vacuum;introducing a PhD program
in economics is, at the end of the day, more about leadership in institutional building
than anything else.And Bill Lyakurwa's paper on AERC is very illuminating about
what can be done to coordinate different countries that need a common solution.
The African experience is quite interesting in the sense of trying to solve a problem
for an entire region simultaneously, not just for a specific country.
What are the main lessons that I derive from reading these three papers? Latin
America has taken a long time developing PhD programs,much longer than we have
seen here in Central Europe.So the revealed preference in Latin America is that PhD
programs are not a top priority. I think that is what history tells us.And that means
that in Latin America the emphasis has been placed over the last three decades or so
on undergraduate education and master's programs.
There is,however,an active debate in LatinAmerica today on the need to develop
PhD programs.There are three main questions under consideration.First,why do we
need our own PhD programs? You find different answers to this question in the
papers in this book.The answer that you find in Lyakurwa's paper on Africa is a lit-
tle bit reminiscent of what Pinto and Sunkel (1966) argued 40 years ago.1 According
323
324 M AU R I C I O C � R D E N A S
to their view, the specific training that is available in the industrial countries is not
adequate for emerging countries.This inadequacy, in turn, is related to the tools and
the issues that are emphasized but that are not relevant for the concerns and prob-
lems outside the developed world. So, in that spirit, there is the need for more local
knowledge that is closer to the problems of the people--and this is particularly the
case for the problems of the countries of Africa.
There is another reason for having a PhD program. It could be that you have tal-
ented people,that they are good students at the undergraduate level,but they just can-
not find a PhD program in industrial countries for two reasons:financial considerations
can put the pursuit of a PhD progam out of reach, or the institutions where they have
gotten their undergraduate degrees do not have the recognition needed to get into a
PhD program elsewhere. It is therefore hard for these talented individuals to obtain
admission into a program.The solution to this problem is to have a local PhD program.
Once the justifications are in place,you have to think hard about the prerequisites
for a successful PhD program. Number one in my list is the existence of a critical
mass of well-trained undergraduates.This means that, based on standardized tests
such as the Graduate Record Examinations (GRE), you should be able to measure
the quality and quantity of potential PhD students; these potential students are a
decisive input into this project.
The other prerequisite is faculty. A successful PhD program depends on the exis-
tence of a group of well-trained professors.The necessary size of the group is a mat-
ter of debate. A top-quality economics department in a U.S. university will have
between 30 and 50 faculty members.This is proportional to the minimum number
of fields of specialization that a highly regarded PhD program should have. In the
context of emerging countries, the experience of CERGE-EI is illustrative.This
program has around 15 faculty members who are full-time professors and, hence,
who concentrate their professional activities at the university. You need to have fac-
ulty members who are interested in research, not in consulting.This is not always
easy to find in the developing world. As mentioned by John Earle, in the case of
CEU, Hungarian professors who have multiple affiliations have become a problem
since they do not spend all their time at the university.This fragmentation of their
time has a consequent negative effect on the quality of their work.
But a successful PhD program has other prerequisites that are, in many cases, less
difficult to get.A good library, or at least access to online publications--for example,
the scholarly journal archive JSTOR--is critical. Placement offices are also highly
relevant.
And, of course, the final prerequisite is the demand for the output that you are
producing. Is there a demand for PhDs? And who is exercising that demand? Is it the
government, the public sector, the academic institutions, the private sector? And is
that demand something that you can substitute with other types of graduate educa-
tion, such as specialized master's programs in different areas such as regulation, the
environment, natural resources?
C O M M E N T O N LYA K U RWA , E A R L E , A N D S V E J N A R 325
These questions need to be addressed before engaging in a PhD program. Finally,
and I will end with this, we have to keep in mind that the essence of a PhD program
is quality rather than quantity.The goal is not to maximize the number of PhDs or
the number of PhD departments,but to make sure that in developing countries there
is access to affordable doctoral training for individuals who have the intellectual abil-
ity and interest in pursuing a PhD. Above all, it is a matter of quality. Having a large
number of poorly trained PhD economists is not only costly, but also highly
ineffective.
Note
1. I mentioned Pinto and Sunkel's paper in my own presentation with Guillermo Perry
at this conference ("Capacity Building in Economics Education and Research:A Note on the
Experience of Latin America and the Caribbean").
Reference
Pinto, A., and O. Sunkel. 1966."Latin American Economists in the United States."
Economic Development and Cultural Change, October.
COMMENT
Developing PhD Programs
Ekaterina Stepanova
AS A RUSSIAN CITIZEN BROUGHT UP NOVOSIBIRSK IN SIBERIA AND NOW COMPLETING
my PhD at the University of Washington in the United States, this is a subject close
to my heart. During this short presentation I will reflect on my own experience as
an economics graduate student and on the factors that I consider important for suc-
cessfully developing PhD programs in economics in countries that are going through
the transition process, where graduate economics education is still on the stage of
early development. I also want to talk about the possibilities and obstacles of doing
research in a developing region after completing a PhD in the United States.
First, let me say, it is wonderful to be back in Budapest. I first came to the Cen-
tral European University (CEU) in 1998 to pursue my MA studies in transition eco-
nomics.This experience changed my whole perspective on both the subject of
economics and the learning process in general.This was an amazing program, struc-
tured specifically to use economic theory to analyze the transition issues in our home
countries (mainly Eastern Europe).The instruction was in English and at the level
the subject is taught atWestern universities,many professors being leading researchers
in the area. For those of us not previously immersed in other languages, this alone
was an incredible experience. For me these two years at the CEU were a process of
discovery, using a study process very different from the process we use in Russia. For
example, this was the first time in my life that I realized that economic journals
existed.We have no access to such things in Russia--I was to find what an exciting
source of economic ideas they are! The environment in my MA class was very idea
stimulating too: such international diversity and so many different ways to approach
problems. I learned a lot from my classmates. But more importantly, as a result of my
MA studies,I got a real taste for academic research in economics and decided to con-
tinue with my graduate studies. Now, thanks directly to this experience, I am com-
pleting my doctoral dissertation in econometrics at the University of Washington,
something this Russian student would not have believed possible back in 1998.
