I would much rather that you only read his post, because it is a wonderful, wonderful piece.
But if you insist on a key extract, this would be it for me:
…we development economists should keep in mind that sustained economic growth is empirically necessary and empirically sufficient for reducing poverty (at any poverty line) whereas targeted anti-poverty programs, while desirable, are neither necessary nor sufficient
Lant’s point in his blogpost is asking what will give the biggest bang for the buck in terms of developmental work. He reviews a paper which “shows that adding a “psycho-social” component to an anti-poverty program in Niger is enormously cost-effective, as it had similar impacts as adding a cash grant but was much less expensive”.
You may get the impression, while reading the blogpost, that Lant Pricthett is being a tad sarcastic. But I don’t think he is – he is truly appreciative of the quality of the work done in the paper, and thinks that the conclusions are truly solid. But, he says, the paper rigorously and correctly answers a question that is, in itself, a completely wrong one.
The development question is: “How can the people living in Niger come to have broad based prosperity and high levels of wellbeing?” The charity question is: “If some agency (perhaps of a government) is going to devote a modest amount of resources to targeted programs that attempt to mitigate the worst consequences of a country’s low level of development, what is the most cost-effective design of such programs?”
Not enough people working in development, Lant seems to say, focus on the truly big picture question in development economics – how can we have broad based prosperity and high levels of well-being? Instead, we focus on improving the cost-efficiency of a program that “attempts to mitigate” the ill-effects of poverty.
To use an analogy, Lant is saying that medical researchers who focus on improving the quality of aspirin by, say, 5% might do better by trying to understand what is causing the headache in the first place. Get rid of the cause, rather than trying to incrementally improve the cure.
But the larger point from his blogpost is applicable to much more than development economics. Don’t try to make your existing solution to anything incrementally better, ask if eradicating the underlying problem itself is possible.
If you’re not familiar with the Hindi language, the title of this post is a play on a fairly popular phrase: aamdani atthanni, kharcha rupaiya
In effect, your income is less than your expenses. Which, of course, isn’t a desirable state of affairs:
For all of the last decade, the primary metric for evaluating budgets was the fiscal deficit. How much would the government target to bring it down by, and how credible were the numbers? The source of that stress was the massive stimulus set in motion by the government well before the global recession showed up, as it was inundated by taxes in the 2006 to 2008 period. The challenge with that stimulus was that it was hard to roll back, much of it being a large increase in state and central government salaries and pensions.
But we find ourselves in unchartered territory, says Neelkanth Mishra:
Tax collection is surprising positively, and should be more than 1 per cent of GDP higher than before the Covid-19 lockdowns (though assumptions are lower). Further, financial markets appear to be expecting both central and state governments to incur large fiscal deficits for several years, with the anchor shifting higher by 3 per cent of GDP. Let us assume that GDP being below where it was supposed to be if the pandemic had not happened means an extra per cent-and-a-half of costs for the government. Interest costs have risen as governments borrowed to bear a large part of the economic loss during the lockdowns. Further, some government expenses, like salaries and pensions, keep rising irrespective of the level of GDP. This still leaves 2.5 per cent of GDP of space for governments to increase spending.
And as it turns out, it is unchartered territory for everybody, the government itself included. Neelkanth Mishra points out that we’re bringing off-budget items on to the budget, we’re paying off export incentives that were due, and the debt write-off for India has also been accounted for. Even so, he says, cash balances maintained by the government with the RBI are at an all time high.
So what can be done? Well, part of the answer this time around lies in asking the states to step up and spend on building out physical infrastructure:
The sharp increase in capital expenditure from Rs 5.45 trillion to Rs 7.5 trillion shows the intent of the government is to stay away from distributing freebies (commendable, given the upcoming state elections), and focus instead on productive spending, which may be rolled back if necessary. However, half of this increase is an allocation for interest-free loans to state governments for capital expenditure, and some of the rest is the inclusion of off-budget provisions in last year’s budget in the budget numbers this year. There are increases in the allocation for defence (particularly once adjusted for the lower spend on aircraft purchases this year), the Nal se Jal scheme, and for roads and railways, but these are incremental rather than substantial. Allowing state governments more fiscal space (deficits up to 3.5 per cent of GDP are allowed, with another half a per cent if the state undertakes power sector reforms), and dangling the carrot of more funding if they undertake capital expenditure is the right approach in theory. Much of the necessary investments need to occur at the state level: Like in health, education, urban infrastructure, water supply, sanitation and power distribution. However, the gap between states’ intent to spend and their execution has widened substantially during the pandemic, and their total spending is far lower than budgeted, despite increases in non-discretionary expenses like interest costs, salaries and pensions.
