A professor of international political economy at Harvard, Dani Rodrik (rodrik.typepad.com), presents his readers with a dilemma: per-capita income in a “landlocked African country,” which he declines to name, “stands at a fraction of levels it had reached in the 1970s, with only the last few years seeing some decent economic growth. What kind of a growth strategy should this country follow?” Mr. Rodrik presents two options: The country can spend its resources on educating and improving the health of the rural poor, or it can focus on creating sustainable sources of income growth, even though “these may be in mostly urban areas and likely to foster greater inequality in the short-run.”

Recently, when Mr. Rodrik was presented with this very dilemma at a meeting with the World Bank, he advised the latter option. But when he “pushed for a growth strategy that focused, well, on growth, the reaction … was skeptical. It was prop-poor growth they wanted.”

Mr. Rodrik sees the situation thus: “Having a growth strategy that focuses on growth proper — and on removing the most binding constraints on it — does not mean that you don’t care about poverty or inequity. It just means that you recognize different targets require different strategies.” Although “a growth policy may not necessarily achieve significant poverty reduction in the short-run,” Mr. Rodrik says he thinks social policy can fill that role. “Growth policy is not social policy,” he says.

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SAFETY NETS AND THE CREDIT CRISIS

The anonymously penned economics blog Bluematter (bluematter.blogspot.com) reflects on a recent paper that claims government safety nets are one of the main causes of banking crises.

The report, authored by a Columbia Business School professor, Charles Calomiris, says government protection against widespread financial collapse “removes the effect of market discipline. It thereby encourages excessive risk taking by banks, and also creates greater tolerance for incompetent risk management.” Mr. Calomiris continues, “Ironically, the government safety net, which was designed to forestall the (overestimated) risks of contagion seems to have become the primary source of systemic instability in banking.”

The blogger at Bluematter writes: “Calomiris makes an excellent point here, but the recent events with Northern Rock show that a commitment never to intervene is not a solution.” Northern Rock, a Scottish bank, had to be bailed out by the Bank of England earlier this year after it suffered harsh losses as a result of the U.S. subprime mortgage crisis.

Tough love, Bluematter says, is the best medicine: “Don’t let banks fail, but Give Them Pain. Make their share price [plummet] and break their CEOs’ hearts.”

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IMMIGRATION AND EDUCATION

Mark Thoma of Economist’s View (economistsview.typepad.com) directs his readers toward recent research suggesting that, overall, immigration has a positive productivity effect on natives in high-immigration cities like New York.

The report, written by Giovanni Peri, an associate professor of economics at the University of California-Davis, adds an interesting caveat: It is highly educated natives who enjoy most of the benefits of immigration, while the less educated remain unaffected.

Mr. Peri admits in his report that pure theory couldn’t provide him with an answer for the question of how high levels of immigration affects natives. “The matter cannot be settled by logic,” he says. “Facts are needed.”

Indeed, the data showed Mr. Peri that immigrants actually do not drive out natives. “In fact, in most cases, large immigration flows were associated to larger population and employment growth for natives as well.”

Nor did immigrants take away natives’ jobs: “Foreign-born individuals in the US are over-represented among workers with low skills … and among those with very high skills. … On the other hand, foreign-born are under-represented among workers with high-school and some college education. Most American workers, therefore (70% of which have high school or some college education), do not compete with immigrants for similar jobs but benefit from their complementary productive tasks. Moreover, even at similar levels of education native and immigrant workers tend to specialize in different occupations.”

According to Mr. Peri, the bottom line is that immigration raises average wages along with house prices, and it does not crowd natives out of jobs or houses. However, most of the economic benefits of immigration fall to the highly educated natives and those who own homes.