Evaluating Recipes for Development Success

This article offers a provocative critique of the ability of research on the impact of insti-tutions on growth to offer immediate and practical recommendations for reforming and redesigning institutions in developing countries and transition economies. The literature traces the sources of growth to unalterable historical and geographic features. It contains equally plausible recommendations for opposite courses of action. It is sometimes driven by fads or recommends imitation of the latest success story. Some recommendations are too vague or too general to constitute practical advice. The article suggests a Bayesian diagnostic procedure to identify the causes of economic failure in an individual country as a first step toward remedying the failure. JEL codes: O43, O17, O20, P30, P48. The main purpose of the most scholarly research, both theoretical and empirical, is to improve our understanding of the phenomena and processes being studied. The work may lead to useful prescriptions for policy, but that is usually the end-point of a long and winding path. Often, however, especially in matters of econo-mic development and growth, the problems under investigation are large and urgent, so practitioners want immediate answers. Academic researchers are also tempted to offer suggestions for policy, however tentative or incomplete. Work on institutions and growth is a case in point. When I present my own theoretical models to audiences, I am almost invariably asked to interpret the results for their policy implications. Listeners usually find my responses meager and unsatisfactory, and I am compelled to agree. In this article, I apply the same, admittedly stringent, test of immediate policy relevance to all academic researches on institutions and development. I interpret the findings of this body of work as if they were prescriptions for policy or institutional reform and question the validity and practicality of these interpretations