…many developing countries and organizations within them are mired in a “big stuck,” or what we will call a “capability trap”: they cannot perform the tasks asked of them, and doing the same thing day after day is not improving the situation; indeed, it is usually only making things worse. Even if everyone can agree in broad terms about the truck’s desired destination and the route needed to get there, an inability to actually implement the strategy for doing so means that there is often little to show for it—despite all the time, money, and effort expended, the truck never arrives.
Andrews, M., Pritchett, L., & Woolcock, M. (2017). Building state capability: Evidence, analysis, action (p. 10). Oxford University Press.
In other words, we have more money to spend this year, but our constraint is quite literally our inability to spend it usefully and efficiently.
It would be worth our collective while, then, to learn a little bit more about state capacity!
As we will learn in today’s post, the principles that we will learn from this marvelous essay are applicable in so many other contexts.
First, the title of his essay:
A Quickly Made Long Tragedy
Here’s one way to understand what this means in practice: the advantage of a top-down decision making system is that decisions can be made quickly. The opportunity cost of such a system is that buy-in from every person involved with the system is not only difficult to get – it is difficult to ascertain in the first place. As Akshay Alladi puts it over here:
The Hayek quote: “The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design” is not confined to economics but to all complex systems- including say forming a new state in Afghanistan. Perils of top down design
What does Lant Pritchett mean when he says a “quickly” made “long” tragedy? The decision making was quick, sure – implementing said decisions on the ground proved to be rather more tricky. And it took twenty years to understand that in this case, more tricky was, in fact, a euphemism for “was never gonna happen”.
Second, talk about connecting the dots as a writer!
I am a very visual person so I propose this diagram as an aid to understanding the tragedy, for both the USA but much more so the people of Afghanistan, of the US engagement
If you’re a student, this is an important lesson. Figure out what type of learner you are, and that as quickly as possible. Do you prefer to understand a concept by drawing a diagram? Or by writing down an equation? Or by writing down your understanding in words? You’d be doing yourself a favor by trying to get better at all three, but any subject becomes easier when you try to figure out how you learn best. Double down on that method and get excellent at it. Try to get better at the other methods sure, but be unapologetic about the method that works best for you.
The entire essay is worth reading, and multiple times. But when you consume anything (a video, a movie, a podcast, a textbook – anything) always ask what else you can learn from it, apart from the intended lesson itself.
This interview went viral (well, about as viral as interviews of economists can be) recently. And it was this excerpt that made the rounds:
India never changed its mind about having a selection system rather than an education system. A selection system is where you put all children in a classroom, but provide a poor or indifferent environment for learning, and see what happens. The students that learn in that environment must be brilliant. As for those who do not learn, teachers will say they must be the type of children who cannot learn. India took that option because they expected that 2-3% of the population would be an educated elite, and that would be good enough. And so, they committed themselves to selection rather than education. Things will only change once they fundamentally change their ideas, which they are hopefully in the process of doing now.
Tyler Cowen chose a different bit of the same question to excerpt:
Ann Bernstein: From your knowledge of India and Indonesia, what are the core causes of their lack of educational progress? These are places with highly qualified civil servants and, at least in India’s case, a democratic government. How do you see this problem? How do we get out of this trap? Lant Pritchett: I’m head of this very large research project called RISE and we’re spending millions of dollars to find out the answer to that question. One of the countries where education improvements have been dramatic is Vietnam. At a tiny fraction of the spending in most countries – including South Africa – Vietnam is achieving OECD levels of learning. When we asked our Vietnam team why the country has produced this amazing success, they told us: ‘because they wanted it’. On one level, that seems silly; on another level, it is the key. Unless, as a society, you agree on a set of achievable objectives and actually act in a way that reveals that you really want those objectives, you cannot achieve anything.
Me, I’m dying to ask Lant Pritchett a question, and I really wish it was asked in that interview:
What made the Vietnamese want educational progress?
