Saturday, March 13, 2010

Dr. Know

Recipient countries should be invited to prepare plans and budgets.

—Jeffrey Sachs, "Homegrown Aid"
New York Times April 8, 2009
Critics of big-money solutions to complex problems like to make a pariah out of Jeff Sachs. He is an easy target, in part because (unlike Bill Easterly) he generally stays up in the stratosphere, out of reach of his critics.

That would have been me until an afternoon a couple of years ago, when I happened to be out for a walk in San Francisco's Mission District with Kiva founder Matt Flannery. Reflexively, I started Sachs-bashing. I'd barely gotten started when Matt glanced my way and said, "yeah, I've noticed people like to put Jeff Sachs down a lot." Surprised and somewhat deflated by my evident lack of originality, I cut my diatribe short and quickly sought another topic of conversation.

For some time since then, I decided to hold my judgments in check. We do have a convention in academia to avoid ad homimen arguments. Focus on the message, not the messenger.

I was prepared to stick with that line of reasoning, until a few months ago, when I finally took the time to read Sachs' most celebrated popular work, The End of Poverty.

Reading this perplexing epistle to the powerful (core analytic insight: poor countries are like sick patients that require differential diagnosis and treatment??) prompted me to wonder if we, as academics, have not been too easy on Jeffrey Sachs, rather than too hard. What is the nature of the expertise for which he is everywhere lauded? For what actual contributions to understanding or human betterment is he responsible?

To seek answers to these questions is, for me, to take a bumpy ride trip along memory lane, revisiting distinct moments in my career as an economist. I suspect many of my generation have similar recollections . . .

First, I am in graduate school. The Berlin Wall has just fallen. There is this guy from Harvard advocating for something that goes by the name "shock therapy" for countries making the transition away from Communism. Apparently it has been just the trick in Bolivia.

I think to myself, "Who is this guy? What is going to happen to all that state-owned stuff when it's just flipped into the market?" Best case scenario is that it will create a lot of rich criminals who will eventually try to create a proper country ... sort of on the Joe Kennedy Sr. model.
Assessment of contribution: Kept hyperinflation at bay. Otherwise, in Russia, crashed industrial production, plunged life expectancy, and seeded the rise of an autocratic kleptocracy. Not a big win.
Flash forward. I'm a post-doctoral fellow at Harvard's Kennedy School of Government. There is that same guy! Except now he's presenting papers (this one for example) that purport to explain why poor countries are poor. It turns out, they're in the wrong place! If poor countries could be in the places where rich countries are, they'd be rich too. Or something like that.

I think to myself, "Who is this guy? ... Next he'll be telling us that he can figure out someone's IQ looking at the shape of their skull."
Assessment of contribution: In a Department of Geography, might count for credit toward Master's degree . . . if submitted on-time, without too many typos.
Fast forward a few years. I am still at Harvard, now as a lecturer in economics. Sachs has decamped to be the head of the Earth Institute at Columbia University. Only now he has morphed again.. this time into passionate advocate for the poor.

I think to myself, "Who is this guy? If he was being straight with people, his response to anyone who approached him to talk about lifting people out of poverty would be, 'I'm sorry, you've got the wrong guy. I'm a macroeconomist. Therefore, by definition, I can't tell you anything of practical use regarding the day-to-day process of economic development. You need to talk to my former Harvard colleague Amartya Sen, the Nobel Laureate and one of the great social scientists 0f the 20th Century. He will be able to help you. (Zvi Griliches has recently passed away, so I'm afraid you won't be able to talk with him.)'"
Assessment of contribution:

Potemkin villages
< Millennium Villages
< real development
But hearing Sachs speak here in DC a few weeks ago, I finally figured out how this all ties together. Sachs isn't isn't just fond of medical metaphors. He is Dr. Know. Though he has often been wrong, he seems never to be uncertain. He is the guy who believes that "we" have the solution. All "we" need is the money to put the solution into practice. Whether in Russia in 1992, or in Kenya in 2010, the obstacle isn't ignorance or uncertainty, it's willpower. When the determination to drive change is present, change happens.

Checkbooks out, please.

In the end, Matt Flannery turns out to be right. Personalized polemics are pointless. What is at stake in the assessment of the contributions and legacy of Jeffrey Sachs isn't who he is or what he knows, but how he knows.

This meta-discipline—one that encompasses not only what we know, but how we know it—is called epistemology. And, when it comes to development, epistemology is at least as important as economics. Notably, it is on the basis not only of economics, but of epistemology, that the role of entrepreneurs in development can best be appreciated.

If solutions are known, need $$. If solutions are knowable, need evaluations. If solutions are evolving, need entrepreneurs.

Thursday, March 11, 2010

My Buddy Pine (a.k.a. "Syndrome") Moment

This is the sixth and last of my series of posts re. aid effectiveness guru Bill Easterly. Others are 1, 2, 3, 4, and 5.

