Dean Karlan

Posted by Joseph Phillips, Jr. on Sunday, October 19, 2014 at 9:51 AM PDT

The Second Annual Howard Bosanko Lecture on October 14th featured Professor Dean Karlan, Professor of Economics at Yale University and President of Innovations for Poverty Action.  The title of his talk was, "Pragmatic Optimism in the Fight Against Poverty: Lessons from Behavioral Economics."

The Bosanko Lecture was organized by Professor Meena Rishi, who is the holder of the Bosanko Professorship in International Economics and Finance.

Karlan's talked about the use of controlled experiments to develop remedies to market failures in developing nations that often impede economic development.  One example he gave was a situation where farmers refused to use fertilizer in crop production.  The two impediments to fertilizer use are the expense (do farmers have the capital to buy the fertilizer?) and the risk (other factors such as weather undercut fertilizer effectiveness and earnings).  Karlan's team ran an experiment to provide the capital as well as to provide weather insurance.  As a result of the experiment, they found that weather insurance had a much more significant impact on fertilizer use.

Karlan's point was that there are many small interventions that can be made to improve the lives of people in emerging nations.  Of course, that does not mean there are not more macro impediments to development, it simply means that small changes can have an impact.  These small changes are easier to pull off because they are less of a threat to the status quo.  Making more macro changes such as improved education, macroeconomic stability, or trade liberalization typically threaten vested interests and are resisted. 

Years ago development economics was one of my areas for research and teaching.  The field was dominated by economists who focused on the market mechanism and who did not really want to acknowledge or deal with market imperfections.  Only people on the fringes did that and they did not get much attention from the mainstream.  Today, those focusing on market imperfections are dominating the field.  Behavioral economics and randomized trials are carrying the day.  Just this year, all SU freshmen were asked to read Poor Economics, by Abhijit Banerjee and Esther Duflo, which also focused on randomized trials and fighting global poverty.  It is interesting to see how the dominant view in a field can change in a relatively short period of time.

In any event, the Bosanko Lecture was a wonderful opportunity for students and faculty to hear about cutting edge work in the global development field.  Congratulations to Professor Rishi for creating the opportunity!