The Wellington Dilemma

…[I] request elucidation of my instructions from His Majesty’s Government so that I may better understand why I am dragging an army over these barren plains. I construe that perforce it must be one of two alternative duties, as given below. I shall pursue either with the best of my ability, but I cannot do both: 1.) To train an army of uniformed British clerks in Spain for the benefit of the accountants and copy-boys in London or, perchance…

2.) To see to it the forces of Napoleon are driven out of Spain.

Your most obedient servant,

Wellington

—Attributed to the Duke of Wellington, during the Peninsular Campaign, in a message to the British Foreign Office in London, 11 August 1812

This quote is pilfered from a new Center for Global Development essay by Andrew Natsios, former USAID Administrator and current Georgetown Prof. In the full (though possibly apocryphal) letter, the Duke complains that the demands of regulation, bureaucracy and compliance (“the accountants and copy-boys in London”) threaten to compromise the achievement of his country’s true goal (driving Napoleon out of Spain).

Natsios makes a similar argument about US aid programs, which he says are suffering from a disfiguring imbalance. The compliance side of aid, which he calls the “counter-bureaucracy,” has grown grotesquely out of proportion to the programmatic, technical side, and threatens to undermine aid’s goals.

As on Wellington’s plains of Spain, the goals of the US counter-bureaucracy are not necessarily compatible with or even complementary to the goals of the organization as a whole. That is, the counter-bureaucracy exists to make sure that US aid programs are managed according to voluminous, archaic, and sometimes internally-contradictory US laws, regulations, and management systems, while aid programs exist to encourage development abroad by building developing-country partnerships and strengthening institutions. US aid has become paralyzed by endless reporting requirements.

Natsios writes:

…[T]he question is whether the counter-bureaucracy has become counter-developmental.

Of course, we would all be a lot more sympathetic to the counter-bureaucracy if it performed functions like preventing waste and corruption, or if it performed independent evaluations of whether aid actually brought benefits to the intended beneficiaries. Unfortunately, a string of recent scandals (made possible of course by reports from the counter-bureaucracy) showed millions of USAID dollars going astray in Afghanistan and Iraq, with little assurance in USAID’s reaction so far that the same will not happen again in the future. So exactly what IS accomplished by those costly reporting requirements?

Was the poverty of Africa determined in 1000 BC?

The usual development conversation about determinants of per capita income revolves around modern choices of institutions or economic policies. But what if history is the main determinant of development today? A paper by Diego Comin, Erick Gong, and myself was just published in the American Economic Journal: Macroeconomics. We collected crude but informative data on the state of technology in various parts of the world in 1000 BC, 0 AD, and 1500 AD.

1500 AD technology is a particularly powerful predictor of per capita income today. 78 percent of the difference in income today between sub-Saharan Africa and Western Europe is explained by technology differences that already existed in 1500 AD – even BEFORE the slave trade and colonialism.

Moreover, these technological differences had already appeared by 1000 BC. The state of technology in 1000 BC has a strong correlation with technology 2500 years later, in 1500 AD.

Why do technological differences persist for so long? The ability to invent new technologies is much greater when you have more advanced technology already. James Watt had acquired a lot of tech experience in the mining industry which he used to invent the steam engine. Other people with the ability to make steel could then slap his steam engine on a vehicle running along steel rails and give us railroads.

Past technology alters probabilities of future success, but does not completely determine it. The most famous counter-example: China was historically technologically advanced and did NOT have the industrial revolution.

A large role for history is still likely to sit uncomfortably with modern development practitioners, because you can’t change your history. But we have to face the world as it is, not as we would like it to be: deal with it. Perhaps when you acknowledge the importance of your own history, you are then more likely to transcend it.

Holy Bureaucratic Gibberish, Batman!

This post is by Adam Martin, a post-doctoral fellow at DRI. On July 1 the Department of Defense rolled out two notable new projects that will undoubtedly inaugurate a new era of peace and safety for the streets of Gotham international community. Even the world’s greatest detective could not have seen this coming.

Like their caped crusader namesakes, the DoD versions of BaTMAN and RoBIN are shrouded in mystery, their real identities cleverly disguised. BaTMAN is:

Biochronicity and Temporal Mechanisms Arising in Nature (BaTMAN) could develop an understanding of the relationship between biological systems and the spatial-temporal universe through the application of advanced principles from the physical sciences... Topic areas that may be of interest include, but are not limited to: quantum biology and molecular clocks; resetting and synchronization of biological clocks and rhythms; microscale recapitulation in macroscale; evolutionary pressure and time; physiological signal processing and clocks; timing and cognition; and robustness of clocks in development.

