New thinking on growth and development policy

That is the title of an executive program I teach in, along with colleagues Ricardo Hausmann, Abhijit Banerjee, Esther Duflo, Sendhil Mullainathan, Rohini Pande, Lant Pritchett, and Chuck Sabel.  It is also the reason that it has been a slow week blogging-wise for me (in case you have been wondering): I have spent much of the week in a classroom.  Attendees are mostly economists from the World Bank, but also include a few professionals from other multilateral institutions and development agencies (ADB, IDB, MCC, and DFID). 

We cover a whole set of topics ranging from growth and growth diagnostics to health, education and credit markets.  The unifying theme for the whole program, in the words of one of the participants, is to "forget the Washington Consensus, and to learn to look for contextualized solutions using diagnostic tools and evaluation techniques."  We try to illustrate the value of such an approach in different circumstances: when doing growth diagnostics for South Africa, for example, or solving the health crisis in Rajasthan. (The latter discussion is introduced by a fascinating video produced by Abhijit and his team.)   

This is the third year of the program, and I find the participants much more willing to buy into this approach than in earlier years.  Either we are selling it a lot better, or times have indeed changed. 

But there is a residual sense of discomfort rooted in the feeling that these new ideas leave their practitioners rudderless--without enough things "we know" to hold on to.  The tendency is to want to turn the new diagnostic approaches into recipes of their own--or at least into a check list that can be applied rather mechanically.  That of course would defeat the whole point of the exercise.  What we need is not more rules of thumb.  What we need is the judicious use of economic theory, in combination with evidence, to identify and remove bottlenecks  That this is hard is obvious, yet should be no objection.     

Comments

[robertdfeinman]

Times haven't changed, but they are changing. Keep up the good work, you never know how long it will take for seeds to sprout.

[Gulzar]

Dani,
I fully agree with your many recipes approach. Governance and development have become identified with a set of stereotyped cliches - transparency, decentralization, multi-party democracy, open markets, deregulation, strong legal institutions etc. This dominant school of thought which permeates the policy making appraratus in most developing countries, tends to see these prescriptions as ends in themselves and essential preconditions to ushering in development.

However, the development contexts in developing countries exhibit spectacular diversity - racial, linguistic, economic, geographic, societal, and religious. A similar set of problems in different countries may manifest as widely varying outcomes. The same set of policy prescriptions may throw up contrary outcomes in countries with the same social contexts. These forces interact with each other both at the micro and the macro levels, at the individual and societal level, revealing a whole spectrum of socio-economic outcomes. There exists multiple equilibria for each socio-economic and political context.

Quite often the success of NGOs in social and economic development enggineering is presented as proof of the failure of government in addressing development issues. This euphoria invariably overlooks the important fact that such success stories are most often sanitized, isolated and one-off examples. These examples present interesting challenges of scalability and are excellent examples of the inherent limitations of the very model that achieved the success story.

Adding to the examples Dani had to say in his articles, I have listed out a few more in my blog here.
http://gulzar05.blogspot.com/2008/04/many-recipes-in-development-strategy.html

[Chandan]

"His most recent book is In Search of Prosperity: Analytic Narratives on Economic Growth (Princeton University Press, 2003)."

Is this for real? I thought I read your recent book titled "One Economics, Many Recipes", Princeton University Press, 2007.

Someone needs to update the website with correct bios!

[Gabriel]

I'm curious. What, exactly, does it mean to ignore the Washington Consensus? When I read the 10 points in the wikipedia entry for example I have a hard time figuring out what should be excluded. Maybe short term capital inflows?

If government officials simply aimed at having sensible fiscal policies (don't spend beyond what you can handle), promote solid education, and clear rules of the game for all most of their problems would be lessened in a generation.

[gordon]

"The tendency is to want to turn the new diagnostic approaches into ... a check list that can be applied rather mechanically".

And these people are attending your class why, exactly?

[Joe S.]

Remember Joe Stiglitz's famous line on international economic bureaucrats: "Third-rate economists from first-rate universities." (The quote is approximate, but close enough for blogospheric work.)

[Per Kurowski]

Dani Rodrik says “New thinking on growth and development policy”

May I humbly suggest some “old thinking on growth and development policy”…like that the banks should have a purpose?

Ever since the Basel regulators came up with the crazy idea that the only objective for the banks was not defaulting and imposed on them the minimum capital requirements based solely on risk they reduced to nothing any other objective of the banks, such as that of creating growth and decent jobs and distributing opportunities.

Do you not think it is high time to restore some purpose to the banks?

[josh]

Prof. Rodrik,

any chance we can get a look at the reading list for the "new thinking" course?

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