Undercover Economist

Arrested development

When you’re lost and running late, it is frustrating to stop and figure out the lie of the land. Nevertheless, that has to be better than speeding off in the wrong direction, however fleetingly satisfying the illusion of activity may be.

Few problems are more urgent or important than that of desperate poverty.

Aid can feed the starving, heal the sick, educate young children before they grow too old for school. But Abhijit Banerjee, an economist at the Massachusetts Institute of Technology (MIT), is one of a growing band who believe that the development industry nevertheless needs to stop and work out whether it is moving in the right direction.

In Making Aid Work, a slim new book that deserves an audience, Banerjee cites a recent World Bank report as recommending a cornucopia of initiatives, including but not limited to ”computer kiosks for villages; cell phones for rural areas; scholarships for girls attending secondary schools; school-voucher programs for poor children; joint forest-management programs; water-users’ groups… ” The problem is that while this stuff sounds sensible, we don’t really know how much of it works. Whether and when aid works at all remains a hotly debated subject, which tells you something about the quality of the research devoted to working out whether it does.

In fairness, that is not an easy job. Economists are well aware that correlation isn’t the same thing as causation – emergency aid goes hand in hand with earthquakes but does not cause them – and it is hard to figure out whether some improvement happened because of an aid programme or despite the aid programme.

Banerjee argues that there is a solution…

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