The Elusive Quest for Growth by William R. Easterly

The Elusive Quest for Growth: Economists' Adventures and Misadventures in the Tropics by William R. Easterly discusses the failed efforts of states to use education, family planning, and debt forgiveness as means to grow out of poverty. He notes that there is little incentive for a student in a poor country to value and invest in her own education if there is no future return for that investment.

In more corrupt countries the very skilled opt to apply themselves to lobbying the government and other activities that redistribute income rather than activities that create new value. For education to provide a return on the investment, the society must have well-functioning institutions and markets that foster a demand for skilled individuals.

Easterly also highlights the problematic nature of structural adjustment loan programs—aid given under certain conditions—which became very popular in the 1980s. Rather than initiating true economic reform, states only pretended to adjust their policies. Because shortfalls would elicit increased loans and donors demonstrated little interest in revoking aid, there was little incentive for states to improve their policies.

Debt forgiveness regimes produced the same moral hazard, as authoritarian governments considered forgiveness as a free pass to continue to steal from their peoples’ futures. Easterly suggests that aid should be tied to prior achievement rather than promises of political leaders, and that aid should increase with further improvement.

Since the end of World War II, economists have tried to figure out how poor countries in the tropics could attain standards of living approaching those of countries in Europe and North America. Attempted remedies have included providing foreign aid, investing in machines, fostering education, controlling population growth, and making aid loans as well as forgiving those loans on condition of reforms. None of these solutions has delivered as promised. The problem is not the failure of economics, William Easterly argues, but the failure to apply economic principles to practical policy work.

Author shows how the solutions all violate the basic principle of economics, that people--private individuals and businesses, government officials, even aid donors--respond to incentives. Easterly first discusses the importance of growth.

Author analyzes the development solutions that have failed. Finally, he suggests alternative approaches to the problem. Written in an accessible, at times irreverent, style, Easterly's book combines modern growth theory with anecdotes from his fieldwork for the World Bank.

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