Download Rethinking Development Assistance

Rethinking Development Assistance:
Networks for Decentralized Social Learning
David Ellerman
University of California at Riverside
Table of Contents
INTRODUCTION
PART I: THE DEVELOPMENT DEBATE: A COOK'S TOUR
HELPING THE POOR VERSUS DEVELOPMENT ASSISTANCE
A CASE IN POINT: BILL EASTERLY'S WHITE MAN'S BURDEN
WHAT IS DEVELOPMENT ANYWAY?
Increased Income or Increased Capability?
Example: "Development" in the Migration Debate
DELIVERING DEVELOPMENT?
"VACCINATING THE CHILDREN"
PERFORMANCE-BASED AID
PART II: RETHINKING DEVELOPMENT ASSISTANCE
HELPING PEOPLE HELP THEMSELVES
The Helper-Doer Relationship
The Fundamental Conundrum of Development Assistance
UNHELPFUL HELP
Unhelpful Help #1: Social Engineering
Unhelpful Help #2: Benevolent Aid
ALBERT HIRSCHMAN'S APPROACH
The Big Push Theory
Motivating Transformation
"Unbalanced" Growth Processes
Cognitive Version of Unbalanced Growth
PART III: DECENTRALIZED SOCIAL LEARNING
THE DUALITY BETWEEN SERIES-ORIENTED AND PARALLEL-ORIENTED RESEARCH STRATEGIES
THE WRIGHT STUFF
DONALD SCHÖN AND EVERETT ROGERS ON DECENTRALIZED SOCIAL LEARNING
CHARLES SABEL AND THE REVIVAL OF DEMOCRATIC EXPERIMENTALISM
FROM THE PRINT AGE TO THE INTERNET AGE
CONCLUDING REMARKS: DECENTRALIZED SOCIAL LEARNING IN THE INTERNET AGE
REFERENCES
Introduction
In Part I, the aim is to clarify the current debate about development aid. It is hard to have an
intelligent debate when the parties have quite different conceptions of the purpose of
development assistance.
In Part II, the idea is to first outline the fundamental conundrum of supplying any autonomyrespecting external help to homegrown development, and then to intellectually "recover" Albert
Hirschman's approach to development to see how it provided an alternative perspective to the
Big Push ideas of yesterday's and today's development planners.
In Part III, the aim is to focus on decentralized social learning about development problems. In a
variety of settings, we find that the best scheme for social learning under conditions of
uncertainty is that of parallel experimentation, with benchmarking between comparable
experiments, and cross-learning between the experiments to ratchet up the performance of the
whole group. Benchmarking between parallel experiments using comparable resources provides
a better notion of evaluation than the rather bogus notion of evaluation ("impact evaluation")
being promoted by some major development agencies.
Finally the conclusion speculates that internet-based technologies provide remarkable new means
for autonomy-respecting decentralized social learning from parallel experimentation.
Part I: The Development Debate: A Cook's Tour
Helping the Poor versus Development Assistance
International programs of development assistance from the industrialized developed countries
(sometimes called the "North" or the "West") to the underdeveloped or developing countries
(sometimes called the "South" or the "Rest") are largely a creation of the post-WWII era. After
some six decades of this development assistance, the results are quite mixed. Where economic
development has been most successful (as in East Asia and to some extent in South Asia),
external development assistance has had little role. Where official development assistance has
had the greatest role (e.g., in Africa), the results have been and continue to be dismal.
Hence in the last decade or so, there has been much rethinking and debate about development
assistance. The debate has not been well-structured. One finds surprisingly disparate assumptions
even about the whole point of the debate. Thus I must begin by probing basic assumptions about
the purposes of the debate.
In the beginning (i.e., the post-WWII era), the focus was squarely on development which implied
a thorough-going modernization and transformation of countries. This transformation was
expected to, inter alia, improve the prospects of the poor but "helping the poor" was not the
primary purpose. Within the major development agencies such as the World Bank (officially, the
International Bank for Reconstruction and Development), the focus was on growth, not the
byproduct of "poverty reduction."
To telescope decades of change into a "short story," the story is one of a steady shift from the
focus on growth and development to a focus on the condition of the poor in developing
countries, i.e., to poverty reduction as the goal rather than a byproduct of development. While a
major shift of the World Bank in the direction of poverty reduction can be dated from the
McNamara era, the shift of focus reached full flower during the Wolfensohn era when the Bank's
slogan was "Towards a World Free of Poverty."
One can find many reasons for the shift within the major aid agencies, e.g., the difficulty and
subtlety of genuine development assistance in contrast with the seemingly easier job of helping
the poor. But one should not neglect the changes in the developing countries themselves. In the
immediate post-war period, many of the developing countries were emerging from colonialism.
In the eyes of the new nationalist rulers, their lack of development was the result of colonial
exploitation so they were sympathetic to the idea of social and economic transformation of their
2
societies. But after a few decades, the rulers lost much of their enthusiasm for any thorough
transformations. They were on top of the heap, and any real changes would probably be downhill
for them. But alleviation of the plight of the poor is another matter. Who can be against it—
particularly when lubricated by millions of dollars flowing into the government's hands?
As so often happens during historical change, there was less than full awareness at the time of
the shift being made.1 The perspective of distance helps to clarify the metamorphosis. But it is
not enough. Even today, the debate over foreign aid and development assistance is quite
confused about the basic point of the efforts: helping the poor—or the social-economic
transformations (e.g., in East Asia) of development.
A Case in Point: Bill Easterly's White Man's Burden
Consider the recent book on aid by William Easterly [2006] who spent sixteen years in the
World Bank before being pushed out because of another book [2001] critical of the Bank and
other large agencies of "Official Development Assistance." This book delivers a reasoned while
still impassioned critique of "Big Aid", the grandiose schemes of "Planners" to achieve "The End
of Poverty" [Sachs 2005] and to "Make Poverty History" in contrast to the "Searchers" who
might pragmatically find incremental ways to reduce poverty. One might reasonably expect such
a book to sketch an alternative approach to development assistance that would firstly "Do no
harm" and secondly have a better chance of actually furthering development in the South (or the
"Rest" as Easterly puts it). But it does not. And this is not an accidental oversight. Aside from
wisely stating that development efforts must start in the developing countries, Easterly explicitly
eschews addressing the subtleties of genuine development assistance in favor of the more salient
and yet still quite difficult question of using aid resources to actually help the poor.
We have to separate two questions that are usually lumped together: What can
Western aid do? How can long-run prosperity be achieved in the Rest? This book
is only about question one, except to argue that Western aid is not the answer to
question two. [Easterly 2006, 28]
Remember, aid cannot achieve the end of poverty. Only homegrown development
based on the dynamism of individuals and firms in free markets can do that.
Shorn of the impossible task of general economic development, aid can achieve
much more than it is achieving now to relieve the sufferings of the poor. [Easterly
2006, 368]
Easterly is arguing that the aid agencies should retreat from their grandiose plans about
development and should explicitly and with some humility focus on poverty alleviation. There is
perhaps some irony here. Behind the rhetorical barrage of the grandiose comprehensive
development schemes and millennial goals that Easterly so effectively skewers, the aid agencies
have for some time been retreating towards poverty reduction as the goal. Easterly argues
convincingly that the major agencies are not effective in reducing poverty, but we should be very
clear that there has been a convergence of goals.
1
As Hegel put it in his Preface to the Philosophy of Right: "'Tis only as the shades of night are gathering that the
Owl of Minerva spreads her mighty wings and takes to flight."
3
Easterly has been justly critical of the grand schemes of Jeffrey Sachs but this should not obscure
the point that they have the same goals of poverty reduction. After being booted out of the
transition economies, Sachs has focused his attention on (sub-Sahara) Africa. There have always
been disasters (mostly natural) and, during the post-war era, there has been organized disaster
relief through a variety of national and international agencies. Disaster relief, by its nature,
should be short-term assistance to recover some semblance of the status quo ante while, in
contrast, development assistance should aim at long-term transformation beyond the status quo.
But the grand schemes of development assistance in Africa have been a disaster in their own
right, and they have been accompanied by numerous natural and human-caused disasters. Thus
in the case of Africa, disaster relief and "development assistance" have become more and more
merged under the rubric of "aid for poverty reduction." Regardless of the rhetoric, the grand
schemes of Sachs are not even oriented towards development that is homegrown and sustainable.
They are oriented towards the short-term relief of the on-going disasters that afflict Africa. Their
argument is that without this disaster relief on a grand scale in the short-term, there will be no
long-term development for Africa. There is some and only some truth in that argument. But it
should be clear that there has been a major de facto shift away from the seemingly
insurmountable problems of genuine development assistance to the still daunting problems of
disaster relief cum poverty alleviation. Regardless of their important differences, both Easterly
and Sachs explicitly or implicitly eschew the problems of development assistance to focus on the
problems of "helping the poor."
What is Development Anyway?
Increased Income or Increased Capability?
Often debates seem to get nowhere because the debaters implicitly are addressing very different
questions and pursuing very different goals. Debates about "aid" are unlikely to get anywhere if
one party is thinking about aid along the lines of poverty reduction, disaster relief, and "saving
the children," while the other party is thinking in terms of economic growth, the development of
productive capacity, and modernization. There will always be the need for short-term disaster
relief but if there is only short-term disaster relief in this generation then it will be déjà vu all
over again for tomorrow's aid agencies to save the children again in the next generation. The
debate about development assistance cannot be resolved by implicitly or explicitly redefining the
purpose as the needed and emotionally satisfying job of "saving the children" and "helping the
poor."
The need for some clarity about the difference between poverty reduction (by itself) and
development raises the related question about the nature of development itself. I am not referring
to the question of Western versus non-Western conceptions of development. Instead, I want to
differentiate development from simply having a certain income level (regardless of whether the
income comes from manna from heaven, oil from the ground, remittances from the North, or the
capabilities of the people2). In the World Bank, the developed-versus-developing country
distinction is roughly reflected in the distinction between "Part I" countries that do not borrow
and the "Part II" countries that are the borrowing clients of the Bank. Some "high income"
2
The fact the "development" refers to the capabilities of the people in a country, not to their level of income derived
from (say) oil, was an obvious assumption to the post-war pioneers of development theory [e.g., Meier 1984] but
today it needs to be explicitly emphasized, [e.g., Sen 1999; Nussbaum 2000; Alkire 2002].
4
countries such as the oil-rich states of the Persian Gulf are included as Part I "developed"
countries even though the source of their wealth has little to do with the capacity of the citizens
of those countries.
Just as there can be wealth without capabilities, so there can temporarily be capability without
material wealth. For instance, the Marshall Plan is often touted as the forerunner for the later
post-war development schemes in the developing world. But it is a bogus comparison because
the people of war-devastated western Europe still had much of their human productive capacity
even though much of the physical productive infrastructure had been damaged or destroyed by
the war (with similar remarks applying to Japan). Hence the task of the Marshall Plan was
reconstruction, not development.