I finished yesterday’s post by asking what needs to change in terms of societal incentives for my Almost Ideal University to have even a chance at existing. Same question, except it seems to not be a theoretical one in Vietnam’s case – and so I’m dying to know: what made the Vietnamese want educational progress?
More generally, what makes any society want educational progress?
I sometimes worry that I have found such a good hammer that the whole world looks like a nail, but please tell me how my answer is wrong: a society that agrees that life is a non-zero sum game is a society that will want educational progress.
Status driven societies, for example. If which college you go to matters more than what you learn in that college, you live in what these days is called a status driven society. And since, by definition, there are only so many “top” colleges in a given geographic area, there are only so many seats to go around. Those that get in have “won”, at the expense of everybody else who has “lost”. And the incentive for the college in question is to not increase the number of seats, for that would drive down its status.
I wonder if that conclusion is as befuddling for everybody else as it is for me? The best college in town should not admit more students because that very act will ensure that it is no longer going to be thought of as the best college in town. We have successfully Groucho Marxed the education sector in India.1 He meant it as a joke, we think it to be a great way to dispense quality education.
(Scaling up will have a negative impact on quality, especially when it comes to education. Therefore replicability rather than scale. That is, there is an argument to be made that the “top” colleges admit more folks than they do right now. But their bigger responsibility is to help other colleges become better, in my opinion.)
It’s the whole college as a bundle problem all over again: when you spend the time and money getting educated from a top college, you’re hoping, as a student, to get at least two things (there’s a third, but that’s not relevant right now):
A great education
The license to say, “… from XYZ” in addition to whatever your educational qualification is. XYZ could be Harvard, could be IIT, could be Fergusson College in Pune. But hey, only so many additional people get to say that every year. Status!
Parents want to be able to say that their kid went to a great college. Kids want to go to a great college. Companies want to recruit from great colleges. Professors want to work in great colleges.
And in a zero sum world (or status driven societies, if you prefer), there can, by definition, only be so many “great” colleges.
Go back to a part of the excerpt from Lant Pritchett’s interview at the top of this post:
And so, they committed themselves to selection rather than education.
Yes, indeed we did. And my contention is that we did so because we prioritized status over education. LinkedIn over Coursera, in my framing.
And that, unfortunately, leads us to a chicken and egg problem. Because the only way to change priorities at a societal level is through… education.
So, three conclusions, and before that, one problem.
The problem: if what I’ve said here makes sense, we have a really, really big battle up ahead of us. How to use a broken education system to nudge society towards a better education system that isn’t broken is a hard thing to think about – and I would therefore love to understand how I might be wrong. Please tell me!
The three conclusions:
Depending on only the education system to provide higher education isn’t a great idea (“But then what else?” is a question I do not have an answer to at the moment).
I need to read more about education in Vietnam
Teaching more people that life is best thought of as a non-zero sum game is a great mission to have in life. No?
Not just in India, of course. But given where I am, and given who I am, I will naturally focus much more on India[↩]
Ali, an FYMSc student at GIPE reached out with a couple of questions about poverty line estimates – their nature, are they adjusted for inflation, etc. That was in response to my post about the tricky nature of poverty lines. Ali’s comment is towards the bottom of that post.
Here’s my list of things to read in order to understand the concept of poverty lines better:
First, the World Bank itself:
Q: What is the new poverty line, and based on this new measure, how many people are living in extreme poverty in the world? A: The new global poverty line is set at $1.90 using 2011 prices. Just over 900 million people globally lived under this line in 2012 (based on the latest available data), and we project that in 2015, just over 700 million are living in extreme poverty. Q: Why raise the poverty line? What was wrong with the $1.25 a day line that we are all used to? A: As differences in the cost of living across the world evolve, the global poverty line has to be periodically updated to reflect these changes. The new global poverty line uses updated price data to paint a more accurate picture of the costs of basic food, clothing, and shelter needs around the world. In other words, the real value of $1.90 in today’s prices is the same as $1.25 was in 2005.
That answer’s at least one of Ali’s questions – the poverty line is indeed updated to account for inflation. But keep in mind that indices are tricky little devils at the best of times. When it comes to measuring inflation, particularly for a basket of goods that the poor are likely to consume across different countries over long time horizons, it is all but impossible.1 But still, to the extent possible, poverty lines are adjusted for inflation.
