The Smartest People in the Room

I'm a person of simple pleasures. For instance, I count any day a success when I have the opportunity to use the word "eviscerate." Take Thursday. That was the day when I wrote this blog post about Presidential Study Directive 7 (PSD-7). In additional to employing the word "eviscerate," the post expresses considerable enthusiasm for the direction of the global development rethink currently going on at the White House.

Yesterday NYU development luminary Bill Easterly had the kindness to not only take notice of the post but also to point out to me that I managed to misrepresent a blog post by Aid Watch staffer Laura Freschi as one by the Maestro himself. (Arrghh. Guilty! Though, in my defense, how was I to know that anyone under the age of 50 could so persuasively convey the jaded air of a veteran development insider? Easterly trains his people well!)

It turns out that Easterly is considerably less sanguine than I am about the potentially transformative potential of PSD-7:

Professor Auerswald (sorry for my teasing you in this post), you do seem to have a theory of social change in which promises about government intentions to someday change priorities are a major force. My experience of many years of observing such statements is that they are more like New Year’s resolutions that are repeated every year.

My rebuttal to this? My counter-attack? None whatsoever. Easterly is right. My last post is probably mostly wishful thinking. What is the likelihood that awareness of the exigencies and opportunities of the moment will be enough displace entrenched bureaucracies and transform decades-old habits of thinking? What is the likelihood that an esoteric administrative exercise like PSD-7 will turn out to have made a difference in the lives of actual human beings? Even people like me who were actually born in Washington DC (yes, some of us exist) recognize the obstacles that stand in the way of such outcomes.

As Easterly is, I believe, aware from any one of my six previous posts calling into question the coherence--indeed the very existence--of his own theory of social change (1, 2, 3, 4, 5, and 6), I do not in fact hold the view that the United States government (USG) is likely to be a "major force" in global development. If anything, I would say that the causality is reversed: the point of my post, and a core point of this blog, is that global development will almost certainly be the major force affecting the United States in the next quarter century, whether the USG plans effectively for this eventuality or not.

So what was it about Freschi's post that motivated me to drop deadlines on that particular day and go on the offensive? It's pretty simple: I find it more than a bit depressing when The Smartest People in the Room refuse to leave the room in which they are the Smartest People. For instance, from Easterly:

I vaguely remember that I was invited to a meeting with a US government big shot on development whose name I’ve forgotten, to take place in Washington. I failed to do my patriotic duty, using the lame excuse that the meeting was two days before Christmas, and I unreasonably treat the days around Christmas as belonging to Family Zone.

After a lifetime working on development, might not Easterly have made it a priority to influence the most sweeping review of priorities in global development undertaken by his country's government in a decade, if not longer? After all, the government of the United States may not be much to Bill Easterly, but it's got more resources at its disposal than he does. No way to find an alternate time? Schedule a call? Write an email? Post a direct Tweet? Undertake a pinkie lift?

No. None of the above. Just not worth the time.

(Note: Bureaucrat appears to have been working two days before Christmas. Not everyone has the benefit, as Easterly and I do, of living by the academic calendar.)

In any process that involves difficult decisions with uncertain outcomes, those seeking solutions should welcome, even celebrate, the views of astute critics (in this case, Easterly). But when critics hold themselves apart from engagement in anything that might resemble positive action, one is sorely tempted to make sausage of their studied detachment.

Step 1: Eviscerate...

What it Means to "Elevate Development"

The White House process aimed at redefining U.S. development policy for the 21st century (known internally as Presidential Study Directive 7, or PSD-7) is coming to a close. Earlier this year some colleagues and I had the opportunity to offer input to Gayle Smith in the National Security Council, who was tasked with leading PSD-7, which we did.

On Monday Foreign Policy blogger Josh Rogin leaked a copy of the document that is coming out of PSD-7. Item one on the proposed new agenda for global development policy, as advanced in this draft, is this:

Moving forward, the United States will foster the next generation of emerging markets by enhancing our focus on broad based-growth and democratic governance.

To begin with, consider here what is not listed first on the nation's development agenda: "Poverty alleviation." "Nation-building." "Global threats." "Counter-terrorism." And other code words allegedly relating to "development" that are based alternately about fear & condescension.

