To Find Certainty upon the Dreaming Air

David Roodman over at the CGD recently posted a great article about the new aid-growth paper published by WIDER, of which he remains a skeptic. Scroll down to the comments, and you’ll see Owen Barder making some very good points in response.

I also posted a comment on the piece. My concern was rather different and probably not best suited for that blog. Among various ramblings, I wrote:

At what point did finding universal answers become the only legitimate basis of economic study? Development has looked and proceeded differently in different places…

Statistics is just one type of evidence. Why have economists apparently forgotten this?

My plea was for an approach to development that took in far more specific case study analysis. By this I mean not the Duflo/Banerjee approach of randomized trials, but a holistic approach to development that focuses more on the actual historical process of development in specific places over real time than abstractions with pretense to universality based on cross section data or studies dealing with specific interventions.

The rationale behind this is simple to me: firstly, a disinterested analysis of what we know about successful development processes emphasises their diversity more than their similarities, though these exist and are important. There is little reason to assume that imagined future development processes will have more uniformity. Secondly, understanding of real development successes and real development failures (however they are defined) demonstrate that they are typically the result of a range of complex interacting factors. In most cases, causal mechanisms have shown inconstancy, with the same phenomenon having markedly different effects depending on context and time, even within the same country.

Of course, this kind of method is messy; it won’t ever give us unambiguous answers as to what works and to what extent. It requires that we formulate policy based on our understanding of the historical circumstances that led to the current state in a country, bearing in mind that the interplay between factors cannot always be modeled as there are concurrent effects on multiple levels (individual interactions, social interactions between groups and state-subject/citizen relations for example) and different effects in different regions or time periods. It will mean that we have to rely on what we know from other countries and other times, trying to tease out the central relevant lessons.

It’s an approach that is anathema to modern economics. The majority of our current work tends towards universality of analysis and conclusion. It seeks to pose theoretical relationships that hold under specific assumptions (which are often implicitly further assumed to hold everywhere if they hold anywhere) and then test them. If the tests work (and for the cynical, even if they don’t), they seek to tell us of a ‘robust’ concrete relationship: each unit of factor X contributes 0.1 units of GDP growth. Paradoxically, this often leads to just as much messiness and uncertainty as a historical analysis. The aid regressions Roodman looks at are a classic example: the exact same data produces opposite results depending on model specification. Neither result is unambiguous even on its own terms.

Economics was not always like this though. Early economists were multidisciplinary creatures by nature. They studied history, social relationships and the economy as interlinked phenomena, using a holistic method that took in historical evidence, theoretical abstractions from this evidence and some further statistical evidence to support their ideas. Statistics was necessarily a smaller part of their work, for their data and the sophistry of their statistical techniques was still quite basic. This period still produced what to my mind remain the two greatest works of economic thought: The Wealth of Nations and Capital.

Continue reading

You can build it. But they still might not come.

 

photo posted on www.post-gazette.com

Kevin Costner built the field and got a game going. I think he was lucky.

An anthropologist I know once told me a great story, which may be a rural myth. It was about a remote tribe in Papua New Guinea from which two members were given the opportunity to travel outside of their homestead to see the urban world in all its ‘glory’. When they returned, they recounted their experiences to the rest of the tribe, and they set about replicating one of the more amazing things they’d seen: an airport. They cleared a runway. They built an observation tower out of wood. They even crafted headphones with little reed antennae for the ground control team to wear. When they were done, they waited for the planes to arrive.

They never did. Building the structures, the visible artifices of an airport is only symbolic. The actual meaning of what an airport is, what makes it functional, cannot be seen. It lies in the relations between people and institutions and in agreements between them.

This anecdote constantly pops into my mind when I observe technical reform processes introduced by donors (often with domestic support) in African Governments. Mark Miller and Matt have both discussed this issue in the past. What they and I have in common (apart from devastating good looks and a rapier-sharp wit) is that we have all done time as long term TAs in developing country Governments. All of us have been witness to ambitious reform programmes stalling on the road to implementation or lying dead and ineffective after implementation. Yet only sporadically have the causes of this been critically examined and learnt from.

On this note, The Roving Bandit recently linked to an exciting post from the IMF’s Public Financial Management blog (and yes, I’m aware of the depths of geekery I’ve plumbed by using the word ‘exciting’ about the IMF and PFM). In it, Richard Allen makes a series of simple, reasonable statements about how technical reform should and shouldn’t be tackled in low income countries. Three things that had me high-fiving myself:

The experience of now-developed countries suggests that the process of establishing credible and robust budgetary institutions can take many decades, or longer. There is no reason to expect LICs to be different.

Because the necessary basics are not in place, many reforms are likely to fail.

Much more attention needs to be given to the political economy constraints to reform since changing budgetary institutions is not at root a technocratic issue.

The most important point Mr. Allen makes is the last one, and it extends beyond budgeting. Very few reform processes recognize that at root, the biggest problems in Government administrations are political economy problems. They are not technical or technocratic problems. Treating them as such can simply create new problems without actually addressing the original ones.

Continue reading

If it’s good enough for New Zealand…

By Mark Miller

As a current employee of the Malawian Budget Division, I read with interest Matt’s blog on technological innovation and I’m sure he’ll no doubt be saddened to hear that this computer system is no further ahead than when he left it a year ago.

However, it struck me that in the field of budgeting at least this trait of ‘leapfrogging’ is sadly by no means specific to technology – whenever reforms are undertaken, invariably ‘international best practise’ (normally from New Zealand or some thoroughly un-governable nation) is the recommended yard-stick for governments to aim at.

Another innovation in budgeting championed by the donor community in recent years was ‘Output Based Budgeting’. Every Kwatcha in the Malawian budget is allocated to specific activities with specific indicators and targets. These indicators include deliverables such as ‘number of meetings attended’ and ‘% of office supplies provided adequately’. Formulating a budget in such a way is a monumental effort that no donor’s government would ever dream of attempting.

Perhaps my favourite example of thoroughly unsuitable ‘best practise’ was a consultant who visited Malawi to make recommendations on how the budget should be classified. Fresh from a trip to Australia where he had been impressed by the ability of government to revise its forecasts when the price of diesel changed by a cent, he proposed that Malawi needed to further disaggregate the budgeting for fuel down into petrol, diesel, paraffin etc. What made this observation particularly startling was that it came:

  1. During a 3 day black-out in the Ministry, with a generator unable to cover for the grossly over-stretched national grid.
  2. In a building where there are no light switches – all of them are either ‘on’ or ‘off’

I could not help thinking that when it comes managing of government’s energy resources we had bigger problems on our hands than refining our diesel forecasts.

Continue reading