Over the last century, the policy options available have tended to focus on what I call An outcome-policy focuses on manipulating the levers of government – taxes, expenditures, regulations, systems of implementation – to achieve certain outcomes.
Hence the slew of papers from the 1990s on the positive effects of women’s education and social capital on growth.7Welfare is measured through either an income metric or consumption metric.
This has spawned a large industry measuring individual- and household-level income and consumption through household surveys, which are then used to calculate poverty rates via a poverty line defined in terms of dollars and cents.
While I will draw on experiences and evidence from the developing world, these points may be of broader relevance.
The manner in which we translate the desire to create a more equal world with less poverty into action is shaped by how we organize and think about the world, how we approach causality, and how we make abstract ideas legible by methods of measurement and categorization.
The idea is that free markets result in high rates of economic growth, while electoral democracy ensures that governments are held accountable and create the conditions for growth.2 This approach underlies the “Washington consensus” that prevailed in the development policy world through the 1980s and 1990s and that over the long term, recent evidence has shown, has led to higher rates of growth.3The neoliberal approach to poverty reduction argues that maximizing economic growth and improving and equalizing access to human capital allows every individual to benefit from the growth and be liberated from poverty.
There is some evidence in favor of this,4 There is also strong reason to believe that neoliberal policies increase inequality and reduce social support, for instance, by creating “opportunity markets” that commodify and sharply restrict access to basic needs such as education and housing.6The driving discipline behind neoliberalism is rational-choice economics, which provides a consistent framework to think about growth, welfare, poverty, and equality of opportunity.Process matters not just for diagnosing the causes of inequality, but also for how policy is shaped.The dominant paradigms for policy-making — neoliberalism, neo-Keynesianism, and neopaternalism — largely address inequality via “outcome-policies” that manipulate the levers of government and, more recently, draw on randomized trials and “nudges” to change behavior, in a manner that is not only easy to measure, but also easy to reverse.Several important themes emerge from this lens: 1) the interaction between economic, social, and cultural processes in generating inequality and the centrality of the need for interdisciplinary analysis; 2) four approaches through which inequality-generating processes might work – evaluation, quantification, commodification, and policy drift; 3) the linkages between micro-, meso-, and macrolevels of analysis; and 4) the importance, in thinking of inequality-generating processes, of taking a Moreover, they are based on an analysis of conditions in North America and Western Europe, where the concern is much more on the shift, over the last few decades, from equality-generating to inequality-generating processes.This is different from the conditions in countries that are home to most of the world’s poor, whose rise in inequality has been coupled with large reductions in poverty and relative expansions of social safety nets over the last two decades.It is much more cognizant of market failure and convinced of the ability of the social sciences to inform policy solutions that deal with market failure.With policies informed by growth models that emphasize investments in physical and human capital, growth is still a priority, but with an awareness of the central role played by ideas and information.They are also easy to shifting the process of decision-making in favor of the less privileged, and on the incremental change of one step building on the last.The full impact of a process-policy generally takes a much longer time to reveal itself but can be longer-lasting because it reduces the inequalities and imperfections in how decisions are made.There is acute awareness of the inability of markets to deliver basic services to the poor and of systemic discrimination.Poverty is still a welfarist metric, but along with data on income and consumption, household surveys now collect data on gender, religion, race, and caste to enable analyses of discrimination.