Tuesday, November 15, 2022

ADMINISTRATOR POWER: Good morning, everybody. Thanks to everyone for joining on this long awaited day. Thanks to all the colleagues from around USAID who are joining virtually, we don't get to see your faces here on the screen, but we know you're out there. And thanks, Isobel, for your personal dedication to the search that has brought us to this day, and for all the work you and so many are doing to strengthen our economics capabilities here at USAID.

And I’ll talk a little bit about a couple of the people you have mentioned. I want to welcome Nathaniel Goldberg, Senior Director of Sector Programs at Innovations for Poverty Action – there you are, ok great – the nonprofit Dean founded in graduate school. Welcome, too, Elijah Goldberg, who works here at USAID as an Economics Advisor, but who also co-founded ImpactMatters – a nonprofit for charitable investment – with Dean.

And then I really want to thank Pete Richards, as Isobel has, for having not only the vision – but the persistence – to chart a path forward for how to elevate economics at USAID, and for doing so much to recruit someone of Dean’s caliber to take on the Chief Economist role. Pete has been an incredibly creative and thoughtful leader at USAID, now for a long time, on all things economics, and he has been absolutely central to delivering on the vision that we have now refined for how we integrate economic thinking much more fundamentally here into the DNA of USAID. A lot of what he has been working on we aren’t yet in a position exactly to speak to in detail today, but as you start to see things being announced and unveiled – I guess you’d say – particularly as you start to see the impact on the field, I hope everybody will remember Pete’s central role in making that all happen. I could not be more grateful. When I had a deep dive with Pete and some of the agency economists about the reform path ahead, I found myself – and I think I did maybe, in fact, ask the question of – what made you stick it out? How did you soldier on through thick and thin? And I think Pete’s response was – the Agency needs economic thinking at the core of what we do. And the world needs the Agency to be stronger in these ways. And so that emphasis, Pete, that you’ve always brought on the real world impact of bringing more refined economic thinking – I could not be more grateful for it. And I know I speak for everybody here as well. Anastasia de Santos, who Isobel mentioned, thanks to her as well for her work on this economic reform agenda. Thanks to Adam Siegel, for his work coming in as a newcomer to the Agency with fresh eyes. And Adam, you did a great job again, finding the doers, the people who were absolutely determined to chart a new course. And so, all of you together have made an incredibly significant impact that's going to be felt at this agency – and out in the world by definition – for a long time to come.

I’d also like to thank Dean’s family, particularly Cindy, his wife, and Laura, his sister, who are here in the audience. Thank you for your lifetime of support of Dean and his work. Our families are the only reason we can fulfill these roles. And as someone who is married to somebody who is behaviorally inclined, Cindy, I sympathize. You know, you try to cook something you've cooked before and it's like, “I think there's some status quo bias at work here.” You think your kid may fare okay at his or her trial for the school play. “That's optimism bias.” There’s no escaping it, unfortunately. But we're all – those of us who married into the field – we’re all amateur behavior analysts at this point.

So, this is a really important day getting to swear-in Dean Karlan as USAID’s new Chief Economist. From his earliest days, according to his mother, Dean demonstrated two traits critical for any development economist – an obsession with numbers, and a kind heart. When he was two years old, he overheard a conversation concerning his grandmother who wanted to do something that seemed like it was going to be quite expensive. Dean, who was not yet talking, went into his bedroom and brought his grandmother his piggy bank.

That caregiving spirit only grew as Dean got older, rearing its head later in life when, as his peers were interning at large banks, Dean took an internship at a microfinance bank in El Salvador. While working to help local communities access credit, Dean was surprised to find that the organization couldn’t measure the effect of its work on the people it served. He felt that there was more to be done, not only for the institution in question, but also for the field.

That thought lingered with Dean, enough for him to shift his career intentions from finance to economics. Instead of hedge funds, Dean went on to pursue a graduate degree at University of Chicago; and a PhD at MIT, with a specific focus on testing the efficacy of the development work he had witnessed in the field.

