The Indirect Approach

Abstract

Aid and conditionalities are the carrots and sticks of the conventional direct approach to fostering economic development. Considering the outcomes of the conventional approach, it might be worthwhile to explore alternative indirect approaches that focus on enabling clients to act more autonomously, rather than try for fuller control of clients' actions with improved carrots and sticks.

Aid and conditionalities are the carrots and sticks of the conventional direct approach to fostering economic development. The economic theory of agency is the most sophisticated treatment of the direct carrots-and-sticks approach to influencing human behavior.

Considering the outcomes of the conventional approach, it might be worthwhile to explore alternative indirect approaches that focus on enabling clients to act more autonomously, rather than try for fuller control of clients' actions (or agents' behaviors) with improved carrots and sticks.

Are there inherent limitations in the direct approach that will not be addressed with better crafted agency contracts or closer monitoring of the agents?

Ellerman traces the intellectual history of indirect approaches from Socrates to modern thinkers such as Wittgenstein, Gandhi, and McGregor.

One theme of his survey is that constructivist and active-learning pedagogies constitute an indirect approach in which the teacher does not directly transmit knowledge to the learner through training and instruction. These pedagogies - translated into social and economic development as learning writ large - form the basis for an alternative indirect approach to fostering development.

Actions have motives just as beliefs have grounds, concludes Ellerman. In the wide spectrum of human endeavor, there is only a fairly small bandwidth in which motives can be supplied by the carrots and sticks of the direct approach (including agency theory and market-driven activities as special cases of the direct approach to affecting behavior). Outside that spectrum, trying to use direct methods in a controlling manner contradicts the motives for actions (and the grounds for beliefs) - like trying to buy love.

For higher activities, motives must come from within. Helpers can at best use an indirect approach to bring doers to the threshold; the doers have to do the rest, which makes the results their own.

This paper - a product of the Office of the Senior Vice President and Chief Economist, Development Economics - is part of a larger effort in the Bank to rethink the role of conditionalities in development assistance. The author may be contacted at [e-mail].