Abstract: Learning from Experience: The Diverging Views of Albert Hirschman and the World Bank on the Birth of Project Appraisal

Michele Alacevich

Abstract

For an institution engaged in development finance such as the World Bank, project evaluation is a fundamental activity. Yet, such a function was conceptualized by the Bank only in the 1960s and became operational only in the early 1970s, more than twenty-five years after the Bank was created. Why this fundamental development occurred only then, and how it occurred, is the subject of this paper. After the early foundational phase of development economics, when "high theories" were center stage, examining what contributed to the success or failure of specific projects became increasingly important in order to draw general conclusions on how to best design development policies. Albert Hirschman, who had been a pioneer of development economics in the early 1950s, was also a pioneer of project appraisal in the 1960s. He joined the World Bank to theorize project evaluation. However, early enthusiasms soon waned, and the ideas of Hirschman and the Bank were increasingly at variance. While Hirschman underscored the intrinsically uncertain nature of the knowledge derived from project appraisal, many World Bank officers argued that acknowledging uncertainty was of no help in decision-making and operational effectiveness. Those early tensions influenced the subsequent development of project appraisal at the World Bank and other international institutions. This, in turn, has repercussions on the type of knowledge that development institutions generate, preserve, and share with other development actors.