326
D E V E L O P I N G P H D P RO G R A M S 327
I do not think I can overemphasize what a difference the CEU program made in
my life and the lives of my classmates.The MA program at the CEU was such a boost
for us: we were equipped with knowledge, ideas, and inspiration to make a change.
Many of my colleagues have since returned to their home countries and now work
for the government or policy research institutions.These people are already having
an impact on their regions' economies.And for those of us who have moved on to
PhD studies inWestern universities?Well, most of us are thinking about the ways we
can contribute to our countries in the future.
In my opinion, developing a PhD program in the region is a great next step. Of
course, the purpose of any PhD program is to do research at a higher level of com-
plexity and to focus on specific topics.The MA program is a good general introduc-
tion to economic research, but a PhD program studies subjects in so much greater
depth.The advantage of having a PhD program in the region is that students can get
a Western level of training without losing contact with the transitional environment
of the region, having access to the data, and in many cases being able to have direct
contact with the regional researchers, policy makers, and government authorities.
There are a couple of factors that need to be considered in establishing a PhD
program and ensuring a smooth transition to it from an MA program:
� Both programs should be well coordinated.That is, there should be no jump in
the level of difficulty but rather a gradual increase in the difficulty level for the
PhD classes.
� The PhD program should be flexible enough to accommodate specific inter-
ests of the students.This puts certain responsibilities on advisers that are differ-
ent from their responsibilities in an MA program. I think an MA program
adviser's role is to direct and to teach a style of research. In the PhD program,
the adviser's responsibilities are to act more as a guide: the adviser should be
someone who can assess student ideas, and someone who can debate with and
challenge the student.This is more like a relationship among junior and senior
colleagues, rather than a student-professor type of communication.
� As in any program, students need to be clear beforehand about what they
expect to achieve during the course of the program.This clarity should include
course requirements and deadlines, but it should also include a more general
idea of what the PhD program is about and the career prospects afterward.
Many doctoral students enter programs without any clear idea of what to
expect after they get their PhDs. If career opportunities were thought through
and outlined when a program is developed, it would be a great motivator for
students.
� Communication among students needs to be encouraged.The student com-
munity is very competitive, even to the extent that people withdraw from
debate and hold themselves back from sharing knowledge and ideas. Partially,
this is induced by the program requirements,which unintentionally discourage
collaboration. However, although stolen ideas and plagiarism are always an
328 E K AT E R I N A S T E PA N OVA
issue,there must be ways at the same time to encourage discussions and student
study groups.
The final issue that I would like to address is how to attract students who are now
doing their PhD work in the United States back to their home region. I should admit
that studying in the United States gives a new perspective on how research could be done
in Eastern European countries. Since our roots are in our home countries though, it is
natural to desire to use the opportunity to give back to the region by bringing the stan-
dards of education back home.Nourishing this desire would therefore benefit everyone.
Attracting students back to the home countries is not a straightforward task.
Unless there is a well-established link between the university in the region and peo-
ple who are doing their PhDs in the United States, it cannot be taken for granted
that these people will ever work on issues related to the region.Western universities
are not specifically geared to focus their efforts on the interests of transitional
economies. As a matter of fact, bar a few notable exceptions, it is rare that an eco-
nomics department in the United States has any focus at all on transition economies.
So, when students in the United States select the topic of their dissertation--which
is often chosen in consideration of what the strong aspects of a particular economics
department are--it may have low direct value back home.Obviously,it is difficult for
a student to keep a detailed eye on and interest in the regional economy when com-
pleting a PhD applied to a different environment.This, in turn, has an impact on the
scope of the future job search, which is then limited to U.S. andWestern markets. Of
course, a further disincentive for some seeking an academic career is the level of
compensation in the U.S. universities, which is considerably higher than in Eastern
Europe.Much of this cannot be changed,but it is possible to use what there is to bet-
ter advantage:
� We need to encourage the development of a specialization in transition
economies at the economics departments of Western universities.Those who
find careers in Western universities can then cultivate and foster collaboration
between their universities and universities in the region.
� We need to attract greater discussion and encourage more research on transi-
tion economies.One way to do this is to sponsor transition economics sections
at the major economic conferences, in the same way as occurs today with
development economics.These will serve as excellent venues for creating a
nucleus of people from various universities who are interested in the topic,and
will create a natural gravitational pull for students from these regions.
� We need to provide incentives for students that make it easy for them maintain
an active interest in their countries' economies.There are several ways to do
this, all requiring a closer touch with students while they are pursuing their
PhD. Here are just two:
� Students are often in almost desperate search of data for their term papers.
Sharing data on transition economies for the course work is very good way
to get motivated to do research in the transition area.
D E V E L O P I N G P H D P RO G R A M S 329
� Sponsor students looking for summer jobs.Teaching assistant or research
assistant positions at U.S. universities are not guaranteed, and are in scarce
supply over the summer.The summer period is therefore an excellent time
for internships or research-assistantships that involve regional analysis.
Indeed, if this possibility existed and were actively marketed to second- and
third-year PhD students, it might well have a great impact on the direction
and even choice of those students' dissertation topics.
In conclusion, I would like thank the Open Society Foundation and the World
Bank for recognizing the importance of economics education in the developing
regions.Through creating these kinds of opportunities it will be possible to increase
the cadre of people working on transition economics research throughout the world
while also increasing the opportunities for doctoral graduates to return to benefit
their regional economies.