But Lant Pritchett has his reservations:
There is no line at dollar a day in income dynamics. One might think a poverty line exists that demarcates a “poverty trap” and that people “in poverty” have a hard time escaping poverty—except that it doesn’t. All of the available evidence that tracks households over time finds enormous fluidity across the dollar a day threshold–and no evidence that it is harder to increase incomes from just below than just above—there is no line.
… and if you read the entire essay, it is hard to disagree with his point. He has an entire page on his website dedicated to talking about poverty lines, and the articles/videos deserve a closer look by any student of development economics.
I cheated a little bit while writing what I wrote above, because I wanted to give a chronological view of developments in the last decade or so. What’s written above is from 2013-14, and then this happened in 2017:
Starting this month, the World Bank will report poverty rates for all countries using two new international poverty lines: a lower middle-income International Poverty Line, set at $3.20/day; and an upper middle-income International Poverty Line, set at $5.50/day. This will be in addition to the $1.90 International Poverty Line – which remains our headline poverty threshold, and continues to define the Bank’s goal of ending global extreme poverty by 2030. … Let us be completely clear: The World Bank’s headline threshold to define extreme global poverty is unchanged, at $1.90/day. The Bank’s goal of ending poverty by 2030, and the United Nations Sustainable Development Goal 1.1, are both set with respect to this line. However – as Amartya Sen noted early on, and the Atkinson Commission reminded us – poverty is not a uniquely defined concept. There is an inevitable element of arbitrariness in choosing any poverty line, no matter how carefully it is constructed.
Here is a useful survey paper on measuring poverty in India:
Poverty can be measured relatively, but a measure of absolute poverty is more useful for making cross-cultural comparisons. Unfortunately, the measurement of absolute poverty is difficult, because of inter-individual and intra-individual variations in minimum needs over time. As a result, simplistic assessment methods and confusion have marked many of the estimates of absolute poverty in less-developed countries. Using Indian material as an example, this paper attempts to trace the progress of the methodology; to explain how widely varying poverty estimates have come about; and to draw some tentative conclusions about the extent and pattern of absolute poverty in India today
Cutler, P. (1984). The measurement of poverty: A review of attempts to quantify the poor, with special reference to India. World Development, 12(11-12), 1119-1130.
Any GIPE student should know about Dandekar-Rath (part-II here), of course, but this paper goes a bit beyond, and is therefore a better introduction (in my opinion). Speaking of Dandekar, the original paper is worth reading, of course, but this is also an enjoyable read.
Finally, here is an excellent speech by Abhijit Banerjee on different (potential) ways to measure the poverty line.
Anybody who has been subjected to an introductory econ class by me has inevitably been through this:
I’ve been talking about Gapminder in my classes for over a decade now, and have written about it on these pages a number of times. I’m still to come even remotely close to being bored: it is simply that good. But today, I want to point out a feature of this graph that is a nice way to get started on thinking about economic growth.
As I always say when I introduce Gapminder to students for the first time, this is what Hans Rosling1 used to call the “Health and Wealth” chart – for obvious reasons. This is the crucial bit though: there is no country that is towards the top left of this chart, and there is no country that is towards the bottom right.
Rich countries – that is, countries with high GDP per capita – have better health outcomes. Poor countries – that is, countries with lower GDP per capita – have worse health outcomes. Yes, we are measuring health through only one parameter, and yes we can never be sure in what direction the causality runs2 – all that I’ll happily concede. But still, richer countries have better health outcomes. I’m, as they say, willing to die on this hill.
Growth matters.
Growth, or GDP per capita, or material well-being – I’ll conflate these terms and give textbook authors a heart attack in the process – they aren’t an end in and of itself. They’re the means to achieving ends: health, education being just two of them.
And yes, growth comes at a cost, and there are problems with growth – many, many problems. But still.
Growth matters.