Example: "Development" in the Migration Debate
This question about the nature of development is also close to the heart of the current hotly
debated topic of migration. In the post-war period, there was a large movement of gastarbeiters
from southeast Europe to industrial centers in the North and there was a comparable movement
of guest workers from Mexico and Latin America into the United States. At first, it was hoped
that these movements would serve to catalyze development in the South. The guest workers
would return home with new-found industrial skills, with a capital stake, and with experience of
life in industrialized and market-driven societies so that they could foster economic growth in
their home countries. Yet (with minor exceptions) this has not happened. In the field of
migration research, there is an old cliché: "There is nothing as permanent as 'temporary' labor
migration." The economic returns to continuing migration far outweigh the meager rewards of
returning to the unpromising economic environment that the migrants fled in the first place.
The 'temporary' labor migrants remit part of their earnings back to their families or relatives in
their home country. Today the North-to-South remittances far outweigh the development aid
flowing in the same direction. Over the last half century, the uniform pattern is that these
remittances increase consumption and living standards (i.e., reduce poverty) in the South but do
not drive economic development. If the labor migrants return at all, it is to retire inexpensively—
perhaps with a small shop or similar life-style business during the retirement years.
How does this relate to the definition of "development"? One of the responses to the
disappointment in labor migration as a driver of development is to simply redefine
"development" as "poverty reduction" and "improved living standards" which has indeed
occurred as a result of the remittances. This line of reasoning puts a developmental "happy face"
on the existing patterns of labor migration. The reasoning goes something like this.
In the industrialized North, there is a range of 3D (dirty, difficult, and dangerous)
jobs that the citizens do not want to do (at the prevailing wages). Hence there is a
need to reach farther afield to find workers for these jobs. In today's globalized
world, these workers can be supplied by the (near) South. The South is the
globalized "bedroom community" for these workers who want to do the 3D jobs
in the North. We do not say that a suburban bedroom community outside a city is
"underdeveloped" simply because the income-producing jobs are in the
metropolis and the income flows from the metropolis to the bedroom community.
In a similar manner, we should realize in today's globalized world that the South
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has a role as a type of "bedroom community" for the industrialized North. We
should not think that when income levels improve in the South due to remittances
from the North that the South is still underdeveloped. It is part of the greater
division of labor within a globalized productive system wherein it functions as a
long-distance bedroom community for the 3D workers needed in the
industrialized cities of the North.
Insofar as this sort of argument can be taken seriously, it is based on the definition of
"development" as being a matter of poverty reduction and increased income levels rather than
productive capacity. The redefinition of "development" then allows a "devil's deal" to be offered
to the South. Instead of becoming industrialized, the South's allotted role in the global division of
labor is to serve as the long-distance bedroom community for the sort of labor that Northerners
don't want to do (as well as a source of raw materials and fossil fuels). In return, the South
becomes more "developed" since the remittances will reduce the poverty and increase the levels
of consumption in the South.3
Delivering Development?
The confusion over "development" comes out in various ways. We have already seen several:
 the displacement of development in favor of poverty reduction in the aid debate,
 the definition of development in terms of income levels (e.g., income from oil), and
 the increase in remittance-based income in the non-industrialized South as being
"development."
Some recent suggestions about reforming "development assistance" seem to be based on rather
strange underlying ideas about development. To put these ideas in context, we need to briefly
review some of the post-war history of development assistance.
In the immediate post-war era, the focus was on physical infrastructure: highways, airports,
seaports, water systems, power plants and distribution systems, and communications systems.
The point was not simply that these physical facilities should be "delivered" to the developing
countries. The people in those countries should develop the capacity not only to maintain the
systems but to produce and install the infrastructure themselves after the first few instances were
externally "delivered."
Soon it was realized that modernization and development is not just a matter of having physical
infrastructure. In addition to the physical infrastructure of schools, there was the social
infrastructure of the whole education system that would prepare young people for the jobs of the
future. In addition to the physical facilities of hospitals, there was the social infrastructure of the
health system that would not only care for those who are afflicted but would create and enforce
the public health measures to reduce, prevent, and perhaps eliminate many of the diseases that
were so characteristic of underdeveloped societies. Here again, it was not just a matter of having
educational or health services "delivered" from the outside—although there might be room for
external assistance in the beginning. The point was for the country to acquire its own capacity to
set up and operate the educational and health care institutions to meet these basic needs.
3
For more on the migration and development debate, see Ellerman 2005a.
6
Market-based economic development added to the list of institutional requirements. The legal
system needed to be developed to protect the fruits of people's labor from usurpation by public or
private thieves, to make the enforcement of contracts a matter of public law (not the private use
of force), and to adjudicate conflicts in a civilized manner (again without the private resort to
violence). The laws from developed countries can be translated and passed by parliaments or
decreed by the executive power but such cargo cult reforms would accomplish next to nothing in
terms of institutional development. The economic historian, Richard Tawney, was particularly
keen to emphasize how little could be "delivered" from the outside in contrast to the capacity that
had to be grown from within. After visiting China in 1930, he remarked:
To lift the load of the past, China required, not merely new technical devices and
new political forms, but new conceptions of law, administration and political
obligations, and new standards of conduct in governments, administrators, and the
society which produced them. The former could be, and were, borrowed. The
latter had to be grown. [Tawney 1966 (orig. 1932), 166]
Industrialization is not just a matter of physical plants but of mindsets and institutions.
What makes modern industry is ultimately not the machine, but the brains which
use it, and the institutional framework which enables it to be used. It is a social
product, which owes as much to the jurist as to the inventor. To regard it as an
ingenious contrivance, like a mechanical toy, or the gilded clocks in the museum
at Peiping made by London jewellers for the amusement of Chinese emperors,
which a country can import to suit its fancy, irrespective of the character of the
environment in which the new technique is to function, is naïve to the point of
absurdity. It is like supposing that, in order to acclimatise Chinese script in the
West, it would be sufficient to introduce Chinese brushes and ink. [Tawney 1966
(orig. 1932), 130]
Thus there is a narrow range of goods and services that can be usefully "delivered" to a
developing country as a part of development assistance. That is the easy part—just the tip of the
iceberg. The hard part of development is the set of transformations that need to take place within
a country—the development of educational, healthcare, engineering, legal, industrial, and
political capacities (to name a few)—to modernize the society. This capacity development is the
heart of the development process and it cannot be "delivered" from the outside.
Once it is appreciated that the heart of development is a homegrown do-it-yourself process of
developing capabilities, then the stage is set for "rethinking development assistance" (the title to
this paper). Are there forms of external assistance that are sufficiently indirect to facilitate
homegrown initiatives—rather than pretending that somehow the external aid can directly "do
the job"? How can there be external help to what has to be an internal process—how can others
help self-help? That is the fundamental conundrum of the helping relationship that arises across
the whole spectrum of human activities—education, social and political organizing,
management, medicine, counseling, and even parenting [Ellerman 2005b].
One reaction to the conundrum is that of Bill Easterly in the previously-cited book [2006]. After
correctly emphasizing that the heart of the development process has to be homegrown, he stops
at the water's edge and suggests that development assistance should refocus on the more humble
7
task of doing what can be externally done to help the poor. Doing that job well would be doing a
lot.
"Vaccinating the Children"
There is, however, another stream in the current debate that requires our attention. In the
development debate over the decades, it has always been recognized that there are a few things
that can be externally done or imposed that do not involve all the problems of developing
institutional capacity. It was previously noted that simply decreeing new laws (e.g., translated
from a developed country) has little real effect other than discrediting the legal system by
rendering illegal a wide swath of "how things are done" in the economy. But there are a few
reforms, called "stroke-of-the-pen reforms," which are self-enforcing and can be done in this
manner. For instance, reducing taxes, abolishing a tariff, or striking down a restriction on
business will tend to be self-enforcing once the changes are made public. Such stroke-of-the-pen
reforms can be imposed as a part of the conditionality on, say, a World Bank or IMF loan and
they do not presuppose a difficult homegrown process of institutional development to be
implemented.
The unfortunate problem is that so many aid agencies, such as the World Bank and IMF, take the
exception as the rule and fill their loan agreements and aid packages with imposed conditions
which are meaningless if not detrimental in the absence of homegrown institutional
developments.
In addition to the few stroke-of-the-pen reforms, there are a few other changes that can (or at
least seemingly can) be "delivered" from the outside. Over the years, the "textbook example" to
epitomize this sort of "delivered program" is vaccinating the children.4 External aid agencies or
their contractual agents can swoop in to an underdeveloped country, can vaccinate the children
of the poor, and then leave with the warm glow of satisfaction at having helped the poor. No
process of homegrown development is required for the vaccines to have their physical effects.
The whole process can be specified, monitored, and verified just as in a market transaction to
deliver so many Harry Potter books, mosquito nets, or Chinese brushes.
Here again, the problem is that some writers on development assistance have taken this sort of
exception as being the rule. They have spun out whole theories of development assistance as if
the whole process of development was just one of getting certain physical effects which, in turn,
could be specified, monitored, and verified like a market transaction and as if homegrown and
internally-directed development of capacities or capabilities played no role.5
4
For instance, Thomas Dichter and the author have independently used this same example for years to illustrate the
exceptional case of "physical tasks [like] vaccinating children" [Dichter 2003, 191]. Perhaps because "vaccinating
the children" has become such a clichéd example (itself updating the older clichés of charity ladies and soup
kitchens to help the poor), some writers who think of development assistance in those terms have updated the
example to supplying mosquito nets [e.g., Sachs 2005].
5
This is subjectively quite different from Easterly's approach which recommends vaccination among other things
because of the clear connection between inputs and results [2006, 180] while recognizing that such external
assistance does not address the crucial homegrown process of capacity development, e.g., developing the capacity in
the healthcare system so that the next generation of children don't have to be vaccinated by good-hearted souls from
the West.
8
Performance-Based Aid
There is a certain cycle in organizations and in organizational theory. Periodically some bright
young managers or management theorists arrive at the 'new idea' of paying for performance,
results, and outputs rather than just paying for putting in the time and effort. The quid pro quo
market transaction provides the mental model so "why can't organizations also run on 'market
principles' like paying by piece rates"? Most of the managerial theory developed in the twentieth
century has struggled to get beyond this sort of organizational naiveté (with occasional relapses).
But such naiveté has been almost institutionalized in the economics profession where the most
sophisticated form is "agency theory." Yet actual organizations do not seem to operate on the
basis of the agency theory models of "pay for performance."
[P]erhaps the most striking aspect of observed contracts is that the
Informativeness Principle, i.e., that all factors correlated with performance should
be included in a compensation contract, seems to be violated in many
occupations. [Prendergast 1999, 21 (emphasis in original)]
If actual organizations do not run in this manner, then it can only be that the managers are
ignorant of "market principles" or that they have not been sufficiently clever in crafting agency
contracts.
