Does Bill Gates see too much like a state, and not like an entrepreneur?

Morten Jerven has a terrific book, Poor Numbers, chronicling the vagaries and inaccuracies of our main measure of poverty and development: Gross Domestic Product. Essential reading for anyone studying development.

In what I can only assume made Morten’s publisher faint in ecstasy, Bill Gates gives it a rousing review.

…it is clear to me that we need to devote greater resources to getting basic GDP numbers right. As Jerven argues, national statistics offices across Africa need more support so that they can obtain and report timelier and more accurate data. Donor governments and international organizations such as the World Bank need to do more to help African authorities produce a clearer picture of their economies. And African policymakers need to be more consistent about demanding better statistics and using them to inform decisions.

I would like to see better GDP numbers–who wouldn’t?–but it’s hard for me to see the constraint on development this revelation would relieve, and why it’s anywhere close to the top ten constraints poor countries face.

The problem with those of us in the development complex, be we academics or Presidents or foundations or NGOs, is we want the world nicely ordered with levers to pull and a dashboard to monitor. And so we put a lot of energies into levers and dashboards and monitors.

I think of poverty and political powerlessness in terms of constraints and frictions–the limitless host of things, little and big, that made it more difficult to run a business profitably or turn a profit or invent a new product or get your kid educated or select the leader who serves your interests. States and institutions and norms and technology and organizations reduce these frictions and relieve these constraints. That is the fundamental driver of development. This is the basic logic behind almost every theory of development in your textbooks, from growth models to poverty traps to everything in between.

Reducing frictions and eliminating constraints is maybe the best thing outsiders can try to help with, freeing entrepreneurs and citizens to do their thing. (Well, I guess we can also help by giving them a big freaking market to sell things to, but that’s another story).

To the extent that missing information and measurement constrains development, or creates frictions, there’s a long list of more likely candidates than GDP. A sample:

  • small banks who don’t know the creditworthiness of the mass of potential borrowers,
  • village leaders who don’t know what funds the local bureaucrats get from the center
  • citizens who don’t know their MP’s meteoric rise in wealth
  • farmers who don’t know prices a district to the west

I kind of wish Gates would say “we need credit bureaus” or “we need freedom of information acts” instead.

I’m not even sure information of these sorts are even the most important frictions to address. To the extent we pay them attention or design programs, I think it’s because they seem cheaper and easier to tackle than the harder ones. But they are all a far sight better than better GDP data.

The litmus test: If we went back in a time machine, and Gates wanted to expand sales or product development or factories in Asia or Africa, would he have called for these things or better GDP data?

Postscript: The discussion continues here.