Specifically, his focus on the use of the randomized controlled trial, something that had long been the gold standard in medical testing, but had not as readily been applied to the social sciences. These trials, now very well known as RCTs, break their subjects up into randomly assigned groups to measure a specific impact. One group receives a specific intervention – like a loan, a therapeutic, a specific piece of knowledge – while the other group, the control group, does not. You wait a while, then measure, and you start to build evidence as to what works and what doesn’t.

Do text messages that remind people about medical appointments drive up vaccination rates? Yes, it turns out they do. Can small grants convince the rural poor to migrate to city centers where jobs are plentiful between harvests? No, it turns out. Do small loans boost mental health? Mixed, we need more randomized control trials to know the answer to that last question.

Dean’s embrace of RCTs and his dissertation at MIT led him to found Innovations for Poverty Action, or IPA, a nonprofit organization that brings researchers and decision-makers together to empirically test development projects. Dean’s advisor, Chris Udry, remembers then-graduate student Dean asking him what he thought about pursuing the project. Chris suggested that Dean pursue tenure instead, but in Chris’ words, “thankfully, he ignored me.”

What is truly innovative about IPA and about Dean’s work, is that it helped revolutionize what development economists cared about. The field has been around since the early 20th century, but it dealt mainly with questions like, why were some countries rich and others poor? Why were some able to develop and become stable while others struggled? Big questions that invited grand theories. But modern development economics is more inclusive and focuses on applying insights to the actual work of development – the programs, projects, and interventions that are aiming to benefit the lives of people in the countries we serve. The goal is to hold development to a standard of impact – moving away from questions like “do people like this program” or “does it make people feel good” but instead, “does it achieve significant and sufficient impact?”

Through Dean and his colleagues’ work, IPA has shown that simple interventions informed by behavioral insights can transform outcomes in the field.

They showed that giving away free uniforms to schoolchildren in Kenya reduced absences by 43 percent. That mass school-based deworming programs not only massively benefited those who received treatment, but also benefited their neighbors and siblings who did not. That simply asking voters to promise not to sell their vote can help reduce vote-selling in elections.

In what most of the people we talked to claim to be his proudest work accomplishment, IPA has worked with over 600 academics to conduct over 900 evaluations in at least 52 countries – and become the gold standard for development evaluation at institutions throughout the world.

He also finds a way to bring some fun into his work. Or some work into his fun? I’m not sure. When the previous owners of Dean’s house told him that his block would get 800 to 1,000 trick-or-treaters a year, he immediately sensed that this was the perfect testing group. For years, hundreds of kids would line up in front of his house in an annual ritual, answering questions from grad students in order to get their candy.

One of those experiments led to a landmark study: “The Effect of Images of Michelle Obama’s Face on Trick-or-Treaters’ Dietary Choices.” When kids over the age of nine saw a poster of the then First Lady before reaching the front of the line, 38 percent of them chose fruit over candy. Talk about priming! Twice as many as those who saw a poster of Ann Romney. The First Lady told the kids, “Let’s Move.” Dean told them, “Let’s measure.”

Despite all the academic prowess, all those who know Dean speak as much to his character than his accomplishments. They say that he fosters a sense of purpose in his research labs. That he is a great leader because, in the words of one colleague, “not only is he one of the smartest people I know… but he is also committed by a moral compass.” That he works well no matter who he works with, from interns to Nobel laureates.

And despite his academic workload, Dean still finds ways to prioritize his family. His IPA colleagues vividly remember a hard and fast rule: that if IPA’s work was going to bring Dean around the world, then Dean would need to bring his family around the world. He’s gone on bicycling adventures around the globe with his son, Max. He treks, from Egypt to Namibia, on adventures with his two daughters, Maya and Gabi.

And now Dean’s travels bring him to USAID – and he couldn’t arrive at a more necessary time.

The pandemic led to a sharp global recession – the sharpest since World War II, badly damaging markets and economic prospects while significantly limiting the fiscal space of most countries. In more than 80 percent of developing economies, debt is now higher than it was before the 2008 financial crisis. And the debt complexion, and who holds the debt, is much different than what economists became used to dealing with, and what countries became used to dealing with. Amidst these headwinds, severe inflation has taken hold and rising borrowing costs and currency depreciations have many of our partner countries wondering how they can prosper, just as climate change wreaks increasing havoc.