His faithful sidekick RoBIN:

Robustness of Biologically-Inspired Networks (RoBIN), seeks to apply the critical control features of biological networks to build unique models for adaptable networks, and create a dynamic biologically-inspired network of scientists and other experts for crisis response and complex decision support.

What does any of this have to do with foreign aid? Most prominently, it serves of a reminder of just how bad an idea it is to ask the military to be more involved in aid. Despite the distilled frenzy of a few prominent voices in the air, the defense establishment is more likely to lead us into a funhouse maze than solve the riddle of development.

But it’s not just military involvement itself that should resisted. The BaTMAN and RoBIN projects are perfect examples of the obfuscating language and flagrant non-accountability that accompanies bloated bureaucracies. These megalomaniacal ideas work great at keeping the funding flowing but achieve little else. The dynamic duo of massive government budgets and weak feedback mechanisms are a source of mischief in military and non-military organizations alike.

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Editor’s note: BaTMAN and RoBIN sound almost too outlandish to be real. We did call Defense Advanced Research Projects Agency (DARPA) to confirm that we were not being had, and the conversation went like this:

Me: Hi, I work at New York University and write for a blog called Aid Watch.

DARPA: OK?

Me: I am wondering if you could confirm that Biochronicity and Temporal Mechanisms Arising in Nature and Robustness of Biologically-Inspired Networks are in fact DARPA programs.

DARPA: Uhmmm...you want to try that in English? (laughs)

Me: Your language, not mine! The acronyms are BaTMAN and RoBIN...

DARPA: (Looks up the programs on his screen…) Well, what we issued was a Request for Information so they are not technically programs per se....They are potential new DARPA programs.

Me: So you can confirm that they are real potential DARPA programs.

DARPA: Yes.

There you have it, BaTMAN and RoBIN are not a spoof.

Separating the wax from the gold: social accountability in Ethiopia

This post was written by Helen Epstein, author of The Invisible Cure: Why We Are Losing the Fight Against AIDS. I was heartened to see that Shanta Devarajan, the World Bank’s Chief Economist for Africa, blogged about my article Cruel Ethiopia in the New York Review of Books.

The article—and Dr. Devarajan’s blog—deal with the extremely delicate and complex relationship between economic and social development and human rights. He and I agree that there is no simple formula to explain this relationship. However, in order to help the poorest people realize their basic right to development, and to ensure our aid dollars are spent as effectively as possible, we need to try to understand it. That’s why I was troubled by this section of Dr. Devarajan’s blog.

Ethiopia has done well in reducing poverty and child mortality, and increasing primary completion rates because their system of delivering basic services has various elements of this accountability built in.  Local districts receive resources based on clear, data-driven formulae that can be independently verified (by third-party civil society groups). The allocation of these resources within the district is decided in community meetings, with the final budget posted on a central bulletin board for the community to see.

If only this were true.

Dr. Devarajan is describing the “social accountability” component of a World Bank-Ethiopia program to support health, education and other social services. In general, social accountability programs train community groups or NGOs to carry out surveys of local government budgets, monitor the quality of services such as clinics and schools, and publicize problems such as corruption or absenteeism among teachers and health workers. In an ideal world, these groups then work constructively and openly with local government officials to find feasible solutions to these problems.

Social accountability programs can be an extremely powerful mechanism for holding local authorities to account, building local democratic mechanisms, improving education and access to safe water, and even saving lives. A World Bank-sponsored evaluation of two such programs in Uganda found that one increased the amount of public education funding that actually reached schools nearly four-fold, and another increased the survival of children under five by one third, with no additional direct funding for health services.

When I first visited Ethiopia in late 2008, I was eager to see how the social accountability program that Dr. Devarajan refers to was working. But during the four visits I made to the country over the next 12 months, World Bank and other officials repeatedly told me the program had been only a small scale pilot program, that it had ended in 2008, and that an expanded program was planned, but would not start until after the elections in May 2010. So I am not sure what program Dr. Devarajan visited. Even in the pilot projects, the monitoring was not, by and large, done by “third party civil society” groups. Nearly all the NGOs were ruling party affiliates.