Unfortunately, few in the economics profession have the empirical curiosity to take
organizations seriously, and management theory is usually dismissed as being soft-headed babble
unless it reflects "market principles" and agency theory. A major exception was Herbert Simon,
an Economics Nobel laureate, who argued that any sort of developed economy is made up of two
rather different elements: markets and organizations. In fact, as economies become more
sophisticated, organizations become the most important part. And "market principles" and
agency theory are of limited use in explaining how organizations work.
The economies of modern industrialized society can more appropriately be
labeled organizational economies than market economies. Thus, even marketdriven capitalist economies need a theory of organizations as much as they need a
theory of markets. The attempts of the new institutional economics to explain
organizational behavior solely in terms of agency, asymmetric information,
transaction costs, opportunism, and other concepts drawn from neo-classical
economics ignore key organizational mechanisms like authority, identification,
and coordination, and hence are seriously incomplete. [Simon 1991, 42]
The short-comings of neo-classical economic theory are compounded in attempts to deal with the
organizational and institutional development that is the heart of the transformations necessary for
economic modernization. For instance, most development economists correctly emphasize that
growth needs to be market-driven. If by "markets" one means quid pro quo self-enforcing market
transactions, then Africa probably had such markets before Europe. But the "markets" that are
important for development are better called "market institutions" (e.g., a banking system to
finance business or an effective legal system) since they require a whole set of underlying
organizations and institutions. The developmental failure in Africa is not a failure to have
(simple) markets but a failure to develop the large-scale private or public organizations that are
9
key to a "modern industrialized society" (e.g., organizations that are not just the shadow of some
"Big Man").
Development models based on simplistic "market principles" such as "performance-based pay"
are unhelpful in addressing these problems of organizational and institutional development.6
But such [performance-based] reward systems are effective only to the extent that
success can be attributed accurately to individual behaviors. If the indices used to
measure outcomes are inappropriate, either because they do not measure the right
variables, or because they do not properly identify individual contributions, then
reward systems can be grossly inefficient or even counterproductive. [Simon
1991, 33]
Simon went on to note that these considerations are not nit-picking; they cut to the core of the
rationale for organizations rather than markets.
In general, the greater the interdependence among various members of the
organization, the more difficult it is to measure separate contributions to the
achievement of the organizational goals. But of course, intense interdependence
is precisely what makes it advantageous to organize people [i.e., in organizations]
instead of depending wholly on market transactions. The measurement
difficulties associated with tying rewards to contributions are not superficial, but
arise from the very nature and rationale of organization. [Simon 1991, 33]
Yet simplistic models of "performance-based," "results-based," and "output-based" models of
development assistance using "market principles" are still periodically suggested by economists
(particularly those writing for right-wing think-tanks in Washington DC or for the World Bank).
Perhaps not realizing that it has become a clichéd example of an exceptional case, these models
are often illustrated using the "vaccination of children."
The following example illustrates the performance-based grant mechanism: a
country of $250 per-capita income qualifying for 90 percent grant resources want
to vaccinate its children against measles. If the World Bank confirms the need, the
government would solicit competitive bids from private sector agents,
nongovernmental organizations and public sector entities such as the ministry of
health. If the lowest qualifying bid was $5 per vaccination, the World Bank would
agree to pay $4.50 (90 percent) directly to the provider for each child. The
government would be responsible for the remaining $0.50 (10 percent). Payments
would be made only upon certification by an auditor independent of all
participants—the government, the World Bank, and the provider of vaccinations.
[Lerrick 2006, 7]
Another product of the Washington think-tanks announces "A New Development Model" called
"performance-based policy."
6
The over-emphasis on external motivation (as reflected in "pay for performance" scheme) might be taken as an
occupational disease of neo-classical economists—if it were not their occupation.
10
Consider one example of how to implement a project effectively. Suppose an aid
agency is interested in getting children vaccinated to prevent the outbreak of a
disease in Malawi, and suppose that the recipient government or the agency
decides the value is worth $5 for each child vaccinated. The agency can then
auction off the right to administer the vaccinations to the highest bidder. That
bidder receives $5 for each child vaccinated, where the number of children
vaccinated would be measured by a third-party auditor. [Hahn and Tetlock,
forthcoming, 172]
The point is not whether or not these schemes would succeed in their stated purposes of
"delivering" health services to the poor; the point is they have quietly abandoned the original
purpose of development assistance, namely the development of capacity in the country's
organizations and institutions (such as the healthcare system). The purpose of development aid is
seen as 'delivering' various goods and services primarily to the poor in developing countries. If a
country's healthcare system is in such a pathetic state that it has to depend on outside aid
agencies to vaccinate its children or provide other basic services, then it would hardly win the
"auction" to provide such services when competing against international service providers. Thus
the state of incapacity and the state of dependence on external aid would be perpetuated.
In fact, the "market principles" even mitigate against the public agencies being involved. A
World Bank book on output-based aid explains that the service providers need to be in a position
to respond to market incentives and need to be at arm's length from regulators and funding
sources.
Providers under output-based schemes need to pass the same tests. Most public
agencies fail both.
That does not mean that output-based schemes should be limited to the
international private sector. Depending on the service, small-scale local
entrepreneurs could be important suppliers—and so could community groups or
nongovernmental organizations. [World Bank 2001, 8]
Those who spin out such models pretend that it is all a matter of working out the details of
quantifying and measuring performance (ex ante and ex post), finding the organizations to
administer the system of auctioning off the contracts and certifying the results, and finding the
(probably international) service providers who can raise the finance for the program (since the
payments are, by definition, after the performance) and then to deliver the services in a
satisfactory manner.
But the problem is much more basic. These schemes are not about development assistance at all.
The schemes by design avoid the "public agencies" that would provide these services in any selfrespecting country—so obviously institutional development in those agencies is not a serious
part of the purpose.7 Instead beneficent aid agencies will swoop in to arrange and fund contracts
for international service providers to "deliver" basic services to the poor—all 'over the heads' of
7
Instead of just assuming that development assistance can be fitted to the Procrustean bed of market transactions,
one of the best books from (an earlier generation of) the World Bank, Arturo Israel's Institutional Development
[1987], starts with the fact that most capacity developments tasks lack the specificity and competition of market
transactions and then considers a range of alternative approaches to the problems.
11
the public agencies of the host country. Such a scheme is almost 'designed' to eliminate any
incentive or pressure for the difficult tasks of capacity development in the developing country,
and thus it will assuredly perpetuate the business of the external service providers to future
generations. But the voters and charity donors in the developed world will at least have the moral
satisfaction that their money will pay to "vaccinate the children"—now and in the future.
Part II: Rethinking Development Assistance
Helping People Help Themselves
The Helper-Doer Relationship
The purpose of this Part II is to rethink development assistance in a way that will point along
some Hirschmanian lines to new strategies. If development is fundamentally a homegrown and
autonomous do-it-yourself project, then any external assistance would have to be along the lines
of the old idea (and cliché) to help people help themselves. We are all familiar with the ancient
Chinese saying that if you give people fish, you feed them for a day, but if you teach them how
to fish—or rather, if you help them learn how to fish—they can feed themselves for a lifetime.
Let us begin by establishing some concepts and terminology. Development assistance is
analyzed as a relationship between those offering assistance in some form, the helper or helpers,
and those receiving the assistance, the doer or doers. The helpers could be individuals, NGOs, or
official bilateral or multilateral development agencies, and the doers could be individuals,
organizations or various levels of government always in the developing countries. The
relationship is the helper-doer relationship.
The Fundamental Conundrum of Development Assistance
The assumed goal is transformation towards autonomous development on the part of the doers,
with the doers helping themselves. The problem is how can the helpers supply help that actually
furthers rather than overrides or undercuts the goal of the doers helping themselves? This is
actually a paradox: If the helpers are supplying help that is important to the doers, then how can
the doers really be helping themselves? Homegrown solutions cannot be externally supplied.
And if the doers are to become autonomous, then what is the role of the external helpers? This
paradox of supplying help to self-help, “assisted self-reliance”8 or assisted autonomy, is the
fundamental conundrum of development assistance. Over the years, the debates about aid,
assistance, and capacity-building keep circling around and around it. It may be helpful in
attacking the problems of development assistance to see that the fundamental conundrum is
equally basic to a wide variety of helper-doer relationships such as the teacher-students,
manager-workers, counselor-advisees, psychologist-patients, organizer-organizees, and parentchild relationships, and that it has been addressed by thinkers from ancient times up to the
present [Ellerman 2005].
The phrase is from Uphoff, Esman and Krishna [1998]. David Korten terms it the “central paradox of social
development: the need to exert influence over people for the purpose of building their capacity to control their own
lives” [1983, 220]. See also Chapter 8 of Fisher [1993] on the “central paradox of social development.” Thomas
Dichter refers to the "Classic development dilemma—how can you help people become self-sufficient?" [Dichter
2003, 271]
8
12
Unhelpful Help
There are many strategies for development assistance that may supply help in some form but
actually do not help people help themselves. The forms of help that override or undercut people’s
capacity to help themselves will be called “unhelpful help.”9
There are essentially two ways that the helper’s will can supplant the doer’s will to thwart
autonomy and self-help:
1) The helper, by social engineering, deliberately tries to impose his will on the doer; or
2) The helper, by benevolent aid, replaces the doer’s will with her will, perhaps inadvertently.
“Override” or “undercut” are shorthand terms for these two conceptually distinct yin-and-yang
forms of unhelpful help (which may be combined, as when benevolence hides the desire to
control).
Unhelpful Help #1: Social Engineering
The overriding form of unhelpful help is a type of social engineering. The helpers supply a set of
instructions or conditionalities about what the doers should be doing. They also offer motivation
to follow this blueprint through various forms of aid to override the doers’ own motivations. If
we use the metaphor of the doers as trying to work their way through a maze, then the helpers as
social engineers perceive themselves as helicoptering over the maze, seeing the path to the goal,
and supplying instructions (knowledge) along with carrots and sticks (incentives) to override the
doers’ own motivation and push the doers in the right direction.
The World Bank's past practices can be seen as a largely unsuccessful form of social
engineering. However there are now significant pressures and tendencies for the large aid
agencies such as the Bank to move towards the second form of unhelpful help.
Unhelpful Help #2: Benevolent Aid
The second form of unhelpful help occurs when the helper undercuts self-help by inadvertently
supplying the motivation for the doer to be in or remain in a condition to receive help. One
prominent example of this is long-term charitable relief usually under the rubric of poverty
alleviation using loans that are only "repaid" by being refinanced, quasi-grants, and outright
grants. The world is awash with disaster situations that call for various forms of short-term
charitable relief. The point is not to oppose these operations but to point out how charitable relief
operates in the longer term to erode the doers’ incentives to help themselves—and thus creates a
dependency relationship. In this sense, charitable relief in the longer term is an undercutting form
of unhelpful help.
