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Development Economics Defined?

[T]oday, “development economics” … has several key features: (1) It very consciously takes place in developing countries. These researchers are out collecting surveys or doing studies “in the field.” Perhaps the best way to define a development economist today is as someone whose presentation includes a picture of the village they worked in to collect data. (2) It is intensely concerned with identification of causal effects. Thus this field aspires to do randomized control trials (RCTs) to identify the causal effect of some X (e.g., de-worming treatments) on some Y (e.g., school attendance), as in Kremer and Miguel (2004). Failing that, some kind of natural experiment that features quasi-random treatment effects is examined. (3) It tends to be a-theoretical. The RCTs are showing reduced-form empirical effects of some kind of treatment on some kind of outcome. The de-worming paper of Kremer and Miguel is purely empirical, for example. This isn’t generally true, as there are papers that explicitly are testing some theory, but the dominant portion of the literature is purely empirical.

Through some historical inertia in the profession, we call this research “development economics.” But I think that this type of research is more properly called “poverty economics,” the study of individuals living in particularly poor, under-developed countries. … The RCTs are evaluations of interventions that aim to improve health, or nutrition, or educational attainment. By going out into these developing countries, these researchers are acutely aware of the constraints facing poor people, and are studying ways to alleviate those constraints.

This is all valuable research. It is perhaps more admirable in its motivations than other sub-fields of economics (*cough* finance *cough*). But it is not about “development.”

Economic development is about the transition of whole economies from low-productivity, poor places into high-productivity industrial economies. This transition encompasses several aspects: a move out of agriculture and into manufacturing or services, urbanization, declining fertility rates, integration with global markets. Current research in development economics – the RCTs and their like – does not study the transition. “What will make these people better off today?” is a different question than “What will make this economy develop?”

That’s Dietrich Vollrath, from the University of Houston, in a post titled “Defining Development Economics.” A few observations:

What I’m Reading

RyanHoliday

1. The Obstacle Is the Way, by Ryan Holiday. Put simply, this is the best nonfiction book I have read in years. In it, Holiday boils down the core principles of Stoicism so you don’t have to spend your evenings reading Seneca, Epictetus, or Marcus Aurelius (though you certainly should), and he explains how we have the freedom to choose how we react to adversity, and how we can turn even the worst things that happen to us into positives. Best of all, Holiday discusses these things with clear eyes, without any self-delusion. Reading this book, I realized I applied many of the principles it teaches without even realizing it, but I still managed to learn a great deal, and I plan on giving a copy of this book to every single one of my graduate students when they graduate.

On the Near Impossibility of Changing Anyone’s Mind About Anything Anymore

Until recently a common understanding of reality drove cross-party policy making. A Republican president, Richard Nixon, created the Environmental Protection Agency with bipartisan support. A Democrat, Bill Clinton, worked with Republicans in Congress to reform welfare, and came close to a deal to preserve the long-term sustainability of Social Security. Such comity is growing harder to find. Right and left do not just disagree on how to regulate pollution; most Republican voters do not accept that man-made global warming is happening. As for America’s future solvency, leading Democrats, such as Senator Elizabeth Warren of Massachusetts, question whether Social Security faces a crisis at all, suggesting that its benefits should in fact be expanded.

What is going on? Democrats have an explanation. The whole country is polarised, they say, but the right has moved further from the centre. What’s more–say Democrats–too many Republicans live in a bubble of para-facts and propaganda, fed to them by Fox News or sham studies paid for by conservative billionaires. That is a bit too glib. For one thing, the left has its own shibboleths of irrationality. Just ask about genetically modified crops, declared safe by the scientific establishment, but reviled as Frankenfoods by the Subarus-and-sandals set.

A recent Lexington column in The Economist, which touches on so many of the things I’d love to blog about, but which would probably take me five or six posts to cover much less elegantly and succinctly than The Economist does. Among other things: