Lant Pritchett, Professor at Harvard’s Kennedy School for Government, argues that the aid industry deserves credit for these reforms and the associated huge improvement in human well-being, but not quite in the way you might expect.

It wasn’t that the World Bank and the IMF required India to make those reforms through conditionality. Instead, Pritchett says, it was the existence of a broad, international movement called “Development,” and an industry called “Aid” that created the conditions for Indian leaders to act as they did.

How so? First, many policy makers involved in India’s reforms spent their early careers working abroad for multilaterals, gaining exposure to ideas not prevalent in India at the time, and gaining experience watching these ideas either work or crash and burn in countries around the world.

Second, the aid industry funds the thousands upon thousands of obscure, detailed economics papers and studies that make up the knowledge base of the movement called Development. Without the painstaking work behind those studies, the movement of Development would never have a chance at producing those rare, brilliant insights with the power to transform hundreds of millions of lives.

To produce those fortuitous moments of brilliance, where the right policy meets the right person and the right opportunity, the movement called Development has to have the depth and breadth within it to produce detailed technical knowledge on a million different topics from tariff codes in India, to migrant remittances in Spain, to firm governance in Korea. Here’s where the piano recital part comes in:

I see the aid industry a lot like a piano recital. It’s kind of boring and it’s tedious and most of the people are wasting their time. But every now and again by God we make a difference and when we do make a difference it really transforms economies and lives for a very long time….

Any movement, be it development or classical music, has to maintain its core.  Music has thousands of young aspiring pianists performing bad recitals that no one but their parents want to hear, all for the purpose of producing just one virtuoso Vladimir Horowitz or one innovative Philip Glass. Aid projects that can’t demonstrate impact and economics papers read by an audience of ten are the development movement’s equivalent of a million and one timid and dissonant renditions of Für Elise performed in student piano recitals the world over. But they are the core that allows for the possibility of “transformational excellence” in a movement.

For Pritchett, what aid does best is to “form the base of the pyramid that creates the possibility of the top.” And the power of successes in development—the rare policy insight, or the competent handling of a potentially disastrous crisis—is so great, and has the power to transform so many lives, that those successes justify the existence of the whole flawed movement, many times over.

Agreements or counter-arguments, anyone?

You can watch Lant Pritchett’s full presentation from the 2010 DRI annual conference, in which he argues this case much more skillfully (and employing other entertaining metaphors), in the audio slideshow below. The audio file of the Q&A following the talk is also posted.

From the always dependable Amanda Taub at the indispensable blog Wronging Rights., which usually wins the weirdest story award in this corner of the blogosphere.

Michael Clemens

Why a Careful Evaluation of the Millennium Villages is Not Optional

UPDATE (3/20, 8:16am) Chris Blattman adds his take on this.

 This is of course assuming that you like this blog (if you don’t, then I DO deserve all the blame).

 What I really want to do here is to give well-deserved and long overdue credit to my fellow blogger, Development Research Institute Associate Director Laura Freschi. She has sole-authored many of the biggest hits here on the blog, including pieces on Do Millennium Villages Work? and History Matters.  The piece on Haiti Earthquake Relief  was our 3^rd most popular ever, and it was done while I was on vacation. She has co-authored many pieces with me in which she more than carried her share of the load. Behind the scenes, she manages the blog, ran the Best and Worst contest, does a lot of research, finds great guest contributors, and exerts her street smarts and good judgment to restrain Yours Truly from some ill-considered posts. 

Yet despite all this, I have often gotten comments (usually favorable) on her posts that are attributed to ME as if I had written them. During the big critical discussion on the Aid Watch blog that we had last week, all the praise and blame was aimed at me alone (again the attribution of blame was correct, but not the praise). Admittedly, this discussion was partly about my personal tone, but Laura’s important role in the Aid Watch blog overall was overlooked. (And even on my personal tone, I would have been in even more trouble with some of you critics if she had not been a restraining and balancing influence).

Maybe I have been acting in some way that hogs all the attention, but if so, I want to correct that now. Please get over the leader bias on this blog, this blog too is a small spontaneous order in which everyone is contributing – and so here I say, thank you, Laura.

Oh wait, the British were the ones who gave us the ideas of comparative advantage & gains from specialization & trade in the first place!

These thoughts were prompted by a Greg Mankiw blog that advised potential Econ Ph.D.  students where to go to school based on rankings of economics departments. One of the rankings was global, which allowed you to see where in the world are the best economics departments. I knew of course that the US does well in Economics Graduate Programs (we are only good at two things, the other being Hollywood movies, so please don’t begrudge us this). The UK itself is a bit shrunken from its former Economics self but still does well, but I was struck particularly how well Canada and Australia do (see picture). Hence, almost 90 percent of the best economics departments in the world are in just four places, all of which were settled by the British if they are not actually British.

Adam Smith’s descendants cast a long shadow….

Then there are those who swoop in to adopt children before their extended families have had time to locate them; or just show up to ‘help’ as an unskilled volunteer, adding to the confusion and occupying jobs that could go to locals. And there will always be organizations around to capitalize on those uninformed good intentions.