WhyAmerican University�
CentralAsia Should Develop an
Economics MA Program
Ellen S.Hurwitz
THE AMERICAN UNIVERSITY�CENTRAL ASIA (AUCA) IS FULLY COMMITTED TO THE
development of an MA program in the field of economics, assuming that we obtain
sufficient international funding.The university's board of trustees and the faculty are
persuaded that such a program is essential for the democratic and educational devel-
opment of the region. Sound political and economic leadership presupposes the
presence of a strong cadre of well-trained economists embedded in the region.
Central Asia lacks any postgraduate programs in economics, and most of its
undergraduate programs in this field are predicated on the economic assumptions of
the Soviet communist era.The establishment of Western-style postgraduate pro-
grams in Central Asia would create a benchmark for the entire educational system in
the region and provide incentives for its future development. Graduates from these
programs would be in high demand in the banking industry, in finance ministries, in
public think tanks, in private-sector enterprises, and in international organizations
working in Central Asia, such as the World Bank.
During the past 15 years,educational reform in CentralAsia has not produced many
undergraduate or any postgraduate programs in economics that are truly contemporary.
Recently developed undergraduate programs are generally eclectic, and combine the
Soviet communist experience withWestern approaches.Conspicuously absent here are
programs with a strong foundation in Western economics that are adapted to the cur-
rent postcommunist needs of the region. Our best students therefore seek master's in
economics programs outside of Central Asia and frequently do not return.
It is important to note that contemporary undergraduate programs in business
and business practices are developing in several countries in the region.These pro-
grams have proven to be self-sustainable. However, they lack strong foundations in
market economics and in the fundamentals of Western economic thought.These
programs are essential for the transformation of economics in banking, business, and
the public sector:they build capacity for sustainable economic development and cre-
ate a climate for the use of global market analysis.
331
332 E L L E N S. H U RW I T Z
Postcommunist economies in Eastern Europe, the Russian Federation, and
Ukraine have enjoyed the benefits of postgraduate programs in Western economics.
These regions are developing the capacity for sustainable progress including best
practices in money and banking, business, and public sector economics. Postgraduate
economics programs in these regions are contributing to successful economic devel-
opment and planning.The successes in these postcommunist economies should be
transferable to developing centers of excellence in Central Asia.
To date the only Western-based economics program in Central Asia is at the
undergraduate level at the AUCA in Bishkek.This university is the only higher-
education institution in the region that is committed to critical inquiry and the
selection of courses of study based upon individual choice and interdisciplinary
opportunity in the liberal arts tradition of American higher education.This univer-
sity enjoys a recently established endowment funded by USAID and the Open Soci-
ety Institute, and supports 12 undergraduate programs and 1 graduate program in
business administration.This university acknowledges that the dearth of economists
in the region constitutes a major threat to its ability to compete in a global and
increasingly open market.We plan to address this critical gap by building capacity
through the development of centers of excellence in economics.
AUCA has studied programs in Russia, Ukraine, and other East European coun-
tries and is prepared to absorb their best practices and learn from their failures.The
AUCA master's in economics program will require a strong financial investment on
which to start.With this investment, the AUCA will:
� Develop a tuition-charging funding plan including loans and state-supported
programs
� Build upon itsWestern-style undergraduate curriculum taught by a strong fac-
ulty to top-notch students from across Central Asia
� Develop a five-semester Western-style curriculum based on Western standards
of excellence
� Develop a comparative research and outreach program to transform the region
into a contemporary market economy
� Identify faculty and administration who have trained in PhD programs inWest-
ern institutions
� Attract top-notch students from across the region as does the undergraduate
curriculum of the university.
AUCA is ready to honor its commitment to the development of regional excel-
lence in market economics with international partners in government, banking,
foundations, and corporations.
The Quantity and Quality of Higher
Education inTransitional Economies
Jong-Wha Lee
Human resources are essential to economic growth, and education--both at the college and
the graduate levels--is important for meeting the challenges of changing demands for
advanced knowledge and technologies. But expanding higher education is quite expensive,
and many low-income transitional countries do not have the resources necessary to invest suf-
ficiently in higher education.
This paper considers exactly what is a good outcome of education by looking first at how
both the quantity and the quality of educational capital are measured. It then looks at how to
improve these measurements of higher education in transitional economies by setting priori-
ties for allocating public resources, noting that establishing regional and global networks at
the university level would be very helpful, particularly in the initial stages. To improve school
quality, how efficiently expenditure is allocated among different inputs is also important. The
paper uses a simple accounting framework that links the source of education resources to
their use and provides mathematical formulas for determining the best way to address the
question of how to use resources efficiently to maximize school output.
Human resources are an essential factor for economic development. Human efforts
and capabilities contribute to economic growth by expanding productive resources
and promoting technological progress. Since a significant part of human capital is
formed through formal and informal schooling, a country needs to build a strong
capacity for good-quality education that is imperative for human as well as economic
development.
Education at the college and graduate levels (beyond the primary and secondary
levels) is important for meeting the challenges of changing demands for advanced
knowledge and technologies. But expanding higher education is quite expensive,
and many low-income transitional countries do not have the resources necessary to
333
334 J O N G - W H A L E E
invest in higher education. Nevertheless, giving up tertiary-level education is defi-
nitely not an optimal choice. People with aptitudes for advanced skills and knowl-
edge must not allow their talents to be wasted; instead they should be nurtured by
higher schooling.
What is a good outcome of education? Any outcome of education is composed
of both quantity and quality of educational capital.The quantity of educational capi-
tal can be measured by the number of graduates, but it is rather difficult to measure
the quality of education accurately. Conceptually, the quality of education is reflected
in the performance of students and graduates. For instance, the value added by
schooling can be measured by the labor market performance--seen in areas such as
greater earnings or employment--of educated workers. Successful placements of
postgraduate degree students in commendable occupations can be considered the
result of a high-quality education.A good educational system is expected to produce
an abundance of well-educated graduates. In this sense, the success of graduate eco-
nomics programs, such as those of CEU and CERGE-EI, depends on whether they
can continue to produce a good number of master's and doctoral students who have
sufficient knowledge to be adaptable in market economies.
