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Esther Duflo

August 20, 2002

Small-Picture Approach to a Big Problem: Poverty


Though rich countries may be able to rescue middle-class economies like those of Uruguay and Brazil from crises simply by lending them billions of dollars, attacking the problems of the poorest countries is not so easy. Putting aside old, one-size-fits-all approaches to development, a new school of thought emphasizes more specific grass-roots solutions.

A cadre of young economists who study development, including some of the most sought-after professors in the nation, are dissatisfied with supposed panaceas like balanced budgets, new infrastructure and financial stability. These economists are using basic insights about people's motivations and the flow of information to guide policy in emerging economies, one piece and one country at a time.

Esther Duflo, an associate professor at the Massachusetts Institute of Technology, epitomizes the new development economics with her broad use of theoretical and statistical tools and her willingness to conduct research in the field.

Ms. Duflo, whose work has placed her among the year's top picks for lifetime tenured positions, says she ultimately wants to find out why the world's poorest people almost always stay poor. That quest has led her to ask how governments and outside organizations can best help the citizens of poor countries, and why information and technology that can promote economic advancement spread less quickly in some settings than in others.

Old-line development economists often assumed that all people would follow textbook theories and that lessons learned in rich countries would stay true anywhere. Yet according to Ms. Duflo, "the level of discrepancy between what people do and what we as economists think they should do can be pretty substantial."

Ms. Duflo has studied the growth of the software industry in India, school construction in Indonesia, pensions in South Africa and household accounting in Ivory Coast. Her current research, conducted jointly with Michael R. Kremer of Harvard, has found, for example, that the use of fertilizer for growing maize in Kenya takes hold quickly among farmers who see demonstrations but that those farmers rarely share their new knowledge with others.

In the past, economists might have missed important discoveries like this by concentrating solely on the big picture. The International Monetary Fund, the World Bank and other teams of economic advisers often took the same message wherever they went, preaching the necessity of programs meant to clamp down on fiscal waste, stop inflation and improve foreign trade and investment.

Over the last half-century, these policies helped Chile, India, Israel and Mexico to stabilize their currencies and lay the groundwork for growth. Yet in Africa, the former Soviet bloc, many parts of Southeast Asia and Latin America, there is little to show for all the well-intentioned advice. Put simply, the same policies have not worked in every setting.

"To some extent the field has been driven by abandoning big-picture paradigms," Timothy J. Besley, director of the Suntory- Toyota International Centers for Economics and Related Disciplines at the London School of Economics, said in a recent e-mail message. "The problems are different country to country and even region to region within countries. These big-picture efforts are good for giving us inspiration, but probably not much good in making concrete progress within particular countries."

Though they do not entirely reject the macroeconomic policies of the old school, the new-style economists have begun to focus on smaller initiatives in public health, agriculture and education. Finding successes among these programs could yield lessons for broader policies.

"I see my job as trying to uncover little pieces of knowledge that can help us define policy for development," Ms. Duflo said.

Mr. Kremer, who is among the favorites to win the 2003 John Bates Clark Medal as the best American economist under 40, agreed. Now, he said, "it's less trying to find the magic key."

Even the World Bank has lately focused more attention on the most basic problems of poor countries, like public health.

The shift from promoting bulky, all-encompassing models to building simple truths from fieldwork and the theory of incentives has come late to development economics. Similar movements took hold a decade or two ago in labor economics and public finance.

"The field of development was for a while split off from mainstream economics," Mr. Kremer said, "and so people in development weren't always using the most modern tools, either theoretically or empirically." With increasing rigor, he said, the field entered the mainstream and began to attract the best students.

After pioneers like Angus S. Deaton, who teaches at Princeton, came a wave of younger professors, often with hands-on experience in the field, who began to search for specific programs and strategies that did work. Even as junior faculty members themselves, professors including Mr. Kremer, Abhijit Banerjee of M.I.T. and Christopher R. Udry of Yale became mentors and collaborators for Ms. Duflo's generation of development economists. They set an example by conducting fieldwork on links among health, education, local politics and productivity in places like Kenya, India and Ghana.

