The growing disappointment and disillusionment with aid effectiveness also led to the quest for rigorous impact evaluation of development projects and programs. This has generated a new approach to development led by economists at the MIT Poverty Lab, whose goal is “to reduce poverty by ensuring that policy is based on scientific evidence” through the use of randomized control trials (RCT) or social experiments. Although RCT are good tools for understanding the effectiveness of some specific micro projects, they often do not start from a clear strategic assessment of how a particular method would fit the knowledge gaps of highest priority (Ravallion 2009a). All too often, research looks for topics “under the light.” The positive outcomes for policy making are more often the occasional by-products of research than its objective from the outset.

Recent micro-empirical studies may have indeed shed light on some important problems, such as the impact of the investment climate on firm performance (World Bank 2005a) or household behavior on productivity (Rosenzweig and Wolpin 1985). But, “there is a risk the bulk of presentday research in development economics appears to be too narrowly focused and/or of too little generalizability to help much in the fight against poverty and to facilitate structural change and sustained growth.” (Ravallion 2009b) Although the chronicle of economic development in the past half-century has often been one of disappointments, there are also a few success stories that deserve a closer look. The contrast in economic strategies and performance among Asian countries – both during the 1950s to the 1970s and during the transition of the 1980s and 1990s – has been intriguing to economists. On the one hand, countries in Latin America, Africa, Eastern Europe and Asia that followed the prevailing structuralist theories in formulating their policies often failed to change their economic structures and narrow the gap between them and the industrial countries. Import substitution policies that were intended to promote industrialization by protecting domestic producers from the competition of imports became the source of high tariffs, quotas or restrictions on foreign trade, and distortions, rent-seeking and economic inefficiencies.

On the other hand, newly industrialized economies, such as Japan and the four East Asian dragons (Korea, Singapore, Taiwan, Hong Kong), adopted export-oriented strategies, instead of an importsubstitution strategy. Starting from a low agrarian foundation, they were able to climb quickly the industrial ladder and achieve convergence with respect to the structure and income level of advanced industrialized countries by the 1980s. Likewise, from an inward-looking, state administrated economy, China, Vietnam, and Mauritius achieved rapid and sustained growth by adopting a gradual transition approach to a market economy in the 1980s and 1990s, instead of the “shock therapy,” prescribed in the free market-Washington Consensus framework and followed by developing countries in Eastern Europe, the former Soviet Union, and many other developing countries. In all these successful cases, the market was the fundamental mechanism for resource allocation as predicted by _laissez faire,_ rational expectations theories, and the Washington Consensus. However, the state also played an active role in the development and transition process as the Keynesian theories and structuralist approach to development had envisioned.

11