School output can be also measured by research conducted at the school; this is
particularly true at more research-oriented graduate schools. However, assessing the
quantity and quality of research products is complicated because output in terms of
research is more likely to be more multidimensional than just the output of numbers
of educated students. Many agree that good articles in leading academic journals are
valuable.In addition,good policy-oriented articles can be of great value,especially in
transitional economies where volatile economic situations often necessitate an
immediate policy analysis.Researchers in the countries where English is not the offi-
cial language need to write papers in local languages as well in English.
Academic institutions must appreciate both teaching and research; but the weight
distributed between these two components will vary, depending on the country as
well as school characteristics.Perhaps schools in countries that are in the initial stages
of transition may put relatively more value on education than on research.Advanc-
ing independent original research by local economists would require a longer time
period.
Questions have been raised about whether postgraduate programs in economics
should focus more on policy-oriented courses than on rigorous theory courses. It is
debatable what type of graduates the tertiary-level schools should aim to produce,
particularly in transitional economies.These economies often lack a supply of expe-
rienced government officials.There is, therefore, a stronger demand for producing
and training government officials at the graduate level.Economics programs may not
be stretched out as far. But postgraduate and other programs, such as those providing
a master's degree in public policy or an MBA, may serve that purpose better.
Both the quantity and quality of schooling need to be enhanced in order to gen-
erate good-quality educational output. How can we then improve the quantity and
quality of higher education in transitional economies? Strong income growth seems
to be most critical for the economy. The expansion of tertiary education comes from
T H E QUA N T I T Y A N D QUA L I T Y O F H I G H E R E D U CAT I O N 335
changes in both the demand side and the supply side of higher education.Stable eco-
nomic growth, by ensuring high future growth of employment and real wages, con-
tributes to the increase in the populations' demand for higher education. Economic
growth can also help to expand the supply of higher education to satisfy the increased
demand.Without sufficient resources, a society cannot provide good-quality educa-
tional facilities for students. In a fast-growing economy, public and private resources
available for education can increase much faster than they can in a society that is stag-
nant or declining. Private enterprises are more willing to participate in the supply of
tertiary education by making more donations to universities. Parents in more afflu-
ent economies must be willing to take on a greater financial burden for their chil-
dren's higher education.
Because transitional economies lack sufficient resources to support adequate local
tertiary educational institutions,establishing regional and global networks at the uni-
versity level would be very helpful, particularly in the initial stages. In the long run,
however, transitional economies should strive to establish their own universities as
well as their own centers for research and development.These centers will create job
opportunities in these countries and encourage individuals who have been educated
abroad in developed countries to invest in the human capital of their home country
by returning.
One of the most important questions is how to use resources efficiently to max-
imize school output.How the given resources are allocated between quantity expan-
sion and quality improvement is an important choice. An increase in education
expenditures can be used for either expanding the number of enrolled students or
increasing the expenditure per pupil.
To illustrate the contribution of the quantity and quality factors to the produc-
tion of educational capital with finite resources, we can use a simple accounting
framework that links the source of education resources to their use (at a tertiary-
schooling level or at all levels).We begin with the following accounting identity:
(education expenditure per student) � (number of students / total population) =
[(expenditure / GNP) � (GNP per capita)] / (ratio of students to total population)
The left-hand side of the equation decomposes the use of public resources for
education (as measured by total education expenditure per capita) into two compo-
nents: school enrollments and public expenditure per pupil. The left-hand side
implies that an increase in resources can be used either to expand schooling quantity
(numbers of students) or to improve educational quality (measured by per pupil
expenditure). The right-hand side of the equation allows us to decompose the
resources into three components:the share of public education expenditures in GNP,
per capita GNP, and the inverse of the ratio of students in total population.The
higher value of each term on the right-hand side of the equation indicates the avail-
ability of public resources for education. Hence, although the share of public educa-
tion expenditures of the GNP remains the same,either an increase in per capita GNP
or a slowdown of the enrollment rate can help to increase investment in education.
336 J O N G - W H A L E E
In order to improve educational quality, school resources should be increased.We
can use the framework of an "education production function" to analyze the impor-
tance of schooling inputs for schooling quality. This equation relates the output of
education to various inputs.This can be depicted as
Schooling Quality = F (School Resources, Efficiency of System; Family Factors ...)
In this framework, an increase in school resources can lead to an increase in
schooling quality. But whether this is the case or not has been an issue of debate and
provoked controversy among economists as well as policy makers. Hanushek (1986,
1995) concludes from existing empirical evidence that there is only a weak relation-
ship between schooling inputs and outcomes measured by student achievement.
However, several studies have challenged this pessimistic conclusion (Hedges, Laine,
and Greenwald 1994; Kremer 1995). More recent studies have found the availability
of resources to have positive effects on student achievement. Based on the panel data
set for a broad number of countries, for instance, Lee and Barro (2001) find that
school inputs such as class size and the quality of the faculty are closely related to
school quality, as measured by internationally comparable test scores.
