Recently, I had the opportunity to attend a conference in Lahore, Pakistan, sponsored by the International Growth Centre, where Shahbaz Sharif, the Chief Minister of Punjab province, delivered the keynote address. While the event provided a platform for stimulating discussions and networking, it also shed light on the prevailing state of the development economics profession – a state that left many questions posed by the Chief Minister unanswered.

During his address, the Chief Minister posed fundamental questions that have traditionally been at the core of economic analysis. These questions revolved around critical issues such as resource allocation: “Should I invest more in transport, infrastructure, law and order, social services, or elsewhere? And where will the funding come from?” These queries, central to the realm of economics, were unfortunately not adequately addressed during the conference discussions on “evidence-based” policymaking.

The predominant focus of the conference seemed to be on isolated policy interventions, devoid of broader market context and oblivious to the concept of opportunity cost. While analyses delved into the efficacy of specific policy tweaks, they failed to consider the trade-offs involved and neglected to assess whether alternative interventions might yield greater benefits. For instance, while improving a public food distribution system may seem beneficial, it remains unclear whether the substantial investment required is justified compared to alternative measures such as enhancing education or infrastructure.

What was conspicuously absent from the discussions was a consideration of opportunity cost – the concept central to economic decision-making. Policymakers must evaluate not only whether a particular intervention works but also whether it represents the most efficient allocation of resources. Moreover, the incidence and efficiency loss of taxation, particularly its impact on vulnerable populations, were overlooked, highlighting a critical gap in policy analysis.

In assessing the efficacy of interventions, policymakers must compare alternatives and prioritize interventions based on their overall impact and cost-effectiveness. Yet, the conference discussions failed to address this imperative, focusing instead on isolated interventions without considering their broader implications or trade-offs.

Furthermore, the conference showcased research projects that measured effects without adequately assessing their externalities or considering whether the interventions addressed genuine market failures. For instance, studies on packaging for export or leather cutting patterns seemed disconnected from broader economic dynamics and failed to address whether competitive forces in the economy might render these interventions redundant.

My own advocacy for sanitation investment stemmed from a comparative analysis of public goods provision versus publicly provided healthcare, grounded in the distinction between rival and excludable services. However, the conference discussions largely neglected such nuanced analyses, overlooking the fundamental concept of opportunity cost and the necessity of comparing alternative interventions.

Regarding tax collection, while enhancing revenue mobilization is crucial for funding public services, the conference discussions on tax-farming experiments failed to consider the long-term equilibrium of the labor market and the potential pitfalls of incentivizing tax collection without addressing systemic issues.

In conclusion, the conference highlighted significant deficiencies in the current state of development economics, particularly in addressing fundamental questions of resource allocation and opportunity cost. Moving forward, policymakers and researchers must prioritize rigorous comparative analyses and consider broader market dynamics to ensure that interventions are both effective and efficient. Only then can we truly address the pressing challenges facing nations like Pakistan and make meaningful strides towards sustainable development.