Internally, here at USAID, as our economists can attest, we face our own headwinds. Over the past decade, the number of USAID economists we have out in the field has declined by 75 percent, to just seven economists in the field. We only have 20 on staff here with us in Washington, D.C. Of those economists who remain, we’ve heard concerns about declining opportunities, limited influence on key decisions, and the overall lack of impact that economic insights have on the direction of too many USAID programs and processes.

Into this breach, steps Dean, to serve as our principal economist and our top expert in economic policy and analysis. He’ll not only help us get ahead of changing market conditions, we hope he will guide us as we respond to economic shocks and emerging macroeconomic challenges.

He’ll also support our bureaus and missions to integrate the latest in behavioral insights and experimental design into our work. He’ll help us recruit and bring new economic and behavioral science expertise into the fold, and bolster USAID’s partnerships throughout the field. He’ll help us to challenge our assumptions about what works, and push us to improve how we see our impact and how we seek to achieve it, helping us deliver progress beyond simply our programs. And at every turn, he’ll make sure to ground our work in something “More than Good Intentions,” the title of one of his most noteworthy books.

Ultimately, that’s what we need to do here at USAID, and this is what Dean’s life has been committed to. We are excited to bring him on board as our Chief Economist, and to help our efforts be the best that they can be – to optimize.

With that, it’s my great privilege, my overdue privilege, to swear Dean Karlan in as USAID’s new Chief Economist.

DR. KARLAN: Hi everybody. Thank you, Samantha and Isobel, for the warm and really touching welcome. And I'm really impressed with the history that you were able to bring in – and stories. Thank you. And it's a real honor, and the trust implicit in me in taking on this role is daunting and inspiring. So, thank you. But, also thank you to everybody on Zoom – both listening now and hopefully, that I'll be working with in the future – for welcoming me here to USAID to help accomplish the things we set off to accomplish. I also want to thank Pete Richards, Anastasia de Santos, Adam Siegal, for doing everything you did to get us to this point – shepherding everything through to help build this office and make the welcome that you’ve made for me, so thank you very much.


My path here is full of serendipity and some persistence. When I was 22 years old – as Samantha referred to – I was two years out of college, and I was headed initially back to business school with the idea of doing something in entrepreneurship or quantitative finance – I didn't really know which. But I decided to defer for a bit and travel with a purpose, with my high school best friend. We started off looking for a human rights organization in Nicaragua – they had just finished a civil war – and this is something we were passionate about.

I care deeply about using economic analysis and tools to improve the world. I'll get there in a moment, but I'm actually far more passionate about respect for human rights. Human rights strike me as far less ambiguous – less about numbers, more about dignity and right and wrong. Economics is about numbers and arguments over point estimates – some theory – but arguments about numbers when properly done. And how excited can you be over 12 versus 8, right?

But we did not find a Nicaraguan human rights organization. What we did find was a USAID-funded microcredit organization in El Salvador and they needed software. And we were a couple of geeks, and we could do that. So, that's what we took off to do.

But what captured my attention, as Samantha referred to, was something not about my day job, something simple. Was it working? Were they helping the poor? But it was also other questions, other questions about operations. Why were they lending to groups rather than individuals? Why were they charging this interest rate? It was 70 percent a year – it was higher than I expected. There was no internet back then. And why were they making loans to women to start businesses or grow businesses without any entrepreneurship training, to clear a 70 percent hurdle rate to make it profitable? And yet here I was about to go to business school, and if I could learn in business school how to make 70 percent, I was going to clean up, right? So, something felt off. Why am I about to go spend all this money on business school and this program was not thinking about business training?

