Thomas E. Chamberlain, Ph.D.

No economy can flourish in the midst of macroeconomic instability. Wild fluctuations in the price level, the exchange rate, the interest rate, or the tax burden serve as a major deterrent to private investment, the proximate driver of growth. Spence 2008a,Pg 69.

ABSTRACT

While significant advances in human wellbeing have been achieved over the past century, great numbers of the extremely poor around the world are in continuing danger of falling in absolute terms—a condition that places the entire human community at growing risk. However, recent advances in mathematical behavior/psychology (producing a new paradigm) coupled with cessation of great-power aggression due to fearsome nuclear arsenals makes possible our ascent to the high plateau of general wellbeing, justice, and security. …We may now conclude with conviction and confidence that market instability—the natural tendency of free and open markets to increasingly divide us into rich versus poor—is sufficient in itself to explain inequality and poverty. This conclusion emerged, first, from the deepening of utility theory (and, accordingly, neoclassical economics) to its neuropsychological foundation (completed 1993), followed ten years later by a mathematical development that identified uneven expected risk across the population, due to uneven discretionary power, as a cause of growing poverty (published on the internet in 2004). The discovery immediately recommended national and international policies for economic stability and development (published in the same paper). …In the present article the primary emphasis is on the recent World Bank sponsored Growth Report, which acknowledges the growing international departure from the Washington Consensus and provides recommended adjustments. The prescriptions of the Growth Report are welcomed, but permanently institutionalized (1) damping of rapid shifts of international finance/commerce along with (2) recapitalization of the poor, both now analytically promoted and increasingly applied around the world, are overlooked. These government measures for preserving and developing human capital are necessary for market-economy stability and (long term) growth, while the private sector retains primary responsibility for growing business/industrial capital. As a further consideration, the complementary Discretionary-Power Principle of Justice for negotiating and accepting human recapitalization (i.e., increasing education, skills, health, etc.) around the globe is recalled and discussed. Additionally, the discussion offered by Professor Sang-Ho Lee of Chonnam National University at the WEAI Conference in Vancouver is provided in the appendix, with responses to his comments.

090703World Bank Growth Report--Assessment and Extension.pdf