"Don't Trust Outside Experts"

So says the headline of an op-ed in the Zambian Post. I couldn't agree more. My rule is: listen to what foreign experts have to say, but make your own decisions.

But wait. I am one of the foreign experts that the article refers to!  Even though I and my colleagues are not named, the editorial is about a brainstorming that the World Bank had organized with us (and which had already stimulated this blog post). The author of the op-ed, Father Peter Henriot, was present as a representative of Zambian civil society via videoconference.

Reading Father Henriot's article, it is clear that we came across as arrogant outsiders with little knowledge of Zambia and ready to advance ill-fitting policies.  For me, this is an interesting lesson in failure to communicate.

The central dilemma that we were trying the participants to recognize is that helping the poor in a sustainable way requires promoting structural change. That in turn may require making investments in areas--non-traditional economic activities or urban areas--which have a greater potential for generating productivity increases than the areas where the poor currently are. 

Investing in the poor directly--augmenting their human capital--is desirable in and of itself, but whether it constitutes a growth policy (in addition to social policy) depends on whether lack of human capital is a binding constraint on economic opportunities.  The question here is whether there are profitable employment opportunities for the poor to deploy their human capital in. Often, the answer is no. We have plenty of experience, from Africa in particular, that it is possible to achieve striking increases in educational attainment (and often life expectancy as well, in non-HIV/AIDS-stricken countries) without corresponding improvements in overall productivity of the poor or of the economy as a whole. 

On the other hand, saying that you should increase economic opportunities while enhancing human capital assumes away the trade-offs: increasing social spending--without cuts in other areas--serves to appreciate the real exchange rate, which is the single most effective way of killing production incentives in non-traditional economic activities. Disregarding this evidence and the implied trade-offs is not very helpful.

So why were we unable to get these points across? First, the videoconference setup did not help. Videoconferencing is more conducive to speech-making than to exchanging ideas.  Second, our language probably did not help either.  As economists, we use lots of shortcuts and skip steps in our arguments when we are amongst other economists. This can lead to misunderstanding when there are non-economists present. (Clearest example of this is that Father Henriot took us to be making an argument in favor of trickle-down growth. We were not. It is precisely because I recognize that growth may not necessarily trickle down in the short-run that I argued for a social policy in addition to and coordinated with a growth policy.) And third, let's admit it, we are often arrogant and presume to know more about the determinants and consequences of economic behavior than our track record justifies.  (For example, we may have been too quick in assuming that most of the non-traditional high-productivity activities would be urban, whereas there is some evidence that many of them may be found in rural areas as well.)

I would like to believe that all these sources of miscommunication and misunderstanding would have been sorted out if we had a chance to discuss these issues at greater length with Father Henriot. Even if we could not come to an agreement on the policies to be followed, at least he may have ended up with a better idea of where we are coming from and why our take may differ from his with regard to appropriate strategy--and perhaps also with just a few doubts about how strongly he should hold his own views. 

But note to self: avoid videoconferencing next time and do remember who the audience is...

Comments

[andrew merrifield]

I find this post especially interesting in light of your exposure (and influence) in South Africa. When you say "The central dilemma that we were trying the participants to recognize is that helping the poor in a sustainable way requires promoting structural change. That in turn may require making investments in areas--non-traditional economic activities or urban areas--which have a greater potential for generating productivity increases than the areas where the poor currently are", I wonder whether you have raised similar arguments in South Africa. I also wonder if anyone exposed you to the National Spatial Development Perspective (nsdp) in your trips here. When I was developing that document (from 1998 to 2003) I received considerable opposition from many of the people you meet with in South Africa for making the same argument. I am curious what they have been saying to you. As for productive opportunities in rural areas in South Africa - as someone who lives, works and actively produces there - I can say that there are extremely limited opportunities for many of the reasons you raise in your discussions on this blog.

[robertdfeinman]

It would be interesting to see some discussion of goals. "Development" may mean different things to different people.

In the west it seems to imply improving material wealth. Other cultures may not find this so important. Once a modest level of standard of living is reached (adequate food, reasonable health, proper housing) then other things may be seen as important.

There seems to be a common theme these days, especially in the US, that we are all working harder and longer so that we can afford more "stuff", but we don't have the time to enjoy it because we are spending all this time making money.