There is no automatic relationship between development and human rights. But it’s worth asking whether development can ever occur in a society where a government is deaf to its people. It seems to me that development takes root in societies that listen, either because the people truly have power, as in a democracy, or because the government is afraid of what would happen if they demanded it.

Fitting Kwame the cabbie into the brain drain equation

The following post is by Yaw Nyarko, a Professor of Economics at NYU and founding director of Africa House. Not too long ago I got in a cab in New York with a Ghanaian taxi driver named Kwame. He remembered picking me up several years ago. What a memory he has. Anyway, he told me he has four children: one is a doctor and the two youngest are in private school. He said his kids were doing exceptionally well, and he is paying for elite schooling from his taxi driver salary.

Aid Watch has blogged about a paper I co-authored which argues four ways the benefits of brain drain could outweigh the costs to African countries. Kwame made those arguments real to me. I wondered again why we rarely consider the gains to the migrants themselves when talking about the African brain drain.

Kwame said he was glad to see me, but he nearly died this year. “Died?” I asked, not sure I heard him clearly through all the Manhattan traffic. Yes, he explained, he got malaria while in Ghana; it was cerebral malaria which was not properly treated. Clearly, this was one brain drainer who still went back to his home country and cared about public services there.

I was going to dinner with the Minister of Health for Ghana that same evening. I thought to myself that I should tell the Minister that Kwame believes something should be done about the open sewers in the country and there should be more insecticide spraying as was done in the Nkrumah era.

I got out of the taxi and left a huge tip. I felt very proud of Kwame as I thought of his four children educated off his taxi earnings. I also reminded myself to redo the calculations on the pluses and minuses of the brain drain to account for the Kwame’s.

The answer is 42! Why Development is not about solutions, it’s about problem-solving systems

UPDATE, Wednesday, July 14: I'm glad we had a good reflective discussion in the blogosphere on these ideas, not the usual polemics. Thanks to all of the bloggers I've noticed who have now commented on this post: Aid Thoughts, Nancy Birdsall at Center for Global Development, Innovations for Poverty Action, Metamorphoses, PSD Blog at the World Bank, and Dennis Whittle at Global Giving (please let me know if I left anyone out). UPDATE, Sunday July 11: new round of the Hayek wars as they relate to this post (see end of this post below)

UPDATE, Friday evening: Russ Roberts comments on this post at Cafe Hayek.

Yesterday we ran a blog post that fits into a now classic genre in development commentary. This genre, after some discussion, always ends with a conclusion like: “Solution X (a transparency law, microcredit, malaria bed nets, conditional cash transfers, web-based clever thing, eliminating business red tape, etc.) is moderately helpful, but a long way from a panacea.” Of course, nobody really claims explicitly “X will be a panacea!” But each new X is systematically oversold, expectations are raised way too high, and the expectations are always later disappointed.

Here's why direct solutions to problems cannot foster development. Each direct solution depends on lots of other complementary factors, so the solutions can seldom be generalized across different settings; Solutions must fit each local context. Solutions that generate the highest payoff in each setting should be a higher priority than the lowest payoff solutions. Since there is little or no feedback on how well each solution is working in each local situation, there is little possibility for any such adjustments.

Development happens thanks to problem-solving systems. To vastly oversimplify for illustrative purposes, the market is a decentralized (private) problem solving system with rich feedback and accountability. Democracy, civil liberties, free speech, protection of rights of dissidents and activists is a decentralized (public) problem solving system with (imperfect) feedback and accountability. Individual liberty in general fosters systems that allow many different individuals to use their particular local knowledge and expertise to attempt many different independent trials at solutions. When you have a large number of independent trials, the probability of solutions goes way up.

Good systems make the private returns to decentralized problem-solvers close to the social returns. Again oversimplifying to drive home the big point, the market does this with private goods (even allowing for well-known exceptions of market failures), and a free political system is the best way known to do this for public goods (reward political actors in line with the social return to their actions).

The problem-solving systems could very well use some of the same solutions that were discussed above (a transparency law, microcredit, malaria bed nets, conditional cash transfers, web-based clever thing, eliminating business red tape). This leads to much confusion, as people then try to directly imitate particular solutions in the absence of a problem-solving system, which as stated above, leads to disappointing results.

