Press Release – Development economists need to start thinking about politics

Economists need to start thinking more about the politics of the world’s poorest countries if they really want to help them develop, according to Professor Tim Besley of the IGC in an article for the hugely influential magazine Foreign Affairs (available here).

Tim Besley, Professor of Political Economy at the London School of Economics, argues that despite the many advances in development economics in recent years, the biggest barrier to escaping poverty remains political. For every success story such as China, there are many countries that have failed to improve the lives of their people, with the result that around one billion people in the world still live on less than $1.25 a day.

How to ensure that countries go from being ‘fragile states’ – run by corrupt and unaccountable politicians and frequently devastated by political violence – to being ‘developmental states’ that provide the infrastructure for their economies to grow, is a question that still puzzles economists and should be an area where they focus more attention, according to Besley. Discussing the state of development economics, Besley writes: ‘Scholars know far more than ever before about who the poor are, how they behave, and the constraints they face. But another major innovation in development economics gets little attention…: an increasing focus on political factors in shaping development’.

In the article, Besley reviews three books on economic development that showcase the increased use of microeconomics – the study of the economic behaviour of the individual – to help the poorest countries in the world: Poor Economics, by Abhijit Banerjee and Esther Duflo; More Than Good Intentions, by Dean Karlan and Jacob Appel; and Portfolios of the Poor, by Daryl Collins, Jonathan Morduch, Stuart Rutherford, and Orlanda Ruthven.

Besley praises the books for their accessibility – all are written in clear, everyday language – and their focus on the people for whom poverty is a daily struggle. He highlights three key economic innovations the books draw attention to:

  1. Behavioural models of decision-making that can help explain why extremely poor people without enough food still have TVs and DVD players;
  2. Models of social constraints that can help explain why people choose not to take advantage of proven ways to improve their health, such as vaccinations; and
  3. ‘Randomised control trials’, where policies are first tested on a subset of the population to see if they are successful.

But Besley adds: ‘Demonstrating that certain interventions work on a small scale highlights just how much could be achieved if a more effective state were to try them on a larger scale.’

He also argues that aid donors should not neglect the importance of local politics either: ‘Outside donors have tried to help such fragile states by lavishing them with foreign aid, but as admirable as the intention behind such largess may be, it often ends up entrenching governments that do little to promote development.’

According to Professor Besley, the existence of extreme poverty in the world is a reminder that economists still have many questions to answer. He writes: ‘No one can fail to be moved by seeing the slums that plague so many parts of the developing world. And the fact that one can travel a few hours by plane and find extremes of wealth and deprivation at either end of the journey is an insult to economists’ notions of rationality, efficiency, and equity. There is no greater challenge to the discipline.’

Read the full article on the Foreign Affairs website here.