The World Bank Group (WBG) announced on July 18 that it had appointed Paul Romer as the next World Bank Chief Economist.

WBG President Jim Yong Kim has high hopes for Romer. “We’re most excited about his deep commitment to tackling poverty and inequality and finding innovative solutions that we can take to scale,” Kim said. Romer replaces Indian economist Kaushik Basu, who retired on July 31.

Romer is a professor of economics at the Stern School of Business at New York University (NYU). He also serves as Director of NYU’s Marron Institute of Urban Management and is a research associate at the National Bureau of Economic Research.

Several new organizations praised the pick for the new World Bank Chief Economist and predicted that Romer would bring about real change at the 72-year-old international financial institution.

The Economist described Romer as a formidable and often contrarian figure in the field of economics. He has criticized his profession for its obsession with obscure models and equations, which he terms “mathiness.”

“For me, the most exciting part about economics is going beyond knowledge that is only potentially useful to knowledge that is actually useful, and doing so on a scale that touches millions or billions of lives,” Romer explained in the World Bank press release.

Romer has also done impressive work both as an academic and an entrepreneur, according to Noah Smith of Bloomberg View. In the 1980s, he was one of the first economists to champion the endogenous growth theory. Technological change, according to his model, occurs as a result of investment in research and development, which creates growth within the economy at large (hence the term “endogenous growth”).

It is important to spend money on innovation because ideas, once created, are disseminated at little or no cost. Romer led by example through his education-technology start-up Aplia, which he founded in 2000.

Among one of Romer’s more unorthodox ideas is the concept of “charter cities.” In line with the endogenous growth theory, he believes developing countries should spend money to build new cities as sites for policy and economic experimentation. He cited Hong Kong and Shenzhen in China’s Pearl River Delta as success stories and a model for these charter cities to follow.

As World Bank Chief Economist, Romer will provide intellectual guidance to the President and the senior management. His staunch support for financing innovation and testing new approaches in order to reduce poverty brings new life to the World Bank’s development goals.

– Philip Katz

Photo: Flickr