All aid to adults based on the simple condition of needing aid risks displacing the causality. The
working assumption is that the condition of needing aid was externally imposed (e.g., a natural
disaster); the aid recipient shares no responsibility. But over the course of time, such aid tends to
undermine this assumption as the aid becomes a reward for staying in the state of needing aid,10
For related notions, see Gronemeyer [1992] on “help (that) does not help” and Ivan Illich's notion of
“counterproductivity” [1978].
10
See Murray [1984] or Ellwood [1988] on the “helping conundrums.”
9
13
all of which creates dependency and learned helplessness. Thus relief becomes the unhelpful
help that undermines self-help.
Albert Hirschman's Approach
The Big Push Theory
Given the conundrum of external help to self-help and the various forms of unhelpful help that
result from overlooking the conundrum, what is to be done? I will address the question by
starting with the path taken by the preeminent development thinker of our time, Albert O.
Hirschman. To put Hirschman's thought in its historical context, we must go back to the "Big
Push" theory that was developed in the 1940's and 1950's, and that is still being revived by those
[e.g., Sachs 2005; and UN Millennium Project 2005] who did not learn the lessons of the failures
of the Big Push schemes during the post-war period or the failures of the similar Big Bang
schemes in the post-socialist transition.
Big push theorists emphasize the connections, interdependencies, and linkages in any economy
[e.g., Rosenstein-Rodan 1943; or Nurkse 1967 (orig. 1953)]. For one thing to succeed, there
might be several connected components that seemingly need to be in place. Big push theorists
also favor the imagery of "poverty traps" or the cumulative causation of vicious circles of
poverty. If one only tries to change one thing, then it will be insufficient to "break free from the
trap" and to "take off" to sustained growth. Hence a coordinated Big Push is necessary to put the
prerequisites in place to break out of the poverty traps and to start sustained and balanced
growth. A modern version of the theory appears in the report of the United Nations Millennium
Project directed by Jeffrey Sachs.
The key to escaping the poverty trap is to raise the economy's capital stock to the
point where the downward spiral ends and self-sustaining economic growth takes
over. This requires a big push of basic investments between now and 2015 in
public administration, human capital (nutrition, health, education), and key
infrastructure (roads, electricity, ports, water and sanitation, accessible land for
affordable housing, environmental management). [UN Millennium Project 2005,
19]
Hirschman [1961] started with an extended critique of the Big Push theory and then presented
his theory of development as an alternative approach.11 Over the years, one primary instrument
for Big Push ambitions was the World Bank or IMF loan agreement laden like a 'Christmas tree'
of conditionalities about all the things the country had to do in the short time period when the
leverage of loan disbursements was effective. The criticism of the Big Push theory always starts
with the basic point that if an underdeveloped country had all the institutional capacity to
implement all the conditions of the Big Push at once, then "it would not be underdeveloped in
the first place." [Hirschman 1961, 54]12
11
Easterly [2006] develops an extensive and persuasive critique of the recent attempt to revive the Big Push
approach (but oddly never mentions Hirschman).
12
A more recent corollary is that if the post-communist countries actually had the state capacity to somehow change
all their institutions at once according to the plans of the Big Bang shock therapists, then those countries would not
have been in such dire straits in the first place.
14
Motivating Transformation
If the Big Plans laden with conditionalities are not working, then many practitioners inferred that
they only needed to make conditionalities "tougher" and more "performance-based." "Just get the
incentives right." Such advice does little to address some of the basic reasons for the
ineffectiveness. Tougher performance-based conditionalities do not solve the basic motivational
problem. This may seem strange from the narrow economic viewpoint, e.g., agency theory.
Doesn't the carrot of aid provide the motivation? In psychological terms, the problem is that the
aid only provides extrinsic or externally-sourced motivation. Real reforms beyond the stroke-ofthe-pen variety will usually require some own-reasons or more intrinsic motivations for
successful implementation. Otherwise there is only the motivation to make the minimal outward
changes to get the aid. In addition, there is a negative reactance against the attempt to externally
impose changes. Making conditionalities "tougher and more performance-based" does not even
attempt to address these underlying motivational problems. More assistance based on improved
conditionalities is reminiscent of the endless attempts to improve central planning under
socialism.
Aid agencies have their preconceptions of "virtue" in the sense of good policies. They try to "buy
virtue" by imposing conditionalities on program aid geared to "virtuous behavior" defined by
various outward acts of allegiance to and implementation of "good policies." But if we take
"virtue" as being defined not just by behavior but also by the right internal motives, then aid can
only buy a faux-virtue. Such aid pushes the external motive of receiving the aid into the
motivational foreground and thus establishes external control—the lack of autonomy.
Where the internal motive was already present, autonomy-respecting aid could remove
impediments and thus enable "virtuous action." "In these situations, the donor would set himself
the task of rewarding virtue (or rather, what he considers as such) where virtue appears of its
own accord."13 This leads straightaway to the "paradox" that aid is only autonomy-respecting
when it does not do what is conventionally taken as a major purpose of program aid—to tip the
balance of motives in favor of reforms, good policies, and transformation.
Paradoxically, therefore, program aid is fully effective only when it does not
achieve anything—when, that is, no quid pro quo (in the sense of a policy that
would not have been undertaken in the absence of aid) is exacted as the price of
aid. [Hirschman and Bird 1971, 204]
The point about conditionalities is not simply that they might be ineffective but that they
undermine the goal of autonomous homegrown development. Suppose that a government is
facing pressing problems to finance better schooling or healthcare and realizes that it must clean
up tax collection in order to raise the funding. In this case, we might say that the government had
"internal motivation" to improve tax collection. But then a development agency (always in need
of "moving the money") arrives to offer to finance the improvements in schooling or healthcare.
Since this relaxes the internal pressures to improve tax collection, the agency substitutes its
conditionalities by requiring a program of improving tax collection as a condition for the loan
and its various tranches, e.g., a structural adjustment program.
13
Hirschman and Bird 1971, 204. Italics added.
15
Reformers in the government who have been pushing for tax reform may even welcome the
conditionalities to "strengthen their hand" and to provide "leverage" and a "commitment
mechanism" to insure that the government will make the reforms. But the net effect is to
externalize the reform motivation with the attendant effects of reactance, foot-dragging, and
sabotage. What might have taken root as a homegrown crop thus becomes the potted plant of an
aid agency. Moreover, this trains governments that the way to resolve pressing problems is to
solicit long-term development loans or grants and then to play the conditionalities game14 with
the agencies rather undertake the difficult reforms on their own.
External interventions by other people intended to change a person's behavior pose a threat to
autonomy. The threat-to-autonomy or reactance effect results from using external motivators—
carrots and sticks—to shift the locus of causality from internal to external. The effect shows
itself in a poor quality and low effort performance, in sullen and perfunctory behavior fulfilling
the letter but not the spirit of an agreement, and perhaps even in the urge to defiantly do the
opposite just to show one's autonomy.15 Hirschman refers to these effects as the "hidden costs"
[1971, 207] of program aid while Lepper and Greene [1978] call them the "hidden costs of
rewards."
In the aid context, "good policies" bought by conditioned aid are usually not effective. If the
policies were not adopted by the government independently of the aid, then the policies would
tend to be
adopted by aid-hungry governments in spite of continuing doubts of the policy
makers themselves, resistance from some quarters within the government,
onslaught against the "deal" from the opposition, and general distaste for the
whole procedure.
Naturally, doubts and reservations are not voiced at the moment of the aid
compact; hence the delusion on the part of the donor that there has been a full
meeting of minds. But soon after virtue has been "bought" through aid under these
conditions, the reservations and resistances will find some expression—for
example, through half-hearted implementation or sabotage of the agreed-to
policies—and relations between donor and recipient will promptly deteriorate as a
result. [Hirschman and Bird 1971, 205]
The debate about conditionalities is to some extent ill-posed. In 'psychological' terms, the
question is how to best indirectly foster the country's intrinsic motivation for reforms as opposed
to the agency theory question of how to best impose carrots and sticks (extrinsic motivation) to
promote reforms. While Hirschman notes that the imagined carrots-and-sticks approach is not
impossible, "it is our conviction that this picture of program aid as a catalyst for virtuous policies
belongs to the realm of rhapsodic phantasy." [Hirschman and Bird 1971, 205]
14
"We will pretend to make best efforts to fulfill your conditionalities and you pretend that you don't have to move
the money anyway."
15
Wilhelm von Humboldt (1767-1835) gave an early expression of this contrast between internal and external
motivation. "Whatever task is not chosen of man's own free will, whatever constrains or even only guides him, does
not become part of his nature. It remains forever alien to him; if he performs it, he does so not with true humane
energy but with mere mechanical skill." [Humboldt 1963, 47]
16
"Unbalanced" Growth Processes
If a country was not "pushed" by all the carrots and sticks of the international loan agreements,
then what would motivate any change? We have already noted that homegrown development
projects have to start from within anyway. Hirschman found the internal sources of change
precisely in the interdependencies that were so emphasized by the Big Push theorists. Far from
denying the interdependencies, Hirschman noted how the impulses of economic change were in
fact transmitted through these linkages. Rather than imagining fission as the result of somehow
coordinating the "Big Push" of splitting many separate atoms at once, one might try to catalyze a
sequential chain reaction using the linkages.16
In other words, I do not deny by any means the interrelatedness of various
economic activities of which the balanced growth theory has made so much. On
the contrary, I propose that we take advantage of it, that we probe into the
structure that is holding together these interrelated activities. As in the atom,
there is much energy here that can be and is in fact being utilized in building up
economic development nuclei. Later on these nuclei look as though they could
never have been separated even for a single instant when in actual fact they might
never have been assembled had not a sequential solution, i.e., an unbalanced
growth sequence been found, by accident, instinct, or reasoned design. To look at
unbalanced growth means, in other words, to look at the dynamics of the
development process in the small. But perhaps it is high time that we did just
that. [Hirschman, 1961, viii-ix]
Thus Hirschman directs our attention back to the linkages, internal pressures, or pressing
problems in a country along with efforts already afoot to address the problems. The best way to
assure that a reform process has some internal motivation in a country is not to start it but to find
it.
I began to look for elements and processes…that did work, perhaps in roundabout
and unappreciated fashion. [T]his search for possible hidden rationalities was to
give an underlying unity to my work. …[T]he hidden rationalities I was after were
precisely and principally processes of growth and change already under way in
the societies I studied, processes that were often unnoticed by the actors
immediately involved, as well as by foreign experts and advisors. [Hirschman,
1984, 91-3]
Not all problems can be attacked at once so attention is first focused in the small on the sectors
or localities where some of the preconditions are in place and where initiative is afoot on its own.