But now there is a small but growing chorus of voices dedicated to equipping individual donors with information on how to help effectively in a crisis. This movement has the power to harness the generosity of individuals, change ingrained giving practices, and create positive pressure on NGOs and aid agencies to demonstrate the impact of their work.

That’s why the award for Best in Aid goes to…the Smart Giving movement, nominated by Saundra Schimmelpfennig of the blog Good Intentions are Not Enough.

This year, a week after the Haiti quake, Stephanie Strom of the New York Times wrote a story on the “unprecedented effort” to teach Americans to resist the impulse to send the wrong goods to Haiti.  Many advocated just sending something very much needed and which has a low transport cost to value ratio: cash. The advice to send cash “appears to be reaching a tipping point,” wrote Strom. Some Americans saw first-hand the piles of unneeded clothing donations in the aftermath of Katrina, or heard about aid distribution problems after the Asian tsunami. Now, people are hearing the message from politicians and policy makers spreading the word on Smart Giving to Haiti in real time, in time to prevent mistakes that cause unnecessary suffering and tragedy.

Contrast Strom’s story with the high profile stories that have appeared consistently since the current surge in interest in global poverty started earlier this decade, like this NYT headline:

Coverage of both global poverty and disasters always stressed the same thing: how much was needed in TOTAL donations. It was never about the danger of the WRONG donations. Today it is.

Saundra Schimmelpfennig herself appeared in the NYT article, and many other news sources (among them CNN, NPR, USA Today, Canada’s CBC radio, WNYC, The Daily Beast, The San Francisco Chronicle, and the Christian news magazine World) sought her advice on everything from the dangers of adoption in the immediate aftermath of a disaster, to how to evaluate disaster relief volunteer opportunities. Here on Aid Watch, guest blogger Alanna Shaikh’s post on how not to help in Haiti, called Nobody wants your old shoes, became one of the blog’s second most popular and most-widely circulated piece ever (the first was a satire, which we’re no longer allowed to talk about).

The campaign against relying on overhead ratio as a measure of charity effectiveness is also part of the good giving message. In collaboration with six other nonprofits, Tim Ogden of Philanthropy Action launched a campaign last December to convince donors to dump the overhead ratio – the measure of how much money goes to programs versus administrative costs – as a primary means of evaluating the effectiveness of a charity. “We’re finally at a point where people do have an alternative,” said Ogden. In the last few years, organizations like GiveWell, Philanthropedia and Great Nonprofits have emerged to give people more useful information about charities, and to pressure charities to devote the resources to collecting that information and making it public.

Finally, the intensity of the debate on evaluation with randomized controlled trials in the academic world, and new organizations like 3IE (the International Initiative for Impact Evaluation) and DIME (the Development Impact Evaluation initiative at the World Bank), are other facets of the same movement. Behind the heated debate on what methods of evaluation to use, we see a much larger point – many more donors now insist on serious EVALUATION and ACCOUNTABILITY than used to do so.

As we’ve said on this blog before, accountability is not something that anyone accepts voluntarily. It is forced on political actors, aid agencies, and NGOs by sheer political power from below, from well-informed advocates for the poor and listening to poor people themselves. All of this may still be in its early stages, but since aid really CANNOT work without serious accountability, the Smart Giving movement is the best news to come along in aid in quite a while.

UPDATE: (3/20, 8:21am) the Center for Global Development reacts to our inclusion of 3IE, which was their brainchild.

(My favorite Mark Twain quote: “In the first place God made idiots. This was for practice. Then he made School Boards.”)

But after that Wolfers goes astray, piling on Hayek as just intellectually unworthy in general. Wolfers uses shaky exercises like number of citations in electronic academic journal archives. He says Larry Summers has as many citations as Hayek, so why not teach Larry Summers to high-schoolers? (not such a bad idea, actually).

Young Wolfers may not know the history of censorship of Hayek in the other direction. When I was in graduate school in The Middle Ages, Hayek was seen as so Far Right that you would be considered a nut to read him.

Since then, many more economists have realized that was extremely unfair to Hayek, including guess who, Larry Summers:

What’s the single most important thing to learn from an economics course today? What I tried to leave my students with is the view that the invisible hand is more powerful than the [un]hidden hand. Things will happen in well-organized efforts without direction, controls, plans. That’s the consensus among economists. That’s the Hayek legacy.[1]

Hayek, who once wrote an essay called “Why I am not a conservative” was prescient in appreciating something that is much more trendy today, the idea of “spontaneous order” (Silicon Valley geeks write about a book a week on some aspect of the Internet being a spontaneous order.) My favorite Hayek quote gives a lot of insight into why development has been so hard to engineer from the top down:

It is because every individual knows so little and… because we rarely know which of us knows best that we trust the independent and competitive efforts of many to induce the emergence of what we shall want when we see it.

This reliance on individual spontaneity and creativity (and here we could include political entrepreneurs who achieve new and better ways to deliver public goods) is threatening to two very specific political factions:

• the Right
• the Left

Hayek knew that the Right was hypocritical about individual rights as much as the Left. The latter dictates what you can’t do in the market, the former wants to dictate almost everything else.

