11 May 2011

Advice from Esther Duflo and Abhijit Banerjee for Southern Sudan

In the New York Times. Banerjee goes with universal cash transfers and health insurance. Sounds good to me.
Q [David Leonhardt]. Let’s broaden the discussion from education. If you each could have a few minutes with the new leaders of South Sudan — the world’s newest country and a very poor one — and they asked you how they could best improve the lives of their citizens, what would you tell them
Ms. Duflo: In just a few minutes, we could not cover very detailed ground. So we’ll have to focus on the basics. First of all, I would try to convince them that a key priority would be to invest enough money and talent in running good quality social services for the poor, including free access to good schools, preventive medical care, and hospitals. This may not seem like rocket science: but these are basic human priorities, and these are also domains where some things are known about what may work. 
Second, I think I would try to convince them to run anti-poverty policy in a more intelligent way than what we see in most countries. In particular, I may try to encourage them not to listen too much to the elevator pitches of all the other experts, and stake their entire policy course on the basis of those… Of course they’ll have to start somewhere, and there is a body of knowledge available to choose policies that are likely to work. But they will still have a lot more to learn about the best ways to achieve their objectives. So I would like to advise them to always keep some margin to experiment, in order to find the best programs to reach those goals. 
Mr. Banerjee: Since they will no doubt want more specific suggestions, here are two policies that I think every poor country should implement. A small universal cash grant to everyone over 12, based on biometric identification. This guarantees that no one has to face the humiliation of being totally indigent, and from our evidence, makes people more productive as well. Making it universal is important, so that they do not attempt to identify the poor (which is very difficult to do effectively in poor countries). 
Second, a free universal health insurance policy that covers catastrophic health events, which allows people to go to private or public hospitals. Catastrophic health shocks do enormous damage to families both economically and otherwise, and are easy to insure, because nobody gets them on purpose. On the other hand, insurance policies that only treat certain catastrophic illnesses are hard to comprehend, especially of you are illiterate and unused to the legalistic nature of exclusions etc. Therefore people do not value them as much as they should which makes it hard for markets to supply them. This is an obvious thing for governments to take on.
Closely following the release of More Than Good Intentions, Duflo and Banerjee also have a new book out "Poor Economics." I'm about 2 chapters in and so far it is fantastic.


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