Brief History of development economics and reviews of latest dev eco books (Pranab Bardhan edition)

A nice piece by Prof Bardhan in Boston Review’s recent edition.

He begins saying how eco was all about development earlier and then lost its ground only to regain it now:

The classical economists, from William Petty and Adam Smith to John Stuart Mill, were all development economists. They offered general theories of markets and growth and wrote about a particular developing country (typically Britain) going through a process of industrial transformation.

Then, for more than a century, development shifted from the economic and intellectual core to the periphery. Debates about development focused on controversies over Soviet industrialization and on the need for protectionist policies to defend infant industries in places—such as the United States, Germany, Eastern Europe, Australia, and India—trying to “catch up” with England.

After the Second World War, as a large number of countries became independent (or “liberated,” as in China), development economics blossomed but remained at the intellectual margins of the economics discipline. Underdevelopment was conventionally understood as the product of market and institutional failures. In the prevailing paradigm, such failures were regarded as exotic exceptions or as the remediable results of bad policies instituted by new governments.

The challenges of persistent poverty and underdevelopment eventually undercut this intellectual marginalization. In the last three decades of the 20th century, economists recognized that standard market-equilibrium models—with their smoothly functioning invisible hands—break down in the context of information failures and dysfunctional institutions in all economies. So economists started paying more attention to rumblings from the periphery.

In the past decade, development economics has grown to extraordinary prominence, not just in academia but also in the public arena. This new development economics has moved in two strikingly different directions. The first focuses on micro-level policy interventions. It uses the tools of field experiments and randomized controlled trials (RCT) to evaluate focused strategies for alleviating persistent poverty. The second trend focuses on macro institutions: the structures of democracy, autocracy, centralized and diffused power, and legal protections of property and contracts that organize politics and markets. Drawing ideas from the burgeoning field of institutional economics, this second stream of work has addressed grand, old historical questions such as why some countries have succeeded in the march to prosperity while others have languished.

In the past two years, some of the brightest minds of the new development economics have published books exploring these two trends. A critical appreciation of these works may give us some insight into the high points and pitfalls of the emerging micro and macro approaches.

He reviews following recent dev eco books:

He is not really happy with any of the four. IN the end:

All four books agree that there are no general recipes or quick fixes for poverty. The macro-political books point us to the grueling task of building inclusive or cohesive institutions and remind us of historical contingencies. The micro experimentalists are a bit more cheerful. In their judgment, small transfers and nudges can make a difference.

Neither group gives enough attention to much of the pre-existing micro-institutional work in development economics or to many of the regional policy issues crucial to fighting poverty. And none of the authors speak to the need for in-depth country or regional studies of political and economic processes, which provide deeper insights than those gleaned from cross-country standardized data, case studies, or micro experiments. Meticulous country and regional investigations do not answer “hot” global questions with over-arching judgments, which seems to preoccupy many prominent development economists today. Having languished for years in the periphery of economics, this profession now has larger aspirations, including hobnobbing with the likes of Angelina Jolie


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