Looking for novel solutions to public policy problems? You could check the high-end think tanks in the U.S. or Britain, maybe research from the Fed, or perhaps Sweden's Central Bank or the elite Sciences Po in Paris.
Then, again, you might want to follow a path truly less traveled. While the world has long been accustomed to looking to the mature industrialized countries for models in economic policy, they don't have a monopoly on good ideas. Smaller, less affluent countries that would ordinarily slip under the radar can serve as laboratories for innovation. Indeed, states that are modest in size, newly independent, far from the influence of the big global players, or emerging from devastating wars (choose one or more) often find it easier to obtain sufficient political consensus to institute radical reforms.
Here are a few that come to mind:
Education Incentives. Universal public education pays dividends in myriad ways ranging from raising economic productivity to creating a more sophisticated electorate. But it exacts costs on families, especially in countries where child labor is a fact of life. And it often pits the will and interests of parents who do not value education against the interests of their children.
Hence, the logic of Mexico's pioneering conditional cash transfer program in 1998 (originally called Progresa), in which welfare benefits to the poor are conditioned on their children's school attendance. Note two bonuses here. First, getting the kids to school gives the state some control over the living standards of children who might otherwise be abused and/or malnourished. Second, it allows for controlled experiments to find out which anti-poverty policies work in developing countries and which don't, fostering a very productive field in development economics. Brazil has since adopted a similar program -- as have a long list of countries as diverse as Jamaica, Nicaragua and Zambia. The Progresa approach has even inspired reforms in New York City, which makes cash awards to families in return for regular school attendance and participation in parent-teacher conferences.
Buffering Export Cycles. Prices of commodities ranging from oil to gold to cocoa are highly volatile, putting countries that depend heavily on export earnings in a bind. When prices are high and government revenues are plentiful, political leaders face pressure to spend the money. This, in turn, feeds demand just when fiscal stimulus is least welcome, often generating inflation.
Then, when commodity prices fall, the process reverses. Politicians must find ways to retrench or accept the consequences of budget deficits. And retrenchment reduces demand just when the economy needs it.
Chile, which must cope with broad swings in the price of it copper exports, created rules in 2000 for smoothing the impact of the commodity cycle that largely depoliticize the process. The government may run deficits if the economy slips below the targeted growth rates or the price of copper falls below its long-term trend. Equally to the point, the government automatically accumulates surpluses during booms that cool down the economy and create a trust fund that can be used to stimulate the economy when it again heads south.