The International Herald Tribune | www.iht.com NEWS ANALYSIS Grass roots economists' influence grows Daniel Altman The New York Times Monday, August 19, 2002
NEW YORK Though rich countries may be able to rescue Uruguay and Brazil from crises simply by lending them billions of dollars, the problems of the poorest countries require more specific, grass roots solutions. A new cadre of development economists, including some of the hottest up-and-coming professors, are dissatisfied with old, traditional panaceas such as balanced budgets, new infrastructure and financial stability. These young economists are using basic insights about incentives, human capital and the flow of information to inform policy in emerging economies, one piece and one country at a time. Using economics to help struggling countries from the top down has been a hit-or-miss affair. The International Monetary Fund, the World Bank and other teams of economic advisers often brought the same message wherever they went: the necessity of programs to clamp down on fiscal waste, stop inflation and improve foreign trade and investment. These policies helped Chile, India, Israel and Mexico to stabilize their currencies and lay the groundwork for growth. Yet in Africa, the former Soviet bloc, Southeast Asia and many parts of Latin America, there is little to show for all the well-intentioned advice. Put simply, the same policies have not worked in every setting. "To some extent the field has been driven by abandoning big-picture paradigms," said Timothy Besley, director of the Suntory-Toyota International Centers for Economics and Related Disciplines at the London School of Economics. "The problems are different country to country and even region to region within countries. These big-picture efforts are good for giving us inspiration, but probably not much good in making concrete progress within particular countries." Though they do not entirely reject the macroeconomic policies of the old country doctors, these new-style economists have begun to focus on smaller, targeted initiatives in public health, agriculture and education. Finding successes among these programs at a grass roots level could yield lessons for broader policies. "I see my job as trying to uncover little pieces of knowledge that can help us define policy for development," said Esther Duflo, an associate professor at Massachusetts Institute of Technology. Development economists have become less ready to presume that a single theory can solve all the problems of all poor countries, said Michael Kremer, a professor at Harvard who won a MacArthur Foundation Fellowship, or "genius award," in 1997. Now, he added, "it's less trying to find the magic key." Even the World Bank has shifted more attention to the most basic problems of poor countries, such as public health. The shift fits loosely into a pattern of economists pushing bulky, all-encompassing models aside in favor of simple truths built up from field work and the theory of incentives. This new way of doing things, which often draws on ideas from other areas of economics, rejects a strict dogma and welcomes tools from several different schools of thought. "Development is a set of questions," Duflo said. "It's not really defined by techniques." That was not always the case, Kremer said. "The field of development was for a while split off from mainstream economics, and so people in development weren't always using the most modern tools, either theoretically or empirically." With increasing rigor, he said, the field entered the mainstream and began to attract the best students. Following pioneers such as Angus Deaton, who teaches at Princeton, came a wave of younger faculty, often with hands-on experience in the field, who began to search for specific programs and strategies that did work. Professors such as Kremer, Abhijit Banerjee of MIT and Christopher Udry of Yale, became mentors and collaborators for Duflo's generation of development economists. They set an example by conducting field work on the links connecting health, education, local politics and productivity in places such as Kenya, India and Ghana. To many in academia, Duflo epitomizes the new development economics with her broad use of theoretical and statistical tools and her willingness to conduct research in the field. Duflo said she wanted to find out why the poorest people almost always stayed poor. That has led her to ask how governments and outside organizations can help the citizens of poor countries, and why information and technology that can promote economic advancement spread less quickly in some settings than in others. Old-line development economists often assumed that all people were rational actors, or that lessons learned in rich countries would stay true anywhere. But according to Duflo, "the level of discrepancy between what people do and what we as economists think they should do can be pretty substantial."
