Against The Nobelists
By Nathan Rhind
In 2019, the Nobel Prize Committee awarded the Nobel Memorial Prize in Economic Sciences to Abhijit Banerjee and Esther Duflo for their insights into development economics and how evidence-based solutions can be applied at scale to help the world’s poor. In 2024, the Nobel Prize Committee awarded the Nobel Memorial Prize in Economic Sciences to Daron Acemoglu, James Robinson, and Simon Johnson for their contributions to the study of comparative development and how nations succeed and fail in a global context. In this essay, I argue that Banerjee and Duflo’s 2011 bestselling Poor Economics and Acemoglu and Robinson’s 2012 bestselling Why Nations Fail suffer from similar shortcomings and pitfalls. More controversially, I –– an international affairs master’s student with admittedly questionable economics marks –– will argue for an alternative conception of development that privileges the voices of the poor in policy-making decisions.
Poor Economics succeeds where many prior development economics books have failed. More precisely, it includes evidence-based, empirical solutions to poverty problems supported by data from randomized controlled trials (RCTs). The randomistas (as I, and others, have called them) are convinced that incremental changes and “thinking small” can lead to massive outcomes in the worldwide battle against poverty. Furthermore, the randomistas are convinced that conventional wisdom is often wrong and that, instead of looking for obvious answers, we must dig deeper to find feasible solutions. Indeed, in the second chapter of Poor Economics, the authors dispute the common notion that all the poor need is cheap grain. Instead, they argue, the poor are just like us in that they value taste as much as nutrition and that evidence-based interventions must be grounded in providing food that people actually want to eat.
In the same chapter, the authors discuss an RCT in Kenya where “children who were given deworming pills in school for two years went to school longer and earned, as young adults, 20 percent more than children in comparable schools who received deworming for just one year.” Fair enough, but what about the children who didn’t receive any deworming pills? We’ve known for a long time that deworming pills are effective counters to anemia and general malnutrition and yet the authors still felt compelled to administer an RCT on the known question. Indeed, one shudders to think of the number of innocent children who have been sacrificed at the altar of science. Furthermore, “informed consent” seldom figures into the authors’ experimental designs. How many Kenyans would have objected to being assigned to the control group deprived of deworming pills if given a voice in the matter?
In chapter three, the authors discuss how small incentives and reliable service quality can greatly increase access to public health instruments. Beyond the issue of informed consent, however, they fail to acknowledge what might work in one place may not work in another because of social, cultural, or other factors. In statistics, this is referred to as external validity, or the degree to which empirical findings can be generalized to larger populations. While these meticulous experiments may have strong internal validity, they nevertheless fail with regard to external validity and overall generalizability. Simply put, what works in one village in Rajasthan may not work in an Albanian town. In ignoring the cultural and social factors differing from nation to nation, they ignore a fundamental reality of challenges facing development initiatives around the world.
Chapter four sees the authors investigate the foundational issue of education and how to get children into schools. They demonstrate that teachers are often absent and curricula are often mismatched to student ability, leading to poor outcomes by students in South Asia (where they spend the majority of their analysis) and around the world. Beyond the aforementioned issues of informed consent and external validity, what really jars the reader about this chapter is its insistence that "dumbing down” the curricula is the only way to help the poor. Indeed, in the chapter’s conclusion, they concede that their approach may not sit well with education experts who view their proposals as “suggesting a two-tier education system.” Principally, what the authors lack is the ambition to overhaul the Indian and other education systems as they instead opt for incremental changes that are unlikely to pay off in the long run. After all, how will mere percentage points more of schooling pay off on the job market? Finally, I found it especially jarring when the authors pointed out that some ostensibly lowly food vendors could have been professors of economics in prior lives. As one particularly astute economist has noted, it is clear where the authors’ sympathies lie.
In the final chapter of their first section on “private lives,” the authors turn to the politically fraught territory of fertility. After examining the lives of girls in Kenya, they conclude that, oftentimes, economic incentives outweigh personal discretions in sexual partnering. Simply put, if bearing a child to an older man will provide you financial security, it makes sense to have the child with that man. Now, the authors found that initiatives communicating the comparatively high rates of STDs and HIV carried by older men did not necessarily reduce premarital sex, but they facilitated more age-appropriate relationships. As a consequence, less girls got STDs and HIV. What this experiment and the others reveal, however, is, despite good intentions, a desire to socially engineer the poor. Moreover, it seemed as if the authors used the poor as guinea pigs in order to extrapolate their findings to more prosperous populations.
The second half of Poor Economics on “Institutions” fails to think big and consider true institutional renewal. Instead, it is again focused on small, incremental changes. Consider the chapter on the poor and insurance. Beyond speculating as to the degree to which poor people understand insurance, the authors fail to consider that insurance may not actually be what poor people need. In fact, assimilating the poor into the brutal realities of financial capitalism may erode existing social relations and reify them into market relations. So the next time a drought occurs, the poor may turn to insurance companies rather than their neighbors. And, as Americans know, insurance companies are notoriously unreliable. Whether its focus is on microeconomics in the first half or macroeconomics in the second half, the authors’ economic reasoning is, well, poor.