Although Wolfers doesn’t do this, many readers of his blog will fall for that classic trick, the Reverse Ideological Rejection: because ideologues like Hayek, therefore I should (ideologically) reject Hayek. This is in the same class as “Hitler liked Wagner’s Ring, therefore I should hate Wagner’s Ring.”

It’s sad that Hayek has been the victim of so many violations of the intellectual freedom for which he was one of the most eloquent and courageous spokesmen ever.

UPDATE:  my hometown newspaper The Village Voice has a blog post on how the Texas school board caused the “right-wing blogosphere” to light up. (HT to HayekCenter.org) It includes the Hayek controversy:

{The blog response} bodes well for conservative attempts to keep libertarians on board: Apparently all you have to do is give props to their favorite economists, and they’ll go along with anything you want.

I am deservedly too obscure to be quoted in this story, but I guess the Voice hasn’t heard about the whole “Hayek: I am not a conservative” thing. Also I’m not sure anyone at the Voice has never met a real libertarian, a group that is NOT disposed to ”going along with anything you want.”

UPDATE 2: Jacob T. Levy’s blog takes on Wolfers on measuring Hayek’s citation count versus other economists.  To make a long story short, there was a problem counting Hayek’s because of the many variations on his first name(s), and once you correct for this he is in the same league as Milton Friedman and beyond Larry Summers.

FOOTNOTES
1. quoted in The Commanding Heights: The Battle Between Government and the Marketplace that Is Remaking the Modern World, by Daniel Yergin and Joseph Stanislaw. New York: Simon & Schuster. 1998, pp. 150–151. (Thank you Wikipedia!)↑

Clinton says that the 3D approach will elevate development to the level of diplomacy and defense. Unfortunately, it could instead lower development further to an instrument employed to achieve military or political priorities. Clinton foresaw these objections: “There is a concern that integrating development means diluting it or politicizing it – giving up our long-term development goals to achieve short-term objectives.” She said reassuringly, “[t]hat is not what we mean, nor what we will do.”

But it’s too late. Sacrificing long term development aims for short term military and diplomatic objectives is what the US already does, and the 3Ds is making it worse. That’s why the Grand Prize for the Worst in Aid goes to…the 3D approach, nominated by an anonymous reader.

References to the “3D approach,”… have become so pervasive in foreign policy, development, and national security circles that they have taken on the status of self-evident, common wisdom.
- J. Brian Atwood, former USAID administrator, February 2010

The frequent contradiction between defense and development is the most obvious instance of 3D dissonance. A coalition of eight NGOs in Afghanistan lamented that “[d]evelopment projects implemented with military money or through military-dominated structres aim to achieve fast results but are often poorly executed, inappropriate, and do not have sufficient community involvement to make them sustainable.” Nonetheless, increasing amounts of aid get channeled through the military, “while efforts to address the underlying causes of poverty and repair the destruction wrought by three decades of conflict and disorder are being sidelined.”

An Oxfam case study on programs to reform the security sector in “frontline” states like Iraq illustrated another way in which narrow military goals (to train and equip soldiers and police) are not entirely compatible with development goals. The report found that an increasing reliance on military contractors rather than civilians “has strongly reinforced the focus on operational capacity over accountability to civilian authority and respect for human rights.”

In the battle of the Ds, enervated development loses to pumped-up defense, and not just in Afghanistan and Iraq. The trend goes two ways: USAID is compelled to spend more and more of its budget on states that are strategically and militarily important (The 2011 foreign aid budget allocates 20 percent of State and USAID money for “securing frontline states.”) A development priority like India (with a huge chunk of the world’s poor) loses out. At the same time, a growing proportion of what the US calls Official Development Assistance flows through the Pentagon rather than USAID.

All US ODA by recipient, 2004-2008, OECD data

Frequent readers of the blog will already be familiar with our final example. On Christmas Eve in Madagascar, President Obama bowed to the exigencies of diplomacy when he punished the nondemocratic government of Madagascar by taking away trade access to U.S. markets. But this same action was disastrous for development.  Already, tens of thousands of jobs created textile exports to the United States under the African Growth and Opportunity Act (AGOA) have been lost. Factories are closing, increased competition among street workers is pushing down wages, and the effects are spilling over into neighboring countries that made inputs to Madagascar’s factories. Any claim that the Madagascar AGOA delisting was part of a high-return Diplomatic initiative to promote Democracy became a wee bit more tenuous when we saw Angola, Cameroon, and Ethiopia named on Christmas Eve as still eligible for AGOA.

[We could go on -- This week brought another collision of development and defense/diplomatic goals in Somalia.]

The lie that underlies the 3D framework is that development, diplomacy, and defense are complementary (or totally “mutually reinforcing”); that there are no difficult choices to be made. Alas, politicians are fond of denying the existence of tradeoffs (we are not trying to pick on Hillary in particular; many politicians are guilty of this).

The only 3D strategy that makes sense for development is one that acknowledges the frequent conflicts between these three very different goals as natural outcomes of their different agendas.  Then we can hold our politicians accountable when they sacrifice Development big-time to achieve small-time (or sometimes illusory) Diplomatic or Defense goals.