We think the experiment was a success. We’ve had a great time blogging here. Thank you all for reading and writing back, and to our wonderful guest bloggers, for helping to make Aid Watch a source for way-outside-the-Beltway commentary on aid. Your response continues to exceed our expectations.

Some of you may be surprised. This was not a sudden decision; we have been talking it over with a few others for some time now.

The simple reason for ending the blog is that we want to free up our own time for writing longer and more substantive pieces, both academic and non-academic, on development.

The blog is a hungry mouth that always wants to be fed, and the longer projects we’d like to take on don’t fit in with those constraints.

Economists are professionally trained to be wary of diminishing returns to any one activity, and to be entrepreneurial about starting new activities. Although we’ll still write about aid, we plan to move away from aid criticism as our main focus, and put more emphasis on the high-stakes development debates going on now. We still believe that more aid will reach the poor the more people are watching aid, but, as we’ve always known, there’s a lot more to development than aid.

Fortunately for us all, there are many other good blogs on aid and development that have sprung up since we started Aid Watch, from smart establishment blogs like Development Impact at the World Bank, to lonely aid workers blogging from Malawi (check the sidebar for our recommendations).

The blog will stay at its current web address, and all the archives will remain available and searchable. Check for updates on our work at the DRI web site.

Signing off for now,

Bill and Laura

Bill switched from childhood Methodist to adult Episcopalian in an attempt to boost income. Did that likely work?

Barro and McCleary 2006 argue the relationship goes from income to religiosity (as measured by church attendance, personal prayer, and belief in hell and the afterlife). At least for the Protestant denominations, the ones on the left mostly feature more religiosity in these senses than the ones on the right.

Barro and McCleary analysed the relationship going the other way also, and found that Belief in Hell raised your economic growth potential.

Another study found that college students who believed in a vengeful, angry God were less likely to cheat on a test than those who believed in a kindly, forgiving God. And of course we know from other literature that trustworthy behavior is associated with more opportunities to trade, and thus more prosperity.

A different twist than the Protestant Ethic: Scared Rich?

Last week the World Bank issued a announced an upcoming event called Random Hacks of Kindness. Tech developers will gather at locations around the world to try to “create open solutions that can save lives and alleviate suffering.” Random Hacks of Kindness began in 2009 as a partnership between the World Bank, Google, Microsoft, Yahoo!, and NASA. Its goal is to “produce practical open source solutions to development problems” by bringing together development experts and software developers.

Initiatives like Random Hacks of Kindness, one example of the wider push to use information and communication technologies (ICTs) to solve development problems, have produced useful tools; for instance the SMS service that helped people communicate with family and friends after earthquakes in Haiti and Chile. But billing efforts like these as capable of producing “solutions to development problems” is misguided at best. This level of hype brought to mind recent overpromising headlines, like: “IT can meet Africa’s Millennium Development Goals” and ”Nations Call for ICTs to Tackle Disease.”

After reading about Random Hacks of Kindness, I asked UC Berkeley ICT for development expert Kentaro Toyama what he thought about them. Toyama responded:

Anyone imagining that a day or two of hacking will produce solutions to development problems, even in some small part, is either a technologist drunk on her own self-image who believes that she’ll solve a mindboggling social challenge with technology, or a World Bank officer drunk on his own self-image who believes that he’ll solve a mindboggling social challenge by motivating some technologists. In any case, it seems clear they are the kind of folks who don’t learn from history.

We should be wary of being distracted by technologies that can solve some direct problems but will never be able to solve underlying development problems. If an app gives a mother access to maternal health information, but she doesn’t have access to basic healthcare, how much good will it do her?

Toyama, who blogs humorously as the ICT4D Jester, was more optimistic about the initiative’s ability to build capacity of programmers in developing countries:

[T]o the extent that these events generate excitement around the ability to develop software in developing countries, they are fantastic…Among the things that make a country “developed” is its intrinsic capacity to create, adapt, and master technology.

Similarly, much of what makes a country “developed” is an emergent system that permits and promotes problem solving.

To paraphrase and adapt a point made previously on this blog: Direct solutions to problems (say, aid programs that use ICTs to locate disaster survivors) may be worthwhile as benefiting a lot of people. But a long list of many such solutions is not development. Development is the gradual emergence of a problem-solving system.

No one really believes that there’s an app for development, but we sometimes seem to talk like there is. We should keep sober our expectations about what ICTs can and cannot accomplish, because getting drunk on techno-hype is sure to cloud our understanding of underlying development issues — like why certain places lack the problem-solving systems that afford mothers access to basic healthcare.

