Friday, July 10, 2009

A white mans burden

Those that follow the blog Aid Watch won't be too surprised by most of the points presented in a paper in the newest JEL by Bill Easterly, Can the West Save Africa? Its definitely worth a read though. The paper presents Easterly's normal lists of why aid is a waste, but also has a number of additional interesting points.

Easterly sees two major strands of thought in development: the transformative approach, which he believes has had limited impact and suffers from a lack of learning, and the marginal approach, which he sees as having had some impact on individual lives.

He does of course admit that measuring the impact of transformational programs is a more difficult problem than measuring marginal programs. This is an important point: the best we can do with transformational programs is a cross-country regression, which presents serious causality problems. This is the point of doing randomized trials, which is a reason why marginal programs are getting more attention these days.

My favorite part of the paper is table 2, where Easterly argues against the hyperbole around Africa by presenting the “four horseman of the apocalypse”. Life is difficult in Africa, but it's not as bad as many have claimed.

I appreciated his criticisms of randomized evaluation (RE), most notably the preference of NGOs, and researchers, to focus on programs expected to perform well. I think this is a very important problem, though it does not invalidate the RE approach as it means the untested programs will (eventually, hopefully) fall out of favor and be discarded. This is the problem with the marginal approach to development: it moves slowly.

I disagree with Easterly on his depiction of poverty traps though. This is a topic on my mind recently, and my gut feeling right now is that it is very complicated. Easterly presents it as an excuse for the pro-aid crowd, but it also has an important place in the help people to help themselves argument. Savings traps are real, in Africa and in the US, and a major solution is to assist people in finding affordable alternatives.

I also disagree with this statement:
It would be hard to argue that Africa’s development problem is missing technical knowledge, as some transformational approaches claim, when some of that knowledge has already been around for 70 years. For example, why is there still malnutrition in Africa due to lack of vitamin A, when this problem and its solution has been well known for 70 years?
This is a strange argument to make, especially since it is no secret that, in the past and still today, African nations lag behind the rest of the world in technology adoption, mostly from a lack of capacity to use technology. Perhaps I am missing Easterly's point here.

Oh, and another paper in the same journal, Psychology and Economics: Evidence from the Field, does a good job of presenting recent experimental economics work. Despite our hopes, people are fairly irrational in their actions.

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