The initial small successes will then create pressures through the forward and backward linkages
to foster both learning and change that is nearby in sectoral or locational terms. The successes
when broadcast horizontally to those facing similar problems will start to break down the
paralyzing beliefs that "nothing can be done" and will thus fuel broader initiatives that take the
16
In addition to the nuclear fission metaphor, there is the chemical metaphor of "autocatalysis" which Freeman
Dyson takes as being the "key virtue to look for in any technology that claims to improve human welfare on a large
scale" [Dyson 2001]. Jonas Salk uses the medical metaphor of a positive epidemic, an epidemic of health, to
describe "a process that would become self-organizing, self-propelling, and self-propagating, as is characteristic of
evolutionary processes." [Salk 1983, 122]
17
early wins as their benchmark. Unlike a model that assumes large-scale organized social action
directed by an external agency, the parties are responding to endogenous pressures and
inducements from their economic partners or to opportunities revealed by others in a similar
position.
One thing leads to, induces, elicits, or entrains another thing through chains of "tensions,
disproportions, and disequilibria." Hirschman at one point refers to the principle of unbalanced
growth as "the idea of maximizing induced decisionmaking" [1994a, 278]. The problem-solving
pressures induced by unbalanced growth will call forth otherwise unused resources and enlist
otherwise untapped energies. As a project moves from one bottleneck and crisis to another (in
comparison with the smooth planned allocation of resources in a project), then "resources and
abilities that are hidden, scattered, or badly utilized" [1961, 5] will be mobilized.
One of Hirschman's best known theories, the exit-voice analysis [1970], was concerned with the
problem of eliciting or inducing decision-making particularly when organizations face decline.
Many change processes can be parsed into two moments. Starting with some "given"
unsatisfactory situation, there are two general options: the transformation of the given by
working to improve it, or the replacement of the given option by another option that is improved.
In Hirschman's formulation of the two moments of change, transformation is voice and
replacement is exit. A customer dissatisfied with a company's product can exit to a competing
product or can complain to the company (exercise voice) to try to get it to change the product. In
an organization, a dissatisfied member has the choice to exit (migrate) to another organization, or
to exercise voice to try to change the organization. Each potential migrant worker faces the
choice: exit to find a better home or commit to making home better. Two such general strategies
of change are ubiquitous (see Part III below): fight (rather fight than switch) or flight (rather
switch than fight), repair or replace, climb this hill or jump to another hill, and even "fix-it or
nix-it" (a slogan used by protestors about the World Bank and IMF).
Conventional economists are trained (some would say "hardwired in graduate school") to think
primarily in terms of exit-based policies since that is the logic of the market (e.g., the "Wall
Street Rule" to sell shares rather than vote shares). Voice- or transformation-based strategies tend
to get short shrift in "the economic way of thinking." Exit-based reasoning may backfire.
Hirschman's original example was the dismal performance of the Nigerian railroads in spite of
the protests (voice) of many dissatisfied customers. In the usual monopoly versus competition
reasoning, things would improve if the railroads had competition, and that eventually came from
the trucking industry. But the effect was that the most dissatisfied and vocal customers (who
required more reliable or time-sensitive transportation services) exited to trucking so that there
was even less pressure on the railroads to improve. Since the railway ministry could not go
"bankrupt," the net effect was that competition caused the railroad to go from bad to worse.
The same logic plays itself out in the school voucher debate or in the migration debate. Foster
exit from where there is low performance and it should lead to either improved performance or
bankruptcy in the low-performing unit. But many of the people whose voice is most likely to
spur change will be the first to exit so "improved performance" is not the likely outcome. And if
the poor schools or poor countries cannot go bankrupt, then the outcome to migration in both
cases may be a self-reinforcing downward spiral to "ghettoized" schools or "ghettoized"
countries.
18
In order to yield responsible general advice, the "economic way of thinking" needs to go beyond
exit-based reasoning to try to better understand how organizations work and how they might be
transformed. But all too often, the advice is to simply change organizations to fit the procrustean
bed of the exit-based market reasoning (e.g., privatization in its various forms). Hirschman also
makes the further point that even the exit-based reasoning is incomplete since it essentially
ignores the question of how transformation to improve performance takes place under the
pressure supplied by the exit of those who are dissatisfied.
Cognitive Version of Unbalanced Growth
This brings us to the cognitive version of "unbalanced growth" as a learning process. Many
readers first saw Hirschman's vision of unbalanced growth as being about incentives or volitional
impulses—but the ideas also have a cognitive side about the social learning process.
One can draw analogies to the process of "unbalanced growth" that takes place in individual
learning. Suppose one takes a static snap-shot of a person's beliefs before and after learning some
new and complex interconnected subject matter. The older set of beliefs might have certain selfreinforcing properties. It might at first seem difficult to change one part of the set of beliefs since
one would then have some cognitive dissonance with the remaining older beliefs. One could
imagine simply changing all the beliefs at once, a cognitive "big push," to arrive at a new selfreinforcing set.
But that is rarely how learning takes place. Against the forces of self-preservation of the "whole
cloth" of older beliefs, there are the incentives to solve problems for which the old beliefs might
be inadequate. Change might start in the small where problem-solving progress might be made
by unraveling and changing some of the beliefs. But now the interconnections can help to
unravel the older cloth. "Bottlenecks" or inconsistencies will appear between the old and new
beliefs, and problem-solving pressures will be transmitted forwards, backwards, and sideways to
adjust other beliefs. "One thing leads to another" and eventually the person will arrive at a new
set of interconnected beliefs.
Now consider the viewpoint of the knowledgeable outsider, a teacher or trainer, who understood
all along the problem-solving superiority of the new set of beliefs. Why couldn't the trainer just
give a "crash course" to impart the new knowledge to the student and thereby save the pupil all
the time, energy, and pain of "learning the hard way"? Carrots and sticks, aid and
conditionalities, could even incentivize the "learning process." While a veneer of some
"knowledgeable behaviors" might be incentivized—particularly in "good students"—by such
carrots and sticks, learning that transforms older beliefs does not take place in that manner. In
order for learners to have an ownership of new knowledge and for the new knowledge to have a
transformative effect, the knowledge must be more the fruits of the learner's own activities. Such
knowledge comes out of a constructivist active learning process, not out of a pedagogy of the
teaching, imparting, transmitting, disseminating, or pouring new knowledge into passive
students.
Returning to the general theme of balanced versus unbalanced development, there is an
interesting parallel with the thought patterns in the "Darwin wars" between intelligent-design
creationists and evolutionists. From the old example of the optical eye to the modern example of
the whole biochemical mechanism of DNA and RNA, there are living systems that are so
19
complexly interdependent that it is quite difficult for the lay observer to imagine how the
systems could have evolved sequentially. Seemingly everything has to be in place at once in
order for the system to work and thus exhibit any evolutionary advantage. Hence this thought
pattern pushes towards a creationist conclusion that there must be some Central Guiding Hand,
an intelligent Designer, to explain such a complex interdependent system.
In the thought patterns of the Big Push school, the complex interdependence of a modernizing
economy also drives toward the conclusion that there needs to be a central guiding hand to jumpstart the balanced growth miracle. Evolutionary biologists and the theorists of the unbalanced
development school thus need to pay close empirical attention to the actual evolutionary histories
in order to dispel the a priori thought patterns arguing for a central guiding hand [e.g.,
Hirschman 1967]. Much of that thought pattern seems based on taking snapshots before and after
some large change, and then not being able to readily imagine a step-by-step process to go from
one to the other.
Hirschman uses the metaphor of solving a jigsaw puzzle for unbalanced growth version of
dealing with the set of problems facing a developing country [1961, 81-2]. One could imagine a
rather superhuman act of putting all the pieces together at once to solve the puzzle. That is the
comforting fantasy of those who promote comprehensive, integrated, and balanced reform
programs. Do all these things together (so that it looks like the "picture on the puzzle box") and
you will have solved your problems!
Countries cannot just solve all their problems at once. They must start with a few pieces that fit
together and try to work outward to find other pieces that fit. Not all starting points are equal.
Certain pieces of the puzzle may have nearby connections and linkages that allow building that
part of the puzzle quickly–as opposed to parts whose solution might give little insight or impetus
to solving the nearby parts. Perhaps someone who has seen similar puzzles solved would be a
good coach to suggest promising starting points or fruitful directions for progress. Perhaps it
would be helpful to study the "picture on the box" but a better metaphor might be putting
together a puzzle when one doesn't know what the final picture will be. The actual solving of the
puzzle is a piecemeal process starting in one or more propitious places and working outward
through fruitful linkages to finally arrive at the new overall configuration.
We might also consider the analogy with the way an entrepreneur might develop a business.
Success in an initial effort will create bottlenecks and pressures upstream or downstream that
need to be resolved–as well as opportunities that can be captured. One thing leads to another in
an evolutionary process of groping, adaptive learning, and experimentation. Each step is driven
by the local needs to relieve pressures or grab opportunities. It is rather different from following
the imposed performance incentives to move step by step through an engineering plan to
construct a building or build a bridge. By studying the successful development of a complex
multi-faceted business, would-be entrepreneurs might gain much insight into the process which
is very different from following a checklist-style business plan, or blueprint. If entrepreneurial
business development is too fraught with uncertainties, complexities, instabilities, and
incomplete knowledge to submit to technocratic planning, then one might well expect the same
to hold for the larger processes of social reform, change, and development in a country.
In summary, learning, experimentation, and pragmatism are basic to any alternative to the
command and control models of development. The limited powers of cognition and the limited
20
capacity for implementation of central authorities in the face of the complexity of organizational,
institutional, and social realities do not give much hope for social engineering approaches.
Hirschman, as a keen observer of the development process, saw successes as taking place in a
rather different way and he recommended that development projects attend to those "hidden
rationalities" more than to the dreams of technocratic rationality entertained by social engineers.
Initiatives need to find and enlist local energies and knowledge for trial-and-error problem
solving. But each problem solved brings to the foreground other problems and opportunities
through forward and backward linkages. Change unfolds because "one thing leads to another"—
not because a given rational plan can be implemented through centrally coordinated action.
Part III: Decentralized Social Learning
The Duality Between Series-Oriented and Parallel-Oriented Research Strategies
After seeing that Hirschman's unbalanced growth vision has a cognitive as well as volitional
side, we now focus in on the cognitive side of development and development assistance.
There is a duality—series-parallel duality17—that runs throughout mathematics, engineering, and
human affairs. Many problems can be conceptualized as searching over a tree (starting at the
root). At each point, we have two options: to continue searching to greater depth along a branch
of the tree, or to (backtrack and) broaden the search to include one or more other branches of the
tree.
