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When it comes to economic reforms in developing countries, many economists agree on broad objectives (such as fostering outward orientation). Broad objectives, however, can be pursued in many di¤erent ways, and policy experimentation is often indispensable for learning which alternative works locally. We propose a simple model to study this societal learning process. The model explores the role of disagreeing beliefs about “what works”. It suggests that this type of disagreement can stall the societal learning process and cause economic stagnation. Interestingly, this can happen even if everybody knows that Pareto-improving reforms do exist. Our analysis is motivated by the empirical observation of a negative relationship between disagreement and economic growth among poorer countries.

Retinal cotton-wool patches, not previously observed in bone marrow recipients, have been reported in three patients who received Sandimmun (cyclosporine) as prophylaxis for graft-versus-host-disease after bone marrow transplantation. These patients all had acute lymphoblastic leukemia and had received, in addition to the standard conditioning regimen, central nervous system irradiation before transplantation. We were thus prompted to examine 55 renal transplant recipients (15 of them prospectively) who were receiving cyclosporine for evidence of similar fundal changes. No cotton-wool patches were found in any of the renal transplant recipients.

Non-collusive corruption, i.e., corruption that imposes an additional burden on business activity, is particularly widespread in low-income countries. We build a macroeconomic model with credit market imperfections and heterogeneous agents to explore the roots and consequences of this type of corruption. We find that credit market imperfections, by generating rents for the incumbent entrepreneurs, create strong incentives for corrupt behavior by state officials. However, non-collusive corruption not only redistributes income from non-officials towards officials but also within the group of potential entrepreneurs. If borrowing is limited, bribes prevent poorer but talented individuals from starting a business. But this is likely to benefit those who may enter anyway; the cost of capital is lower and there is less competition on the goods markets.