A famous joke is that the Answer to the Ultimate Question of Life, the Universe, and Everything is 42.{{1}} Indeed, 42 could come out of a problem-solving system to solve a particular problem (the guests at my party have brought seven six-packs, will I have enough beer?), but is rather unlikely to generalize to other problems.

The problem-solving system is adapting solutions to local circumstances. And even more importantly, a problem-solving system coordinates the efforts of many different problem-solvers with nobody in charge (for example, in the market, prices serve as signals to coordinate the actions of many different suppliers to solve the problems of demanders).

Direct solutions to problems (say, using aid programs) still 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.

UPDATE, Sunday July 11: new round of the Hayek wars as they relate to this post:

Friedrich Hayek is obviously the main source of inspiration for the ideas in this post.  But hasn't Hayek now been totally discredited by his association with Glenn Beck? A nice article in the NYT Book Review by Jennifer Schuessler discusses the Beck-Hayek phenomenon.

Beck was invoking Hayek to make the "slippery slope" argument that an extensive systemof social services leads inexorably to something like Fascism or Communism.  Hayek's association with this argument looks a lot more dubious once you realize that he was IN FAVOR OF an extensive system of social services. As Schuessler notes:

“The preservation of competition,” {Hayek} wrote, is not “incompatible with an extensive system of social services — so long as the organization of these services is not designed in such a way as to make competition ineffective over wide fields.”

Schuessler also notes Hayek's 1960 essay “Why I Am Not a Conservative”

I had the same argument with (guess who?) Jeff Sachs back in 2006 when he attempted to smear Hayek in a similar way.

Mr. Sachs disses the great Hayek by repeating the old canard that Hayek thought any attempt at taxpayer-funded social insurance would put us all on the "Road to Serfdom." This is an especially strange charge, since Hayek (while certainly opposed to the social engineering that proponents of a full-blown welfare state usually have in mind) himself calls for some form of taxpayer-funded social insurance against severe physical deprivation on pages 133-134 of "The Road to Serfdom." Mr. Sachs, who is currently best known for his star- driven campaign to end world poverty, has apparently spent more time studying the economic thinking of Salma Hayek than that of Friedrich.

Hayek's Road to Serfdom is a superb statement of how a spontaneous order was responsible for Western prosperity, following rules based on individual liberty, and Western prosperity was NOT the result of social planners trying to directly solve social problems. That's how it inspired the post above.

OK let's now go watch the spontaneous order of the World Cup final.

[[1]]Douglas Adams, Hitchhiker’s Guide to the Galaxy[[1]]

A spoonful of transparency: good but no cure-all

The New York Times ran a story last week about a five-year-old Indian law that reinforces the right—and sets in place the process—for individuals to request government-held information. Ms. Chanchala Devi, for example, applied for a government grant she had heard was available to help poor people like her build their own houses. After four years of fruitless waiting, she used India’s Right-to-Know law to request a list of people who had received the money while she had not. Within days, the story reported, Ms. Devi’s own funding came through. The story continues:

…it has now become clear that India’s 1.2 billion citizens have been newly empowered by the far-reaching law granting them the right to demand almost any information from the government. The law is backed by stiff fines for bureaucrats who withhold information, a penalty that appears to be ensuring speedy compliance.

Great news. But while the law has empowered individuals (over 2 million of them in the first 3 years of the law’s existence) to seek redress for their grievances, the article also cites critics who complain that the law has not had hoped-for system-wide effects on corruption, and that it acts as a “pressure valve” without posing a serious challenge to the system.

Joseph Stiglitz, among others, has convincingly argued that information gathered and produced by government officials rightly belongs to the public; that people need such information to participate meaningfully in democracy; and beyond these arguments, that openness has an intrinsic value. A 2008 JPAL study gives Stiglitz an empirical assist: giving urban poor people access to published “report cards” about local politicians’ performance and spending influenced those voters to elect incumbents based on issues (rather than caste or religion, for example).

Possibly the most-repeated success story told about information disclosure comes from Uganda, where World Bank researchers found in 1995 that only 13 percent of national government transfers to local schools actually reached the schools. After the Ugandan government began publishing in the newspaper how much money was supposed to go to each school, the proportion of funds “leaking” out of the system decreased dramatically. Four years later, 90 percent of that money was reaching the schools, and the newspaper information campaign was given credit for the change.