Anyone concerned with human rights will undoubtedly consider the ethical considerations of such aforementioned studies. What Poor Economics reveals, in my opinion, is a patronizing perspective on the poor by a globalized elite who see them as easily manipulated by behavioral economics and nudges. What is seldom considered is the damage caused by these interventions or how these treatments (for example, deworming pills) could be allocated more judiciously. Where Poor Economics fails by thinking too small with incremental change, however, Why Nations Fail falls short by being too overzealous about institutional reform. The sins of the former are very much the virtues of the latter, and vice versa.
Acemoglu and Robinson follow in a long line of economic historians who seek to explain the “great divergence” that occurred during the Industrial Revolution and into the twentieth century. The term, popularized by Kenneth Pomeranz, refers to the disparity that emerged regarding development between Europe and the rest of the world. Pomeranz himself argued that this was due to the comparatively high prevalence of coal in England which was necessary for many industrial innovations and processes of the nineteenth century. Others, such as Joel Mokyr, have proposed the divergence was due to the Enlightenment and Scientific Revolution which allowed Europe to transmit innovative ideas to artisans and industrialists. Gregory Clark, meanwhile, has argued that the dissemination of middle-class values via a social Darwinian process allowed traits of conscientiousness and industriousness to survive and be inculcated within subsequent populations. More controversially, David Landes and Niall Ferguson have proposed that the divergence occurred due to a superior culture of Europe and its institutions.
Acemoglu and Robinson’s intervention into this debate is to suggest that there is a very simple reason why this divergence occurred. In sum, they argue that places with inclusive institutions thrived while places with extractive institutions failed. As for the dichotomous definition of inclusive and extractive, they suggest that inclusive institutions are ones where property rights are protected and respected by all members of society whereas extractive institutions are ones where the rich leech off of the economic production of the masses. What Acemoglu and Robinson fail to consider (as other scholars have noted) is how the interdependence between inclusive and extractive institutions has fuelled industrial capitalism and what constitutes a truly inclusive institution.
In his seminal work Empire of Cotton: A Global History, Sven Beckert enters the great divergence debate by proposing that Europe became rich due to an abundance of unlimited labor in the form of chattel slavery. Using Acemoglu and Robinson’s typology, inclusive institutions in the Global North profited from the extractive institutions of the Global South. Simply put, the Europeans became rich off the backs of slave labor. Furthermore, it is unclear as to why certain institutions constructed in the American colonies are deemed “inclusive” by Acemoglu and Robinson since they denied property rights to African- and indigenous-Americans.
In addition to their failure to confront the intractable linkage between extractive and inclusive institutions, they also seem to fail to confront the rise of China. At the end of chapter three, they briefly consider the rise of China before tabling the issue for chapter five where they conclude that China will fracture much like the Soviet Union as its economic liberalism forces an elite to accommodate political liberalism. To date, more than a decade after the book’s publication, China doesn’t appear to be slowing down. In fact, it seems to have pioneered a viable model where inclusive economic institutions coexist with and are reinforced by extractive political institutions. Xi Jinping isn’t stupid, and he seems to have learned a vital lesson from the Soviet Union’s collapse; namely, that it is imperative to retain politically extractive institutions and a stranglehold on power even as the elite class cedes economic control to the invisible hand of the market
Although the linkage between Poor Economics and Why Nations Fail may seem tenuous, they actually have a common perspective on how the world operates. According to the authors, technocratic interventions are needed at the institutional level (according to Acemoglu and Robinson) and individual level (according to Banerjee and Duflo) in order to enact meaningful change. What they fail to consider is that technocratic interventionism has been precisely one of the causes of far-right and far-left populist discontent in the twenty-first century. In order to truly speak for the people, it would be wise if these authors could actually take their perspectives into account. What do the poor actually believe about vaccination access? This hardly figures in Poor Economics. Similarly, how do citizens of developing nations actually perceive their institutional capacity? Again, this hardly figures in Why Nations Fail.
A more truly inclusive development economics would necessitate professors leaving the ivory tower not just to conduct fieldwork and social experiments but to actually hear what people on the ground have to say. Expertise must be derived from scientific fact and the consent of the experimentees rather than abstract appeals to authority. If we are to return our societies to more equitable, radically democratic polities, we must heed the words of Ernesto Laclau and Chantal Mouffe who, in 1985’s Hegemony and Socialist Strategy: Towards a Radical Democratic Politics, wrote: “‘Radical', as in 'radical democracy' or 'radical politics', suggests a commitment to the expansion of liberty and equality into the ever wider areas of the 'social' as to give political voice to the ordinary people.” I have learned a remarkable amount from these authors but, for two books about development economics, the voices of the poor are strangely and unfortunately absent.