Notice further that in this sentence "broad-based growth" is listed before "democratic governance." What does that mean? It means that the people who wrote this draft get it: expanded economic opportunity precedes democratic change. Both together lead to increased prosperity. That is development. (Elaboration here.)

Now as a counter-point, Bill Easterly [actually, Aid Watch staffer Laura Freschi, see below] offered his comments today. He focused on administrative structure:

The most significant change in the draft is the creation of interagency committee reporting to the President to run US development policy.

He wants to know what it means to “elevate development” as a “key pillar of US foreign policy.”

Here's my attempt at an answer to that question. "Development" today refers to the process by which the majority of the world's population is joining the global economy. It is a process whose momentum is going to overtake and obliterate puny debates about "aid" (pro and con) and eviscerate stale discussions about donor coordination and accountability.

"Elevating development" means taking (at least some!) decision-making away from those alleged development experts who pay no attention to entrepreneurship and global business (the actual drivers of development) and instead continue to devote their energies to making failed approaches less failed. (Yes, I am talking about pretty much every "development economist," Easterly included.)

It means that people who have not been accountable or serious about advancing actual development may potentially lose their authority, and then their jobs, because this is too big an opportunity for this country to be entrusted to people not determined to make the most of it. It is not only too big for one agency. It is also much too big for the entirety of the U.S. federal government--which, incidentally, will have succeeded if manages to remain relevant to global development in the next quarter century, much less dominant.

That is what this process is about. That is what the draft PSD-7 memo from the White House is about.

Now if you don't care about the role of the U.S. government in the world today, don't read this memo. If you do, its message is worth considering carefully. There is not an organization in this country that would not benefit from its own PSD-7 process, and that wouldn't also be moving forward if it similarly found a way to "elevate development" in its strategic planning.

Correction: ... Ummm ... well... as it turns out Bill Easterly didn't quite exactly write the post that I attribute to him in this blog post. As kindly pointed out to me by Bill, the post was actually written by Aid Watch staffer Laura Freschi. Apologies to Bill... and to Laura!

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.

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.

Inviting Jeff Sachs and Bill Easterly to Agree

I just sent this email to Jeffrey Sachs. He was at my alma mater on Wednesday speaking with students and faculty at the school about global development, Millennium Villages, the Earth Institute, and related topics. I had the chance to chat with him briefly at the end of his visit and to share with him the recently published special edition of Innovations on invention-led development.

The point of the message is to encourage Jeffrey Sachs and Bill Easterly to put aside their disputes on the lesser topic of aid effectiveness, and co-author an essay on a more important subject about which they appear to be in agreement: namely, what actually works in global development.

Dear Professor Sachs:
...

I have been greatly heartened to hear directly from you, and from Professor Easterly (cc'ed), your shared view that entrepreneurship and innovation are at the core of the process of economic development. The two of you may also a share the view (one that I hold most emphatically) that a development strategy focused on entrepreneurship and innovation is not equivalent to one that relies on markets as they currently exist. Rather it is one that considers interventions to markets strategically, with an appreciation for the reality that solutions in a rapidly changing world are not known, but are rather are evolving, and thus that success at scale begins with broad-based local experimentation combined with the resources, commitment, and alignment of incentives that jointly ensure support for approaches that work.

I believe that the discourse on global development would be greatly advanced if you and Professor Easterly were to participate together in an event, and jointly author an essay, focused not on the subsidiary subject of aid effectiveness, but rather on the core issue of what actually drives global development--a topic on which it appears your are largely in agreement. The event would be all the more interesting if you could be joined by actual entrepreneurs who have, in their own work, advanced global development--people like Iqbal Quadir and Mo Ibrahim. Should you be willing to participate in such an event, I am sure that you would find any number of willing hosts. For my own part, I can say that Innovations journal would be more than pleased to publish the jointly authored essay that the two of you seem well placed to author on this topic.

Best regards,

Philip Auerswald

Speaking of Scarcity...

Bill Easterly has a blog post today titled "Who gets the Last Seat on the Plane? Why Aid Hates Economics." He's right again. But his argument could be extended. For example, there is another scarce resource not mentioned in this post whose allocation matters for development: The talent of development economists, like Easterly.

Take, for example the Aid Watch blog itself, whose motto is "Just asking that aid benefit the poor."

Now (bear with me for a moment here!) let's say you're back in the historical paradise of planning, namely the Soviet Union. Everyday, you have to eat the same old cr&p food...

photo credit

You're sick of it, but you can't find a way out.