Before Ms. Duflo rose to prominence, Mr. Banerjee said, "the data were there, the theory was there, and some of the tools were there, but there wasn't anybody who was on top of all of them."

"It's the bundle that's really impressive," he said. "She goes for big questions always."

A decade ago, Ms. Duflo was a history student at the Ācole Normale Sup´rieure, a top college in France. She was interested in the problems of developing countries and spent some time working in Madagascar. While carrying out research in Moscow and planning a move into politics, Ms. Duflo met Thomas Piketty, another graduate of the Ācole Normale and an economics professor at M.I.T. at the time. He told her of the opportunities for research in economics in the United States and the string of graduates from the Ācole Normale who had pursued them.

"I had no clue this whole setup existed," she said. "I was interested in development before I was interested in economics, actually."

Ms. Duflo decided to switch to economics and completed a master's degree at Delta, an economics research center affiliated with the Ācole Normale. For graduate school, she went to M.I.T., where she took courses from Mr. Banerjee and Mr. Kremer. M.I.T., which almost never hires its own doctoral graduates, offered her the chance to stay on as an assistant professor.

Now, Ms. Duflo has offers of tenure from Princeton and Yale, as well as M.I.T. Mr. Banerjee said Ms. Duflo's popularity had to do with the renaissance in their field as well as her own abilities. "After many years, all the departments are looking for people in development economics," he said. "The field has become more visible," and students want to specialize in it.

Ben S. Bernanke, who was chairman of the economics department at Princeton before his appointment to the Federal Reserve Board early this month, said his department had been recruiting Ms. Duflo to expand its development offerings. Ms. Duflo spent last year at Princeton as a visiting professor and said it had been refreshing to spend time outside M.I.T.

Mr. Bernanke lauded Ms. Duflo's prodigious publishing in academic journals, an achievement that Mr. Banerjee attributed to her exceptional energy. That trait seems to characterize many young development economists, who often spend their summers working in Africa and Asia. "I don't sit in a room much," Ms. Duflo said. "You cannot do development without spending time in developing countries."

Other hot prospects in economics besides Ms. Duflo also dabble in development. Sendhil Mullainathan, another associate professor at M.I.T., has garnered interest from other institutions. Marianne Bertrand, who teaches at the University of Chicago, was offered a position at M.I.T. while she was teaching at Princeton. The three have collaborated on papers and could be seen sitting together, whispering and joking, during presentations at a labor studies conference by the National Bureau of Economic Research last month in Cambridge, Mass.

Not every leading economics department is eager to hire a development economist like Ms. Duflo, however. Stanford, for instance, has expressed little interest.

The reason, said Ilya R. Segal, a professor at Stanford who trained as a theoretician at M.I.T., stems from a long-running schism between two stereotypical schools of empirical, or applied, economics: one that favors data-intensive studies with only cursory theoretical models and another that insists on rigorous theoretical underpinnings for all assumptions. The data-intensive type is often attributed to Harvard and M.I.T., and the theoretical type is usually associated with Stanford, the University of Chicago and a handful of other prestigious universities in the Midwest known in academia as "freshwater" schools.

"The style of applied economics on the East Coast and at the London School of Economics tends to care very little about methods per se — it is very eclectic," Mr. Besley said. "Perhaps the freshwater approach has a more definite sense of the 'right way to do economics.' " He added that Robert M. Townsend, a senior professor at Chicago, had done some valuable research in Thailand.

Ms. Duflo's work is "more the Cambridge style," Mr. Segal said. "People who do this kind of empirical work are very unlikely to get an offer from us." Even many senior faculty members at M.I.T., he said, would probably not get jobs at Stanford.

Ms. Duflo might disagree. "Development is a set of questions," she said. "It's not really defined by techniques."

Yet Mr. Banerjee conceded that the schism had led to criticisms of work produced by him and his colleagues. "It's very easy to paint yourself into corners," he said. "You know that your answers are being rated relative to the assumptions you make. You take your hits on that."

Copyright 2002 The New York Times Company

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