And as I mentioned in yesterday’s post, Lant Pritchett is a bhakt when it comes to worshipping growth:
Broad-based growth, defined as the process that raises median income, is far and away the most important source of poverty reduction. There is no instance of a country achieving a headcount poverty rate below 1/3 of its population (at moderate poverty line of $5.50) without achieving the median consumption of that of Mexico. This is not to say that there do not exist anti-poverty programs that are cost-effective and hence should be expanded, or, conversely, that there are anti-poverty programs that are not cost-effective (or even have zero impact on poverty) and should be cut back or eliminated. Analyses of these types of programs would enable a more efficient use of resources devoted to poverty reduction. But large and sustained improvements in global poverty will almost certainly have to focus on how to raise the productivity of the typical person in a poor country, which is a key source of national income growth.
Pritchett’s fervent defense of the idea of worshipping growth stems from two places. One, as a worthy idea in and of itself, but more so because he thinks that development economists have lost their way a little bit:
The only solution to world poverty is vast increases in the productivity per person which would be the result of sustained economic growth that is broadly shared and increases in national development. This is going to require the answers to many complex and interesting questions, and research into those questions is, to my mind, the domain of development scholarship. And, when national development is achieved the kinky development agenda is (nearly) completely solved through general social progress.
(By the way, this article carries my all-time-favorite title ever.)
He is saying, in plain simple English, that growth is what matters. Everything else that is currently going on in development economics is secondary.
Growth matters.
And as one might anticipate by now, Gulzar Natarajan agrees:
I am strongly inclined to argue that foreign aid should be confined to either development of pure physical infrastructure or for R&D or for state capacity building and should avoid advocating or supporting specific social development programs in areas like health, education, nutrition, agriculture etc. As I will try to explain, there is something about social development programs that demands that these societies struggle hard on their own to make difficult collective social and political choices.
If Kenya needs to fix its school education system, its stakeholders need to grapple with the real reasons why children are not attending schools, why teachers are not accountable, why the quality of instruction is so poor, and prioritise resource allocation and make political choices accordingly. There is a path dependency associated with reaching the destination. Technical solutions are a diversion from the real task. For example, take the issue of teachers accountability to the parents. A biometric attendance solution is a good innovation but in a complex system can at best offer the illusion accountability and that too for a short-time, while also postponing the imperative to undertake the reforms like making the school and teachers accountable to the local community.
What he is really saying is that Goodhart’s law is a real problem, and we should cut to the chase and focus on the real, underlying problem, rather than chase relatively easily measurable metrics.
That is, getting teachers to punch in on time is no guarantee that they’ll teach well, much like getting students to attend classes is no guarantee that they’ll learn well. But making attendance mandatory, and measuring it, gives us the satisfaction of Having Done Something.
But the point of getting education “right” is to make people more productive. The point of getting education “right” is not to have teachers (or students) turn up on time!
And the point of helping folks become more productive is, as always the fact that:
I’d gone to the RTO the other day for some work, and I suppose you know what comes next.
I wouldn’t say it is impossible to get work done without the help of an agent, but it is certainly true that it isn’t a breeze either. And if one teaches opportunity costs, it makes sense to take the “help” of an agent. Sure you can do it yourself, but it then becomes eye-wateringly expensive in terms of time. And therefore, money.
And while I waited in the numerous byzantine lines to get my work done, I reflected, like every good economist should, on what could be done to reform the system.
Just ban agents, my understandably irrational brain screamed as a first pass solution. Why doesn’t the bureaucracy come up with a better process map that just gets out of the way instead, Cold Calculating Rationality suggested.
Because they aren’t incentivized to, C.C.R went on to reason, proceeding to shut me out of the conversation altogether. Although I was, truth be told, a very interested bystander by now.
But why aren’t they incentivized to – isn’t that the next logical question to ask, mused C.C.R.
I mean, won’t it make their job easier if they make their processes easier?
Well, yes, but they earn the same either way, no? It’s not like payments are linked to productivity increases.
How would they earn more?
Maybe through a Coasean solution in which there’s connivance with the agents, and they get a cut? That is, make the process impossibly cumbersome, and continue to keep it cumbersome, no matter what any well meaning committee proposes. That then facilitates agents stepping in and “helping” blissfully ignorant citizens get their work done faster – for a fee, of course.
They take a cut of the fee – and hey, there you have it! Bureacracts have an incentive – but not to simplify the system! They have an incentive to continue to clog up the system.
C.C.R needed a break at this point in time, so it and I played a couple of rounds of Fruit Ninja on my phone.