Then one day, a leader arrives, with a banner that reads "Just asking that the food not suck!" You cheer! You hoist your comrade on your shoulders! At last, you are fighting back against the system. The battle for better cafeteria food is on!!

But what is the opportunity that is missed here? What is the thing you really need, that you're not going to get from the "Just asking that aid benefit the"--I mean, the "Just asking that the food not suck" campaign?

What you're not getting, and what you really need, is some new restaurants!! Yes, that would be just the thing. Some options. You would like another place to go to eat.

There is a general rule here: What really drives change isn't protest, but genuine competition driven by consumer choice. (Back to dining for a moment: Think about food in airports twenty-five years ago, if you were alive then. All Sodexo monopoly. Uniformly terrible and expensive. Now, with entry and competition for licenses, the food in the airport is at least as good as what you get outside the airport.)

Entry (or threat of entry) doesn't have to be by entrepreneurs in order for it to induce beneficial change. In the U.S., the most significant new entrant in the aid business in the last decade has been the Department of Defense. At his big event at Brookings last month, Easterly ridiculed the assertion by Secretary of State Clinton that the DoD's mission could be aligned with development, saying:

Her big think point was that we can merge defense, diplomacy, and development. And that’s probably one of the worst ideas I’ve heard in my career as a development economist.

Well, what does he think is more likely to stir USAID from its longstanding torpor: (a) the Aid Watch blog, or (b) the threat of being rendered obsolete by the Pentagon? I'd put my money on (b).

So instead of "just asking that aid benefit the poor," how about just asking for some new restaurants?

Randomized Out-of-Control Trials

Listening to the audio for the recent "What Works in Development" meeting at Brookings, I couldn't help but notice the moderator's (no need to name names here) telling insistence on using the term "randomized clinical trial" in place of the generally preferred "randomized controlled trials." Either way, the message is the same: "Put on your lab coat, Sonny. . . It's time to do some people experiments!"

Now I'm going to let the experts--and they were in abundance at Brookings last month--address the finer points of external validity (for the uninitiated, this reflects the researchers ability to answer the question "Well, so what?") and other challenges to the claim of RCTs to being the big thing in development.

What interests me is what RCTs might do to entrepreneurship. And it's not a pretty picture.

To set the stage, consider this observation on the process of development from very-smart-guy Mancur Olson:

Because uncertainties are so pervasive and unfathomable, the most dynamic and prosperous societies are those that try many, many things. They are societies with countless thousands of entrepreneurs who have relatively good access to credit and venture capital.

Power and Prosperity, pp. 188-189

What works in development, according to Olsen, is experimentation. Why? Because we don't know what works. Such a view, earlier articulated by Hayek and other, finds a contemporary expression in Bill Easterly's now-familiar (to folks that follow this sort of stuff) distinction between "searchers" vs. "planners" in development. For those of you inclined to economic theory (anyone? ... hello?) here's my version.

Now Bill Easterly is also known as an advocate for accountability in aid. He has concerns about the potential overuse of RCTs. However neither he nor the colleagues represented in his recent book with Jessica Cohen, (mis)titled "What Works in Development," have much of a notion of what else might really work better.

All good so far.

But here's a problem.

No entrepreneur ever used randomized controlled trials to create a business. None. Ever.

OK, I don't know that for sure. But please find me one... and you know I'm not talking about a biotech startup that pulls off a clinical trial to test for safety and efficacy. I'm talking about using a randomized trial to build the business itself... the entrepreneurship part of entrepreneurship.

Development driven by entrepreneurship (also known as "development") is comprised of randomized out-of-control trials. That would be--yes!--the opposite of randomized controlled trials.

Why does this matter? Stop and think. In what U.S. industry do clinical trials dominate? That would be pharmaceuticals. And in what industry are markups higher, and barriers to entry greater, than they are in the pharmaceuticals industry? The answer to that question is, of course, no other industry. When it comes to persistent oligopoly, pharma beats them all.

A very big part of the reason for this is that large-scale clinical trials are expensive. But you can't sell a drug without them. (For mostly good reasons, I might add, in the case of medicines.) So even successful biotech companies have had great difficulty breaking into the business of conducting their own clinical trials; instead they often partner with "Big Pharma" on the last mile of drug development.

