The indirect approach
Aid and conditionalities are the"carrots and sticks"of the conventional, direct approach to fostering economic development. The economic theory of agency is the most sophisticated treatment of the direct carrots-and-sticks approach to influencing human behavior. Considering the outcomes of the conventional approach, it might be worthwhile to explore alternative indirect approaches that focus on enabling clients to act more autonomously, rather than try for fuller control of clients'actions (or"agents"behaviors) with improved carrots and sticks. Are there inherent limitations in the direct approach that will not be addressed with better crafted"agency contracts"or closer monitoring of the agents? The author traces the intellectual history of indirect approaches from Socrates to modern thinkers, such as Wittgenstein, Gandhi, and McGregor. One theme of his survey is that constructivist and active-learning pedagogies constitute an indirect approach in which the teacher does not directly transmit knowledge to the learner, through training, and instruction. These pedagogies - translated into social and economic development as learning writ large - from the basis for an alternative indirect approach to fostering development. Actions have motives, just as beliefs have grounds, concludes the author. In the wide spectrum of human endeavor, there is only a fairly small"bandwidth"in which motives can be supplied by the carrots, and sticks of the direct approach (including agency theory, and market-driven activities as special cases of the direct approach to affecting behavior). Outside that spectrum, trying to use direct methods in a controlling manner, contradicts the motives for actions (and the grounds for beliefs) - like trying to"buy love."For higher activities, motives must come from within. Helpers can at best use an indirect approach to bring doers to the threshold; the doers have to do the rest, which makes the results their own.
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- Joseph E. Stiglitz, 1974. "Incentives and Risk Sharing in Sharecropping," Review of Economic Studies, Oxford University Press, vol. 41(2), pages 219-255.
- Canice Prendergast, 1999. "The Provision of Incentives in Firms," Journal of Economic Literature, American Economic Association, vol. 37(1), pages 7-63, March.
- Ross, Stephen A, 1973. "The Economic Theory of Agency: The Principal's Problem," American Economic Review, American Economic Association, vol. 63(2), pages 134-139, May.
- Kreps, David M, 1997. "Intrinsic Motivation and Extrinsic Incentives," American Economic Review, American Economic Association, vol. 87(2), pages 359-364, May.
- Akerlof,George A., 1984. "An Economic Theorist's Book of Tales," Cambridge Books, Cambridge University Press, number 9780521269339, May.
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