With DSK handcuffed in the back, who will take the IMF driver's seat?

According to unwritten agreement, the IMF has always been headed by a European, just as the president of the World Bank has always been American.

Some (mainly Europeans, funnily enough) argue that the IMF needs a European leader now more than ever, because the biggest issues the IMF currently faces are in the eurozone  rather than in the developing world. Possibilities named include French Finance Minister Christine Lagarde, Italian Central Bank head Mario Draghi.

Others, like Felix Salmon, argue it’s time for a change.  After all, when he was chosen in 2007  DSK himself said that his appointment would be the last time a European automatically got the nod.  ”Voice and representation of most countries in a changing world have to be better taken into account by the board, but also by the staff,” he said, “as well as by management.”

Owen Barder calls for the selection to be open, transparent, and merit-based (in contrast to the back-room deals that usually cinch the nomination.) This would open the field to contenders like Turkish former UNDP head Kemal Dervis and South African politician Trevor Manuel.

Meanwhile, the Freakonomics blog attempts to rescue the reputation of economists the world over by reminding us that morality and occupational choice are not highly correlated.

Postscript from Bill 8:30am Tuesday: Did the IMF get it wrong in 2008? Disturbing story in NYT this morning about the previous DSK sex scandal of an affair with a subordinate:

Aid Watch has complained before about shaky social science analysis or shaky numbers published in medical journals, which were then featured in major news stories. We questioned creative data on stillbirths, a study on health aid, and another on maternal mortality.

Just this week, yet another medical journal article got headlines for giving us the number of women raped in the DR Congo (standard headline: a rape a minute). The study applied country-wide a 2007 estimate of the rate of sexual violence in a small sample (of unknown and undiscussed bias). It did this using female  population by province and age-cohort  — in a country whose last census was in 1984. (Also see Jina Moore on this study.)

We are starting to wonder, why does dubious social science keep showing up in medical journals?

The medical journals may not have as much capacity to catch flaws in social science as in medicine. They may desire to advocate for more action on tragic social problems. The news media understably assume the medical journals ARE vetting the research.

We could go on and on with examples. The British Medical Journal published a study of mortality of age cohorts in five year bands for both men and women from birth to age 95 for 126 countries—an improbably detailed dataset. (The article was searching through all the age groups to see if any group’s mortality was related to income inequality.).  Malaria Journal published a study of nationwide decreases in malaria deaths in Rwanda and Ethiopia, except that the study itself admitted that its methods were not reliable to measure nationwide decreases  (a small caveat left out later when Bill and Melinda Gates cited the study as progress of their malaria efforts).

The Lancet published a study that tested an “Intervention with Microfinance for AIDS and Gender Equity (IMAGE)” in order  “to assess a structural intervention that combined a microfinance programme with a gender and HIV training curriculum.” The conclusion: “This study provides encouraging evidence that a combined microfinance and training intervention can have health and social benefits.” This was a low bar for “encouraging:” only 3 out of the 31 statistical tests run in the paper demonstrate any effects – when 1 out of every 20 independent tests of this kind show an effect by pure chance. (The Lancet was also the culprit in a couple of the links in the first paragraph.) Economics journals are hardly foolproof, but it’s hard to imagine research like this getting published in them.

Medical journals would presumably not tolerate shaky medical science in the name of advocacy; why in social science? We also care about rape, and stillbirths, and dying in childbirth. That’s why we also care about the quality of social science applied to these tragic problems.

Postscript: we are grateful to Anne Case and Angus Deaton for suggestions and comments on this article, while not attributing to them any of the views expressed here.

Before anyone on this list gets too much of a swollen head, note that everyone after the top 4 got between 5 and 10 votes out of 299 professors surveyed (there was another group at 4 votes, including a certain J. S*chs). There also seems to be a sheer name recognition effect over-representing economists that show up in the news media, kind of the same way that Donald Trump was leading in the Republican nomination polls recently.

Do more guns cause more violence?

The experiment:

We exploit a natural experiment induced by the 2004 expiration of the U.S. federal assault weapons ban to examine how the subsequent exogenous increase in gun supply affected violence in Mexico. The expiration relaxed the permissiveness of gun sales in border states such as Texas and Arizona, but not California, which retained a pre-existing state-level ban.

The results:

Using data from mortality statistics and criminal prosecutions over 2002-2006, we show that homicides, gun-related homicides and gun-related crimes increased differentially in Mexican municipios located closer to Texas and Arizona ports of entry, relative to those nearer California ports.

