Update: This post has generated a very interesting discussion in a different blog. See it here.
In the old days—that is, the 1950s and 1960s—development was about correcting market failures. Influenced by the “big push” theories of economists like Rosenstein-Rodan, post-war Keynesian economics and the apparent success of the Soviet Union, policymakers in developing countries saw the role of government as providing public goods (bridges, roads and ports), addressing externalities (protecting “infant industries”) and redistributing income to poor people (by, for instance, keeping food prices low). Donors supported these countries by financing some of the public goods—a bridge, say. Knowledge assistance consisted of helping to identify the market failure, and then designing the “optimal bridge”.