Now I'm not saying we should abolish the Food and Drug Administration--though, like the U.S. Patent and Trademark Office, it is in serious need of some tender loving care . . . alternately administered with a potential kick in the groin or two.

No, I'm just asking this question: Is the increasingly widespread use of RCTs a move in the direction of an FDA for development--if not in a hardwired, institutional sense (unlikely, unless you think that the World Bank is in danger of becoming relevant again) then instead in the sense of customs, standards, and expectations.

I can see it now... A well-meaning RCT acolyte popping up on NPR to talk about the Aravind Eye Hospital and saying

Well, yes, it is true that they have cured two million people of blindness in thirty years. But we don't have any real evidence of their effectiveness. How many of the people treated at Aravind would have ceased to be blind without the surgery they received? Was the Aravind approach really better than alternatives? And did it really have an impact on economic growth in the regions in question? The only thing I can say without proper evaluation is that this is a nice retirement project. But I can't tell you that it is effective development.

Am I making this up?

Will not "higher standards of evidence" not only distort resource allocation (if outcomes are improperly defined) but also create barriers to entry? Won't this favor incumbents, 0r outside consultants flown in to do the work? Might not all of these "secondary" effects more than outweigh any benefit gained from "better" standards of evaluation?

Furthermore, might we not do better by studying the work of those exceptional entrepreneurs--like Aravind's founder, Dr. Govindappa Venkataswamy--who do a particularly remarkable job in creating social value, and putting our resources into supporting the nascent efforts of others like them, using an approach to evaluation that is actually appropriate to entrepreneurship?

Instead of putting our faith in randomized controlled trials whose beneficial impacts are uncertain, shouldn't we bet on the process of randomized out-of-control trials (a.k.a. entrepreneurship and innovation) that has been the very definition of development and growth pretty much everywhere in the world for five centuries?

Randomized clinical... that is, controlled trials work fine in public health, but for development, they could well be the cure to aid ineffectiveness that turns out to be worse than the disease.

IMAHAINGTTIA!

@montero funny how entrepreneurs define by creating and academics define by quoting and correcting each other.

me: guilty as charged

Having for five years taken great joy in editing a journal featuring narratives by entrepreneurs addressing global challenges, I can relate to what Montero's saying here. Academic one-upmanhip isn't even interesting to academics. How can it possibly be interesting to anyone else?

But, in the immortal words of Peter Finch, IMAHAINGTTIA!

Take the alleged "debate" over what works in development, featuring the inimitable (please don't try) Jeffrey Sachs and his Big Apple neighbor, William Easterly. Why would the two of them be adversaries on the topic of what works in development? After all, they both know what works and what's more, they agree!

But not only don't they listen to each other, they don't even listen to themselves. (For you folks watching at home: Yes, that is pathetic.)

Here's the Jeffrey Sachs version:

I believe that the single most important reason why prosperity spread, and why it continues to spread, is the transmission of technologies and the ideas underlying them. (The End of Poverty, p. 41)

Here's Easterly:

Historically, industrialization arose in initially poor countries which have since become rich, with the common theme of a heavy reliance on both domestic and international market opportunities and decentralized private entrepreneurship.

Now only two things need to happen to connect the dots between these two statements.

One is to pull Sachs out of whatever Secretariat meeting he happens to be in at the moment to remind him that human beings are responsible for the "transmission of technologies" and furthermore that the most adept among us at this task actually have a name: technology entrepreneurs. These people do not wear lab coats (for the most part), they do not work at the United Nations, and they do not know Bono.

The other thing that needs to happen here is to drag Bill Easterly away from friendly chats with fellow economists for long enough to give the topic of aid effectiveness a rest (perhaps permanently) and start spending some time and attention studying what matters most in development.

And, again, what was that?

Entrepreneurs. Technology. Innovation. These have been the drivers of increased prosperity for the past 500 years. They continue to be the drivers of increased prosperity today.

Jeff and Bill: If you don't agree with this statement, why do you yourselves--like pretty much all other growth and development economists--use variants of it in your own writings?

And if you do agree with this statement, then why don't either of you pay any serious, scholarly attention to entrepreneurs, technology, and innovation?

What is the matter with you people!

IMAHAINGTTIA!

