WWID: Not growth policy?

In Chapter 6 of What Works in Development, Abhijit Banerjee of JPAL recaps the ineffectual history of research on economic growth and concludes that "it is not clear that the best way to get growth is to do growth policy of any form." Perhaps it would be better, he says, to focus on keeping our house in order - maintaining social stability and building human capital - so that we can take advantage of the growth "spark" when it occurs.

I sympathize with commentator Peter Klenow, a micro-oriented macroeconomist, who responds:

Beyond accounting, macroanalysis has contributed a slew of robust correlations that help guide microexperimental work. Correlation need not imply causality, of course, but certainly does not rule it out... It is up to theorists and microexperimentalists to flesh out the causal mechanisms behind these correlations.

Bill Easterly - editor of the book, and reserving the last word for himself - makes three main points:

1. Macroanalysis established the negative effects of extreme policies and outcomes (e.g. land expropriation and hyperinflation in Zinbabwe); it was only in cases of moderate variation where the conclusions broke down completely.


2. "Macroeconomists have earned their ignorance the hard way," largely "because the demand for explanations of growth was so intense."


3. RCTs "do not really offer a serious alternative to how to achieve 'growth success'", because the small interventions they test in specific situations could never scale up to meaningful increase growth on a macro scale.
   

I think Easterly is being too pessimistic here, and Klenow is closer to the mark - the right answer has to be a middle ground where RCTs are one of many tools in the toolkit, microexperimental work complements and is informed by macroanalysis, and we keep on trying to crack the mystery of growth, counter to Banerjee's skepticism that we ever can.