Knowledge Problems and Incentive Problems
Why is it difficult to give effective foreign aid? We discuss knowledge problems, incentive problems and feedback and learning.
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Don't randomized controlled trials go a long way towards solving both of these problems? I recently read Dean Karlan's More Than Good Intentions and remember seeing a positive blurb from Tyler Cowen on it. Are either of you impressed/enthusiastic about the use of randomized controlled trials to test the efficacy of various programs done by IPA and The Abdul Latif Jameel Poverty Action Lab? Isn't there a clear difference between how an organization like Innovations for Poverty Action operates and how Soles4Soles operates? And with Esther Duflo being appointed to the Global Development Council aren't these ideas becoming more standard?
You are basically talking about private organized "aid". It´s true that especially "gifts" like second hand clothing or corn shipments are likely to destroy local markets. In contrast, official foreign aid programs are usually estabished by bilateral negociations between governments or international organizations and executed by big development agencies which of course apply planning, monitoring and evaluation tools together with local partners. Even many serios NGOs work this way. This is a way to avoid or at least minimize the knowledge problem. Also the incentive problem has been adressed by theP aris Declaration and Accra Agenda for Action (http://goo.gl/dccPb) [QUOTE]1. Ownership: Developing countries set their own strategies for poverty reduction, improve their institutions and tackle corruption. 2. Alignment: Donor countries align behind these objectives and use local systems. 3. Harmonisation: Donor countries coordinate, simplify procedures and share information to avoid duplication. 4. Results: Developing countries and donors shift focus to development results and results get measured. 5. Mutual accountability: Donors and partners are accountable for development results.[/QUOTE]
Are you suggesting that government officials are more efficient at identifying opportunities for and providing aid than private organisations? I would like to see the evidence that supports your statement. I still have to see an instance of a governmental enterprise that is more efficient than a private one in equality of conditions. The Paris Declaration and Accra Agenda for Action seem to me like a set of nice guidelines, but does that mean that they are being properly implemented and are yielding good results? We should judge by the results and not by the stated intentions.
I saw closely some projects of foreign aid when I worked in Peru, mainly from GTZ and other European agencies. Well, they are agreed by government officers and usually are aimed to benefit the same officers with trips to Europe, fellowships, good salaries, etc. I saw lot of money lost in useless and cosmetic programs but a lot of well funded people managing the money "international aid liason" or "international officer is a very good job in our lands. Anyway, as Florian say this not always happen and some of those programs are more than simply public relations, but sadly to say the money lost in the middlemen is often a lot