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.

WWID: An Experimental Approach

In Chapter 2 of What Works in Development, Dani Rodrik (who has sadly stopped blogging) argues that 1), we shouldn't consider RCTs superior to other types of studies, because while they have strong internal validity they often have weak (and unacknowledgedly so) external validity (and other studies can be stronger on external validity), and 2), there is a philosophical convergence on "experimentalism" between micro development economists (e.g. the randomistas) and macro development economists, who now think much more in terms of diagnostics and testing to find binding constraints on economic growth than the previous worldview which came with an a priori vision of what works (e.g. the Washington Consensus).

Then there are two short commentaries:

• Sendhil Mullainathan sees a divergence instead of a convergence (with the macro guys willing to make sweeping recs, and the micro guys only willing to make "guarded statements" about very specific interventions)


• Martin Ravaillon argues that the internal validity of RCTs is less ironclad than advertised because of omitted variables like selective participation, other actors (e.g. gov't shifts resources toward control villages, etc.)