In the Boston Review, Abhijit Vinayak Banerjee analyzes why development economics has done such a poor job of prescribing growth policies.
Excerpt: "Since about the 1950s, the norm in economics has been to start from a specific model—a specific set of assumptions about how people make decisions, how technology works, and how markets behave—and to derive, based on mathematical and quasi-mathematical reasoning, predictions about what would happen in a world defined by the model. This has the obvious and immense advantage of making it possible to give some categorical and irrefutable answers to economists’ framing questions, if only within the model’s circumscribed world. For example, one can actually prove that free trade works, or that monetary policy does not, at least under a particular set of assumptions. Moreover, anyone with a little bit of algebra and patience can play the game of setting up a model—often by tweaking some assumption in someone else’s model and deriving new results. One does not need to be a Marx or a Keynes to have something useful to say about the great questions of the time.
Thanks to this approach, the last 50 years have been halcyon days for economists. We have learned a lot about different models, and the process of working them out has revealed many pieces of general economic logic that lurk behind them. Yet it is not clear that this process has taken us much closer to answering the basic questions about the economic machine."