The Trouble With Bill (He's So Close to Great)

First, a question: What would happen if an exceptionally public-spirited chiropractor was to blow the whistle on exaggerated claims made by other chiropractors? We'd all say "great!" And what if he was to persuade similarly high-minded colleagues to collaborate on a book about making chiropractors, as a profession, more accountable? Again, we'd say "great!"

But what if that same well-meaning chiropractor was to endow said book on chiropractor-accountability with the title What Works In Health-care? We'd all say... well, it wouldn't be nice. "Who's making exaggerated claims now! Isn't there more to health-care than the work of chiropractors? And I thought you just told us that most of your fellows are frauds anyway? What exactly is going on here??"

The problem would be worse if policy-makers, political leaders, and power brokers actually believed that the book and its cover were one and the same. Nutrition? Don't bother me. Exercise? Who cares. Preventative medicine and therapeutics? No my concern. All I care about is straightening your spine.

Now go back and substitute "development economist" for chiropractor, "aid-effectiveness" for chiropractor-effectiveness... and, for "nutrition" and "exercise" the words "entrepreneurship" and "technological innovation." There you have my dismay (OK, fine, over-reaction) to the book by Jessica Cohen and Bill Easterly titled What Works in Development.

Now let me explain why I'm going to spend the next 4-5 posts persisting in the seemingly irrational undertaking of picking a fight with Bill Easterly: It is because Easterly is the most compelling voice among development economists today. Others are brilliant (Michael Kremer, Esther Duflo among them) and worthy of genuine admiration as scholars. Some are doing great practical work, alongside their academic work.

However, Easterly is alone in having solid academic background, a large platform from which to speak, and something like the right message to deliver.

That last phrase holds the key to my frustration... "something like the right message." Yes, Easterly is near the top of the list among economists addressing the vitally important issue of strategies to make the most of the coming prosperity (see post #1 of this blog). If he can't get it right, what hope is there for the rest of us?

In any event--whether or not it turns out that there's anything to my particular angle here--my guess is that boxing with the blind men Uptown who still don't see the limits of big money approaches to development has got to get a bit tedious. So if my observations serve only as a brief, peripheral break from the "aid good"/"aid bad" show, so much the better.

Aid Effectivess DOES NOT= Development

When I first heard about the new book by Jessica Cohen and Bill Easterly on What Works in Development, I was downright excited.

Then I looked at the papers posted online , the combined texts of which look like this

... and listened to the podcast of the book release event at Brookings on January 21, the transcript of which looks like this

I finally got a hold of a copy of the book itself. If you are interested in techniques for assessing the impact of aid (and, parenthetically, why cross-country macroeconomics is difficult to the point of being, well... pointless) I urge you to order up a copy right now. An impressive list of the usual suspects in development economics shares insights as to what we Think we really Know about aid from Randomized trials.

But "what works in development"? I think not.

What is my view of what works in development? Here's one picture (the text of chapter 3 from The Coming Prosperity):

http://wordle.net

Many other plausible pictures are possible... None resembles an economist's navel.

More to follow on this general topic... including why framing the search for solutions in global development as Easterly vs. Sachs is a bit like framing the search for solutions to the obesity epidemic as Coke vs. Pepsi.

No, "DOD" Does Not Stand for "Department of Development"

Also relating to my post on Saturday on the topic of U.S. global development policy, here's a reality check on the role of the DOD in development that I got in an email from Gordon Adams who for five years was Associate Director for National Security and International Affairs at the Office of Management and Budget (the senior White House budget official for national security):

1.Such efforts are not central to the DOD/military mission, but by-products of the military role in Iraq and Afghanistan (and a few other countries where counter-terrorist operations are under way). We have government agencies for which development is the mission, notably USAID.

2. The focus of DOD's effort is not development, but meeting near-term mission needs for commanders. The net result is investments that are not oriented toward long-term development, but acquiring "hearts and minds," as part of the military mission. Projects end up not deriving from a country-based view of development needs, and are, as the Special Inspector General for Iraq Reconstruction has noted, often not sustainable in the long run.

3. Empowering DOD for this mission has the consequence of further weakening State and USAID; Congress concludes they are not capable of their mission, with the result that a growing civil-military imbalance gets even worse.

4. In the end, making DOD responsible for development is counter to US national interests, because it puts a uniformed face on US forward engagement, which is not universally appreciated. In turn, this makes further US steps more difficult as other countries and peoples come to see the US forward engagement as military, and driven by US security interests, not development.