Gun-related Homicides in Municipalities Bordering California versus Other Border States

Our estimates suggest that the U.S. policy change caused at least 158 additional deaths each year in the post-2004 period. Gun seizures also increase differentially, and solely for the gun category that includes assault weapons. The results are robust to controls for drug trafficking, policing, unauthorized immigration, and economic conditions in U.S. border ports, as well as drug interdiction efforts, trends by income and education, and military and legal enforcement efforts in Mexican municipios.

The conclusion:

Our findings suggest that U.S. gun laws have exerted an unanticipated spillover on gun supply in Mexico, and this increase in gun supply has contributed to rising violence south of the border.

From a paper presented by Oeindrila Dube at NYU’s Development Seminar, with Arindrajit Dube and Omar Garcia-Ponce.

Rhetoric on “aid effectiveness” keeps escalating, is there anything to show for it?

The past (almost) two years, Bill and I have been collecting data, combing through that data, and refining the numbers to ‘grade’ aid agencies and assess overall trends in aid practices. We waited until our paper passed peer review to release our findings. Rhetoric versus Reality: The Best and Worst of Aid Agency Practices has now been accepted for publication in a special issue of World Development. [1]

Our work updated Easterly and Pfutze’s 2008 study, Where Does the Money Go: Best and Worst Practices in Foreign Aid, on five dimensions of agency ‘best practices’: aid transparency, minimal overhead costs, aid specialization, delivery to more effective channels, and selectivity of recipient countries based on poverty and good government.  Based on these measures, we calculate an overall agency score using original data and 2008 OECD data. These scores only reflect the above practices; they are NOT a measure of whether the agency’s aid is effective at achieving good results.

There is slight improvement in transparency and more donors are moving away from ineffective channels. But transparency is still at unacceptably low levels. For example, two agencies (MOFA Japan and France’s DgCiD) fail to report any aid data at all.

The most conspicuous failures in both trends and levels are in specialization and selectivity. Luxembourg is as unspecialized as the US with a 70^th of the aid flow. Many such unspecialized small donors likely have most of their aid eaten up by fixed costs before the funds reach any beneficiaries. At the same time, allocation to corrupt countries is increasing, not decreasing. Aid to corrupt autocrats is not explained by emphasis on the least developed countries; donors such as the US, Sweden, and Norway do poorly on both income selectivity and autocracy/corruption selectivity.

The best bilateral agency is UK’s Department for International Development (DFID).

DFID is one of ten agencies that fully reports aid flows to OECD, and it lists number of staff, administrative costs, salaries and benefits and its ODA budget on its website. DFID also has relatively low administrative costs and salaries and benefits relative to aid disbursements (2.6% and 1.6% respectively). DFID relies on more effective channels of aid disbursements, not tying any of its aid and dispersing relatively little food aid (1.3%) (pages 53-54).

Japan, New Zealand, and Germany also do well, rounding out the top five best agencies.  The United States ranks below average mainly because of poor performance on selectivity and choosing to allocate aid through ineffective channels. As we write in the paper, “the foreign policy needs of the US superpower and the lobbies for particular aid channels seem to dominate the politics of American aid” (page 54).

Another theme that emerged is that the Scandinavian countries’ reputation of altruism based on aid volume does NOT translate to good practices; they have below average scores on specialization and transparency and are mediocre in the overall ranking.

Lastly, the UN agencies on average are worse than the other multilateral agencies and the bilateral agencies, and the differences are statistically significant. Above all, they are worse on overhead and transparency. On overhead, they have an average ratio of 46 percent of administrative costs to ODA. UNDP reports no data on its operating costs or ODA, now even worse than its minimal reporting in 2008.

The two goals of the paper were to test if: 1) donors’ rhetoric matches reality; and 2) they are making any improvements in doing so. Our answer is no on both accounts.

Postscript: Fortunately, we are now part of a larger community running independent checks on aid. For other recent aid quality exercises, see Birdsall and Kharas, 2010; Knack, Rogers and Eubank, 2010; and Ghosh and Kharas, 2011.

FOOTNOTES
1. The dataset for the paper can be downloaded here↑

I finally read the World Bank’s 2011 World Development Report, Conflict, Security, and Development. It shed new light on an earlier discussion I had by email with World Bank Media Chief David Theis last month, which I reproduce here, and then I add a new letter I just sent to Mr. Theis.