Other cultures may be trying to avoid this trap.

So, perhaps next time, the "experts" could ask what those in the underdeveloped areas see as their goals. This also means asking the common people as well as those most likely to be attending such meetings.

[Random African]

I'm glad I guessed it was Zambia.

As far as the Op-Ed, it sounds a bit like protection against discipline invasion. I mean it's one thing to complain about "experts" making calls without knowing anything about the country but complaining about experts not visiting the country is a stretch (especially when the local expert denies that the limits of social policies without growth experiments).
Communication is an issue, sure. But one has to remember that some people are not convinceable. And I don't exactly see what makes Father (hint) Henriot (hint) a better expert on zambian devellopment issues.

In the west it seems to imply improving material wealth. Other cultures may not find this so important.

oh yeah ? What do they find important then ?
I mean, remember we're talking about places where material wealth gets you education, health, a social status, a family life, sex..etc..etc..

[robertdfeinman]

RA:
I'm not trying to sound condescending, but there is a difference between having a decent standard of living (say eastern Europe) and having one of that wallows in excess like the US.

I'm also not talking about those who are at subsistence level - they obviously need to see their standard of living improved.

But what is needed to move the one billion who live on $1-2 per day to something better is of a different nature than what is usually meant when outside experts start talking about trade and large-scale projects.

The small scale improvements don't provide much opportunity for the big players to make any money from investing, so they get neglected in favor of projects which benefit the multi-nationals. I don't think it would be surprising if people in these countries suspected that outside "experts" had the same agenda as the multi-nationals and thus were put off by their advice.

[Random African]

I'm sure you're not trying.

I don't see why you mention the obvious difference between the US and Eastern Europe.. Are you implying that Eastern Europeans value "material wealth" less than Americans ? That their culture prevents them from wanting to afford more heat in the winter ?

Or is this a case of "no-matter-what-the-topic-is-all-i-really-want-to-do-is-talk-about-america" ?

and as far as the needed improvements being of a different nature, hmmm.. may be. But yet, I'm not sure most multinationals need any kind of big scale improvement of the economic climate. They're MNC, they're big, they're powerful, they can broker deals, get special treatment or even pick governments. Firestone, Exxon or De Beers sure didn't need Liberia, Angola or South Africa to be more welcoming IN GENERAL, they just needed (and got) those places to be welcoming to them (and not the competition). For poor Angolans, South Africans and Liberians, reforms matter.
And when people in these countries refers to someone part of a multinational organization that has its own interests and dubious past, the point is sort of hard to make.

[Per Kurowski]

Danni Rodrik says: "The central dilemma that we were trying the participants to recognize is that helping the poor in a sustainable way requires promoting structural change. That in turn may require making investments in areas--non-traditional economic activities or urban areas--which have a greater potential for generating productivity increases than the areas where the poor currently are."

But I have also recently finished reading a paper by him and Ricardo Hausmann titled “Discovering El Salvador’s Production Potential” and where they do not even acknowledge the fact that most of the people with initiative in El Salvador seem to have decided to look for their production potential outside of El Salvador.

Danni Rodrik does admit with modesty to some blindness saying that as an economist “we are often arrogant and presume to know more about the determinants and consequences of economic behavior than our track record justifies”.

I am not sure though it really has to do with arrogance but sometimes with a more serious condition namely that in a lot of their thinking processes they have really put on blinders and been imprisoned in a PhD box… where they care more about the how than the what they say… and which is why I have sometimes toyed with the idea of launching a 100% PhD free university. But all is not the PhD’s fault since the students have also seen their capacity to criticize sadly and seriously eroded over time.

[Per Kurowski]

By the way my previous comment came out much more harsh than intended… as I must admit that I have seen some excellent research being done and also in most other ways even found the El Salvador paper that I referred to to be very good and very well balanced.

[ben]

Experts can be from the "outside" in more ways than one. Urban elites in developing countries are often even more out of touch with the lives of the rural poor than foreigners are.

[Great Zamfir]

I am a bit worried about your focus on communication, coming across like arrogant outsiders, the videoconferencing thing.

Another possibility could be that Father Henriot is simply right, that your group did not have very much knowledge about Zambia and really was advancing ill-fitted strategies. How can you be sure this is not the major issue?

