BACK in 2008 I wrote a piece where I suggest a framework for thinking about development called freedom diagnostics. The idea is that policy-makers can focus their efforts on those policies which give the greatest bang for the buck in terms of human capabilities (or as Amartya Sen calls them, freedoms). The way to do it is to focus on the interactions amongst these freedoms. At the time I was taking classes with Rodrik, Hausmann and Sen, so it was just natural for me to merge the idea of growth diagnostics with a more broader-based idea of what constitutes development. For the first post in this blog I will post that piece. Look forward to your comments.

ON THE NEED FOR FREEDOM DIAGNOSTICS

 A Tailored Approach to Economic Policy

Even before the global financial crisis, the failure of the one-size-fits-all approach to economic growth was already clear. The standard laundry-list policy prescriptions with neo-classical flavor (so called Washington consensus) had been discredited amongst development economists and growth diagnostics was slowly taking its place. The new approach not only promised to be more effective, but also came with a significant jump in modesty – it was full of humbling words such as ‘contingent’, ‘constraints’ and ‘priorities’. Today, growth diagnostics has gone mainstream and the crisis has forced even developed countries to accept ‘unconventional’ policies – the mantra now is a tailored approach.  

However, while recognizing the importance of a tailored approach, the growth diagnostics framework also rejected a nihilist attitude where ‘anything goes’. Although the right thing to do may change from country to country and from time to time, there is such a thing as ‘the right thing to do’: one must find and relax the binding constraint to growth. The implication of growth diagnostics is that a small concentrated effort can have a huge impact on the economy, allowing politically and administratively constrained policy-makers to focus their limited resources where they matter the most.