Development Economics is the New Biology

Poverty Under the Microscope, a recent article by Beth McMurtrie, presents an excellent cross-section of the current state of the field of development economics.

The article follows the work and quotes superstars such as Rachel Glennerster, Abhijit Bannergee, Ester Duflo, Sendhil Mullainathan, Dean Karlan, Bill Easterly, Dani Roderik, Michael Kremer, Justin Sandefur, Lant Pritchett, Mark Rosenzweig, Darron Acemoglu, James Robinson, Nancy Birdsall, Angus Deaton, and Owen Barder. If you are looking for a list of names to follow in the field of development, this is it.

For years development economists presented theories and prescribed policies while seated behind desks at universities and think tanks in capital cities. Over the past two decades however, this has changed. Development economists began rolling up their sleeves and running experiments in the field. This has lead to a revolution of sorts and a characterization of these experimentation specialists as ‘randomistas’ named after the randomized control trial, their ‘gold standard’ approach. Bannergee, Duflo, Mullainathan, Glennerster, Karlan, and Kremer lead the herd of randomistas from offices at prestigious east cost universities to the fields and streets of the developing world.

Skeptics of this new wave of experimentation such as Acemoglu, Easterly, and Deaton point out the majority of development occurs from within and cannot be built or designed from the outside. Much of development is political and occurs when the political structures of a country are right. An astonishing proportion of the aid industry is populated by ‘experts’ and ‘technocrats’ that leverage their influence in ways that may end up being antithetical to the goals of development.

Others offer a critique that is even more pointed. Lant Pritchett, a professor of international development at the Harvard Kennedy School of Government, claims that economists have been running experiments for years and that many RTCs are taking economists away from what they ought to be doing, namely, making predictions.

This critique, however, seems a bit overextended as RTCs have provided many valuable lessons and innovations. Certainly the world is in a better place because of these experiments. The experimental approach of the randomistas has clarified many problems which have confounded the so-called ‘experts’ for a long time. In fact, many of the lessons RTCs has taught us are providing economists with a larger bank of evidence to inform their ever-so-critical predictions.

The world is made up of complex systems that are constantly adapting and evolving. Due to this, sometimes, considering the big picture is indeed helpful and offers tremendous insight. At the same time due to the dynamism of the world focusing on questions of smaller-scale is helpful as well.

This places development economics at an interesting impasse. The big-picture thinkers and the small-scale experimenters, each performing excellent work in their own right, must find common ground to work together on issues.

“The emerging ‘consensus’ revolves not around a specific list of policies, but around how one does development policy,” wrote Rodrik in a 2008 working paper, “The New Development Economics: We Shall Experiment, But How Shall We Learn?” Practitioners of what he dubbed “new” development economics “tend to be suspicious of claims to ex ante knowledge about what works and what does not work.”

Justin Sandefur, of the Center for Global Development, is representative of this new type of economist. He is working with the government of Tanzania and a nongovernmental organization to determine whether providing land titles to poor people can encourage entrepreneurship. “In an ideal world, we’re providing the ministry of lands with how to price and how to roll out land ownership in urban areas,” he says.

Asked if he could have done this work a generation ago, he says no: “There would have been a strong emphasis on building a complex theoretical model on how this would all work out.” The way he sees it: “You can ask big questions and not get any real answers, or you can ask smaller questions and get credible evidence.”

Economics draws a lot of comparisons to physics. Indeed the mathematical models and tools endowed to economists in graduate training are akin to that of physicists. This ‘physics envy’ is, however, something that must be quelled. Economists must learn when to deploy the strict tools of mathematical models and when to use some other method. Methods perhaps more known to biologists.

Biologists work primarily in a the complex ecosystems of our planet. Their work aims not to control the ecosystem but to learn from it and allow it to flourish. This is perhaps the way the discipline of economics should go, and is absolutely the path the field of development economics needs to follow. Integrating a healthy mix of rigorous experimentation isolating human behavior and critical understandings of the big picture and the systems that make up the societies and economies of the world. Perhaps the rise and fall (and rise again) of development economics is, in the long run, a good thing.

It may not have the ring as Orange is the New Black, but development economics is the new biology. I’m starting it now: #DENB

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