In 1961 Rosenstein-Rodan did something that no social scientist usually has the nerve to do (in this paper); based on his theory (and the available data he had on “economic fundamentals”), he made forecasts of how rapidly different parts of the world were going to grow over the next 15 years.
As you can see from the table, he got it almost completely wrong. …In fact, many of the economies about which Rosenstein-Rodan was bullish are not much richer today than they were in 1961.
The main reason why Rosenstein-Rodan got it so wrong is because he completely ignored the role of institutions and politics.
Now the thing is that, though most economists today would espouse more sophisticated theories than those of Rosenstein-Rodan, much of development economics — especially when it comes to the practice of development — still ignores institutions and politics.
Full post here.
If it’s war, quite obviously I fall on their side.
But I suppose I am not sure who we would fight against. I would have guessed most development economists agree that political stability and “good institutions” matter a great deal, and they quibble mainly over primacy, or perhaps which institutions.
I do think that development economics has had a blind spot for civil conflict. But even that has changed a great deal in the past few years.
Mostly, I think, theirs would be a war on neglect: the failure to study and understand institutions, rather than a rejection of their importance. That is probably the greatest gap in the field, one that the experiments revolution helps fill a little, but far from completely.
The fact that we still say things like “institutions matter” and don’t really have much hard proof for what specific institutions and why is a symptom of the problem.
I suppose the institutional perspective would instead ask why development economists aren’t pursuing the question with more vigor. I suspect it has something to do with a poor fit with the kind of empirical methods economists are allowed to employ and still maintain intellectual respectability.