A Marginal Revolution? Revitalizing the fight against global poverty

A shorter version of this appeared on the ONE Campaign blog in May 2011 with the title “Bucks, bangs and governance”, but has been lost to the internet gremlins.

Dean Karlan and Jacob Appel’s “More than good intentions: How a new economics is helping to solve global poverty”, and Abhijit Banerjee and Esther Duflo’s “Poor economics: A radical rethinking of the way to fight global poverty” set out a common manifesto for research, policy and practice on global development. This manifesto suggests that: “If we resist the kind of lazy, formulaic thinking that reduces every problem to the same set of general principles; if we listen to poor people themselves and force ourselves to understand the logic of their choices; if we accept the possibility of error and subject every idea, including the most apparently commonsensical ones, to rigorous empirical testing, then we will be able not only to construct a toolbox of effective policies but also to better understand why the poor live the way they do” (Banerjee and Duflo). In an age of austerity and pressures on budgets, there is a ready audience for books that offer a way to make aid more effective and to revitalise the fight against global poverty. So, it is no surprise to see the excitement that the publication of these two books has generated in and beyond the development policy community.

The organisations with which the authors are primarily associated – Innovations for Poverty Action (IPA) and the Abdul Latif Jameel Poverty Action Lab (J-PAL) – have a shared heritage and agenda which each of the books pushes in complementary ways. The three key messages are:

  • First, there is a need to revitalise the fight against global poverty. Grand debates about whether or not aid works – with Easterly vs. Sachs the classic – have been unproductive, polarized, “train wrecks” (Karlan and Appel, pp.4-5). It would be more useful to think about concrete problems that might have specific answers.
  • Second, there is a need to better understand the reality of poverty, with more attention given to how people experience poverty. As Banerjee and Duflo put it: “To progress we have to abandon the habit of reducing the poor to cartoon characters and take the time to really understand their lives, in all their complexity and richness.”
  • Third, there is a need to be innovative in coming up with solutions and then rigorous – with Randomized Controlled Trials (RCTs) regarded as the gold standard of rigor – in testing what works, in order to learn. By proceeding methodically, step-by-step, progress can be made (Karlan and Appel, p.38).

Lessons and recommendations

Both books offer a series of more specific lessons or recommendations. For Banerjee and Duflo the five key lessons are that: i) poor people lack information, but can be provided with more and better information; ii) poor people bear a lot of responsibility for making decisions about their lives and can be helped – nudged – to make better decisions; iii) there are good reasons why markets don’t always work for the poor, and government intervention can be necessary to deal with such situations; iv) poor countries are not doomed to failure – they are poor mainly because of poorly-informed policy; and v) expectations about what people can do often turn into self-fulfilling prophecies. Karlan and Appel in their resolutely practical recommendations set out – as does IPA’s “Proven Impact Initiative” – seven interventions that their evidence suggests are effective. These are: micro-savings initiatives; reminders to save; prepaid fertilizer sales; de-worming; remedial education in small groups; chlorine dispensers for clean water; and, commitment devices that help people to make choices that enable them to reach their longer term goals.

Questions: Gold Standards and a Quiet Revolution

There is much to like in the books. The authors bring debates about how aid can be made more effective to a wider audience and do a great job of moving beyond what have become sterile debates about whether aid works. There is a need to revitalise the fight against global poverty, to better understand the nature of poverty, to be innovative and to learn about works and what does not. And the focus on information gaps and nudging incentives suggests some very promising ways forward. However, there are questions to be asked, first about methods and second about focus.

In terms of methods, it is not clear that RCTs – the method that both books regard, to varying degrees, as the gold standard of rigor – can shed much light on why development interventions work or do not work. Relatedly, there are question marks about the extent to which an RCT can provide useful information about whether an intervention that works in a particular context is likely to work in a different context. This debate – a sub-set of a wider debate about how best to learn about what works in terms of development interventions – is a live one, with a number of development economists and other social scientists reacting against the apparently revolutionary and arguably reductionist claims of the randomistas. RCTs are an important response to one of the problems that besets efforts to tackle global poverty; in many areas, not enough is known about what works. But, they may be of limited use when it comes to understanding complex interventions and the ways in which policies play out in particular contexts.

In terms of focus, Banerjee and Duflo are very persuasive when they suggest – for instance, in a must-watch presentation by Esther Duflo at the Center for Global Development – that: “It is possible to improve governance and policy without changing the existing social and political structures.” The micro-institutional approach that they propose has much appeal when considered alongside the history of largely failed attempts to support macro-level changes to political structures and governance. But, the lives of the poor are shaped by politics and governance at the macro-level as well as by policies and institutions at the micro-level. Banerjee and Duflo acknowledge this, but are perhaps too ready to adopt an exclusive focus on the micro. Tackling poverty in scalable and sustainable ways requires that we understand, build and leverage the links between the micro and the macro, the local and the global. This might entail, for instance, working to develop global norms on budget transparency, while simultaneously enhancing the availability of information at the local level so that people can hold their leaders – at local and national levels – accountable for their actions.

These questions should not however detract from the books’ central and crucial message; that we need to listen, innovate and – perhaps most importantly – prioritise learning about what works. As Karlan and Appel put it: “Anyone acting on good intentions deserves praise, no matter how far from optimal their actions may be. But how much more good could we do in the world if impact-informed giving came to be seen as the coolest kind of all?” (Karlan and Appel, p.18). That is an agenda that we should all get behind.

Alan Hudson, Senior Policy Manager, Governance, ONE

31st May 2011

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