Clinical Economics or Differential Diagnostics

Jeff Sachs and Tyler Cowen had a conversation at the Mercatus Center (perhaps you’ve heard about it). (My brother actually got to attend this in person! The rest of us had to settle for the video. I’m still jealous!) It is a fascinating video and no matter what you think about Jeff Sach’s ideas, it is difficult to watch this video and not realize he is brilliant. The best part (in my opinion) of this conversation is when Sach’s compares how the economics profession acts compared to his wife’s profession (pediatrics). Start listening at about the 20 minute mark for the differential diagnostics discussion.

Transcript

Jeff Sachs: I should explain this idea of clinical economics, as I’ve called it, or differential diagnosis. When you’re married to a pediatrician, as I have been for 35 wonderful years, you get up in the middle of the night a lot when patients call with a very sick child.

I’ve listened to my wife take an oral history a thousand — thousands of times, perhaps. It’s a wonderful art, first of all, because a mother calls with a crisis of a baby or a young child — usually a high fever. The first thing that is important to know is that there are a thousand possible etiologies of that fever. My wife doesn’t say institutions. She says . . .

[laughter]

Jeff Sachs: . . . “It depends. Let’s hear your problem. Oh, you’re in a desert, you’re here, you’re this . . .” No, when it comes to the child, it could be something as normal as a common cold or a something as devastating as meningitis.

The purpose of a differential diagnosis is two things. First, it is of course to try to get to the core reasons so that you can make a proper prescription based on a proper diagnosis. Second, it’s done in a way that you’re minimizing serious risk.

The first question always that my wife asks is, “Is the baby’s neck stiff, or do you notice that?” Because that’s one of the symptoms of meningitis. If the mother answers that way, the next point is “I’ll meet you at the emergency room. Don’t stop. Just go.” Because it could be something that is fulminant and life-threatening immediately.

If it’s not that, then it can go on for an hour.

But by the way, it’s not just an hour of questions. It’s an hour of sequenced questions down a decision tree, and it’s fascinating to watch. I wish as economists we had those basic skills inbred. I certainly didn’t learn them, and it took me a long time of seeing lots of “patients” to see that one needs that same kind of approach.

That’s what I mean by differential diagnosis. Why it’s so annoying to me, the one explanation fits all viewpoints. Because now I’ve seen a lot of places, a lot of crises, a lot of challenges. One of the things that I discovered was how poor our profession is at times in having that sense that the problem that you saw over there is not the same as the problem that you’re seeing here.

Tyler Cowen: Let me push on this a bit and see if you can convert me into being more of a Sachsian. One of my worries is that the doctors are not actually in charge. It may be the lawyers, which is . . . We’re in a law school, but still, if I may say, in some ways a step down.

To some extent you have people voting on the baby, not all of whom even know who the baby is or what the baby’s symptoms are. The differential diagnostics may exist in a kind of platonic realm, but you are more optimistic about them than I am.

What would you tell me to address my skepticism and make me more of a Sachsian, given that I have this reluctance to embrace your view the way you hold it?

Jeff Sachs: I think I get what you’re driving at and I do have a fundamental view of at least how I want to proceed professionally. But it’s also based a bit on a theory of change.

Tyler Cowen: Tell us the theory.

Jeff Sachs: I believe that knowledge matters and that the more clarity, the more evidence, the more appropriate an analysis, the more likely we can find a good outcome to things. Many people are cynical. I tend not to be. I’m sometimes accused of being gullible as a result, or being too soft in the face of whatever. But I believe that there’s a way to reach an agreement, typically, among pretty conflictual and often pretty antagonistic actors.

I think its a good point and one that needs to be made. (It is the sort of something that goes without saying, yet often goes unsaid.) We can quibble over the practical and technical differences between the specifics of pediatrics and economic development, but I think the broader point holds. Those working in development are often motivated by the vast challenges, the vast human suffering, and the vast needs. Perhaps because of this we want to fix it all. We want to create the panacea for global development. This goal or notion is misguided. Surely doctors go into medicine for similar reasons; the vast challenges, the vast human suffering, and the vast needs. No doctor, however, starts their career with the goal of trying to develop a cure for all human diseases. 

