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Who gets the Last Seat on the Plane? Why Aid Hates Economics

Not long ago, I was returning home from a trip when the airline bumped me from my flight due to overbooking. The airline rep was very sympathetic, but I didn’t want her sympathy, I wanted A Seat On the Plane. She had traded off my wishes against those of other passengers, and I lost.

Economists are unpopular because we say there is always SOME resource that is overbooked in aid, and aid is Forced to Choose: who is going to get the Last Seat on the Plane?

Politicians and advocates try to argue their way out of the Scarcity and Tradeoffs, using one or another of these proven strategies:

(1)   There really is no scarcity

This is Sachs’ central argument for more money in aid –you should never be forced to choose who should live and who should die, so you should always ask for more aid money. This has been effective as advocacy, but still doesn’t make aid money an infinite resource – there is still a limit on how much rich people will give. And the scarce resource is not only money – it is also political capital, rich peoples’ attention, or effective and accountable aid workers in the field. So using AIDS as an example, sure you should do some of both treatment and prevention – but how much of each? In the end, they are still competing for limited Seats on the Plane.

(2)   Our project doesn’t use any scarce resources

This argument is usually made by omission. The Millennium Villages don’t advertise that they are dependent on one extremely scarce resource — Western experts — perhaps it would then become obvious that they are neither scalable nor sustainable. And of course there is a big tradeoff between the Millennium Villages and better projects you could do with this scarce Western expertise. A better project replaces the scarce foreign expertise very soon with more abundant local expertise and labor – such as training programs to transmit foreign technical skills to locals, who will in turn pass it on to other locals.

(3)   My cause actually is the same as your cause

Advocates of one cause often argue many other causes NEED their cause. If the necessity is absolute, then indeed the tradeoff disappears. If it is less than 100 percent absolute, there is still a tradeoff. Hey, Other Passenger who took my seat: don’t claim that You are so Important that it’s pointless for Me to get on a plane without You! Unless You are the Pilot.

In summary, there really is scarcity and aid really is forced to make intelligent choices. Be sure to give a seat to the pilot.

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14 Comments

  1. Or in other words: Why We Can’t Have It All.

    Posted February 8, 2010 at 9:12 am | Permalink
  2. Ted H wrote:

    Bill, I think part of the whole aid drive, particularly with celebrities, is to get more people to donate more money so trade-offs don’t exists. I suppose in theory it’s possible to avoid trade-offs, but I don’t think it’s possible in practice.

    In terms of AIDs prevention versus AIDs treatment, if I assume I can’t have both entirely, I’d lean more towards AIDs prevention and education. You can’t solve the problem of AIDs if your primary goal is to just treat AIDs, you need prevention via education to prevent AIDs (unless someone manages to come up with a vaccine). I’m a bit uncomfortable with saying that less money should go to treatment and more to prevention, again working off the assumption there is a trade-off, because I don’t want people to suffer; but, on the whole, there is more benefit from preventative education in the long-run than concentrating on treatment.

    Posted February 8, 2010 at 10:15 am | Permalink
  3. Matthew wrote:

    (Bit off topic) Reading the synopsis of a report entitled “Rethinking Poverty” made me wonder how the Aidwatch blog might respond. Comments?

    The Report makes a compelling case for rethinking poverty and poverty-reduction efforts, saying that over-reliance on market forces and economic liberalization have led to neglect of nationally designed and developmentally-oriented strategies, to the detriment of the world’s poor. The most important lesson, according is that governments need to play a developmental role, integrating economic and social policies that support inclusive output and employment growth, while attacking inequality and promoting justice.

    Posted February 8, 2010 at 11:41 am | Permalink
  4. Matthew wrote:

    That paragraph is quoted from the synopsis of the report (not my words). Guess I chose the wrong markup for a quote.

    Posted February 8, 2010 at 11:43 am | Permalink
  5. The basic idea of opportunity cost is that the cost of spending resources on Plan A is the value foregone by not spending the same resources on the best available Plan B. Yet so many economists in the Dev Biz forget this basic idea when they support the notion of an “impact evaluation” which compares the results of spending the scarce resources on Plan A such as Millennium Villages to doing nothing (as if the resources were not scarce) rather than spending the same resources on the best available Plan B. But the development bureaucracies love impact evaluations as the ultimate low hurdle because then their projects only need to be “better than nothing” to get a positive evaluation. But rather than consider this basic economic blunder, could we please more time discussing the details of using randomized testing in the impact evaluations?

    Posted February 8, 2010 at 12:00 pm | Permalink
  6. David Roodman wrote:

    The irony: you can thank economist Julian Simon for the overbooking system, which he designed to use scarce resources (airplane seats) more efficiently.

    Posted February 8, 2010 at 1:18 pm | Permalink
  7. peripheries wrote:

    @Ted: Unfortunately there is little evidence that “education” works againts AIDS. William Easterly does brush the issue in the white man’s burden (with an example about diarrhea), but there are evidences from clinical trials showing that despite being in a trial where you get free condoms, intense counselling and so on, overall the HIV incidence is hardly lower than that of the general population of the same area.

