IAD on A-i-d

This post is by Claudia Williamson, a post-doctoral fellow at DRI.

In The Samaritan’s Dilemma: The Political Economy of Development Aid, Elinor Ostrom and other members of the Workshop in Political Theory and Policy Analysis at Indiana University apply Ostrom’s Nobel Prize-winning Institutional Analysis and Development (IAD) theoretical framework to development aid, specifically examining Sweden’s development agency, SIDA.

The IAD framework begins by analyzing the local context governing individual decision-making and scales up this analysis to include all types of rules that provide various incentive structures. This model presents the process of development as a series of collective action problems, analyzing the incentives for the provision of public goods and managing common pool resources.

Applying IAD to aid means that donors must first consider why there are development failures to begin with before they can accurately access whether intervention is an appropriate solution. This means investigating the underlying institutional arrangements structuring the incentives that produce collective action failures. If donors do not address these fundamental institutional failures, then any aid program is unlikely to be sustainable. Most donors pay lip service to these insights, but Ostrom and her colleagues find that their concern for the problems they entail is more rhetoric than reality.

The IAD framework views aid as a nested game, not a chain of delivery, between a variety of actors across different countries – including donor and recipient governments, contractors, civil society, NGOs, etc. These interrelationships create the incentive structure that will ultimately determine the likelihood of success from foreign intervention; therefore, the sustainability of a project and the achievement of long run development goals depends on the complex structure of incentives faced by all actors involved.

Given how complicated of a task this can become – e.g., dealing with the presence of multiple donors, special interest groups, the addition of new rules introduced by donors, and the possibility of corruption- it’s no wonder that donors may not be able to achieve their stated ends. In fact, donors often face perverse incentives that hinder sustainability and project success.

The title ‘The Samaritan’s Dilemma’ stems from an article by James Buchanan (more on which here), another Nobel Laureate. Buchanan explains how donors’ willingness to be charitable incentivizes recipients to alter their behavior in counterproductive ways. Recipients may, for example, reduce the amount of resources they themselves devote to the problem at hand. The original problem worsens and donors feel even more compelled to continue support, establishing a cycle of interventionism and reducing the chances of sustainability.

Ostrom’s approach to understanding development is to shift our focus towards the underlying incentives surrounding collection action problems. The traditional solution to such problems is central planning and government regulation, including the use of foreign aid. Ostrom argues, however, that expanding centralized bureaucracies is often counterproductive and may create additional unintended consequences. Instead, we should focus on individuals at the local level who are better equipped to develop solutions that are responsive to the complex local conditions generating these problems in the first place.