Like most simple stories in development, this one is actually not so simple. A paper by Paul Hubbard at the Center for Global Development objects that the plummeting proportion of funds going astray has to be put in the context of comprehensive fiscal and education reforms going on in Uganda at the time. Another study found that information disclosure efforts like the famous newspaper campaign were only effective in communities “that were literate and assertive enough to act when abuse was revealed.” Hubbard observes: “transparency by itself is insufficient if there is no opportunity for collective action.”

Which brings us back to India, where the Right-to-Know law is helping Chanchala Devi—and hundreds of thousands like her—to get what she is entitled to from her government. Why should we want it to be a cure-all for India’s corruption ills? What drives us to search for panaceas and silver bullets? Any expectation that this law alone will tackle an entrenched and corrupt bureaucracy is probably way too much for it to bear.

Thank you, World Cup fans, I now understand institutions for development

UPDATE July 8, 2010 12:10pm: link to a great new article on the spontaneous evolution of rules in the history of football (see end of post) I learned a lot from the furious debate that followed the post about rules vs. norms, regarding whether Uruguay cheated Ghana.

My original notion was that intentionally breaking the rules to prevent a loss was cheating, and that it was too bad norms prevalent in Football World did not penalize such behavior more fiercely so that it wouldn’t have happened in the first place. (A column in today’s Wall Street Journal agreed with me. Maybe we’re just both fervent Ghana fans.)

But let’s shift now from normative to positive economics. Do the norms in the Football World let you sometimes break the rules intentionally and suffer the official penalty, without any further normsy punishment of everlasting disgrace? From the numerous comments the post received (assuming they weren’t all concealing Uruguayan ancestry), the answer appears to be yes. (Read the comments on the original post; also read Steve Horwitz's great post on the blog Coordination Problem.)  Many commentators pointed out similar intentional rule violations in American sports, which the norms of American sports fans appear to tolerate. Norms in sports (as in economics) evolve spontaneously to fit the needs of participants (fans, players, or businessmen), and so deserve some respect before a rush to judgment. Possible cautionary lesson #1: arrogant people (code word for Americans) should not pass judgment on other societies they don’t understand (like Football World).

Other people pointed out the complexities of rule systems that include penalties for breaking the rules. You don’t want excessively draconian penalties (like the death penalty for contract violations or handballs), or nobody would engage in mutually beneficial activities in the first place, like contracts or football matches. And, with that caveat, no penalty system can be perfectly designed so that it never pays to break the rules in any and all situations. Some egregious case where it paid to break the rule could cause an over-reaction towards excessive penalties or dysfunctional rules (possible examples in financial and economic reforms as well as football).

Norms play a useful role in not only strengthening the incentives to keep the formal rules, but also in complementing the formal rule-formal penalty system. Norms can handle the subtleties of when intentionally breaking the rules and accepting the penalty is OK and when it is not. So for example, social norms might forgive a businessman who chooses to break a contract because of something unforeseen like a fire in his factory, but not so much a businessman who lied about whether there was really a factory fire. In football, I assume fan norms would still be pretty tough on a minor football player on one team who intentionally causes a long-lasting and disabling injury to the best football player on the other team. Possible cautionary lesson #2: Norms are complicated. Norms may evolve in a useful way that no single person can fully understand. Norms can be smarter than I am or you are.

Back to normative economics: I can still express my own opinions – I still think Ghana should have won. Now, that that’s over: Go Spain! (Sorry, Dutch and German fans, but none of your banks’ foundations awarded my research institute 400,000 euros.)

UPDATE July 8, 12:10pm:  just found a great new article on the history of football (in its many varieties) as an example of the spontaneous emergence of rules (HT Facebook friend Gonzalo Schwarz).

UPDATE 2: PS if my memory is correct, neither Netherlands nor Spain were beneficiaries of any of the egregious rule violations and blown calls by refs during this World Cup. Maybe playing by the rules is a winning strategy after all.

The Androids are coming, is aid ready?

This post is the second in a series by Dennis Whittle. Dennis is the CEO of GlobalGiving, an international marketplace for philanthropy. In my last post, I argued that the "operating system" used by the current international aid agencies is stuck using IBM punch cards while the rest of the world has moved on to cell phones, laptops, and iPhones.

In the old system, you had to type programs into a stack of hundreds of punch cards, walk them down to the computer center, hand them to an operator, and wait in line for them to be processed. The lower you were in seniority, the longer you had to wait.

