Economics of Developing Countries Coordination Essay

The moral of the story is that even though sticky prices are in no one's interest, prices can be sticky simply because price setters expect them to be" (para. 18). This real life scenario is what Wolfgang Munchau suggests is leading to the global economic crisis. Munchau argues that the world leaders' failure to act has resulted in a global coordination failure, and the global recession that is currently in full force. Indeed, Munchau says, "Not one of [the London summit's] resolutions move the world a small step closer to resolving the global economic crisis" (para. 1). The reason for this, according to Munchau, is because they have waited to make crucial decisions, decisions that they are still waiting to make (para. 1).

Munchau's argument offers a commentary on why some consider governments a part of the coordination failure problem instead of the solution. Governments, at least democratic ones, are traditionally slow to act, since they have a two-level game that requires they both get the approval of their own legislative bodies and that of the global community before they can implement a policy. Furthermore, governments tend to be more hesitant and less likely to act with business savvy than are private corporations. This does not necessarily mean that governments will always be a part of the communication failure problem. However, it does suggest that they must learn to act with more efficiency in order to avoid compounding coordination failure problems. Instead, governments must make decisions -- even risky ones -- efficiently. When economic crises occur on a global level, it is even more pertinent for governments to act quickly in order to be part of the solution rather than part of the problem. References Mankiw, N. Gregory. "New Keynesian Economics." The Concise Encyclopedia of Economics. 2008. 18 June 2009. Munchau, Wolfgang. "The Consequence of Global Co-Ordination Failure." Evro Intelligence. 4 June 2009. 18 June 2009. .....