To improve school quality, it is also important how efficiently expenditure is allo-
cated among different inputs. School inputs comprise pupil-teacher ratios, expendi-
ture per pupil,quality of faculty,teaching materials,school length (such as numbers of
school days per year), and so on.Transitional economies may not improve all school
inputs at once because they have limited resources, so setting the priorities for allo-
cating public resources is important. For instance, when good-quality teachers are
scarce, the government can focus initially on recruiting good faculty. In particular, in
transitional economies where brain drain prevails, the recruitment and retention of
good-quality professors and researchers is a very important item on the agenda.In this
regard, the experience of the Republic of Korea may be helpful. Ofer, in his paper
elsewhere in the volume, asks why approximately 85 percent of the Korean students
who left to study abroad go back home following graduation. One salient feature of
education strategies in the Republic of Korea was to pay relatively higher salaries to
teachers while keeping pupil-teacher ratios high (Lee 2001). In addition, because of
rapid economic growth as well as democratization, there has been a continuing
demand for foreign PhDs in academia, in think tanks, and in the public sector.The
prestige of academic jobs and the seniority system in salary and promotion in a Con-
fucian society such as that of the Republic of Korea must have helped those who
received their PhDs from abroad decide to return to their home country.It seems that
providing sufficient incentives for good faculty is essential for retaining them.
References
Hanushek, Eric. 1986."The Economics of Schooling: Production and Efficiency in
Public Schools." Journal of Economic Literature 24 (September): 1141�77.
T H E QUA N T I T Y A N D QUA L I T Y O F H I G H E R E D U CAT I O N 337
------. 1995."Interpreting Recent Research on Schooling in Developing Coun-
tries." World Bank Research Observer 10 (August): 227�46.
Hedges, Larry, Richard Laine, and Rob Greenwald. 1994."Does Money Matter? A
Meta-Analysis of Studies of the Effects of Differential School Inputs on Student
Outcomes." Educational Researcher 23 (3): 5�14.
Kremer, Michael R. 1995."Research on Schooling:What We Know and What We
Don't, A Comment on Hanushek." World Bank Research Observer 10 (August):
247�54.
Lee, Jong-Wha. 2001."Education forTechnology Readiness: Prospects for Develop-
ing Countries." Journal of Human Development 2(1): 115�51.
Lee, Jong-Wha, and Robert Barro. 2001."Schooling Quality in a Cross-section of
Countries." Economica 68 (272): 465�88.
Scaling Up Capacity Building to
Underserved Regions
Capacity Building in
Economic Policy Research
Outcomes and Future Steps
Jeffrey Fine
THE CONFERENCE ENCOMPASSED A WIDE SET OF INTERVENTIONS, CHARACTERIZED
by differing approaches to capacity building. Discussion was enriched by experien-
tial knowledge, namely, lessons learned in the course of implementation.
This note, based on a PowerPoint presentation at the close of the meeting,
acknowledges concerns common to most of the papers and subsequent deliberation.
It does so under five principal themes:
� The ethos underpinning various types of capacity building
� Structural parameters shaping the institutional context of the various initiatives
� Situational parameters informing their activities
� Strategic guidelines for facilitating their activities in future
� A concrete proposal for collectively sustaining their efforts
Ethos
Ethos refers to the distinguishing character or guiding beliefs of a person, group, or
institution. Underpinning all of the capacity-building efforts represented at the
conference is a powerful commitment to a culture of learning, to knowledge cre-
ation and validation through scientific rigor and methods, and to the enrichment
and sharing of knowledge through professional peer review. Accountability for
outcomes extends beyond the activities of the institutions and networks themselves
to the broader inculcation of these values through evidence-based policy making,
as well as openness and transparency in deliberating public choices and outcomes.
In many if not most instances, the capacity-building efforts are taking place in poli-
ties where such values are far from commonplace. Consequently, their potential
impact is not confined to knowledge creation and the improvement of economic
policy making, but extends to other social and political processes promoting open,
341
342 J E F F R E Y F I N E
democratic societies. Such outcomes are of course difficult to measure, but
nonetheless they comprise very important outcomes of capacity-building in
economics.
Structural Parameters
Shaping each of the capacity-building efforts is a national higher education policy.In
many developing countries this policy is undergoing major changes, which may
include the entry of private universities (both domestic and foreign), increasing
autonomy for publicly supported universities, rapid growth in enrollment in tertiary
education, and different approaches by government to its financing. Such changes in
policy have a direct impact on capacity strengthening, for example, on the quality
and financing of postgraduate study. Also important in many countries is science and
technology policy, in determining priorities for research and its financing.Advances
in information and communications technology will continue to be a seminal factor
in determining how research is executed within and across national borders, in shar-
ing knowledge, and in introducing new modes of learning. Especially meaningful to
the conference participants were expanding opportunities for future collaboration in
research and formal education, in particular at the postgraduate level. Also falling
under the rubric of structural parameters are changes in institutional culture, since
many of the efforts discussed at the meeting are either embedded within universities
and policies institutes or constitute reactions to institutional rigidities. Consequently,
how institutions embrace these broader-reaching changes will undoubtedly play a
role in shaping future capacity-building efforts in economics.
Situational Parameters
The political and economic contexts within which the capacity-building efforts
operate vary enormously. However, all of them, in a broader generic sense, are
responding to interfaces among three systems (figure 1).
The capacity-building efforts typically address greatly varying demands for
research from a wide range of clients including governments,donors,the private sec-
tor, and academia (as meant by the double-headed arrow 1 in figure 1). Much of this
research is client specific. A major conundrum is the need to balance this type of
demand, which typically plays an important role in financing an institution or net-
work's activities, with other types of research aimed at informing public policy, gen-
erating new knowledge, and enhancing skills. Clients also play a major role in
defining the competencies that should be addressed by systems of higher education
as well as financing academic-sourced research and postgraduate education (as meant
by the double-headed arrow 2 in figure 1). National systems of higher education
produce future researchers and in turn are enriched by research (as meant by arrow
3 in figure 1). All three systems will be undergoing major changes, which in turn
have far-reaching implications for the capacity-strengthening initiatives discussed at
the conference.
CA PAC I T Y BU I L D I N G I N E C O N O M I C P O L I C Y R E S E A R C H 343
FIGURE 1
The Three Systems in Capacity Building
Research
3 1
Clients/
Education
Stakeholders
2
Source: Author.