    Posted February 8, 2010 at 3:46 pm | Permalink
  8. Kasper wrote:

    “In summary, there really is scarcity and aid really is forced to make intelligent choices. Be sure to give a seat to the pilot.”

    Very well, but who gets to choose who the pilot is, then?

    Posted February 8, 2010 at 9:18 pm | Permalink
  9. Skeptic wrote:

    RE: Matthew H and the UN report…

    Just reading your quote, it seems to me that you – and probably the UN as well – are confusing two issues. One is how a government should manage its own resources and policies. The other is how a government, organization or individuals should help poor or otherwise disadvantaged people in another country. I would probably agree with whats in your quote when it comes to, for example, US regulation of the financial sector. But on the international side, foreign assistance does great damage to the poor because by definition it is NEVER market driven, and almost always strengths the individuals and institutions in the state and government that are the source of the problems in the first place.

    Posted February 9, 2010 at 1:57 am | Permalink
  10. Matthew wrote:

    @Skeptic

    Yeah, sort of.

    I blithely quoted from the report’s synopsis because it felt like Aidwatch bait. However, given that the report is largely focused on the impact of government policy within a country (certainly it is when criticizing over-reliance on market forces as per my quote) I’m probably missing the mark for *Aid*watch.

    It’s an interesting report nonetheless and does seek to crystallize some issues around foreign Aid. Perhaps I should have quoted it’s answer to the question “Can aid ease fiscal constraints?” from p 94. Not much bait for debate in that little section but certainly more relevant here :)

    Posted February 9, 2010 at 5:39 am | Permalink
  11. ” A better project replaces the scarce foreign expertise very soon with more abundant local expertise and labor – such as training programs to transmit foreign technical skills to locals, who will in turn pass it on to other locals.”

    Even better, though, is when technology renders the scarce expertise unnecessary: 10 year ago building a website required scarce expertise in HTML programming. Now it requires 5 minutes at Facebook.com or similar sites. 10 years ago reaching an audience of millions required ownership of a television or radio station, or printing presses. Now you just need a blog, or a twitter account.

    Similarly, our EpiSurveyor.org website allows anyone to create mobile-phone-based data collection systems immediately, for free — a capacity that is otherwise entirely dependent on scarce and expensive experts.

    Posted February 10, 2010 at 9:32 pm | Permalink
  12. Karen W wrote:

    In response to 2)
    I worked for Millennium Villages for 3 years and have a lot of criticisms and insights as to why they may not be “sustainable” or scalable. However, I do not believe that this particular criticism is valid. The Millennium Villages project does as much as possible to train and build technical skills in locals and integrate with local governance structures (village council, local and state government, nearby medical facilities, other UNDP projects). This is a direct result of the stated goals of the project and the beliefs of MVP management in using and building local talent. For example, locals are used at every level in a variety of positions such as project management, health care workers, and database managers. During my time at MVP, I held training sessions with many of the local staff, who I then relied upon to train other locals.

    Posted February 10, 2010 at 9:55 pm | Permalink
  13. fundamentalist wrote:

    Can someone tell me why China doesn’t play a more important role in the analysis of economic development techniques? China today is a walking talking miracle! In the 1960’s, Chinese were starving to death and eating each other. The US kept them alive with massive loans to buy our grain. Then just 30 years ago things changed.

    China is the greatest economic development story in the history of mankind! It seems to me that if people were truly interested in the poor, they would have armies of economics examining every detail of China’s miracle. Yet it seems that development economists are stuck in Africa squabbling over failed aid programs and tiny, tiny ideas.

    Posted February 16, 2010 at 1:25 pm | Permalink
  14. Bill Stepp wrote:

    This has been effective as advocacy, but still doesn’t make aid money an infinite resource – there is still a limit on how much rich people will give. And the scarce resource is not only money – it is also political capital, rich peoples’ attention, or effective and accountable aid workers in the field. So using AIDS as an example, sure you should do some of both treatment and prevention – but how much of each? In the end, they are still competing for limited Seats on the Plane.
    ——
    Aid money isn’t given freely, it’s stolen money that is then given. (Taxation is theft.) But private money is given freely; it’s not aid in the sense that other people’s money stolen by the government is.
    You should make this distinction.
    “The Government’s” money, bad; the Gates Foundation’s money, good.

    Posted February 18, 2010 at 10:40 pm | Permalink

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  • About Aid Watch

    The Aid Watch blog is a project of New York University's Development Research Institute (DRI). This blog is principally written by William Easterly, author of "The Elusive Quest for Growth: Economists' Adventures and Misadventures in the Tropics" and "The White Man's Burden: Why the West's Efforts to Aid the Rest Have Done So Much Ill and So Little Good," and Professor of Economics at NYU. It is co-written by Laura Freschi and by occasional guest bloggers. Our work is based on the idea that more aid will reach the poor the more people are watching aid.

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