Friday, March 06, 2009

MIT development economists

Esther Duflo and Abhijit Banerjee are two star development economists from MIT. While the merits of microfinance are highly hyped, these two prefer rigorous science, particularly randomized experiments, before placing so much hope on the hype. Not that there's anything wrong with microfinance, but development fads come and go, sometimes before we even know if they were effective. Practitioners try one thing and move on without testing and knowing – that may be a paraphrase from one of the two, so I'll just give you their actual comments on microfinance from a recent interview at Poverty Action Lab:

ED: Look at microfinance. There is no evaluation yet of the impact of a microfinance loan – we have the first preliminary results ever of the impact of a plain vanilla, group lending microfinance model. That's it. It is not as if there have been mixed results before now. The studies don't exist. And that is microfinance, where there are already a hundred economists studying it.

AB: So, if microfinance suddenly doesn't make all babies do calculus by the age of five, it is deemed a failure. I think if we just accept that in the end a few things work and somehow that gives people the spirit or the enthusiasm or the hope to act a bit more and enable those things to accumulate on their own.

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