Economics with a Social Face

• Author: Conny Lotze
• Position: Interviews development economist Nora Lustig, long-time advocate of employing social policies in the battle against poverty

Economics, long known as the dismal science, usually examines issues with clinical detachment. But Nora Lustig has spent her career trying to give it a conscience. She has been in the vanguard of development economists who not only insisted on the link between poverty reduction and macroeconomic policy but also advocated well-targeted social policies to help the poor break out of poverty for good. For a long time, "there was a sense that poverty reduction had to be done through growth, which seemed to imply that policy measures that aimed directly at poverty reduction weren't as important," she tells F&D. "But I think that we have shown that both are very important. If you want to reduce poverty more quickly with growth, you need policies that have a very profound impact on equalizing opportunities in many respects."

Lustig's curiosity about the causes of inequality and poverty and her drive to find solutions have been at the core of her work, which she has undertaken in academia, think tanks, and as an advisor to policymakers. Meticulous in her use of empirical data, she is credited with injecting a somber and scientific note into the often ideologically charged development debate in Latin America. "Lustig is unusual in that she is one of the few academics who has managed to be involved in both Latin American policy work, particularly in Mexico, and the Washington academic and multilateral organization world," says Andres Velasco, Professor for International Finance and Development at Harvard. "She brought perspective to the latter and rigor and discipline to the former." Lustig relentlessly pushed to include analysis of the effects of such factors as income distribution, education, and health care in the debate on overall economic development, which was dominated by macroeconomic concerns. She broke ground in 1999 with the concept of "socially responsible macroeconomics"-a call for policies that protect the poor during times of crisis and simultaneously help lower chronic poverty.

After the emerging market crises of the 1990s, the message sunk in, and multilateral agencies and developed countries realized that the process of eradicating poverty and achieving sustained development had to involve the poor as active participants. "It has to do with human behavior, and with the need to empower the poor to gain access to economic development," Lustig explains. Poverty reduction now tops the world's economic agenda. Just 15 years ago, Lustig points out, poverty was not even peripherally discussed at the Group of Seven industrial country summits. Now, in contrast, the world's economic movers and shakers are actively exploring innovative ways to aid poor people-such as investing in early childhood development, educating women, and promoting microfinance-all topics dear to Lustig's heart.

Yearning to question

Born in 1951 in Buenos Aires, Lustig was the child of Austrian immigrants who had fled anti-Semitism in pre-World War II Europe. Although her parents worked hard, her father as a watchmaker and her mother as a bookkeeper, they found it difficult to break out of the lower-middle-class mold, given Argentina's economic instability in the 1960s. That, coupled with latent anti-Semitism, prompted the family to move to the United States in the late 1960s, settling in the San Francisco Bay area. Lustig enrolled in Oakland's Merritt Junior College, a primarily African-American community college famous for being the birthplace of the Black Panther movement. After qualifying for in-state tuition, she transferred to the University of California at Berkeley, where she obtained her Bachelor's and Ph.D. in economics. During Lustig's first years, Berkeley and other university campuses in the United States were gripped by student protest against the Vietnam war and support for the civil rights struggle.

But political activism was not her calling. Instead Lustig focused on examining the economic disparities within and across countries through academic research. Her thesis advisor, Albert Fishlow, now at Columbia University, recalls that "her principal focus was always on having an empirical basis for economic policy. She wanted to have the facts." In her dissertation, she used empirical verification to test hypotheses by Latin American...