Noah Smith
· Noahpinion
· May 06, 2026 at 06:08
· ⏱ 18 min read
| Read on Substack ↗
Summary
Noah Smith argues that development economics is not ignoring big questions like industrialization; the field already produces extensive research on theories of growth, but testing them is inherently difficult due to limited historical data and methodological weaknesses. This means no actionable market insights for traders — the article is a meta-critique of academic economics, not a source of tradeable ideas.
•Jesús Fernández-Villaverde criticized development economics for focusing on RCTs instead of why South Korea got rich while Bolivia did not.
•Only about 19% of development economics papers include RCTs (Leight 2022), a modest share.
•There are at least ten major theories of development (institutions, geography, human capital, industrialism, culture, coordination failure, flying geese, economic liberalism, state capacity, national cohesion) each with active research programs.
•Cross-country regressions are fraught with endogeneity, limited observations, and comparability issues.
•Structural models are like toothbrushes — everyone has one but no one uses another's, and they rarely get rejected.
•Narrative history and micro-empirical work (e.g., Lane 2025 on South Korea's industrial policy) are useful but cannot definitively isolate causes of growth.
•The divergence between South Korea and Bolivia from 1960–2010 is a single historical event with many confounding factors.
•Humility is needed: development economists can inform policy but cannot provide a science of development.