And this from a colleague in the Armed Forces, who concurs that DOD is not a development agency, but adds

I still think there is more of a role for the DoD than simply developing technologies. The military also has core competencies in logistics, command and control, monitoring and evaluation, ops research, training, program management, etc, which USAID or other agencies could leverage as part of their development efforts. If nothing else, the military could help USAID and DoS developing these capabilities within their own organizations, or assist when they share a common footprint in various countries.

BTW: Gordon Adams is now a Professor at American University's School of International Service. He and Cindy Williams have just come out with a great book titled Buying National Security: How America Plans and Pays for Its Global Role and Safety at Home.

Anonymous DOD guy is ... anonymous DOD guy.

What Rajiv Shah is up Against (One View from the Inside)

From what I hear, Rajiv Shah is an amazing individual who has what it takes to transform General Moto... I mean, USAID. Still, he has his work cut out for him. That, at least, is the conclusion I draw from this message I received yesterday from a colleague with current, and I expect accurate knowledge, of the situation at USAID, sent in response to my last blog post:

USAID has two main problems as I see it: insularity and ideological group think. These both sort of reinforce each other and bear on several of the practical problems of the agency such as the fact that much of the funding of the agency gets tied to "green development"--as if anyone actually really knows what that means, let alone how to achieve it--and environmental impact statements on development projects. What this really means is that we are going to be pushed out of development by the Chinese who clearly care more about the environment than do we (sarcasm intended).

DoD does not have its hands tied to the same extent as USAID does with all its externally imposed or, frankly, internally imposed, constraints: an accounting system reminiscent of the Army in 1940; a structure in the foreign service that cares more about how long you've been with the agency and who you've pissed off lately than the quality of your work, the projects you've completed, or what expertise you bring to the agency; and worse yet, a promotion system more concerned with time in grade than anything else.

Then of course, they pay talented people like [noun indicating insufficiency], and brown-nosing blow-hards like kings.

There are of course the normal obstacles, like the government's inability to fire incompetent people and a completely dysfunctional human resources division ... but hey, this is what everyone else seems to have to deal with.

The issue of insularity is a problem for the agency because it is completely hostage to the political left, which means it has zero supporters from anywhere else in the political spectrum. That puts the agency's survival in question and undercuts its ability to represent the US population at large--which, after all, is a primary role of a diplomat. The agency's precarious political position also affects it's ability to solve problems, as people on the inside approach things from the perspective of how best to hang on to USAID money rather than how best to accomplish the agency's mission and .... I am afraid, I don't think a new administrator is really going to change any of that.

On a related note, they could also use a real dose of facts about under which administrations and Congresses they have fared better or worse. There is a tendency to obsess about Republicans being their enemies, despite the fact that this technically isn't technically true, since most of the agency's downsizing happened under Clinton (not either Bush or Reagan), and their budget growth in recent years came almost entirely under a Republican president and Congress. This is completely lost on them.

My own view on this last set of points: One of the great things about the end of the Cold War is that it caused an implosion of ideology. If you wonder what this means, go to China (still think it's a "Communist" country? you are seriously missing the point), Vietnam, or India for that matter. Unfortunately, the political leadership in the United States is having a hard time catching up with this global reality. (Business leadership is doing better.)

The concern raised by my colleague here is just a case in point. The global transformation currently under way--what I term the coming prosperity--is far beyond anything that might be pegged as a "liberal" or "conservative" issue. If any of our nation's representatives overseas don't get that, they sure should.

Hillary Clinton on Global Development: The GREAT, the TERRIBLE, and the unspoken

On Wednesday (a decade ago in Twitter time) Secretary Clinton gave two speeches at the Center for Global Development. You may have mistakenly heard that it was one speech, but it was, in fact, at least two.

Here's the GREAT speech the Secretary gave on technology, entrepreneurship, and innovation as drivers of development (the Secretary's actual words, in their logical order as determined by me):

Development is a strategic, economic, and moral imperative -- as central to advancing American interests and solving global problems as diplomacy or defense.

New technologies are allowing billions of people to leapfrog into the 21st century after missing out on 20th-century breakthroughs. Farmers armed with cell phones can learn the latest local market prices and know in advance when a drought or flood is on its way. Mobile banking allows people in remote corners of the world to use their phones to access savings accounts or send remittances home to their families.