Suppose one is facing a search tree in trying to find a solution to a development problem. If one
is quite sure that the solution lies along the branch that one is on, then a strategy of series
experimentation is appropriate. Test the current proposed solution and then move along that
branch, as it were, by improving that proposal. But if there is genuine uncertainty as to which
branch may contain "the" solution or even "a" solution, then a strategy of parallel
experimentation would be more appropriate. Try several options, prototype quickly to test the
options, and communicate between the experiments since improvements in one option might also
benefit other options. Eventually a clear winner might emerge so that resources could then be
concentrated on that option.
One might imagine a "series advocate" and a "parallel advocate" giving arguments for and
against each strategy. For the series proponent, a multiplicity of experiments is wasteful
duplication. Isn't it more efficient to put one's resources on the best option? Why not do
everything in the One Best Way? Large prideful organizations tend to favor this reasoning. The
organization's experts will decide on the best experiment or approach—otherwise the
organization would appear "not to know what it's doing." It is safer to put one's resources on the
knowledgeable choice rather than waste anything on what the authorities do not support.
Scattering our resources among less-promising options will detract from our best chance of
getting the breakthrough by putting all our resources on the most promising option. Applied to
the social world, this is the viewpoint of the social engineer.
For instance, at the beginning of the decade of the transition (1990s), Ralf Dahrendorf (a political
sociologist and head of the London School of Economics), wrote a book, Reflections on the
17
See chapter 12 "Parallel Addition, Series-Parallel Duality, and Financial Mathematics" in Ellerman 1995; or
Ellerman 2005c.
21
Revolution in Europe: In a letter intended to have been sent to a gentleman in Warsaw [1990],
(echoing Edmund Burke's Reflections on the French Revolution: In a letter intended to have
been sent to a gentleman in Paris [1937; orig. 1790]) about the coming post-socialist transition.
Dahrendorf argued for the transition "to work by trial and error within institutions" [1990, 41;
quoted in: Sachs 1993, 4]. Neoclassical economics (in contrast, say, to neo-Austrian economics)
has become the primary intellectual framework of today's social engineering. In the early
debates about the transition, a prominent economist and gifted self-publicist, Jeffrey Sachs (then
of Harvard and now at Columbia University), argued that he and other economists already had
the answers. After quoting Dahrendorf, Sachs argued to the contrary in favor of an economicsinspired Big Bang program of institutional shock therapy. "If instead the philosophy were one of
open experimentation, I doubt that the transformation would be possible at all, at least without
costly and dangerous wrong turns." [Sachs 1993, 5]18
Parallel experimentation is based on the opposite knowledge, the pragmatic or Socratic
knowledge that one does not know—acknowledged ignorance. There is an old distinction
between risk, where rough probabilities are known, and genuine uncertainty, where the
probabilities are unknown and where one has only conflicting hunches. Parallel experimentation
is based on genuine uncertainty.
The use of a parallel-path strategy for the solution of difficult development
problems is standard practice in several of our outstanding industrial laboratories.
It is extremely common in agricultural and medical research. And in the atomicbomb project, one of the most spectacularly successful military projects the
United States has ever undertaken, the parallel-path strategy was employed.
[Nelson 1961, 353]
A sober reading of the history of science and engineering shows that experts are often rather
myopic; they see only a few steps ahead on the usual path. But the disruptive paradigm-shifting
discoveries tend to come "out of left field"—from outside the conventional framework that is the
stock in trade of the experts. This sort of known-ignorance pushes for the "waste and
duplication" of a parallel approach.
Development work is a messy, time-, and energy-consuming business of trial,
error and failure. The only certainties in it are trial and error…. Indeed,
development work is inherently so chancy that by the law of averages, chances of
success are greatly improved if there is much duplication of effort….Just so, when
Pasteur, that wise old man, begged for enlarged support of the biological sciences,
he begged for multiplication of laboratories. [Jacobs 1969, 90-1]
The Wright Stuff
A certain scheme—parallel experimentation—has emerged from a remarkable variety of sources
as the best means of learning and development under conditions of genuine uncertainty. One of
the most basic examples is the process of biological evolution itself. Evolutionary change
involves the interplay between two processes: variation and selection (along with the
18
The intellectual continuity between Jeffrey Sachs' discredited Big Bang ideas during the 1990's and his attempted
revival of the discredited Big Push ideas today illustrates Isaiah Berlin's notion of a "hedgehog" [1978] with (only)
One Big Idea.
22
transmission of the selected variants to the next generation). Variation expands the range of
possibilities and selection narrows it. Charles Darwin's theory of evolution was a theory about
selection, the theory of natural selection. Darwin and Darwinism have had relatively little to say
about the structure of variation aside from the fundamental contra-Lamarckian point that
variation is "blind" in the sense of being independent of learning during the lifetime of an
organism.
Sewall Wright (1889-1988) together with Ronald A. Fisher and J. B. S. Haldane were the three
progenitors of one of the revolutions in modern biology, the mathematical theory of population
genetics [see Provine 1971; 1986]. In the recent complexity science literature, Wright is more
often mentioned as the inventor of the "fitness landscape" to represent optimization on a rugged
and cloudy landscape. Yet the fitness landscape was only a tool Wright used to expound his
shifting balance theory of evolution.19
Natural selection is a mechanism to push a population up a fitness hill—but it may be a very low
hill. "The problem of evolution as I see it is that of a mechanism by which the species may
continually find its way from lower to higher peaks in such a field." [Wright 1932; reprinted in
Wright 1986, 163-4] How does evolution ever get the population back down a hill and across a
valley of low fitness to climb a much higher hill? If selection operates to cut down variety to the
survival of the fittest, what is the mechanism to increase variety in order to find a path from low
to higher hills?
Like Darwin, Wright thought it relevant to carefully observe artificial selection. Wright found
that breeders do not keep all their animals together in one interbreeding herd. They deliberately
break the herd up into subherds, subpopulations, "races," or 'demes' (as in demography) so that
there is parallel experimentation between the subherds. It is a question of balance. The subherds
should be small enough so that the variety found in the subherd (through sampling error) or
created through mutation, sexual reproduction, and genetic drift will be emphasized through
inbreeding. But the subherd should not be so small that inbreeding leads to the quick fixation of
ill-adapted genes and the deterioration or demise of the subherd. When a clearly superior
example is produced in a subherd, then the seed is crossbred into the other subherds to give them
the benefit of the innovation. But seeds could not be constantly crossbred between the subherds
as that would defeat the benefits of their semi-isolation. Shifting balances were involved. How
small to make the subherds and how much cross-breeding between the subherds?
Seeing these processes at work in artificial breeding and selection, Wright reasoned that Nature
might have found some version of such parallel experimentation with naturally forming
subpopulations and cross-fertilization by migration. Garrett Hardin has given an excellent
illustration of this theme.
19
The tool was rather misleading if taken to imply some scalar measure of "fitness" (like altitude above sea-level) so
that there would be one highest peak, a "Mount Everest of fitness."
23
[Source: Hardin 1959, 293]
In more technical terms:
In the shifting balance theory, a large population that is subdivided into a set of
small, semi-isolated subpopulations (demes) has the best chance for the
subpopulations to explore the full range of the adaptive topography and to find the
highest fitness peak on a convoluted adaptive surface. If the subpopulations are
sufficiently small, and the migration rate between them is sufficiently small, then
the subpopulations are susceptible to random genetic drift of allele frequencies,
which allows them to explore their adaptive topography more or less
independently. In any subpopulation, random genetic drift can result in a
temporary reduction in fitness that would be prevented by selection in a larger
population, and so a subpopulation can pass through a "valley" of reduced fitness
and possibly end up "climbing" a peak of fitness higher than the original. Any
lucky subpopulation that reaches a higher adaptive peak on the fitness surface
increases in size and sends out more migrants to nearby subpopulations, and the
favorable gene combinations are gradually spread throughout the entire set of
subpopulations by means of interdeme selection. [Hartl and Clark 1997, 259]
From the shifting balance theory and other examples, we might outline a general pragmatic
schema—"the Wright stuff"—for experimentation and learning in the context of uncertainty and
known ignorance:




different experiments (subherds or "demes") running concurrently with some common goal,
with some semi-isolation from immediate competitive pressures,
with benchmarking comparisons made between the experiments, and
with the "migration" of discoveries between experiments wherever possible to ratchet up the
performance of the whole population.
24
Perhaps the purest example of parallel experimentation as a scheme for collective innovation and
learning is provided by the communities of scientific researchers working in a field. They also
work in small semi-independent groups who constantly face the same shifting balance decisions
about working in bigger or smaller groups, or closely following what others are doing versus
disregarding the current "research rut" and striking off in new directions. Innovations are
quickly transmitted via the scientific literature to the other groups for intersubjective verification
and cross-learning. The knowledge available to all the groups is ratcheted up.
The series advocate in science would again like to use "what we know" to cut down on the
wasteful exploration of untested or 'discredited' ideas. The experts should be able to broadly
agree on the best path of research and then centrally controlled resources should allocated along
that path. Perhaps the most famous example in recent history in the life sciences was the Soviet
experts' decision that Lysenkoism represented the path for Soviet genetics to take. The other
branches on the search tree were pruned away.
Another major example is the pluralism of political parties or organizations (e.g., cities or states
in a federation) taking different positions and performing different experiments addressing
common social problems. The rivalry between political parties is immediate and direct while the
rivalry between diverse cities or states is more indirect. But in all cases, the idea is to have
within the whole polity a number of positions being articulated and a number of parallel
experiments going on with some form of benchmarking and cross-learning so that innovations
will serve to ratchet up performance across the polity.
Here again, the series advocate is well-represented by "scientific socialism." When one has
access to the "science" of the "innermost workings of history" then parallel experimentation is
only a waste of resources. John Dewey quotes the English Communist John Strachey's statement
that the communist parties' "refusal to tolerate the existence of incompatible opinions ... [is]
simply asserting the claim that Socialism is scientific." Dewey goes on to comment that it
"would be difficult, probably impossible, to find a more direct and elegantly finished denial of all
the qualities that make ideas and theories either scientific or democratic than is contained in this
statement." [1939, 96] With "scientific socialism" now in the dustbin of history, the spirit of the
"scientific" organization and control of society lives on in the application of orthodox economics
as if the communist social engineers just had the wrong textbooks.20
But antipathy to parallel experimentation comes not only out of ideologies which already know
One Best Way; it comes even more often from authoritarian regimes or organizations who have
no interest in sponsoring a genuine alternative. It may be a low hill but they are on top of it and
any parallel experimentation would be downhill for them.21
20
Orthodox economics also deftly avoids the complications introduced by multi-peaked landscapes by the
assumption ("convexity") that each decision-maker has only one hill to climb. Thus the whole point of having the
parallel experiments is just assumed away in favor of simple hill-climbing maximization—as if "Mt. Tory" in
Hardin's previous illustration was the only landscape for each decision-maker.
21
See Sabel and Simon 2003 for a theory about using public law litigation to deliberately destabilize low-level
equilibria.