But why, C.C.R asked – for it can take only so many minutes of mindless swiping – would anybody want to be an agent? I mean, there are surely better, more remunerative ways to earn a living.
C.C.R. and I stared at each other in part jubilation, and part horror.
“There aren’t better ways, no?!”, we said in unison.
“I mean, if markets are weakly efficient, nobody would willingly work as an agent, surely”, said C.C.R triumphantly.
“And so”, C.C.R went on to say in that insufferably smug way that is its wont, “if you really want to reform the system, you need to create better employment opportunities everywhere else. Reforming this particular system is just putting a band-aid on a cancer. Because yes middle-mean are bad, but nobody grows up dreaming of being a middleman. Of course the middlemen, and that entire nightmare of a system is going to be up in arms if you seek to eliminate it. The lack of alternative, viable careers: that’s the real problem.”
“So, just more pro-growth policies, you’re saying?”, poor old irrational me asked timidly.
“I wonder where else we can apply this line of thinking”, I was about to ask C.C.R… but then it was my turn at the window, and I was so happy that I was finally done with the whole thing that I stopped thinking about it altogether.
That was a question sent in by a student recently, and today’s essay is an attempt to answer the question.
Have you heard of the tsetse fly? Unless you are a student of biology, or from Africa, it is unlikely that you have. And there’s no reason for you to have heard of it, of course. On the other hand, if you were to be from Africa, and from a long time ago, you likely would not only have heard of the tsetse fly, but you would have dreaded it.
Why would you have dreaded it? Because the tsetse fly feeds on the blood of vertebrate animals, and in doing so, also manages to transmit diseases between species. And this fly was so very efficient at transmitting diseases that it actually prevented the emergence of animal husbandry in those parts of Africa where it was both present and dominant.
Worse: research has established that the existence of the tsetse fly in certain parts of Africa has at least partially contributed to those parts of Africa remaining relatively underdeveloped today.
Ethnic groups inhabiting TseTse-suitable areas were less likely to use domesticated animals and the plow, less likely to be politically centralized, and had a lower population density. These correlations are not found in the tropics outside of Africa, where the fly does not exist. The evidence suggests current economic performance is affected by the TseTse through the channel of precolonial political centralization.
That’s what development economists do: they try and figure out which parts of the world are not doing well. Then they try and figure out why (imagine being able to identify a fly as a potential cause of underdevelopment!). And finally, they try to recommend policies that might make the situation better.
Three Big Questions
When I teach courses in development economics, I often introduce the subject by speaking about three “big picture” questions:
What does the world look like?
Why does it look the way it does?
What can we do to make it better?
And honestly, that is really all you need to think about when you want to understand what development economists do. Let’s tackle each of these questions in turn.
What does the world look like?
Good development economists don’t begin with recommendations and policy measures. That’s a long way down the road. They begin by trying to paint for themselves a picture of the world.
My favorite way to paint for myself a picture of the world is by using a freely available online tool called Gapminder.
What are we looking at? Hans Rosling, the Genius (I don’t use the word lightly, and the capitalized G is intentional) who came up with this tool, used to call this chart the “Health and Wealth” chart.
Well, here’s what it tells me – see if you agree with my understanding. It tells me that the reason economists harp on so about increasing income (GDP) for all nations is not because getting rich is an end in and of itself. It is the means to an end – that end in this case being better health.
Two caveats: higher life expectancy doesn’t necessarily mean better health. But in this case, I think it is an acceptable proxy. Second, correlation is not necessarily causation! Higher wealth may not necessarily be causing better health. Maybe better health is causing higher wealth? Maybe some other variable is causing both of these things? Maybe it is all of these and more?
But all those caveats aside, at first glance, a basic fact emerges:
There is no country that is at the top left of this chart, and there is no country at the bottom right of this chart.
Poor countries tend to not do well in terms of life expectancy, and rich countries tend to do well in terms of life expectancy. If I want the members of my family to live longer, I would want my country to be towards the top right of this chart.
But back to the central question: what does the world look like? This is a generalization, of course, but most of the African nations tend to lie towards the bottom left. Most of the European nations tend to lie towards the top right. And Asian nations (and some South American nations) tend to lie somewhere in the middle.
That’s one answer to the question we were trying to answer in this section: what does the world look like?
