positive part to play after all. Other extensions would involve very different game-theoretic models of endogenous policy formation and rent seeking.
The problem of underdevelopment is closely related to the notion of the staple trap. In other words, low incomes and poor long-term growth rates are ultimately the result of an undiversified production structure, and the inability to adapt to change. Policies matter, and these often need to be adapted to the size of the economy. The right policies include macroeconomic stability, openness (as it promotes competitiveness), as well as the accumulation of human and social capital. Here, issues of political economy, which determine policy, can be crucial. Also, one cannot discount the value of the appropriate timing of policy changes, which are often the product of pure chance. These issues are discussed further in Chapter 8 .
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