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Latin America’s Reform Priorities

SAN JOSE, COSTA RICA -- We seldom acknowledge that lack of knowledge – ignorance, if you like – impairs the spending decisions of policymakers and international aid organizations. Yet their priorities are often set in an ad hoc way with little regard for achieving the largest welfare gains possible.

Recently, a rare attempt was made to improve the quality of decision-making in Latin America and the Caribbean. The Consulta de San José in Costa Rica asked a group of leading economic experts to rank solutions to the biggest challenges facing the region. For the first time, all the costs and benefits of more than 40 different policy options were laid out side-by-side. The results were eye-opening.

Over three days, experts heard evidence about the region’s biggest challenges. It became clear that politicians often make decisions based on limited knowledge. They put money into unproven policy initiatives.

There is no clear evidence, for example, that shows how we can actually improve the quality of education in schools. A program to provide teachers with monetary incentives and professional training was recently established in Mexico, but research shows no significant impact on educational outcomes.