But there are other answer possible! Here are just two to get you started:
Play around with the World Bank Atlas, a most excellent data repository.
Why does the world look the way it does?
The Magic That Happens When You Hit Play in Gapminder
I have been using Gapminder for over 12 years now, but I am yet to get tired of watching that video. In fact, as I often tell my students, you could do a lot worse than spending time with Gapminder open in one tab, and Wikipedia in the other.
(On a tangential note, take a look at what happened to the world between 1918 and 1921. That’s the Spanish flu at work.)
Why did I include this video in this blogpost?
Because it helps us begin to think about the answer to the second question: why does the world look the way it does?
The world looks the way it does today because some countries were able to steal a march on others about two hundred years ago. The United Kingdom, the United States of America, Japan, Germany and some other nations started moving towards the right top of the chart before other countries could. You could, in fact, make an argument these countries were able to move to the right top by making sure that the other countries stayed at the bottom left!
And when you make that argument, you begin to try and answer the second question – this argument is the anti-imperialist stance. The Asian and African colonies of the European powers of the 19th century lag behind as much as they do today because they were colonies: that’s one candidate for explaining why the world looks the way it does.
The tse-tse fly (remember?) is another candidate for a more localized answer to the second question. Politics, race, religion, geography, caste, gender, openness to innovation – there are so, so many candidate answers! People can (and do!) spend entire careers making their way through just one of these candidates.
By the way, if you would like to read books about this topic – why does the world look like the way it does – here are two absolute must-reads:
I’m not joking! That was a genuine proposal, made by this guy who you may have heard of. Started a software firm, dabbled in philanthropy, and is now engaged in trying to literally save the world. Yes: Bill Gates. His master plan to save Africa involved giving everybody a chicken.
Our foundation is betting on chickens. Alongside partners throughout sub-Saharan Africa, we are working to create sustainable market systems for poultry. It’s especially important for these systems to make sure farmers can buy birds that have been properly vaccinated and are well suited to the local growing conditions. Our goal: to eventually help 30 percent of the rural families in sub-Saharan Africa raise improved breeds of vaccinated chickens, up from just 5 percent now. When I was growing up, chickens weren’t something you studied, they were something you made silly jokes about. It has been eye-opening for me to learn what a difference they can make in the fight against poverty. It sounds funny, but I mean it when I say that I am excited about chickens.
Well, I exaggerate, of course. Not literally giving everybody in Africa a chicken – but something along those lines.
Development economists were less than impressed:
But first, let’s talk about poultry. I think we can agree that we can only give away so many chickens. You’ve said that a family that receives five hens could eventually earn $1,000 annually, assuming a per-bird price of $5. But would that still be true when a third of your neighbors are in the same business? As supply goes up, I’d expect the price and profits to come down. And moving to an economy in which 30 percent of rural Africans sell chickens is a humongous increase in supply.
And to make matters worse, other development economists were less than impressed with the development economists who were less than impressed with Bill Gates’ chickens:
I have friends/alumni/colleagues working around the world in many facets of the challenge of development. I have friends working for the Prime Minister of India. I have friends working for the President of Indonesia. I have friends working on the conflict in Yemen. I have friends working as civil society activists in Egypt. I have had policy discussions with policy makers all over the world. I worked for 15 years in the World Bank. I have taught development at Harvard for 15 years. In all of those conversations with friends, colleagues, policy makers, and students all kinds of difficult and pressing development questions have arisen that research could address. Never, ever, ever has “chickens versus cash” arisen as an issue at all, much less as the remotely possible “best investment” in research.
By the way, that blog post that I quoted above? It has possibly my all time favorite title ever: Getting Kinky with Chickens.
Why am I telling you all this? Because allow me to let you in on a dirty little secret: there is zero consensus on what is the correct answer to the third question.
Well, OK, zero consensus is an exaggeration. But it ain’t a settled issue, no sir.
That is, nobody has come up with a definitive, one-size-fits-all answer to the question, “What can we do to make the world better?”
Let’s parse through the question. That might help us understand why it is such a controversial one.
What can we do to make the world better?
