Ricardo Hausmann

On March 4, 2019, Juan Guaidó named Hausmann as Venezuela's representative to the Inter-American Development Bank (IDB), a Washington-based multilateral agency and the only international financial organization to recognize Guaidó as the legitimate president of Venezuela. The IDB cancelled its annual meeting in Chengdu, China after Hausmann was denied a visa by the Chinese government. On September 27, 2019 Hausmann resigned as ambassador to the IDB, writing on Twitter that "his academic duties at Harvard University are incompatible with the job at the IDB". Hausmann emphasized that he would be available to help Guaidó "any way he could"; he recommended Alejandro Plaz as Venezuela's IDB representative, who was named to the post by Guaidó.

Since 2014 Hausmann operates his private consulting firm, Ricardo Hausmann Consulting LLC, located in Boston, Massachusetts.

Thus the growth diagnostics methodology departs from the "symptoms" of low growth that are visible in a country's economy—for example, low investment. Using a decision tree, all possible causes of these symptoms are inspected and if possible, eliminated. Next, the causes of these causes are scrutinized. This goes on until the most binding constraint to growth in a country is found. This is the constraint that economic policy in the country will need to address to accelerate growth. The authors argue that applying the wrong cure for the wrong disease, i.e. implementing the wrong economic reform in the wrong circumstances, can be both economically unproductive and politically dangerous.

Our metaphor is that products are like trees, and any two trees can be close together or far apart, depending on the similarity of the needed capabilities. Firms are like monkeys, who derive their livelihood from exploiting the tree they occupy. We take the forest – the product space – as given and identical for all countries. [...] The process of structural transformation involves having monkeys jump from the poorer part of the forest to the richer part, but the probability of doing so successfully will depend on the expected productivity of those trees and to how close the monkeys are to unoccupied trees where proximity is related to the usefulness of the specific assets the country has for the production of the new good.

The Product Space ties in with the idea of growth diagnostics, because it was developed with the purpose of identifying the coordination failures whose removal can further the economy of a developing country. The ultimate goal of the Product Space is to develop analytical tools that allow to study economic development, by looking at the de facto technological capacity of countries and not only at the traditional measures of governance used by agencies such as the World Bank or the International Monetary Fund. In a 2009 paper, then, the economic complexity index is put forward as a more accurate predictive measure of growth than previous indicators. Research on the Product Space and economic complexity by Hausmann, Hidalgo and their team is summarized in the (2011) book, The Atlas of Economic Complexity.

The idea of dark matter has not gone without criticism. First, Willem Buiter has argued that dark matter should result in a higher rate of return on U.S. external assets than on U.S. external liabilities. However, he claims, there is no convincing evidence that this is the case. Second, the U.S. income from dark matter seems to vary enormously from year to year, even though it stems from permanent characteristics of the U.S. economy like the export of know-how. Lastly, Mathew Higgins, Thomas Klitgaard, and Cedric Tille agree with the assertion that U.S. foreign assets are currently undervalued. However, they argue that more important, U.S. foreign liabilities are overvalued. Thus, The U.S. has fewer foreign liabilities than is currently assumed; this fact (rather than dark matter) explains the unexpectedly high net income. In a 2007 article, Hausmann and Sturzenegger respond to some of these critiques, defending the existence and function of dark matter.

At CID, Hausmann has concentrated his research efforts in two broad areas: the underlying determinants of macroeconomic volatility, financial fragility and crises; and the determinants of long run growth. Themes he has been exploring include the causes of growth accelerations and collapses; the causes and consequences of original sin; growth diagnostics, the process of structural transformation and the Product Space; and global imbalances and dark matter. Country-specific studies he has been involved with have included projects on Argentina, Armenia, Azerbaijan, Belize, Brazil, Colombia, Chile, China, El Salvador, Egypt, Guatemala, India, Kazakhstan, Mexico, Morocco, Paraguay, Peru, South Africa, Tunisia, Venezuela, and the United States. He also works on gender issues and has been a co-author of the World Economic Forum's yearly Global Gender Gap Report since its creation in 2006. He writes a monthly syndicated column for Project Syndicate covering economics of development.

