By Barry Jagoda

Jim Rauch is celebrating his 20th anniversary in the Department of Economics, and if there is a single thread that runs through his work, it is bringing human qualities to the otherwise impersonal marketplace of neoclassical economics. This can best be seen in his 2001 book, Networks and Markets, in which Rauch studies the role of people who know each other, often in a non-economic context, and how these relationships affect economic activity. His widely cited paper on "human capital externalities" in cities also puts

In recent months, as part of sabbatical study at the American University of Beirut, Rauch presented findings that take issue with the Arab Human Development Reports published by the United Nations.

Rauch disagrees with these influential documents on the state of development in the Arab world on two levels: "Do you look at improvement, or do you simply make a straight comparison with the levels of other countries? As someone trained to deal with development, I think you should look at improvement. That's a philosophical difference," he said. "Second, as a social scientist, I know that you can’t just pick indicators out of the air to prove your point."

The UN writers suggest Arab economies are stuck but Rauch, thinking that there has been considerable progress in the Arab world, constructed his own analysis.

In an article published in the San Diego Union-Tribune, Rauch concludes that "on average, Arab regimes have performed better than other countries at raising the education, health and incomes of their citizens and vastly better than the European colonial regimes that preceded them."

Challenging accepted beliefs is a Rauch pattern. He and his siblings were enrolled in a model integrated school district in the 1960’s in suburban New York and, after high academic accomplishment at Princeton, he sought a liberal, diverse outlook for graduate school at Yale, which he says "was known as a heterodox place where people were not toeing the mainstream line."

Asked if he has a certain "missionary orientation" to development economics – to feed the hungry, eradicate poverty – Rauch said, "I did when I was in graduate school and over my life I’ve kind of moved back and forth. As an assistant professor maybe I was just concerned about keeping my job. Then I did my first book [Leading Issues in Economic Development] and the book on networks and that made me a better known scholar. Now, with the work on Arab development, and on a couple of other projects, I have returned to areas of passion."

Rauch points out that the field has changed in recent years. A graduate student is more likely to be encouraged to evaluate a small project that shows specific costs and benefits. Earlier, one might have written a large-scale growth model and suggested that if countries just followed your plan they would prosper. "The dominant signal the profession is giving young people is that you should write papers with a scope that is small enough for you to crunch the numbers accurately," Rauch said.

But Rauch is at work on a growth model of his own. He had been wondering if successful export firms in less developed countries started out as strong companies or if they became successful because of their work as exporters. In new research, Rauch finds that firms already producing quality products are the successful exporters, mainly because they need to expand their marketplace beyond their own borders to find enough customers.

People also continue to be a focus for Rauch. Working with economists and sociologists, under a grant from the Russell Sage Foundation, he is writing and editing a book called Formation and Decay of Economic Networks. To be published late in 2006, the book shows that recognizing the role of interpersonal networks changes thinking about public policy.