To World Bank Media Chief David Theis, April 7, 2011

David, I noticed that President Zoellick’s speech yesterday on the Arab Democratic Spring did not actually mention the word “democracy” … The omission is quite startling given the topic, so I was wondering: is there a legal prohibition (such as from the articles of agreement) that prohibits the President from overtly using the word “democracy”? Bill

From World Bank Media Chief David Theis, April 8, 2011

Hi, Bill. Since you worked at the World Bank for 16 years, you probably know that our Articles of Agreement say that the Bank, which is owned by 187 member countries, “….shall not interfere in the political affairs of any member; nor shall they be influenced in their decisions by the political character of the member or members concerned.”

Here’s a link to the Articles, if you need a refresher: http://go.worldbank.org/0FICOZQLQ0

Thanks very much,

David

New letter yesterday

To World Bank Media Chief David Theis, May 9, 2011

Dear David,

I have finally had a chance to read the 2011 World Development Report (WDR) on Conflict, Security, and Development. On p. 188, it says:

“ External forces can …begin to restore confidence … They can also deploy troops to provide physical security guarantees against a relapse.”

On p. 192, it talks again about the idea for external forces “to deploy peacekeeping operations to confront violence in a timely manner.”

Thanks for the refresher in your April 8 letter on the restriction that the World Bank “not interfere in the political affairs of any member.”

And thanks for explaining that any descriptive use of the word “democracy” on Arab revolts by President Zoellick would be such an interference in political affairs of a member state.

I was just wondering if you would consider a deployment of outside military troops to be less of an interference than using the descriptive word “democracy”?

Thanks for any clarification you can provide.

All the best. Bill

Mr. Theis kindly said he would check with the WDR team and get back to me.

F.A. Hayek continues to be the most mis-characterized economist of all time.  As if Glenn Beck were not doing enough damage, now even someone I greatly respect — Frank Fukuyama– has gotten Hayek wrong yet again. In a review of a new edition of the Constitution of Liberty in the NYT book review, Fukuyama says at the end:

In the end, there is a deep contradiction in Hayek’s thought. His great insight is that individual human beings muddle along, making progress by planning, experimenting, trying, failing and trying again. They never have as much clarity about the future as they think they do. But Hayek somehow knows with great certainty that when governments, as opposed to individuals, engage in a similar process of innovation and discovery, they will fail. He insists that the dividing line between state and society must be drawn according to a strict abstract principle rather than through empirical adaptation. In so doing, he proves himself to be far more of a hubristic Cartesian than a true Hayekian.

To say Hayek’s skepticism about government was based on “great certainty” is not just wrong, it is so much the opposite of  Hayek, it’s like accusing Michele Bachmann of excessive belief in the Koran.

Hayek’s view of knowledge was that it was partial and dispersed among many. The market gave individuals the incentives to apply this knowledge, and coordinated the uses of this local knowledge in a way that rewards each of us who knows best about any particular narrow area. (Frank notes this insight in an earlier paragraph, which makes the paragraph above even more puzzling.)  Government usually lacks both the incentives and the coordination mechanism. In government we don’t know who knows best, so which knowledge wins the argument could often be wrong.

This does NOT imply the caricature that Hayek always opposed government action. As Fukuyama notes:

It may, however, surprise some of Hayek’s new followers to learn that “The Constitution of Liberty” argues that the government may need to provide health insurance and even make it ­compulsory.

A government based on individual liberty will have some feedback and reward mechanisms that would produce better government outcomes in such areas than under tyrannical outcomes, and will make possible some kinds of government innovation and discovery that Fukuyama likes. But the political feedback mechanisms even under liberty (like majority voting, protesting, freedom of speech, or lobbying) are much cruder and less likely to align individual and social payoffs than the market feedback mechanisms, so one should be cautious about the scope of activities in which government programs will be effective.  One should be particularly wary of large-scale government plans that require a type of centralized knowledge that Hayek argued forcefully does not exist (down with Robert Moses, up with Jane Jacobs!)

To sum up,  Hayek’s skepticism about government was NOT based on his certainty, as Fukuyama would have it,  but on his awareness of his ignorance. (and everyone else’s)

Us public intellectuals who are communicating ideas of Hayek to a broader public are NOT fond of ideas that highlight our own ignorance, so one prediction that can be made with a higher degree of certainty than usual is that Hayek will continue to be misunderstood.

UPDATE 3:30pm 5/9/11: Links to other reactions to Fukuyama: Pete Boettke, Don Boudreaux, David Boaz, Don Boudreaux again with more, and, intriguingly, Hayek himself. (HT to Knowledge Problem for bringing them all together.)