Sunday, September 16, 2007

Clinical Economics

Jeffrey Sachs' description of the developing world in terms of an economic development ladder is vivid. Through engaging stories, he shows the difference between Africans in Malawi who have not a toehold on the development ladder and Bangladesh women and young Chinese professionals who are, with their countries, on the ladder and on their way to escaping poverty hopefully forever.

Early in The End of Poverty, Sachs then relates the key paradigm shift that he made and which he professes for understanding and eradicating poverty: clinical economics. His wife is a pediatrician and no doubt his observance of her skill and practice of solving late-night emergencies has helped him to develop his concept of clinical practice applied to developing country economics. Sachs took four lessons from clinical medicine: (1) the human body is a complex system, (2) complexity requires a differential diagnosis, (3)all medicine is family medicine and (4) monitoring and evaluation are essential. Just like the human body, a country's economy is a complex system and diagnosing it requires more than looking at a severe budget deficit and runaway inflation (the two symptoms of Bolivia's problems when Sachs first got involved in development consulting back in the mid-1980s). The diagnosis for Bolivia, for example, required an understanding of its economy in terms of geography (it is land-locked), its political and social systems and the fact that its primary exports have been high-dollar value per weight items such as tin which were necessary to overcome the high costs of transporting it to ports from the high Andes. If you're browsing a bookstore and come across this book, don't forget to look at the table on page 84 entitled "Checklist for Making a Differential Diagnosis." Pretty comprehensive. Sachs is one of the main players in the Millenium Development Goals, a UN initiative to eradicate extreme poverty and improve the health of people around the world.

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