The Challenges of Simple Problems

Book Review: The Idealist: Jeffrey Sachs and the Quest to End PovertyNina Munk131010125449-idealist-cover-459xa

It is hard to come up with something to say about Nina Munk’s magnificent book that hasn’t already been said. The sincerity of this statement is proven by the fact that those very words have already been said. Due to this reality and the fact that I’ve been meaning to review this book since I read it several months ago; I will review Nina’s work by reviewing the most popular reviews already written. Four key lessons stick out to me while reading the actual book and its many reviews.

Nina spent the better part of six years following Jeff Sachs around to meetings with African diplomats, to seminars with large aid agencies, and flash-mob appearances in various rural African villages. She also spent considerable time in two of the Millennium Villages. Dertu, an arid Kenyan village close to the Somali boarder and, Ruhiira, a village in Western Uganda.

Joe Nocera in a New York Times Op-Ed sets the stage:

Nina Munk’s new book, “The Idealist,” is about the well-known economist Jeffrey Sachs and his “quest to end poverty,” as the subtitle puts it. I know: That subtitle sounds like classic book-industry hyperbole, but, in this case, it’s not. That really is what Sachs has been trying to do. The question of whether or not he is succeeding is where things get tricky.

The quest began in 2005, when Sachs, who directs the Earth Institute at Columbia University, started an ambitious program called the Millennium Villages Project (MVP). He and his team chose a handful of sub-Saharan African villages, where they imposed a series of “interventions” in such areas as agriculture, health and education. The idea was that these villages would show Africa — and the world — how the continent could loosen the grip that extreme poverty had on so many of its people.

From the start, the Millennium Villages Project has been controversial. It has soaked up large sums of money — the original seed money was $120 million — which its critics believe could have been better used on more targeted, less grandiose forms of aid. Because Sachs, for years, refused — on ethical grounds, he said — to rigorously compare the results at his villages with villages that didn’t get the same kind of help, development experts complained that there was no way of knowing if the project was making a difference.

Jeffrey Sachs is a brilliant man. This much is clear. As a world-renowned economist Sachs successfully (more or less) turned around the economic fortunes of Bolivia and Poland with “Shock Therapy”—a plan that aimed to jolt an economy out of socialism and into a market economy and gave him the nickname “Dr. Shock”. It is important to note that Sachs is a macro-economist. He is trained to think about the world at the country level, rather than at the individual level. To be sure he is very good at analyzing the country level of the world. This is the reason, however, macro-economists typically are not called to evaluate projects, programs, or policies. It is the job of the micro-economist to consider individual behavior in aggregate and evaluate success or failure.

If the first lesson is that Sachs is brilliant—on the level of his grad school age-mates Paul Krugman and Larry Summers—the second lesson is that solving poverty is not easy. Erika Fry summarizes a few of the challenges faced by Sachs the MV Project in her review in Fortune:

But Sachs’s quest—which plays out in the handful of villages in sub-Saharan Africa that comprise his Millennium Villages Project—seems to falter at every turn. A livestock market is abandoned two months after it opens. Villagers use their new mosquito nets (distributed to prevent malaria) on goats. Water-carrying donkeys drop dead. Hospital generators break down. Much-anticipated markets for banana flour and pineapple never materialize. And, because there is no market or local storage facilities, a bumper crop of maize—thanks to fertilizer and high-yield seeds—goes to the rats.

 

Bill Easterly articulates the third lesson in his first review of Nina’s book. “As the author makes clear, no one has worked harder to help the world’s poor than Jeffrey Sachs, or made more of the world’s affluent care about their plight.” This lesson put in context with Sach’s idea that, “we have enough on the planet to make sure, easily, that people aren’t dying of their poverty”, presents a harrowing conclusion. That nobody has worked harder, than Jeff Sachs, trying to show ending poverty is easy.

But as Easterly writes in his second review of the book:

Sachs’ technical fixes frequently turned out to be anything but simple. The saga of Dertu’s wells is illustrative. Ahmed Mohamed, the local man in charge of the effort, discovers that he needs to order a crucial part for a generator that powers the wells. The piece takes four months to arrive, and then nobody knows how to install it. Eventually a distant mechanic arrives at great expense. A couple of years later, Munk returns to find Mohamed struggling with the same issues: The wells have broken down again, the parts are lacking, and nobody knows how to fix the problem.