Shaping higher education will be the accelerated creation of new knowledge,
giving rise to new areas of specialization. Economic research in the future will
increasingly draw on specialized knowledge and skills in such areas as transport,
health, education, finance, communications, and education. Parallel to this develop-
ment will be the need for capacity-building efforts to develop training appropriate
for these subdisciplines,to specialize in particular areas of public policy,and to address
client demands through collaborative efforts pooling specialized skills and knowl-
edge within and across national boundaries.Also characterizing this trend will be the
emergence of new fields. Of particular importance to most of the capacity-building
initiatives will be institutional and behavioral economics, which can inform research
undertaken in settings characterized by asymmetries in information, the absence of
a robust legal framework, and severe shortcomings in the efficiency of different mar-
kets. Advances in information and communications technology may also expand
opportunities for access to a career in economic policy research, by allowing indi-
viduals who have a first degree in another discipline to obtain the core skills,through
the Internet, necessary to succeed in postgraduate study.This option might prove
especially important in increasing the number of women engaged in economic
research and teaching.
Addressing Change: Some Strategic Guidelines
Some of the capacity-building initiatives comprise networks.All of them engage in
"networking"--namely, collaboration formally among different institutions, espe-
cially in postgraduate education, and informally among individuals conducting
research on specific issues.
While differing considerably in their ambit, intensity, and degree of formality, all
of these networking activities are designed to fulfill two principal functions: coping
and enrichment.
344 J E F F R E Y F I N E
Most commonplace in terms of coping is a pooling of scarce resources,for exam-
ple, to address shortfalls in staffing. Also important in many settings is the need to
reduce intellectual isolation, through the Internet and periodic meetings, in order to
provide the critical mass of scholarship necessary for peer consultation and review
and to sustain professional morale. Often networks are also a response to institutional
rigidities, facilitating the introduction of new materials and methods of learning.
Increasingly important for economics,as in other fields of higher education,is the
role of collaboration in enriching both research and learning.An immediate consid-
eration is the benefits to be had from pooling human resources,within countries and
across regions, to utilize scarce skills in specialized fields. Beyond such scale
economies are the positive externalities resulting from the convergence of staff and
students from a wide range of economies and political settings. Such collaboration
also allows for increased specialization, in teaching and research, by institutes and
departments of economics within the same country or region. It also increases the
opportunity for individuals to continue working within a particular subdiscipline
without having to migrate to more-developed economies in order to advance
professionally.
Looking to the Future:A Specific Proposal
The presentations and deliberations at the conference clearly established both the
need for and benefits from intensified collaboration on a regional and global level.
Moving in this direction, however, will mean surmounting a classic "externality."
Within their own settings,the initiatives can address,if only partially,the challenge of
financial sustainability by meeting client demands for technical skills and knowledge.
At a global level, however, no single "client" is prepared to underwrite a collabora-
tive effort, since many others, not footing the cost, stand to reap the benefits.
This situation is not dissimilar to the one in agriculture, where investment in
socially and economically desirable research must often be underwritten by the pub-
lic sector.The international response to the state of affairs in agriculture has been the
creation of the Consultative Group on International Agricultural Research
(CGIAR), which directs both core and programmatic support by the international
donor community to selected research institutes and other shared interventions at
national and regional levels.A similar situation prevails in the field of economic pol-
icy, where global development efforts stand to benefit considerably from enhanced
collaboration in research and capacity building. How a consultative group for eco-
nomic management (CGEM) might be structured and financed clearly requires in-
depth analysis. Its potential benefit, not only for the capacity-building endeavors
discussed at the conference, but also for accelerated, equitable development more
generally, comprises a logical follow-on activity.
The Experience of the Swedish
Government in Capacity Building in
Russia and Eastern Europe
Eva Sundquist
I HAVE BEEN ASKEDTO GIVE A DONOR'S PERSPECTIVETO ONE OF OUR SUCCESS STORIES,
our contribution to the Economics Education and Research Consortium (EERC),
a program that we are all happy that we decided to fund because the results far
exceeded our expectations. So far we have contributed slightly more than 3 million
euros to the EERC. Over the past couple of years we have made some cuts in our
annual support, and soon we will decide whether to continue our support and if so
to what extent and for how long.We are one of the donors that have been support-
ing the EERC for the longest period.
Why Did the Swedish Government Decide to Contribute
to the EERC?
First, a brief background. In 1998, the Swedish Ministry for Foreign Affairs received
a visit from Andrea Harris of the Eurasia Foundation, who was then responsible for
the EERC in Russia and Ukraine. Usually, Swedish technical assistance is channeled
through the Swedish International Development Cooperation Agency (SIDA) to
Swedish experts focusing on institution-building and exchange of expertise. How-
ever, the Swedish government decided to make an exception in this case and con-
tribute substantially to the EERC.
Seeing that the Open Society Institute and the World Bank were already in on
the project helped us form a swift decision, since they acted as a quality guarantee.
We were particularly pleased that the Kiev Mohyla Academy had a reputation for not
taking bribes. Needless to say, the decision to contribute to the EERC was based on
objective criteria,but the composition and the size of our contribution depended on
the fact that the desk officer for technical assistance to Russia, myself, and my head
of section, were all graduates from the Stockholm School of Economics, and that we
all had experience working in Russia and in Ukraine. Also the deputy minister
345
346 E VA S U N D QU I S T
responsible for technical assistance to Eastern Europe, himself a trained economist,
had experience in Eastern Europe.
In contacts with the authorities in Russia and in Ukraine, we had noticed the
need for more staff with real skills in economics. In addition, Swedish companies in
the region needed local staff with relevant training in economics.With the benefit of
hindsight,EERC graduates have been very successful in finding work in policy insti-
tutes and government, and increasingly also in companies in the private sector.Two
important Swedish companies in Ukraine are sponsoring the EERC in Kiev:Tetra
Pak and Chumak.