25
Donald Schön and Everett Rogers on Decentralized Social Learning
How can a society learn to make legal and institutional reforms? The default theory of social
learning is that the center makes policy innovations—series experimentation—which are then
transmitted to the periphery.
[The standard approach] treats government as center, the rest of society as
periphery. Central has responsibility for the formation of new policy and for its
imposition on localities at the periphery. Central attempts to ‘train' agencies at
the periphery. In spite of the language of experimentation, government-initiated
learning tends to be confined to efforts to induce localities to behave in
conformity with central policy. [Schön, 1971, 177]
But social learning can take place in a decentralized bottom-up manner with centralized
coordination. In large multi-plant companies, innovation may take the form of new ways of
socially organizing and structuring productive processes, e.g., quality circles or self-managed
work teams. Separate plants might perform pilot experiments to find out "what works and what
doesn't." The headquarters office frames the experiments, detects the successes, and plays the
knowledge-broker to help other plants cross-learn from the successful ones. In the Japanese
system of just-in-time inventories, there is local problem-solving by teams, benchmarking
between teams, and continuous improvement ratcheting up the performance of the teams.
Schön described a similar process involving the government and the periphery of local units
trying to carry out a certain social reform.
Government cannot play the role of 'experimenter for the nation', seeking first to
identify the correct solution, then to train society at large in its adaptation. The
opportunity for learning is primarily in discovered systems at the periphery, not in
the nexus of official policies at the center. Central's role is to detect significant
shifts at the periphery, to pay explicit attention to the emergence of ideas in good
currency, and to derive themes of policy by induction. The movement of learning
is as much from periphery to periphery, or periphery to center, as from center to
periphery. Central comes to function as facilitator of society's learning, rather
than as society's trainer. [Schön, 1971, 177-8]
Decentralized parallel experimentation with centrally-sponsored framing and benchmarking
followed by peer-to-peer cross-learning in the periphery (like deme-to-deme cross-learning in
Wright's theory) is a more appropriate model than research at a central facility followed by the
teaching-dissemination of the results.
In Everett Rogers' early work on the diffusion of innovations he focused on the classical huband-spokes or center-periphery model of diffusion.
In this classical diffusion model, an innovation originates from some expert
source (often an R&D organization). This source then diffuses the innovation as a
uniform package to potential adopters who accept or reject the innovation. The
role of the adopter of the innovation is that of a passive accepter. [Rogers 1983,
333]
26
Spurred on by Schön's work [1971], he became aware of decentralized diffusion systems with
horizontal diffusion between peers (which might involve partial re-invention of the model) rather
than vertical transmission from experts to adopters.
During the late 1970s I gradually became aware of diffusion systems that did
not operate at all like the relatively centralized diffusion systems that I had
described in my previous books. Instead of coming out of formal R&D systems,
innovations often bubbled up from the operational levels of a system, with the
inventing done by certain users. Then the new ideas spread horizontally via peer
networks, with a high degree of re-invention occurring as the innovations are
modified by users to fit their particular conditions. ...
Gradually, I began to realize that the centralized diffusion model was not the
only wheel in town. [Rogers 1983, 334]
Perhaps the best example of a parallel system of decentralized innovation and diffusion in a
developing country is in China over the last quarter of a century. The Chinese recognized local
reform models which could be in a region, county, commune, or even brigade, and could be in
any sector or area such as administration, health, education, or industry. The center would
recognize a "model" which could then be visited by groups from all over China who want to
make a similar reform in their locality.
The diffusion of innovations in China is distinctive in that it is (1) more horizontal
in nature, (2) less dependent upon scientific and technical expertise, and (3) more
flexible in allowing re-invention of the innovation as it is implemented by local
units. These aspects of decentralized diffusion are facilitated by China's use of
such diffusion strategies as models and on-the-spot conferences. The "learning
from others" approach to decentralized diffusion in China was adopted officially
as a national policy in the national constitution in 1978. [Rogers 1983, 340-1]
The same period marks the beginning of China's historic record of growth and development at
the end of the twentieth century.
Charles Sabel and the Revival of Democratic Experimentalism
The Japanese just-in-time (JIT) inventory system can be viewed as a system of dynamic
production learning—not just a system of cutting inventory costs. Buffer inventories in
production might be analogized to loans from international development agencies that allow one
to get by current difficulties without necessarily solving the underlying problems. But with a JIT
system, the costs of the problem are evident and attention is then focused on solving the problem
so that it does not recur again. Hirschman has praised the low tolerance for error and narrow
latitude of some technical systems (e.g., aircraft maintenance) which thus serve as inducement or
pacing mechanisms for maintenance and learning. High tolerance for error (induced or
aggravated by deep-pocketed external aid agencies anxious to move the money to "help" in a
crisis) or wide latitude for maintenance would operate like high inventory levels to weaken the
incentives for corrective actions.
27
Just as a lowering of the water in a canal will reveal obstacles to navigation, so a systematic
reduction in the levels of inventories will bring problems to the surface so that this created
necessity will be the mother of invention to resolve the problems. Then with a continuous
reduction in inventory levels, other problems will come to the surface and be resolved in a kaizen
process of continuous improvement.
This successive removal of inventories creates bottlenecks in production that
make it possible to identify each work station's weaknesses; and in this way it is
analogous to the potentially informative disruptions of production caused by, say,
the construction of a new steel plant in stories of unbalanced growth. [Sabel,
1994, 240]
Hirschman has been asked if he would actually advocate "unbalanced growth" in view of the
"efficiency" properties of the formal models of balanced growth, and one of his responses is that
in the JIT inventory system, "the Japanese initiate and induce it." [Hirschman, 1994b, 319]
Thus the Japanese system of just-in-time inventories, local problem-solving by teams,
benchmarking between teams, and continuous improvement (kaizen) can be seen as a system of
parallel experimentation and social learning in production that induces problem-solving and
ownership by the participants. Charles Sabel developed this and other examples in his theory of
social learning [1994] and theory of rolling rules and ratcheting standards regimes [Dorf and
Sabel 1998; Sabel et al. 2000] that, in turn, have spawned a new school of Democratic
Experimentalism or Pragmatism.
Often legal and institutional development strategies are flawed by implicitly assuming that which
needs to be created. This often takes the form of assuming an effective governance system is in
place so that a development advisor simply has to pour some new wine into the sound bottle,
e.g., design a comprehensive set of new laws to be passed in a developing country. In contrast,
Sabel asks how collective action problems are solved in the small and how change does take
place—without assuming an effective fiat from the center.
In Sabel's treatment of collective action problems, individuals are assumed to have some
sociability, some powers of reflection and discussion, and incomplete identities always in the
process of formation and change. They are often in problematic situations where some collective
action would benefit the group but where each may be vulnerable to the non-cooperation of
others (which could be defection or simply error). The problem being discussed is the group
members' own common problem so that they would be involved in implementing any proposed
solution (the "learning") and will thereby be monitoring the actions of others and hence the
description "learning by monitoring." The discussion to arrive at a collective action plan must
also include discussion of how to apportion the gains from cooperation and how to adjudicate
differences that will arise.
So far the description of learning by monitoring is consistent with the repeated games treatment
of the evolution of "cooperation". Sabel goes beyond the game-theoretic treatment by assuming
that the self-definitions and identities of the participants are changed by the discussion and
cooperative efforts. Part of the discussion is to reinterpret and reframe their past, to discover and
clarify their interests, and to establish a group identity with which the members can start to
identify so that the cooperation is based more and more on "who they are" than on a tenuous
28
game-theoretic modus vivendi (cooperating today only to avoid retaliation tomorrow). The
reciprocal belief that others also cooperate partly on the basis of identification (rather than
strategy and guile) will lead to giving others some "benefit of the doubt" by interpreting
occasional non-cooperation by members as error rather than betrayal. In such a manner, trust
and the norms of reciprocity (social capital) can be developed.
Central managers or coordinators, instead of being assumed as a deus ex machina, can be seen as
agents of the group facilitating the "government by discussion"22 (or deliberative democracy)
within the group and helping to minimize the vulnerabilities of cooperative action—while
through benchmarking and other means of competitive stimulus helping to insure that the group
continues to face the problems that come to light. Where a set of people have interdependent
opportunities and fates, the group members through initial problem-solving discussion and action
accompanied by mutual monitoring can start to "bootstrap" [Sabel 1995] a new collective
identity that can help to stabilize future cooperative problem-solving and learning.
Sabel's treatment of solving collective action problems illustrates the pragmatic themes of the
incompleteness of the social world (people's values and beliefs), the constructive nature of social
solutions, and the constitutive role of people's active involvement. Sabel and colleagues have
also elaborated a remarkable range of what we termed "parallel experimentation schemes" in
legal and institutional development, e.g., regimes of rolling rules and ratcheting standards.
Recently, Charles Sabel and Sanjay Reddy have proposed just such a mechanism of parallel
experimentation for social learning for development.
From these general considerations it is possible to sketch the kernel of a two-level
economic-development framework that encourages constraint-relaxing learning—
offered only as an example. At the “top” a benchmarking committee of the
relevant government entities and qualified private actors, collaborates with
potential users to establish the initial substantive and procedural criteria for
participation, and defines the initial metrics by which applications are to be
ranked. At the “bottom” project groups—whose members can be public or private
entities or partnerships of both—compete to present projects that score highly
under the emergent criteria.…After each round the selection criteria, benchmarks
and institutional arrangements are adjusted to reflect improved measures of
performance and a richer understanding of success. There is thus public or state
learning as well as publicly available learning by private agents. Because the
implicit theory of economic development—expressed in the selection criteria—is
revised in the light of the means chosen to pursue them—the pooled experience of
actual projects—we can call these arrangement experimentalist. [Sabel and Reddy
2003, 10]
Start with a persistent social problem in a developing or transitional country, e.g., how to do
bankruptcies and industrial restructuring, how to promote small private firms in a corrupt
environment, how to fight endemic corruption, how to provide public services, and so forth. The
22
This tradition would include the work of John Stuart Mill, Walter Bagehot, James Bryce, John Dewey, Ernest
Barker, Frank Knight, James Buchanan, Bernard Crick, Charles Lindblom, Jurgen Habermas, Jon Elster, Amy
Gutmann, and Dennis Thompson.
29
agency (e.g., some appropriately local development agency) proposes a competition (e.g.,
between national regions, states, cities, etc.) for the best approach to addressing the problem. To
qualify, an entrant must make public the "theory" or ideas behind their approach. Moreover, they
must agree to be judged by certain public benchmarking criteria (which they might themselves
propose).
