10 reach the same conclusion with perfectly rational individuals.<sup>11</sup> In the end this calls for the use of judgement and intuition in deciding what assumptions we should rely on.

The World Bank has been increasingly engaged in this difficult area. Given the drift of global concerns, we did not have a choice. This naturally leads to another related field beyond the narrow confines of economics, that is, institutions and governance.<sup>12</sup> Our _World Development Report_ on _Governance and the Law_ , which is currently a work‐in‐progress, takes on this challenging task.<sup>13</sup> One important arena of policy making, a big task faced by those at the helm of policy, is the control of corruption. Traditional economics treated an act of corruption, whether to pay a bribe to get an illegal electricity connection or not, on par with whether to buy an apple or not—an exercise in narrow cost‐benefit analysis (see Bardhan 1997; Mishra 2006). It is not surprising that we have been so singularly unsuccessful in controlling corruption. To understand this phenomenon it is important to bring in psychology and political institutions. Development policy cannot be built on economics alone.<sup>14</sup> Finally, one area in which we have knowledge gaps but not as much as conservative commentators make out, is the connection between climate change and development. If we proceed the way we have done thus far, it is a journey headlong into disaster. This is unfortunate because awareness of the connection between environmental resources and economic development came early, as evidenced in the works of Thomas Malthus, David Ricardo, Knut Wicksell, and others, even though we have been tardy in terms of action and policy. In recent times, the importance of this has been stressed by several authors, notably by Stern (2007, 2015). Now, with the Paris Agreement, 2015, there is a platform to relate what we know on the subject with action on the ground, which is not easy since it entails some cross‐country coordination. It 11 For an ingenuous exercise in this, see Myerson (2004). Behavior, which at first sight seems so obviously driven by an irrational adherence to norms, can be explained as rational behavior in a more complex setting. 12 The importance of this field is stressed by Bourguignon (2015) in analyzing the African experience. As he stresses, this is much more than an academic exercise. It is germane to the design of successful policy interventions.

13 The challenge of this task is captured well in the short essay by Green (2016), which points to the necessity of delving into this arena if we want to do economic policy right, and to how hard it is to do so both because it ruffles feathers and is intellectually such treacherous terrain. Academic research, taking on governance and political institutions, with the sharp scalpel of analysis, is still relatively rare; but see Dixit (2009) and Acemoglu and Robinson (2012).

14 While here I give the example of corruption to illustrate the need for multiple disciplines, the need is quite ubiquitous in today’s world of strife and conflict. An excellent example is the Middle East. It is difficult to explain what is happening there purely in terms of economic indices, from gross domestic product through poverty to various measures of inequality and polarization. As Devarajan and Mottaghi (2016) argue, what is happening, in essence, is a breakdown of a social contract, which, like plumbing, goes unnoticed when it functions well, but is always important. One can go further and look at areas that seem squarely situated in the domain of economic problems, such as the subject of poverty and inequality mitigation, which is central to the World Bank’s work. Is it enough to rely on market forces and natural economic growth? Careful, econometric studies of countries that have been most successful in this, such as Brazil, show that we have to go beyond these. Ferreira, Ravallion, and Leite (2010), for instance, find hard evidence that changing social security practices and expansion in social assistance expenditure by the federal government was critical and, in fact, in turn, happened because of the 1988 Constitution.