There is no limit to the potential for technology to shrink obstacles to progress. And the United States has a proud tradition of producing game-changers in the struggles of the poor. The Green Revolution was driven by American agricultural scientists. American medical scientists have pioneered immunization techniques. American engineers have designed laptop computers that run on solar energy so new technologies don't bypass people living without power.

Because development is indispensible, it demands a new approach. We hope to put ourselves out of the aid business. Rather than helping fewer people one project at a time, we can help countries activate broad, sustainable change.

Private businesses are able to reach large numbers of people in a way that's economically sustainable, because they bring to bear the power of markets. We're exploring venture funds, credit guarantees, and other tools to encourage private companies to develop and market products and services that improve the lives of the poor. We are seeking more innovative ways to use our considerable buying power -- for example, through advance market commitments -- to help create markets for those products, so entrepreneurs can be sure that breakthroughs made on behalf of the poor successfully reach them.

Here's the TERRIBLE speech she gave pandering to folks worried about losing their jobs at USAID (the Secretary's actual words, in their logical order as determined by me):

We also need to ask hard questions about who should be doing the work of development. It's time to rebuild USAID into the world's premier development agency.

The experience and technical knowledge that our development experts bring to their work are irreplaceable. Whether trained in agriculture, public health, education, or economics, our experts are the face, brains, heart, and soul of U.S. development worldwide.

Development projects can be stalled or stymied by too little support from leaders. Our diplomats can help make the difference. They have the access and leverage to convince government ministers to give these development programs their support.

Some of the most transformative figures in the history of development represent the convergence between development and diplomacy. Today, we have many such "development diplomats" working at USAID. They embody the integration between development and diplomacy that, when allowed to exist, can amplify both of these disciplines.

Finally, here's the speech she might have given instead of the terrible one.

I'm here to talk about global development policy. If anyone happens to hear a loud chomping sound outside the door while I'm talking, that's the Department of Defense eating our lunch.

Now the mere fact that the Department of Defense has moved into the development business shouldn't worry you. They're doing it because they have no choice. (As you probably noticed, our political leaders got in the habit for a while of telling them to invade countries without any clear plan of what to do in the event that they "won." So they're trying to fix that.)

What should worry you is that a bunch of farmboys from Missouri are, in more than a few cases, doing a better job figuring out what works than this room of so-called experts. That may be because they have common sense. Or it may be because they don't have cozy relationships to outside contractors whose ability to continue to pay their mortgage depends on their skill in pushing the same Kool-aid (pun intended, of course) that has been toxic to developing countries for fifty years.

What does all of this mean for you here at USAID (because even though I'm at the Center for Global Development, you all know who I'm really talking to)? It means after 30 years of diminishing relevance, you all are now in serious danger of losing not only your jobs, but your Agency.

So this is what I'm going to do. I'm going to set you up with a really smart guy from the Gates Foundation. He's going to be in charge. And I'm going to say a lot of nice things about you for a while. I'm even going to try to get you some more money. And I'm going to ask you all to read and ponder one single four-page essay by President Paul Kagame of Rwanda.

And it that doesn't get you to figure out what actually works in about 24 months, then you're all fired.

Have a nice day.

Nobody Owes Rwandans Anything...

Sound harsh? Before you judge, consider the source: Rwandan President Paul Kagame. Here's more of what President Kagame has to say:

It is very simple: nobody owes Rwandans anything. Why should anyone in Rwanda sit back and feel comfortable that taxpayers in other countries are contributing money for our own well-being or development? Why should we not be doing what we are able to do and raise ourselves up to higher standards and achieve more and better and get out of this poverty that we find ourselves in. Change has to start in the mind. And that is what we have been working on over time. Once the mind gets correct, the rest becomes simple.

This is the reason that we are focusing on creating an entrepreneurial mindset in every Rwandan. This mindset begins with a sense that one’s life, choices, and actions matter to the whole country. It begins with a clear understanding that business as usual is not acceptable. Every day, every Rwandan from all walks of life has a unique opportunity to change our country for the better.

The full essay is well worth a read. It'll be the lead in the special edition of Innovations journal that my editorial team and I have put together for the Ashoka-Lemelson Celebration of Fellows coming up in Hyderabad next month. (Thanks to Michael Fairbanks for that.)