Only eight months after I finished the book, I thought I’d finally review More Than Good Intentions, by Dean Karlan* and Jacob Appel. What I particularly appreciated about the book was its clear explanation of how academic research in behavioral economics can lead to solutions for real problems of social policy in the developing world. Given the level of popular discontent with neoclassical economics, fairly or unfairly, after the financial crisis, works like this go a long way towards demonstrating that the economist’s conceptual toolbox can contribute to making the world a better place.
More Than Good Intentions opens with a short review of the Easterly-vs.-Sachs saga, and essentially sidesteps the debate about whether aid ever works with a call for more evaluation of extant aid programs. Their chosen tool is the randomized controlled trial. Of course, there are any number of development problems that are not amenable to randomized evaluation. Questions about the ethnicized distribution of government resources or the transnational funding networks of rebel groups really call out for other epistemological approaches. What RCTs can do well is evaluate program-based aid in contexts where funding shortages mean that some potential beneficiaries can’t be included, and this is precisely the approach taken by the research projects summarized in the book.
The rest of the book is thematically structured around financial activities (borrowing, saving, consumption) and non-financial activities (agriculture, healthcare, education). The financial sections of the book are the best non-technical introduction to the topic that I’ve seen. Dean’s interests tend towards microfinance and decision-making, and these chapters give a thorough overview of contemporary Western narratives around microfinance and the many reasons why the financial needs of the poor are more varied than simply “getting a loan.” For instance, whilst an RCT conducted in South Africa showed that randomly extending microfinance loans to people who otherwise wouldn’t have gotten one did raise those clients’ incomes, qualitative data from the Philippines also showed that the rigid structure of microfinance products drives many people back to the neighborhood moneylender. (The takeaway here isn’t that moneylenders are evil, but that microfinance banks might take a lesson in customizable loan repayments from them.) Another RCT in Peru used list randomization [PDF] to show that nearly a third of microfinance clients use their loans for household consumption instead of business needs – technically a violation of their loan agreements, but a more accurate reflection of their current financial needs.
The non-financial chapters are also consistently interesting, although they tend towards summarizing notable research and policy innovations rather than placing the results within a global context. They’re like the greatest hits of development research. For instance, the agriculture chapter doesn’t provide an overview of agricultural modernization attempts in Africa, but it does shed light on why Kenyan farmers don’t purchase fertilizer when they need it (it’s hard for them to save money after the harvest), and how Ghanaian pineapple farmers spread information about new agricultural technologies. Similarly, the education chapter doesn’t go into great depth about the history of universal primary education, but it does demonstrate that programs as simple as providing uniforms or cash grants to poor students can dramatically improve attendance. One of the most remarkable studies of recent years showed that treating Kenyan students for intestinal worms with a twenty-cent pill reduced absence rates by up to 25%. This result was so spectacular that the researchers started an NGO, Deworm the World, dedicated to reproducing this success.
All in all, More Than Good Intentions makes a strong case for the relevance of behavioral economics to development policy. It’s also an excellent popular introduction to some of the fundamental questions of foreign aid and development economics. I gave a copy to my parents to answer their perennial question of “so what exactly do you do in development work again?” So far it seems to be working.
*Dean is the founder of Innovations for Poverty Action, where I work. He generously sent me a copy of the book for free.