We also decided that we wanted to give a contribution on our own terms. First,
we wanted to make sure that at least one of the graduates from the EERC in Russia
stayed in Russia, to mitigate the risk of brain drain.Therefore we created something
called the Swedish assistant professorship--we spent hours trying to come up with a
better name, but failed.This assistant professorship has now been moved to the
EERC in Kiev. Second, we wanted to include students from Belarus. In doing this,
we realized that we would contribute to the brain drain, but if only one or two of
the students return to Belarus once the political climate improves, we thought it
would be worthwhile.Third, a couple of years ago, when we decided to double our
technical assistance to Moldova, we also decided to fund some students from
Moldova in Kiev. Fourth, we wanted all "our" students to learn more about Sweden,
so we added a study tour to Stockholm and to the Stockholm Institute of Transition
Economic (SITE) for the second-year students from Belarus and Moldova.
Other Experiences
I do not wish to dwell on our less successful attempts to fund other schools, but I
think that, at least from an administrative point of view, we have learned that the
ministry should never assume first-hand responsibility in funding educational
projects--we should leave this to the experts. If we make a general commitment, the
bill risks running up to unexpected figures.
Recommendations
The Swedish government has learned some valuable lessons about ways to provide
support for educational projects; we have also learned ways to assess which organiza-
tions we want to support.The recommendations here reflect this experience.
For Other Governments
� Make sure that there is a quality stamp attached to the proposal (in our case,
this was provided by the World Bank).
� Set reasonable expectations (so far we have funded some 12 Belarussians who
have graduated. I think we all agree that if just one will return to Minsk, when
T H E E X P E R I E N C E O F T H E S W E D I S H G OV E R N M E N T 347
the political situation improves, and ends up as a deputy minister of finance, it
will have been worth the money).
� Target subjects (such as economics) where training is needed to promote the
future of a country.
� Make sure that other donors are there for the long term so that the project is
not abandoned partway through.
� Be prepared to go in with a substantial long-term commitment in order to
make a difference.
� Demand plans for how to indigenize the project.
� Make sure that there are independent evaluations from time to time.
� Never engage in direct management of an educational project.
� Make sure assistance is limited in time and targeted in scope.
� Make sure you have an exit strategy.
For Organizations Seeking Support
� Make sure you talk to the right people--often you only need to find one like-
minded person, and he or she will then be able to convince the rest!
� Talk to people in charge before you write the proposal.
� Write short proposals based on donor requirements.
� Present the proposal in person.
� Offer governments the possibility of customizing their contributions.
� Make sure you speak to people who understand the importance of creating
local capacity for teaching and research at internationally recognized standards.
Scaling Up Capacity Building to
Underserved Regions
ReginaYan
THE EURASIA FOUNDATION HAS BEENA PLANNER,FOUNDER,DONOR,ADMINISTRATOR,
and fund-raiser for the Economics Education and Research Consortium (EERC).
We have certainly learned some lessons in this venture over the last 10 years. I would
like to focus my comments primarily on the financial and organizational aspects of
capacity building.
In building capacity in economics education and research, we inevitably have to
start with education, which is the foundation for research and network development.
EERC is involved in all three elements of capacity building: providing education
through our master's degree program in economics in Ukraine; supporting research;
and advancing network development through research workshops,grant competitions,
and publications (both print and electronic) from the network office based in Russia.
Building capacity through economics education generally requires high fixed
costs and long-term financial commitment.We need to build the institutions in order
to produce the human capacity we need. Unfortunately, some economics programs
have to begin as projects with short-term funding and short-term planning cycles.
As a result, there is a misalignment between the long-term goals and the short-term
funding reality. That means that those of us who support economics education in the
context of a short-term funding reality have to try consistently to cultivate and line
up the next batch of donors. Often donors and the program administrators do not
fully appreciate the demands of fund-raising and the financial cost of implementing
these education programs.
In addition to the taxing demand of constant fund-raising, I also observe that
some of these programs are lacking in their financial management and administrative
capacity. Often the donors are not willing to support these costs, without which
these programs are handicapped in their ability to develop into sustainable and well-
run institutions. Donors often want to fund only teaching and not organizational
infrastructure (that is, overhead).The fact is, poor financial management and staffing
pose serious threats to the future of these programs.
349
350 R E G I N A YA N
Bill Newton-Smith earlier commented that, based on his experience with the St.
Petersburg School of Management,he found it more effective to build programs with
an existing state institution than to build them as stand-alone programs.In many ways,
this approach makes sense, but in reality its success is rare. Using existing institutions
presents ready local ownership and buy-in for these programs. In turn, it translates
into a long-term commitment from the local community. Practical and essential mat-
ters, such as conferring degrees and achieving accreditation, also require these pro-
grams to be based in a university setting, not to mention the practical aspect of their
eligibility for support from the state budget when foreign donor funds phase out.
On the other hand, it can sometimes be impossible to build a program of high
international standard within the limits of a local institution--particularly one that is
run by the state--that has to operate under strict state requirements that are often
incompatible with modern education.We face some of these challenges in Ukraine.
When building an internationally qualified program, autonomy in hiring, firing,
compensation decisions,and financial management would be critical during the pro-
gram's incubation period.
I applaud my colleagues at the Central European University (CEU) and the Cen-
ter for Economic Research and Graduate Education (CERGE) for using multiple
approaches to support economics education--including setting up endowments
both in the United States and locally, establishing student loans, and securing corpo-
rate and state support.All these, if available in the local context, are essential to pro-
viding long-term support in building economic human capacity. Unfortunately, in
some countries the lack of a legal status for an endowment and the strict licensing
requirements for student loan programs present tremendous hurdles for the success
of these programs.