Contrast that with today, when hundreds of millions of people have their own computers, and several billion people have access to cell phones. iPhone and Android platforms now provide a way for hundreds of thousands of individuals to create and distribute new software. That software may or may not succeed in the marketplace, but it can be downloaded and used, and the most popular new apps get flagged to other users.

What would an analogous distributed operating system look like for the aid business?  The design of any such operating system has to address five questions:

1. Who decides which problems aid should address?
2. Who comes up with the solutions?
3. Who gives the funding?
4. Who competes to implement the solutions?
5. Who gives feedback on how well the solutions work?

The existing system is closed. It assumes these questions will be answered by experts within one of the "mainframe" organizations like the World Bank, the UNDP, USAID, or one of the big NGOs.

Unlike 60 years ago, the expertise, resources and technology now exist to make a new decentralized and distributed aid system possible. Many more people—and not just experts—have relevant developing country experience (for example, the Peace Corps alone has over 250,000 alumni). Regular Americans give over $25 billion each year to charitable causes abroad—about the same amount as the US official aid budget. And PCs, internet, cell phones and related technologies now make it possible to connect all of these people and resources directly to the people who need help.

Marketplaces that directly connect funders to projects include GlobalGiving, DonorsChoose, MissionFish, GiveIndia, HelpArgentina, Conexion Columbia, Betterplace (Germany), GreaterGood South Africa, Net4Kids (Netherlands).  Markets need quality information, and groups such as Guidestar, New Philanthropy Capital, GiveWell, Great NonProfits, Philanthropedia, Keystone Accountability, Charity Navigator, and the BBB Wise Giving Alliance have begun to operate mechanisms that collect and make available data from a wide variety of sources. Technology startups such as Frontline SMS and Ushahidi are making it possible for beneficiaries to have direct input into what they need ex-ante (schools? health clinics? microcredit?) and how well projects are being implemented once underway.  Other initiatives (for example, Jumo) are in the planning stages.

Not all of these new initiatives will succeed.  But within a few years, it will be possible for any person or group in the world to help answer any of the five questions above that form the core of the aid operating system.  If the existing agencies that run closed systems don't adapt to this new set of conditions, they will become as irrelevant as old IBM mainframes.

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Related post: Is aid stuck using IBM punch cards?

More well-deserved Crisis Recognition for economists: Carmen Reinhart and Ken Rogoff

The NYT Business Section on their book, This Time Is Different. It's nice when a fat book covering 800 years of financial crises can be summed up in one 4-word title, and then the message of the text in one 3-word response: No It's Not.

Or as the authors put it, We've Been Here Before.

The authors and the article both understandably concentrate most of the discussion on Implications for Today's Crisis. These days you can't even talk about broccoli without discussing Implications for Today's Crisis.

But the book will surely remain a classic long after the crisis ends, and then its long-run message might include a development angle: We've Been Here Before, But We Got (and Stayed) Rich Anyway.

The Declaration: History has a sense of humor

The man who wrote it owned other human beings. The rich Anglo-Saxon males who signed it believed themselves superior to women, Catholics, Jews, other Europeans, Native Americans, blacks, Asians, and poor white males. It contained no development strategy, no announced intention for poverty reduction, and no nation-building Power Point presentation. For many decades afterward, anyone who took it literally would have been seen as crazy.

Yet the principles the Declaration gave in two sentences have done more than anything else for both liberty and development in the 234 years since that day.

We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable rights, that among these are life, liberty and the pursuit of happiness. That to secure these rights, governments are instituted among men, deriving their just powers from the consent of the governed.

Happy birthday, Declaration, and thank you.

Rules vs. Norms in Development, or more importantly, Did Uruguay cheat Ghana?

Today there is a great discussion of rules vs. norms because it applies to something people REALLY care about: World Cup football. Uruguayan player Luis Suarez illegally blocked a sure Ghana goal with his hands, a goal in the last seconds that would have won Ghana the game. He was ejected according to the rules and Ghana awarded a penalty kick, which they missed, and then Uruguay subsequently won. Did Suarez cheat? An article on GhanaWeb says yes.  Others say no. A major neutral, the Wall Street Journal (which now has a surprisingly good sports section) backs Ghanaweb: Uruguay cheated "big-time." One side would say Suarez realized his team would surely lose if he let the ball go past his hands and lawfully and rationally chose to take the penalty to give his team a chance; the other side says intentionally breaking the rule to prevent a loss was unforgivably unsportsmanlike.

