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Diagnostics before Prescription

  • Dani Rodrik

Development economists should stop acting as categorical advocates (or detractors) for specific approaches to development. They should instead be diagnosticians, helping decisionmakers choose the right model (and remedy) for their specific realities, among many contending models (and remedies). In this spirit, Ricardo Hausmann, Andres Velasco, and I have developed a "growth diagnostics" framework that sketches a systematic process for identifying binding constraints and prioritizing policy reforms in multilateral agencies and bilateral donors. Growth diagnostics is based on the idea that not all constraints bind equally and that a sensible and practical strategy consists of identifying the most serious constraint(s) at work. The practitioner works with a decision tree to do this. The second step in growth diagnostics is to identify remedies for relaxing the constraint that are appropriate to the context and take cognizance of potential second-best complications. Successful countries are those that have implemented these two steps in an ongoing manner: identify sequentially the most binding constraints and remove them with locally suited remedies. Diagnostics requires pragmatism and eclecticism, in the use of both theory and evidence. It has no room for dogmatism, imported blueprints, or empirical purism.

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Article provided by American Economic Association in its journal Journal of Economic Perspectives.

Volume (Year): 24 (2010)
Issue (Month): 3 (Summer)
Pages: 33-44

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Handle: RePEc:aea:jecper:v:24:y:2010:i:3:p:33-44
Note: DOI: 10.1257/jep.24.3.33
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  2. Krueger, Anne O, 1997. "Trade Policy and Economic Development: How We Learn," American Economic Review, American Economic Association, vol. 87(1), pages 1-22, March.
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  8. Charles R. Frank Jr. & Kwang Suk Kim & Larry E. Westphal, 1975. "Foreign Trade Regimes and Economic Development: South Korea," NBER Books, National Bureau of Economic Research, Inc, number fran75-1, December.
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