New School Economics

By Starr, Kevin | Stanford Social Innovation Review, Summer 2011 | Go to article overview

New School Economics


Starr, Kevin, Stanford Social Innovation Review


New School Economics MORE THAN GOOD INTENTIONS: How a New Economics Is Helping to Solve Global Poverty Dean Karlan & Jacob Appel 320 pages, Dutton, 2011

I like Dean Karlan. I like his work. Our Mulago Foundation funds his organization, Innovations for Poverty Action (IPA). We do whatever we can to get others to fund IPA. Disclaimers out of the way, here's a two-sentence summary of Karlan's More Than Good Intentions : This book is a gem. Anyone serious about aid, philanthropy, or impact investing should read it, maybe a couple of times.

More Than Good Intentions lays out a new approach to exploring and testing solutions to the thorny problems of global poverty. Yale University professor Karlan and his coauthor, IPA project associate Jacob Appel, have produced a book that is very readable, hugely useful, and often entertaining. Metrics geeks looking for a technical manual will be disappointed; those of us looking for a practical way to understand what works will not be.

Karlan and his colleagues at IPA are part of a new movement in development economics, a movement spearheaded by Esther Dufl o and Michael Kremer and represented by a small army of researchers all over the world. As Karlan puts it, their work consists sists of a "two-pronged attack" on the problem of fi nding the best solutions to poverty: 1) using rigorous evaluation methods akin to clinical research to test poverty solutions, both old and new; and 2) understanding problems and interpreting results using the lens of behavioral economics.

Karlan and Appel believe that understanding what works for poverty alleviation programs boils down to one deceptively simple question: "How did people's lives change with the program, compared with how they would have changed without it?" The primary-but not only-tool that Karlan et al. use to answer that question is the randomized controlled trial (RCT). In an RCT, a pool of subjects is randomly divided into intervention and control groups; the former gets the interventions and the latter does not. The two groups are fundamentally alike-both are measured before and after, and the impact is the diff erence between what happened to the intervention group and to the control group. RCTs are not new. The novel element here is the systematic and creative application of RCTs to test poverty solutions in the real world.

RCTs have their fl aws, and there has been an understandable backlash against them. They can be expensive and complicated; perfect control groups are a myth; and results are too often too broadly interpreted. Yet Karlan is not doctrinaire about RCTs. He simply believes that you should measure from the beginning, measure the right thing, get good quality numbers, and make a case for what would have happened without you.

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