Don't get me wrong, I have no idea about the answer, and perhaps no-one has. But I suspect the attitude 'if they do not like our proposals, it must be miscommunication' is partly responsible for coming across as arrogant.

[Per Kurowski]

Ben says "Experts can be from the "outside" in more ways than one. Urban elites in developing countries are often even more out of touch with the lives of the rural poor than foreigners are."

Absolutely right but this should also remind us that the experts in the “inside” can also be those most blinded by the trees. Otherwise how else can you explain that ludicrous proposition from our bank regulators that you could solve the whole issue of risk in banking by fixing some minimum capital requirements for the banks, based on how some financial Blackstone type operators, namely the credit rating agencies, view the risks of their clients… without setting us all up for the mother of all systemic risks.

[robertdfeinman]

Per:
Re "blinded by the trees". Many people (and I assume you as well) saw that the credit Ponzi scheme was unsustainable. Those who facilitated it were not blind, they were throwing sand in the eyes of the public so that they could clean up before the music stopped.

Imagine what investment policies would be like if the CEO's and hedge fund managers had to wait five years after they left the firm before they could collect their bonuses or use their options. In other words, their compensation would be dependent on the long-range health of the firm.

[Thorstein Veblen]

Are there really examples of African countries who had substantial increases in human capital and did not grow? By human capital, I specifically don't mean # of years in school, but test scores, %-literate, life expectancy, % of population w/ malaria. I'm quite ignorant about africa, but i had thought what some countries did was increase they number of schools and kids in schools while each school itself had very, very poor quality. So there were perhaps more years of schooling, but in schools where nothing got done. If, on the other hand, there was a 30% jump in literacy, a 50% jump on math scores, and a 5 year increase in life expectancy, and no economic growth, then the human capital theory is wrong. I suspect it was more like there was a 50% increase in the number of schools, a 3 year increase in average years of schooling, and a 50% increase in unqualified teachers, no increase in math scores, slight increases in literacy, no increase in life expectancy, and no economic growth. Those two things are quite different.

[Random African]

ah ! % of pop with malaria ? that's funny.

but more seriously, yes, there are countries that managed to improve their human capital with their gdp per capita stagnating or falling. But that was in the 70's and the 80's, in the 90's many of those parameters fell hard (partly because of aids, partly because the social budgets got cut).
Zambia is one, the Republic of Congo is another, Tanzania, Senegal and Ghana work too.

[Per Kurowski]

robertdfeinman: “Many people saw that the credit Ponzi scheme was unsustainable. Those who facilitated it were not blind, they were throwing sand in the eyes of the public so that they could clean up before the music stopped.”

Oh would it not be nice to be able to explain our current financial turmoil as just another traditional Ponzi scheme. Unfortunately this is not the case. Regulators, officers, investors, academician, journalist and the public found everything just too bewildering and confusing so as to dare to pose the questions. You see, I can ask questions about most corporate financial issues but when it comes down to down to physics and chemistry, such as the magic of risk elimination, I feel so lost that I can’t even formulate the question.

By the way if you insist to pursue the issue of someone throwing sand in the eyes of the public, then you would have to start by pointing the fingers at the regulators themselves (I do) and who actually threw the credit rating agencies into the eyes of the market.

[Per Kurowski]

robertdfeinman: "Imagine what investment policies would be like if the CEO's and hedge fund managers had to wait five years after they left the firm before they could collect their bonuses or use their options. In other words, their compensation would be dependent on the long-range health of the firm."

Beautiful… and even more so if we apply the same rules to development consultants with a lag of ten years, and to university professors so as they collect their earnings depending on the real results of their students… but then perhaps we should stop talking about all this before the owner of the blog finds us out.

[Antoon de Klerk (African)]

Economics is after all about people.

The greatest incentive for involvement in our beloved science is also its greatest challenge: it involves people.

Unlike our colleagues in the physical science world our subjects (oops) can/and certainly do respond to our observations.

Respect for travelling into the developed world Dani. Unfortunaley/fortunately when development textbooks hit the African soil they are rather quickly destroyed - or put on the table of the finance minister (same thing).

Keep the faith though - what ever influence we may have in life is often blind to us.

African economic students & practitioners are reading your work..

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