Nobel Prize
I can't top Marginal Revolution's multipost coverage of why Edward Prescott and Finn Kydland deserve their Nobel prize in economics. But I can plug my May 2001 NYT column on Prescott's path-breaking book with Stephen Parente, Barriers to Riches. An excerpt:
Open international trade has indirect advantages as well. By increasing competition, it spurs producers to find ways to reduce costs and, hence, prices to consumers--again, increasing living standards. And it spreads knowledge and skill. People all over the world gain access to the best technologies and most productive business practices.
Unless they're forbidden to adopt them.
Such prohibitions explain why poor countries stay poor, two economists, Stephen L. Parente of the University of Illinois and Edward C. Prescott of the University of Minnesota, argue in "Barriers to Riches," published last year by MIT Press. "Although countries have access to the same stock of knowledge," they write, "they do not all make equally efficient use of this knowledge because policies in some countries lead to barriers that effectively prevent firms from adopting more productive technologies and from changing to more efficient work practices."...
If savings and education were enough, says Professor Prescott, "Khrushchev would have been right."
"The former Soviet Union would have buried the West. They were well educated. They had high savings rates. The efficiency with which you use resources matters."