Based on the proposals, some of which could describe already existing programs, the agency will
select a certain number of winners and will provide material assistance in some form, e.g., a
block grant. The assistance will always require a substantial matching contribution (which could
be as prior investment) from the entrants to assure that they want to solve the problem and are
not just in it to get the assistance. In any case, the aid provided by the agency is the least
important part of the parallel experimentation scheme. The more the aid, the more a central
agency will be emboldened to start dictating "answers" so the aid should be unobtrusively small
so as not to interfere with the primary motivation of the public hunt for solutions to address a
problem that is pressing ("pressing" in the Hirschmanian sense where in one thing creates
pressure for another).
The others in the contest will learn the winning theories as to how the problem can be addressed
and they may choose to adapt their own mode of operation. After a certain time period, the
results are assessed according to the previously agreed-upon benchmarks to see who the real
winners were. There might be a second round of assistance where aid would go to those who did
well in the first round (whether they previously received assistance or not). The point is to
encourage horizontal or cross-learning between those who did well and those who didn't. Project
funds might also be used to sponsor visits or secondments so that the laggards could learn
directly from the emerging success stories. The public benchmarking establishes a rolling
standard that will ratchet up as social learning improves performance (continuous improvement).
Matters of local pride and prestige will play a role.
The public and competitive benchmarking between parallel experiments and ratcheting up of
standards of performance are the heart of a real-time notion of parallel evaluation.
Conventionally, the expert planners decide on the One Best Way which was supposed to be
implemented. An evaluation is performed to learn from the experiment. There are the usual
problems in the objectivity of evaluations and the resistance of bureaucracies to learning (due to
the implication of prior error).
But the real problem is that the expert development planners might be embarrassed by any
genuine competitive comparison with existing approaches parallel to their One Best Way, e.g.,
the contrast with the World-Bank-IMF-supported Big Bang transition in Russia and China's
homegrown incrementalist approach to the transition [e.g., Ellerman 2003]. Hence the method of
"evaluation" much preferred by the expert planners is a so-called "impact evaluation" that just
compares the results of their project to the "counterfactual" of doing nothing in a similar
situation. By comparing their intervention "to a control group that did not get the intervention"
[Easterly 2006, 373], the planners can avoid any potentially embarrassing comparisons to nonhypothetical parallel approaches that might use comparable resources. A project manager in a
large aid agency such as the World Bank can thus get a "positive evaluation" by passing the
ultimate low hurdle of having a "positive impact"—no matter how many resources were
expended—in comparison with a "control group" where no resources were expended!
30
Perhaps the most basic concept in economics is the notion of opportunity cost; the cost of
expending resources on plan A is the value foregone by not expending the same resources on the
best alternative plan B. By "resources" here, I mean not just monetary resources but also the
scare time and effort of reformers who are willing to try to change things. It is remarkable how
many otherwise sophisticated economists think that it is "scientific" to do an "impact evaluation"
of plan A by comparing its results to the results of expending no resources at all in an otherwise
comparable situation. And if day one in a Principles of Economics course covers "opportunity
cost", then day two might introduce the concept of "rivalry"—the competitive market-based
version of parallel experimentation where consumers and consumer research organizations play
the role of benchmarking between the rivals. If a company or organization recommends that the
"scientific" way to evaluate its products or programs is to ignore their costs and then to see if
they are "better than nothing," then one might suspect that the products or programs were pretty
lousy. Such a private company would soon be bankrupt but not a public aid agency.
Hence it should come as no surprise that the World Bank's Research Department has launched a
major initiative to promote "impact evaluations" as the "scientific" way to evaluate development
programs.
Impact evaluation is an assessment of the extent to which interventions or
programs cause changes in the well-being of target populations, such as
individuals, households, organizations, communities, or other identifiable units to
which interventions are directed in social programs. One way of conceptualizing
net effects (or outcome) is the difference between persons or other targets that
have participated in a project and comparable individuals, or entities that have not
participated in the project.
An impact evaluation must estimate the counterfactual, which attempts to define a
hypothetical situation that would occur in the absence of the program, and to
measure the welfare levels of individuals or other identifiable units that
correspond with this hypothetical situation.23
But under conditions of uncertainty and acknowledged ignorance, the best approach seems to be
parallel experimentation and the real-time evaluation of benchmarking and communication of
ideas between actual (i.e., non-hypothetical) experiments where comparable resources were
expended (as opposed to no resources).
From the Print Age to the Internet Age
There are a number of interesting analogies between the "printing revolution in early modern
Europe" [Eisenstein 1983] and the current revolution due to the Internet.
Elsewhere I have argued that the global development agencies such as the World Bank and IMF
operate as "churches" rather than learning organizations [Ellerman 2005, Chapter 7]. They attach
their name and prestige to certain specific views which then sets in motion the intellectual
dynamics to preserve, confirm, and maintain those views. In the Middle Ages, this was more
than a metaphor. Prior to the printing revolution, the Church had a relatively easy job of
23
On the World Bank's website, www.worldbank.org, click on "Data & Research", then "Impact Evaluation", and
then "Overview" to find this description.
31
controlling what the literate class read. In the realm of scientific literature (and even without the
Church's efforts to protect its franchise), it was hard for many competing theories and data sets to
be before many sets of eyes at the same time for the purposes of comparison (a type of
benchmarking).
All this changed with the print revolution. In the realm of spiritual affairs, alternative
interpretations of sacred texts became more available and this diversity led to more divergence in
that realm. But concerning the "book of Nature," the ability to compare ideas, maps, and data
sets led to more convergence. "The communications shift altered the way Western Christians
viewed their sacred book and the natural world. It made the words of God appear more
multiform and his handiwork more uniform." [Eisenstein 1983, 275]
Similar changes are at work today. Those organizations that depended on the "authority" of their
views and on the difficulty of access to alternative views will find themselves undercut by the
Internet. For much of the postwar era, the development views available to government officials
and researchers in the developing countries—who did not have ready access to major libraries—
were dominated by the official publications of the major agencies such as the widely and cheaply
disseminated annual World Development Report (WDR) of the World Bank. When in doubt on
any issue, an official in the Third World could always reach for a copy the WDR on the topic to
find a seemingly "well-researched" view. Now a few minutes with Google gives a much wider
array of views on any topic. It is no longer a matter of which organizations can put the most
(highly subsidized or free) shiny publications with "sound research" (all coincidentally
supporting the announced views of the organization) into the hands of researchers in developing
countries. Today, the slick research reports of the major organizations still have their "scientific"
studies supporting their views, but a few minutes on the Internet shows that a number of
unaffiliated scholars have been unable to reproduce the results from the same data sets or that the
results were quite sensitive to the specification of the variables or the data sets. Thus the Internet
helps to undercut the authoritative pronouncements from the church-like development
organizations.
The church-like development organizations are all in favor of "learning from experience"—once
the "experience" has been filtered and interpreted by the Center. These global organizations
argue that they are necessary because they can scan globally for "best practices" which are then
interpreted and written up to be disseminated from the hub along the spokes in the "well-research
publications" so that others may learn in the developing countries. But in the Internet age, it
cannot be seriously argued that researchers in Tanzania have to go through an organization in
Washington DC in order to learn about development experience in Malaysia. The direct Southto-South network connections can have much more complexity than a simple hub-spokes model
as well as greater fidelity. The direct connections avoid the interpretation or "spin" put on all
messages that go through a central hub.
The church-like organizations have been quick to see the possibilities provided by the Internet.
Instead of their authoritative reports going in highly subsidized print versions to the Third World,
they can now be downloaded for free from their websites. Using an Internet search engine on a
development topic puts the onerous job of interpretation and quality control in the hands of the
researcher. The major organizations, ever attendant to the needs of their clients, have developed
mega-sites, such as the World Bank's Development Gateway
(http://www.developmentgateway.org/ ), which provide one-stop shopping (along with implicit
32
"quality control" in the selection of links) for researchers. This is "Putting the Internet to Work
for Developing Countries"—just as, in a prior age, the Church quickly learned to use printed
books for its own purposes.
While it may be easy to understand the World Bank's goal in setting up the Development
Gateway (spun off as a foundation in 2001 to appear more independent), that does not mean that
there is no role for sense-making in the face of the avalanche of conflicting information available
over the Internet. There was a comparable problem in the early print age when tracts on
astrology and alchemy were as readily available as works that we would now consider to be
more credibly scientific. "From Paracelsus through Mesmer and on to the present, the press has
lent itself to the purposes of pseudo-scientists as well as those of real scientists, and it is not
always easy to tell the two groups apart." [Eisenstein 1979, 695]
One response was the rise of scientific organizations such as Britain's Royal Society that did not
itself take a stand on the issues and that tried to use collegial peer-review to make sense of the
mass of newly available information. One should expect similar mega-sites to arise today that try
to organize best-practice/worst-practice information on a collegial peer-review basis, sites not
controlled by some church-like organization pushing its views. Wikipedia (for general topics)
and ELDIS (http://www.eldis.org/) with a focus on development information are examples along
these lines in contrast to the Development Gateway.
Concluding Remarks: Decentralized Social Learning in the Internet
Age
We have tried to cover much territory. In Part I, the idea was to try to clarify the current debate
about development aid. It is hard to have an intelligent debate when the parties have quite
different conceptions of the purpose of development assistance, e.g., helping the poor or trying to
indirectly facilitate the social, economic, legal, and political transformations that a society has to
make in its own way in order to modernize and develop.
In Part II, the idea was first to outline the fundamental conundrum of supplying any genuine
external help to homegrown development, and then to intellectually "recover" Albert
Hirschman's approach to development to see how it provided an alternative perspective to the
Big Push ideas of development planners. Just as the internal volitional impulse for
developmental decision-making might come from horizontal linkages within an economy, so
cognitive social learning might also take place through horizontal communication links on the
periphery (in contrast to disseminated solutions from the center).
In Part III, the idea was to fill in some of the intellectual background for parallel experimentation
under conditions of uncertainty. We saw in a range of settings—starting with biological
evolution—that there is a common scheme for decentralized social learning:




different parallel experiments with some common goal,
with some semi-isolation from immediate competitive pressures,
with benchmarking comparisons made between the experiments, and
with the "migration" of discoveries between experiments wherever possible to ratchet up the
performance of the whole population.
33
We also saw that major development agencies are making a "Big Push" in the opposite direction
of promoting impact evaluations to see if a project (using whatever resources) is better than
nothing (using no resources)—rather than promoting parallel experimentation and crosscomparisons between experiments using comparable resources.
Sponsoring or facilitating schemes of parallel experimentation is an important social learning
methodology by which helpers can, in an autonomy-respecting way, help doers who undertake
the experiments to address common pressing problems. Today the internet provides remarkable
new technologies enabling horizontal communication on the periphery (not through some
powerful aid agency as the "center") and peer-to-peer learning within networks of experimenters.
With the widespread discrediting of centralized development agencies and the rise of the new
web-based technologies for horizontal networking, there is a revolution underway comparable to
the printing revolution in early modern Europe. A genuinely alternative approach to development
assistance is more feasible today than it ever was before.
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