Friday, March 03, 2006

Who's an "engineer" in the economic policy sphere?

Today's EOPP Happy Hour was really enlightening. (For those who do not know what EOPP is, EOPP is a research group consisting of professors and PhD students of economics at LSE interested (mainly) in development economics and political economy.)

The topic was "What defines economics?" But the discussion flew into the issue of the relationship of economics with policy-makers.

We had Professor Paul Gertler from UC Berkeley as a guest. And he made a couple of revealing remarks.

In addition to academic works, he's been doing policy advice works in developing countries like Mexico, Argentina, Uganda, Kenya, etc. When he talked to politicians in these countries about what development policy should be undertaken, their first response was

"Does it get me into trouble?"

When he said no, then the next response was

"Does it make me look smart?"

When he said yes, then the third response was

"Does it make the public better off?"

He also told us that the reason for why conditional cash transfer schemes (CCTs) like Oportunidades (formerly known as PROGRESA) in Mexico and Bolsa Familia in Brazil, where poor households receive cash from the goverment conditional upon sending kids to school etc., is more acceptable for policy-makers than, say, simply providing education to all kids for free. The empirical evidence shows that CCTs are by no means more cost-efficient. But politicians love it because parents will vote for them if they implement CCTs (parents get cash!). Providing free education, on the other hand, does not directly benefit those with voting rights.

Then the following discussion led us to the idea that there needs to be "engineers" in the economic policy sphere, a metaphor suggested by Tan. Engineers are those who know natural science and apply it to real situations. Likewise, we need someone who knows economics and knows how to implement it to reality.

The following is the point made by Professor Mark Schankerman. Economists are good at finding WHAT the efficient outcome is. A good example is free trade. But economists are bad at finding HOW the efficient outcome can be achieved. That's why politicians often don't like the free trade policy, for example. In the process of implementing free trade, there will be those who lose from free trade. Politicans cannot ignore such people. Finding what the efficient policy is is like what scientists do in natural science. But finding how it is achieved in reality is a different job. In the case of natural science, engineers undertake such a job. What about social science?

Who can be an "engineer" in the economic policy sphere? Time was over at this point. I wonder if this is a journalist who understands economics well. Or maybe this is what political economists or political scientists (the distinction is very blurred these days) are all about.

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