So, I asked about the evidence and impact that they had but there really was none. I didn't know what the path was at that point, but I felt strongly that there must be a better way. And that is when I switched my career path and focused on evidence of impact, evidence of what works and what does not. So, I went back to graduate school with a new goal to contribute to this evidence – to learn what's out there, and see how I can help build on it – about what works, what does not and why to help improve the lives of the poor. By amazing coincidence, today is the 20 year anniversary of the creation of Innovations for Poverty Action, the nonprofit I started upon finishing graduate school. IPA’s goal has always been twofold – to help generate more evidence, and help more evidence get into policy. Being asked to take on this honor, being Chief Economist at USAID, is a testament to the thousands of people at IPA, several of which are here today. Thank you very much. At our sister organization at MIT, the Jameel Poverty Action Lab (J-PAL), and our countless implementing and donor partners who have been integral in building this evidence community. On a personal note, it is a real thrill to have all of you – and Nathaniel Goldberg is actually the oldest serving IPA team member – so it's a real pleasure to have you here with me.

I've now spent most of my career repeatedly answering a very simple question – does it work? And then a slightly more complex question – why? The why is actually really critical for the job at hand here. It doesn't make any sense for USAID to measure the impact of every one of its programs – it's way too much data, way too much evidence gathering. We need to understand why something works and that's what gives evidence legs, that's what allows us to take lessons from one place and move them somewhere else and apply them.

But we have learned over the years that some interventions work really well, some okay, some not at all. And the why helps us understand which it’s going to be and make better predictions. Whether something works is uncorrelated with how clickbait-worthy it is. That's the reality. Sometimes something's really sexy, and it doesn't work. Sometimes something's really boring, and it does. Some of the most effective and important projects have to do with poop. It's hard to make that too clickbaity.


What are some of my goals and my guiding principles here? First, I plan to apply the first rule of applied behavioral economics. Sometimes people ask me, what is a nudge? What does that mean? You know, it's a layman term, but yet it's one that has taken over the space of applied behavioral economics. The definition of a nudge, as I like to copy, basically – I didn't create this term – is make it easy, make it easy for people to make the decision that they would want to make in a moment of deep reflection and full information. It's a loaded caveat, but that's what a nudge is. And that summarizes – make it easy. This applies not just to how programs are designed, but it also applies to how USAID runs. And this is the mantra that I want to take to my efforts to try to help get evidence into play. Let's make it easy for program officers to make decisions using evidence.

Second, my success is entirely dependent on others. I am here to amplify and empower the voices within the agency that strive for cost effectiveness. I've barely been here, yet I've already seen talent and passion in every corner. And I want to help harness that energy, focus on evidence of impact, analysis of costs, and help USAID worldwide choose the best programs it can, and improve its place in the world – both on the programs we fund, as well as the macro policies that we support.

Third, as large as we are, we are tiny. So, we have to be a leader. We have to be a leader in the development community, empowering local organizations through our localization agenda, empowering other donors, large and small, by leading through example, how to use evidence to make the world a better place, that comes through transparency and sharing.

Lastly, I care about improving programs, not about improving reports. If my office is ever adding paperwork – with no change in behavior – we have failed. So please let me know if you ever see that happening as that's not our goal. That's not what we want. In fact, we want to help do the opposite. If we see reports out there that are not changing any actions for people – that's called sludge, and we want to help remove that. So in our search for where we want to insert ourselves, we also want to help try to find those moments of sludge, that are reports that are being filed that don't change any actions, don't change any decisions.

Ultimately, my goal is a really dorky one – one that makes economists swoon. It's a more efficient use of resources. It may mean choosing different activities that make a bigger impact, or it may mean doing the same activity, but in a cheaper way enabling us to help more people. Either way, cost effectiveness improves and we as an Agency can do more good for more people.

So for those who know me well, you're actually pretty impressed that I was not folding in side notes throughout this. Usually there's a flooding of little side references throughout everything as I talk, and I actually stuck to my speech. I’m very happy about that.

To Samantha and Isobel and everybody else who has been instrumental here in helping to create this office and build this office and expand it. Thank you again for the honor and the trust in enlisting me to help you further this goal. To everybody in the Agency, I hope to hear from everybody, to see how we can do this. How can we accomplish this? I just hope it's not all at once. Thank you very much.

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