If you have children, then you know Buddy Pine (a.k.a. "Syndrome") :He's the kid in The Incredibles who idolizes Mr. Incredible, only to turn vindictive (see expression above) after his hero rejects him as a would-be sidekick (IncrediBoy). Adopting the name Syndrome, he dedicates himself to besting his former idol.

In the confessional spirit that seems to be the flavor of the week on the development blogosphere, this post is about my Buddy Pine moment with the Mr. Incredible of the aid-criticism world, Bill Easterly.

The year was 2006 (or was it 2005?) and Easterly was visiting George Mason for a semester. Toward the end of his visit, I managed to catch a talk of his at the Mason Econ. Department. The talk was full of good stuff on dealing with endogeneity in cross-country growth regressions, the role of institutions in determining development trajectories, and other macro-development topics. After the talk I approached Easterly to pose the question that had been waiting anxiously all afternoon to ask: Would he, by any chance, be willing to author a lead essay on the topic of social entrepreneurs as "searchers" for the journal I had just co-founded with Iqbal Quadir?

Easterly was very gracious, but his reply took me aback nonetheless. Social entrepreneurship might be heartwarming, I recall him saying, but it has nothing to do with development.

Nothing to do with development? What?

Now, given that I can't remember where my car is parked half the time, I could have this wrong. Maybe that wasn't what he said, or what he intended to say. But the remark as I heard it really stuck with me. How could Bill Easterly—of all people!—take the position that entrepreneurship in any form has nothing to do with development? What about the staff of 100,000 that daily carries out the work of BRAC in Bangladesh, founded by Fazle Abed three decades ago? Not the outcome of social entrepreneurship? Not development? What was I missing?

That was the Buddy Pine moment.

From then on, I looked at Easterly's writing with, let's say, a bit more of a critical eye than I had previously. I searched copies of his books for mentions of the words "entrepreneur" and "entrepreneurship." (Elusive Quest for Growth: 6; White Man's Burden: 12 . Compare with Sachs, The End of Poverty: 4; Schramm, Litan & Baumol, Good Capitalism, Bad Capitalism, and the Economics of Growth and Prosperity: 225).

What I have realized over time is that, while Easterly has made a huge contributions in pulling back the curtain on assorted Wizards of ODA that inhabit Emerald ($) Cities on the banks of the East River, the Hudson, and the Potomac, and while he talks a good game about "searchers" and "seekers," he's really not all that interested in entrepreneurs and entrepreneurship. Apparently once a macro-economist, always a macro-economist.

Now, you might say, so what? As Easterly himself pointed out to me earlier this week, it's not very entrepreneurial to try to force everyone to talk only about entrepreneurship.

Of course, he's right... Well, almost... No, actually, he's wrong.

Why? Because, among the prominent development economists and former World Bank staffers that circulate in the same environments as Easterly, the number who really focus on entrepreneur-led development is exactly zero. Which is to say, nobody. Not Rodrik, not Kremer, not Duflo, not Pritchett, not Birdsall. And, no, not Easterly. Keep working down the list. As good as they are along other dimensions, none of them focuses on entrepreneurs and entrepreneurship.

I'm sure you'll agree with me that nobody is a long way from everybody. Therefore... wrong. Q.E.D.

For the A-Team in the academic study of development to be systematically ignoring the core driver of the process of development is an alarming mis-allocation of a scare resource: talent. Instead, academic development professionals (Easterly among them) fixate upon the effectiveness of Official Development Assistance (ODA)—these days, about $100 billion. A lot of money? Well, it's less than one fifth of one percent of global GDP. It's also less than half of the $200+ billion in remittances that flow annually from people in wealthy countries directly to their relatives in poorer countries. And it is less than 1/5 of the $500+ billion that exits poor countries every year and heads to rich countries in illicit transfers of various types.

In sum, Official Development Assistance in its entirety is about as relevant to the process of global development as the programs of the U.S. Department of Commerce are to the advancement U.S. economy. Part of the story, to be sure, but a small part.

But enough about the world. Let's get back to me. I admit that Easterly's introspective ploy did cause me to abandon my plan to lure him back to Northern Virginia and subsequently to read aloud from The Theory of Economic Development (in the original German) until he reversed his prior error and consented to write not one, but a sequence of essays for Innovations about entrepreneur-led development. But, otherwise, the Oprah Show at Aid Watch this week was on the wrong topic. Tweetiquette? Blog decorum? ...

When Mr. Incredible is reduced to politely discussing a topic that doesn't really matter much to start with... well, then this Buddy Pine doesn't even want to be IncrediBoy anymore.

Next posts...
  • Why entrepreneur-led development is development (picking up from Iqbal and from Paul Kagame)
  • Why "top-down" vs. "bottom-up" dichotomy is not the fundamental one. Basic tension is exploration (flexibility) vs. routine (order). Sound like "searchers" vs. "planners"? It's not...
  • "RCT, non merci"... Why ascending markets (a.k.a. "developing countries) need more growth capital for successful entrepreneurs and skilled mentors, not more randomized controlled trials of development projects
... and more relating to the coming prosperity.