Making aid work

An important article from Abhit Vinayak Banerjee describes what happened when a group of economists tried to get aid organisations to spend a few minutes saying where their help was going after the 2005 earthquake in northern Pakistan. The economists wanted to make sure the aid was going to the right people.

All that was needed was an office or Web site to which everyone could report the names and locations of the villages where they had sent aid and the amounts sent. … So, with the help of some contacts in the IT industry and some students at Lahore University, they designed a simple form and approached donors with a simple request: whenever you send out a consignment, please fill out one of these. There were paper copies available as well as a Web-based form and a call center. The reaction, when it was not actually hostile, tended to be derisive: “Are you mad? You to want us to spend time filling out forms when people are dying? We need to go and go fast.” Go where? the economists wanted to ask. But nobody seemed to care.

In many ways this episode captures very well one of the core problems with delivering aid: institutional laziness. Here many of the standard problems were not an issue: the donors and the intermediaries were both genuinely trying to help.

As Banerjee points out, this episode is symptomatic of aid programmes. I would argue also that it is typical of all programs run by government agencies. There is simply no incentive to be efficient.  One result:

Primary education, and particularly the question of how to get more children to attend primary school, provides a fine test case because a number of the standard strategies have been subject to randomized evaluations. The cheapest strategy for getting children to spend more time in school, by some distance, turns out to be giving them deworming medicine so that they are sick less often. The cost, by this method, of getting one more child to attend primary school for a year is $3.25. The most expensive strategy among those that are frequently recommended (for example by the World Bank, which also recommends deworming) is a conditional cash-transfer program, such as Progresa in Mexico, where the mother gets extra welfare payments if her children go to school. This costs about $6,000 per additional child per year, mainly because most of the mothers who benefit from it would have sent their children to school even if there were no such incentive. This is a difference of more than 1,800 times.

Banerjee is optimistic that two of disciplines applying to, for example, the pharmaceutical drugs industry can help. These are randomised trials (where possible), and using evidence to support funding decisions. Indeed, as he says, a number of the larger philanthropic organisations are now basing their decisions on evidence.

As I believe, it’s not just aid. There are few incentives for any government agency or policymaker to get things right for any but the most publicity-rich short-term initiative. There are two main reasons. First, given the complexity of our society the relationships between any particular policy or programme and an actual outcome are difficult to identify. Second, there are no incentives for anybody to identify such relationships. Politicians and officials aren’t paid according to how objective criteria. Government organisations don’t benefit if they become more efficient – often the reverse is true and they are disbanded if their ostensible reason for existing is actually achieved.

What we have seen in aid, less obviously tragic perhaps, we see in the western countries too: the persistence of corrupt, environmentally disastrous policies, such as the mad farm support schemes that have just recently derailed the Doha round of trade talks, threatening the entire world trading system.