Who, exactly, is “we”? That is, who is in charge of decision making when it comes to making things better? Do democracies work better? Or do autocracies? Or something in between? Remember, we are not asking which political system is the best from a moral, or political, perspective. We are asking which system is likely to give us the most rapid growth. Was Singapore under Lee Kuan Yew a true, participatory democracy, or was it a democracy with Asian characteristics? What about South Korea under General Park? And while we’re on the subject, an autocracy is not by itself a guarantee of rapid growth! Pakistan, Cambodia are two examples from our own neighborhood. Also remember: just because a system may give us more rapid economic growth doesn’t mean it is the best system to use. China is the obvious country to think about in this regard!
Do we really need to “do” stuff, or is it more about just getting out of the way, and letting the economy work it’s magic?
Chart from a lecture I'm giving: how migration replaced aid as a development program pic.twitter.com/KRa7FlhRal
3. Are we agreed on what “better” means? Lesser pollution comes at the cost of lesser industrialization, for example. Are we so sure that all seven billion of us can identify the exact point on the spectrum that works best? And if not, then we’re back to the first point: who is “we”?
And hey, even if you could imagine a world in which we somehow, magically get everybody to agree on “What can we do to make the world a better place?”, we’d begin a new round of battles, centered around a new question.
Still, there is some good news. The unsettled nature of the debate means that this is extremely fertile ground to work upon, and you can count on development economics as a field remaining a fundamentally interesting one to work in for years, if not decades, to come.
And that, my friend(s), is what development economics is all about!
A topic on which I changed my mind this year, and therefore this year ought to count as a success. Props to Murali Neelakantan for helping me do so! On patents.
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Two sets of links about this year’s Nobel. One set is rather informative…
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If you think of one’s opinion about RCT’s as a spectrum, I fall on the “I think it’s not a bad idea at all” part of it. How might I be wrong? Five articles that help me understand this.
“Lately I find myself cringing at the question “what works in development?” I think it’s a mistake to think that way. That is why I now try hard not to talk in terms of “program evaluation”.“Does it work?” is how I approached at least two of the studies. One example: Would a few months of agricultural skills training coax a bunch of ex-combatants out of illegal gold mining, settle them in villages, and make it less likely they join the next mercenary movement that forms?
But instead of asking, “does the program work?”, I should have asked, “How does the world work?” What we want is a reasonably accurate model of the world: why people or communities or institutions behave the way they do, and how they will respond to an incentive, or a constraint relieved. Randomized trials, designed right, can help move us to better models.”
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.. Chris Blattman on the issue. (Note that this was written in 2016)
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“In the early 2000s a group emerged arguing that important improvements to development and hence to human well-being could be achieved through the wide spread use of independent impact evaluations of development programs and projects using randomized control trial methods (RCT) of choosing randomly “treatment” and “control” individuals. I have been arguing, since about that time, that this argument for RCT in IIE gets one small thing right (that it is hard to recover methodologically sound estimates of project/program causal impact with non-experimental methods) but all the big things wrong.”
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You can’t write anything about RCT’s without writing about Lant Pritchett’s opinion about them.
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“Like other methods of investigation, they are often useful, and, like other methods, they have dangers and drawbacks. Methodological prejudice can only tie our hands. Context is always important, and we must adapt our methods to the problem at hand. It is not true that an RCT, when feasible, will always do better than an observational study. This should not be controversial, but my reading of the rhetoric in the literature suggests that the following statements might still make some uncomfortable, particularly the second: (a) RCTs are affected by the same problems of inference and estimation that economists have faced using other methods, and (b) no RCT can ever legitimately claim to have established causality.”
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.. Angus Deaton weighs in (and if you ask me, this is my favorite out of the five)
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“The economists, like the medical researchers, seem to have lost touch
with their proper role. They are not ethically assigned to master our lives.
The mastering assignment is what they assume when they focus on
“policy,” understood as tricking or bribing or coercing people to do what’s
best. It sounds fine, until you realize that it is what your mother did to you
when you were 2 years old, and had properly stopped doing to you by the
time you were 21. The field experimenters scorn adult liberty. And that is
the other way many economists have lost touch. As noted by the
economist William Easterly, another critic of the experimental work, and as
argued at length by your reporter in numerous books, the real way to solve
world poverty is liberty. Not dubious, fiddly, bossy little policies handed
down from the elite. ”
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Dierdre McCloskey (as usual) doesn’t pull punches.
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