ecember 2012 saw the passing of the great development economist, Albert O. Hirschman, at the age of 97.
Development economists spend their time these days performing randomized controlled experiments, in which a particular intervention like co-payments for mosquito bed nets are introduced into one group of villages and not into another matched set. This approach establishes causality with a level of certainty approaching that of the randomized trials used in pharmaceutical testing. But while such experiments are useful for evaluating the effectiveness of certain types of public policies, they all operate at a very micro level and don’t aggregate upwards into an understanding of the broader phenomenon of development. It is hard to imagine that all the work being done under this approach will leave anything behind of a conceptual nature that people will remember fifty years from now.
Albert Hirschman operated at the opposite end of the spectrum. He did very little quantitative work, and will be remembered for a series of slender books written in an accessible English that non-economists have no trouble understanding. He did not observe the methodological straightjacket his discipline imposed, but wandered off instead into other fields like politics and philosophy in an attempt to recover some of the unified social theory of the 18th and 19th centuries–hoping to avoid, as he put it, the “specialization-induced intellectual poverty in this field.” His legacy is not data collection or micro results, but rather some very big concepts that continue to shape the way we think about not just development but public policy more generally.
Hirschman’s best known books were Exit, Voice, and Loyalty (1970) and The Passions and the Interests (1977). In the former, he took on an issue central to public administration, namely, the problem of disciplining poor or incompetent managements like those running many American public schools. Milton Friedman had recently introduced the idea of vouchers and competition. He argued that in the private sector, bad management was disciplined by the possibility of exit, either on the part of customers who didn’t want to buy the company’s products, or by shareholders who lost confidence in the company’s management. This discipline didn’t exist in the public sector because it was often a monopoly supplier of the good in question, such as education. If parents were allowed to use a mechanism like vouchers to take their tax dollars away from failing schools and put them into better ones, there would be market-like incentives for both the competitive and failing schools to improve their performance. Since then, an exit option from state-provided public services has been a staple of...