A little more than a year after that, the wells are up and running again, and the Millennium Villages blog celebrates Dertu as having “the most reliable water supply within the region.” Yet by 2011 the wells have run completely dry due to a drought—a not-uncommon occurrence in the arid region.

Such examples multiply in Munk’s book, showing that purely technological answers to poverty fall well short of Sachs’ promises. It turns out that technology does not implement itself; it requires the assistance of real people subject to widely varying incentives and constraints in complex social and political systems.

The final lesson comes from Angus Deaton’s review:

Modern technology, with its models and manuals, has an irresistible fascination for social engineers, and has done so for most of the past century. New knowledge and new ways of doing things have indeed been the source of much of human progress. Yet the schemes of the planners have rarely brought the improvement in the human condition that their well-intentioned architects had hoped for, and have often brought disaster. Thousands of years of painstakingly accumulated local knowledge cannot be incorporated into such plans. Nor can technocratic methods make up for bad politics, or provide a substitute for the two-way contract between politicians and people that provides public goods in exchange for taxes and that underpins development.

….

The Millennium Villages come with none of the coercion that accompanied the rural development projects of Stalin or of Nyerere, let alone the murderous horrors of Mao’s Great Leap Forward. For that we should be grateful. Yet the crying shame is that while the hubris came from Sachs, the nemesis came to the villagers.

The fourth lesson is tragic. When technical “experts” fail to act with humility or seriously consider the local challenges not mentioned in textbooks, suffering comes not to the foreign experts but to the local poor.

about-ninaThese lessons, which are discussed and summarized in the podcast Development Drums in which Nina is interviewed, are important for everyone wishing to do something good in this world. In this podcast Nina dispels several misguided reactions to this book. Some people when they read The Idealist say, “I’ve read your book, you must be against foreign aid” or “I’ve read your book, helping the poor must be hopeless”. Nina is vehemently against either of these reactions. In the former foreign aid is not the problem; it is hubris, an unwillingness to recognize failure, a disregard for the difficulties of specific contexts, and a general lack of appreciation for the challenges inherent in development projects led by outsiders. In the later helping the poor is not trivial, it is an imperative. We must however understand the challenges at play and approach the situation with humility, especially as an outsider.

If this all hasn’t been enough to convince you to read The Idealist, perhaps the following quotes will. The book is about poverty, development, and economics; but unlike most books in this genre, it is an absolute pleasure to read. Don’t take my word for it, others have already said the same thing.

Angus Deaton, in The Lancet: “Beyond the enormous punch that the book delivers, the quality of the writing is that of a fine novel, not of the usual tract in social science. We get to know and care about the characters, including Munk herself; we share their dedication, their optimism, and their dreams of improving lives. We also care when their illusions are destroyed, and their dedication is betrayed. Much of the message is conveyed by the arc of the story, and by the change in Munk’s own voice as she moves from her initial optimism and her commitment to reporting on something that really matters—the fight against global poverty—into final disillusion. It is a trip that many of us have made over the years, but few with so much knowledge from the field and none whose experiences are so eloquently and movingly reported.”

Erika Fry, in Fortune: “A fine writer with a gift for deploying spare, vivid detail, Munk overcomes the burden of what could be duller-than-dirt subject matter—the politics of foreign aid; the ins and outs of Uganda’s matoke market; NGO infighting over anti-malaria efforts—into a lively and at times, quite funny book.”

Andrew Jack, in The Financial Times: “Nina Munk’s The Idealist, [is] a highly readable examination of Jeffrey Sachs’s Millennium Villages Project in Africa.”

Laura Seay, in The Christian Science Monitor: “[The Idealist] is an absolute must-read for anyone who is interested in doing good for those in need. Far from writing a cheerleader’s account about someone who “just wants to help,” Munk raises questions about whether poverty actually has technical solutions, or whether cultural norms and behaviors can derail even the most well-funded and planned activities.”