Dark matter is a term coined by Hausmann and Federico Sturzenegger to refer to the 'invisible' assets that explain the difference between official estimates of the U.S. cumulative current account, and estimates based on the actual return on the U.S. net financial position. Specifically, the U.S. Bureau of Economic Analysis (BEA) estimated the net U.S. current account deficit to be 2.5 trillion in 2004. However, according to Hausmann and his colleague Federico Sturzenegger, the U.S. current account deficit cannot in reality be as high as it is estimated to be: otherwise, the U.S. would be paying large amounts of interests on its debt. This does not seem to be the case: net income in 2004 was still a positive 30 billion, which is not lower than it was in 1980, before the U.S. built up its current account deficit. Thus, the authors argue that the "real" cumulative current account in 2004 was in fact positive, and that somehow a large amount of (foreign) assets are being left out of the calculations.

Self-discovery is a concept developed by Hausmann and Dani Rodrik, referring to the process of discovering what economic activities can profitably be pursued in a given country. In a 2003 paper titled "Economic Development as Self-Discovery", Hausmann and Rodrik contest the notion that growth will follow automatically from the presence of state-of-the-art technologies and good economic institutions (like well-designed and enforced property rights). Another condition, they state, is that entrepreneurs in the country know what new economic activities can profitably be pursued there—in other words, that there is sufficient self-discovery.

In September 2000 Hausmann came to Harvard. Hausmann is director of the Center for International Development (CID) at Harvard University and Professor of the Practice of Economic Development at the Harvard Kennedy School of Government. He also holds the George A. Cowan chair at the Santa Fe Institute. Between 2005 and 2008 he chaired the International Panel on the Accelerated and Shared Growth Initiative for South Africa, an international panel of economists called upon by South African government to advise their economic growth program. He also teaches two development-related subjects: Development Policy Strategy and Why Are So Many Countries Poor, Volatile, and Unequal?. Concurrently with his position at CID, Hausmann has also held several positions at profit and non-profit organizations: he was a member of the board of Venezuela's full-service telephone company CANTV (2001–2007), of microfinance institution ACCION International (2009–2011), and of the advisory board of Abengoa, a renewable energy and engineering company based in Spain. From 2010 to 2011, he was also the elected president of the Latin-American and Caribbean Economic Association.

The expression original sin was first used in international finance in a 1999 article by Barry Eichengreen and Hausmann. The authors define original sin as a situation in which the residents (or government) of a country are unable to borrow in their own domestic currency. In other words, a poor country is forced to borrow funds denominated in foreign exchange (e.g. the U.S. dollar, the euro, or the yen). Based on their measure of original sin the authors show that original sin was present in most of the developing economies and independent from histories of high inflation and currency depreciation. This is seen as problematic because if the borrowing country's domestic currency depreciates, the loan will become more difficult to pay back, since their currency is now worth less relative to the loan.

Hausmann earned a bachelor's degree in Engineering and Applied Physics (1977) and a PhD in Economics (1981) at Cornell University. From 1985 to 1991, he was Professor of Economics at the Instituto de Estudios Superiores de Administracion in Caracas, where he founded the Center for Public Policy. From 1992 to 1993, he served as Minister of Planning of Venezuela and as a member of the Board of the Central Bank of Venezuela. Around the same time, he was Chair of the IMF-World Bank Development Committee. Hausmann served as the first Chief Economist of the Inter-American Development Bank (1994–2000), where he created the Research Department..

Ricardo Hausmann (born 1956) is the former Director of the Center for International Development currently leading the Center for International Development’s Growth Lab and is a Professor of the Practice of Economic Development at the John F. Kennedy School of Government at Harvard University. He is also a former Venezuelan Minister of Planning and former Head of the Presidential Office of Coordination and Planning [es] (1992–1993). He co-introduced several regularly used concepts in economics including original sin, growth diagnostics, self-discovery, dark matter, the product space, and economic complexity.