We all envy Justin Lin of the China Center for Economic Research (CCER) at
Beijing University. He is affiliated with a premier state university in China, and yet
he appears to have a lot of autonomy, basically because he is not financially depend-
ent on the university. He was also able to wean his program of international donor
support in a very short time. In a sense, he is free of both the state university require-
ments and international donor expectations, allowing him to develop an array of
programs ranging from economic training to business management and even train-
ing of journalists. I find the training of journalists most intriguing and forward-
looking.
We discussed earlier the demand of economic capacity and the society's percep-
tion and support of the relevance of the study of economics. Often people are afraid
to talk to economists, fearing that a simple question will elicit an hour of incompre-
hensible lecture.There is nothing more fruitful than to educate journalists about eco-
nomics and assist them to be curious as well as comfortable in reporting economic
news. That in turn generates public interest and demand for quality economic
analysis.
In summary, the greatest challenge in building capacity lies with education, and
economics education requires both long-term donor support and commitment from
the local community.
Contributors
Ramona Angelescu, Global Development Network, New Delhi, India
John Bonin, Wesleyan University, Middletown, Connecticut, USA
Fran�ois Bourguignon, World Bank,Washington, DC, USA
Robert Campbell, Indiana University, Bloomington, Indiana, USA
Mauricio Cardenas, Fedesarrollo, Bogota, Columbia
Tom Coupe, National University of Kyiv�Mohyla Academy, Kyiv, Ukraine
Laszlo Csaba, Central European University, Budapest, Hungary
Marek Dabrowski, Center for Social and Economic Research,Warsaw, Poland
Shantayanan Devarajan, World Bank,Washington, DC, USA
John Earle, Upjohn Institute for Employment Research, Kalamazoo, Michigan,
USA
Yehunda Elkana, Central European University, Budapest, Hungary
ManuelaV. Ferro, World Bank,Washington, DC, USA
Jeffrey C. Fine, Telepraxis, Ottawa, Canada
Alan Gelb, World Bank,Washington, DC, USA
Sergei Guriev, New Economic School, Moscow, Russia
Ulrich Hewer, World Bank,Washington, DC, USA
Ellen Hurwitz, American University of Central Asia, Bishkek, Kyrgyz Republic
Homi Kharas, World Bank,Washington, DC, USA
Aehyung Kim, World Bank,Washington, DC, USA
J�nos Kornai, Collegium Budapest, Budapest, Hungary
Jong-Wha Lee, Korea University, Seoul, Korea
JustinYifu Lin, China Center for Economic Research, Peking University, Beijing,
China
William Lyakurwa, African Economic Research Consortium, Nairobi, Kenya
Peter Materu, World Bank,Washington, DC, USA
Benno Ndulu, World Bank,Washington, DC, USA
351
352 C O N T R I BU TO R S
William Newton-Smith, Open Society Institute, London, UK
Gur Ofer, New Economic School, Moscow, Russia
Ugo Pagano, University of Siena, Siena, Italy
Guillermo Perry, World Bank,Washington, DC, USA
Boris Pleskovic, World Bank,Washington, DC, USA
Shekhar Shah, World Bank,Washington, DC, USA
Priya Shyamsundar, World Conservation Union, Kathmandu, Nepal
Ekaterina Stepanova, University ofWashington, Seattle,Washington, USA
Lyn Squire, Global Development Network, New Delhi, India
Eva Sundquist, European Union (Swedish Foreign Ministry), Brussels, Belgium
Jan Svejnar, University of Michigan Business School, Ann Arbor, Michigan
ReginaYan, Eurasia Foundation,Washington, DC, USA
Note: Affiliations as of June 2005.
ECO-AUDIT
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F or the last 15 years, the World Bank and its partners--private foundations
and governments--have supported the "centers of excellence" for build-
ing capacity in modern economics education and research in developing
and transition countries. To scale up these efforts, the Central European Univer-
sity (CEU) and the World Bank jointly organized a conference entitled "Scaling
Up Capacity Building in Economics Education and Research: Lessons Learned
and Future Directions," which took place at the CEU campus in Budapest,
Hungary, on June 14�15, 2005.
The joint conference brought together representatives of the following
regional centers of excellence: the African Economic Research Consortium
(AERC) in Nairobi; the Economics Department of Central European University
(CEU) in Budapest; the Economics Education and Research Consortium (EERC)
in Kyiv and Moscow; the New Economic School (NES) in Moscow; the Center
for Economic Research and Graduate Education (CERGE) in Prague; the China
Center for Economic Research (CCER) in Beijing; and the Global Development
Network (GDN) in New Delhi.
In This Volume
Foreword by Fran�ois Bourguignon; introduction by Aehyung Kim and Boris
Pleskovic; opening remarks by Yehuda Elkana and Alan Gelb; and keynote
address by J�nos Kornai.
Lessons of Experience and Future Directions. Papers by William Newton-Smith,
Gur Ofer, Justin Yifu Lin, L�szl� Csaba, Ramona Angelescu and Lyn Squire,
William Lyakurwa, and Robert Campbell; comments by Marek Dabrowski,
Jeffrey Miller, Ugo Pagano, Tom Coup�, Alan Gelb, and Sergei Guriev.
Regional Perspectives. Papers by Mauricio C�rdenas and Guillermo Perry;
Benno Ndulu, Michael Crawford, and Peter Materu; Homi Kharas; Ulrich Hewer;
Shantayanan Devarajan, Manuela V. Ferro, Shekhar Shah, and Priya
Shyamsundar; John S. Earle; Jan Svejnar; and Jong-Wha Lee; comments by
John P. Bonin, Mauricio C�rdenas, Ekaterina Stepanova, and Ellen S. Hurwitz.
Scaling Up Capacity Building to Underserved Regions. Papers and comments
by Jeffrey Fine, Eva Sundquist, and Regina Yan.
ISBN 0-8213-6595-9