Development Economics as Clinical Economics

The challenge of making policy recommendations for an economy, especially a poor and unstable economy, shares many of the challenges of clinical medicine. Yet, the practice of development economics is not yet up to the task.

Economists are not trained to think like clinicians and are rarely afforded clinical experience in their advanced training.

A graduate student in a U.S. Ph.D. program in economics may very well study the development crisis in Africa — without ever setting foot in the country or countries under study.

An adviser may hand over a data set, say for Nigerian households, and ask the student to do a statistical analysis without the benefit of context, history or direct observation. Years later, the student may have the opportunity to show up in Nigeria for the first time.

The five key lessons of clinical medicine have clear counterparts in good economics practice as well. First, economies, like individuals, are complex systems.

Like the circulatory, respiratory and other systems of a human being, societies have distinct systems for transport, power, communications, law enforcement, national defense, taxation and other systems that must operate properly for the entire economy to function appropriately.

As with a human being, the failure of one system can lead to cascades of failure in other parts of the economy. When the U.S. government asked Bolivia to eradicate its peasants’ coca crops in the late 1990s, the result was a deepening of rural poverty.

When the government sought to respond to the rising rural poverty with social and development programs, the crisis became a fiscal crisis.

When outside donor agencies, including the U.S. government, failed to help Bolivia with the fiscal crisis, the crisis became one of civil disorder, with the police, army and peasants battling in the streets.

Eventually the government was toppled — and Bolivia entered a new period of extended instability.

Second, economists, like medical clinicians, need to learn the art of differential diagnosis. Medical pathology textbooks are now often 2,000 pages long — and even those may cover just one of the key physical systems.

Doctors know that lots of things can go wrong and that a particular symptom, such as high fever, might reflect dozens, or hundreds, of underlying causes.

The IMF, by contrast, has focused on a very narrow range of issues, such as corruption, barriers to private enterprise, budget deficits and state ownership of production.

It has also presumed that each episode of fever is just like the others — and has trotted out standardized advice to cut budgets, liberalize trade and privatize state-owned enterprises, almost without regard to the specific context.

The IMF has overlooked urgent problems involving poverty traps, agronomy, climate, disease, transport, gender and a host of other pathologies that undermine economic development.

Clinical economics should train the development practitioner to hone in much more effectively on the key underlying causes of economic distress and to prescribe appropriate remedies that are well tailored to each country’s specific conditions.

When in Afghanistan or Bolivia, the IMF should think automatically about transport costs. When in Senegal, attention should turn to malaria.

Third, clinical economics, like clinical medicine, should view treatment in “family” terms, not just individual terms.

It is not enough to tell Ghana to get its act together if it faces international trade barriers that prevent it from selling its goods and services to world markets, is buried by unpayable, inherited debt, requires basic infrastructure investments as a precondition for attracting new investors, or is burdened by refugee movements and disorders from neighboring countries.

The IMF presents standardized advice to cut budgets, liberalize trade and privatize state-owned enterprises, almost without regard to the specific context.

In short, for the IMF and World Bank to tell Ghana to liberalize its trade, balance its budget and attract foreign investors may be fine and good. But it will be ineffectual if not combined with trade reforms in the rich countries, debt cancellation, increased foreign financial assistance for investments in basic infrastructure and support to the West African region as a whole to maintain peace.

In the case of a country, the entire world community is part of the family. That is an assumption of the Millennium Development Goals, and especially the concept of a global partnership to achieve the goals — but it is not yet part of real clinical practice.

Fourth, good development practice requires monitoring and evaluation, and especially a rigorous comparison of goals and outcomes. When goals are not being achieved, it is important to ask why — not to make excuses for past advice.

Under current development practice, the IMF and World Bank have rarely taken on specific development objectives as the standards for judging country performance and, by extension, their own advice. Instead, countries are judged on the basis of policy inputs, not outputs.

A government may be told to cut its budget deficit by 1% of GDP. It is judged on whether or not it carries out that measure — not on whether the measure produces faster growth, a reduction of poverty or a solution to a debt crisis.

The result is a descent into formalistic debates on whether or not a particular policy has been carried out, not on whether the policy was the right one in the first place.

The current situation reminds me too much of the fable of the farmer whose chickens are dying. The local priest gives one remedy after another — prayers, potions, oaths — until all of the chickens are dead. “Too bad,” says the priest, “I had so many other good ideas.”

Fifth, the development community lacks the requisite ethical and professional standards. I am not suggesting that development practitioners are corrupt or unethical — such cases are rare. Rather, the development economics community does not take on its work with the sense of responsibility that the tasks require.

Economic advice requires a profound commitment to search for the right answers — not to settle for superficial approaches. It requires a commitment to be thoroughly steeped in the history, ethnography, politics and economics of any place where the professional adviser is working.

It also requires a commitment to give honest advice, not only to the country in question, but also to the agency that has hired and sent the adviser.

Not every problem facing the impoverished world is homegrown — nor will all solutions be found in good governance, belt tightening and further market reforms.

True solutions will also require deeper debt relief, greater development assistance, more open trade with the rich countries and the like.

Any IMF or World Bank official, as well as any academic development practitioner, has the responsibility to speak truth not only to the policy makers within the impoverished country, but to the policy makers of the rich and powerful countries as well.