The Department of Economics at the University of Chicago hosted the annual D. Gale Johnson lecture in Swift Hall last Monday afternoon featuring William D. Easterly, professor of economics at New York University, as a guest speaker. Easterly, who spent 16 years as a research economist at the World Bank, has authored articles on economic development and foreign aid.
Easterly began his presentation by joking that development economists have “shed a lot of darkness” on their subject. On their behalf, he admitted that, despite much work, good explanations for the successes and failures of economic development programs remain undiscovered.
He cited the failures of structural adjustment and shock therapy to deliver sustained economic growth in Asia, Africa, and Latin America as examples of the “ignorance” of developmental economists.
Moreover, even the economic growth rates of the so-called East Asian “tigers”—South Korea, Taiwan, Malaysia, and Indonesia—have experienced a reversion to the mean over the past few years, Easterly noted.
He proceeded to explain why economic success is unpredictable and non-replicable, a major theme of his presentation. Easterly argued that “development success is innovation—it is always something new.” He emphasized that “there are no recipes for innovation.”
Renowned economist Jeffrey Sachs, from Easterly’s perspective, attempts to make that very recipe. Jokingly mentioning that “one of my part-time hobbies is making fun of Jeffrey Sachs,” Easterly criticized Sachs’ “Big Push,” which aims to cut poverty in half by 2015.
Easterly noted that “to be fair, leading development experts such as Bono and Angelina Jolie are supportive of him,” drawing laughter from the audience. In his other criticism, he mentioned that “50 years of previous Big Pushes have not worked” and “$600 billion in aid to Africa didn’t yield growth.”
Easterly was skeptical of outside experts in general, claiming that “they have failed to replicate economic successes, have limited knowledge of local conditions, and do not have much incentive to make the right decisions.”“The system with a plausible ability to handle innovation—free-market democracy—has a strong association with the level of development success,” Easterly argued. The notion of freedom was essential to his argument, championing individual freedom as a prerequisite to innovation. Societies should be free to come up with their own combination of policies that is most conducive to innovation in their own context, Easterly said. What development economists should do, then, is offer advice in specific fields such as health care and education and examine the general argument for free markets, rather than trying to design specific features of the free-market system for developing countries.