I had a lunch with my boss a long,long time ago at the World Bank Research Department to discuss my research. He listened impatiently to my description of my various research papers and finally burst out, “yes, but what would you tell the Finance Minister to do tomorrow?” I got asked this question what seemed like thousands of times while I was at the Bank. It’s still at the heart of the Bank’s approach to development today, shared by many others.
It is fairly simple to calculate the following:
(This equation is partly inspired by a different equation that Pete Klenow suggested for the value of economics research in the Brookings volume “What Works in Development: Thinking Big and Thinking Small”)
All these probabilities are likely to be low. Multiplied together, the overall probability of my advice paying off is pathetically, infinitesimally low.
If my boss forced me to answer me that question, today I would say to the Finance Minister: “Disregard us World Bank experts. You already know that principles of economics help solve economic problems. You already know you should be democratically accountable to your own citizens. You’ll muddle through.”
I didn’t yet have the courage or wisdom to give that answer at that lunch long ago, so my Bank research department career lasted a while longer after that.