ABSTRACT
One can rationally assume that all countries want to achieve a decent standard of living for their people through improved material well-being. However, nearly seventy years after the conclusion of World War II, when the plight of the poor was brought to the forefront, and economists, policy makers, and rich countries leaped forward with solutions, many countries still have high rates of poverty. The gap between rich and poor has widened in many countries. Growth remedies-–scores of them-–have failed. Even as recently as 1999, nearly two-thirds of the world’s population lived in countries where the average income was about one-tenth of the level in the United States. William Easterly (2002) referred to economists’ endeavors to solve the poverty puzzle as an “elusive quest.” According to him, this quest has remained elusive because of the failure to apply economic principles to practical policy work. Timothy Yeager (1999) argues that the main reason behind failed growth experiments is not the lack of well-functioning markets (along with the absence of excessive government regulations), which has traditionally been offered as the cure to the problem, but the absence of a correct institutional framework.