One possible fix is to perfect the rules. If it pays to break the rules, they must be bad rules. The rule could be changed to give an automatic goal in this situation.  However, it's not that easy --  it's impossible to have perfect rules. (The "automatic goal" rule would have worked here, but general application would  inevitably lead to new disputes about whether the ball would really have gone in.)

The other solution to imperfect rules is to supplement them with norms. With strong norms in business, a businessman who exploits a loophole to cheat another businessman will often find himself ostracized and will lose a lot of future business, so he doesn't cheat. Norms can handle complex situations more flexibly than explicit rules, so they are an essential complement to rules.

Unfortunately for Ghana and for a lot of cheating victims in business, norms have to reflect a wide and deep consensus of what is right and a willingness to punish the cheater. If everyone agreed now that Suarez  had cheated and will ever after see him as the equivalent of a thieving child-beater, then maybe he would not have used his hands in the first place. Unfortunately, as often happens in developing countries, neither the rules nor the norms were strong enough to prevent cheating and we are the worse for it.

How the crisis is making us more aware of the best economists: Alberto Alesina, for example

One small positive side-effect of the current crisis is more public recognition of economists' research. The media frequently gets wrong who are the best economists to quote on any given issue (no names please), but sometimes they get it right. So I want to add my own wee bit to Greg Mankiw's much more high-powered blog-push to recognize Alberto Alesina. Greg cites a new Business Week article on Alesina's research on fiscal stimulus vs. budget cuts.  The Business Week headline was "Alesina Who?" which definitely confirms the theory about the media being clueless on economists.

Of more direct interest to readers of this blog is Alesina's work on political economy and foreign aid (Alesina played a huge role in founding the modern field of political economy). On aid, see in particular his articles on whether corrupt countries receive less foreign aid, and who gives aid to whom and why. If you are still not satisfied, check out his web site at the Harvard Economics Department. (Full disclosure: I have known Alberto for many years, have learned a lot from him, and co-authored several papers with him.)

Globalization is even better than you thought: detective novels!

Today's Wall Street Journal carries an article on the international spread of best-selling detective novels, including authors from developing countries like Nigeria, South Africa, Turkey, Korea, Argentina, Cuba, and Italy. This shows that globalization and development foster yada, yada, yada, yada, yada. A certain Aid Watch contributor can now feel less ashamed about revealing that he unwinds from the stress of aid criticism by reading detective novels.  I'm part of a secret circle that exchanges tips on the great detectives from all over the world with others whom you would not suspect of being crime novel fanatics. Long before Stieg Larsson, we were all reading the Great One, Henning Mankell, the master of Tartan Noir, Ian Rankin, and the Great Russian Boris Akunin (all of whom go curiously unmentioned in the WSJ article).

Why don't we broaden the circle to include the readers of this blog -- what mystery thrillers did you hide in your luggage on your last long-distance trip? What are your all time favorites? Extra points for authors from developing countries.

Troubled Water

A new Frontline segment investigates one of its own stories from 2005, a report on a child-powered merry-go-round that acts as a water pump. At the time, the PlayPump seemed an innovative, clever way to increase the clean water supply in African villages.

After FRONTLINE/World first aired the story in 2005, major donors in the United States -- and the U.S. government itself -- launched a multimillion-dollar campaign to install the device in thousands of African schools and villages. Now, correspondent Amy Costello investigates what happened to those communities, as the promise of the PlayPump fell short and the device's biggest American boosters began to back away from a technology they had once championed.

We blogged about PlayPumps in February, citing a report by the charity Wateraid which decried the pumps’ “reliance on child labour” and a commentary in the Guardian which calculated that children would have to “play” for 27 hours every day to meet PlayPumps’ stated targets of providing 2,500 people per pump with their daily water needs.

The Frontline correspondent visits communities where school children have tired of  the merry-go-rounds and women have to turn the cumbersome pumps by hand, and communities where PlayPumps have broken, leaving villages without a clean water source for up to 17 months while  no one responds to calls for maintenance. She reports on a never-released Mozambique government document that discloses a long list of problems with operation, repair, and maintenance of the device. She talks to a Save the Children official who says that only 13 out of 42 PlayPumps they helped install in Mozambique are working, but can’t say why.

According to Frontline, no one from the the Case Foundation (one of the major funders) or PlayPumps International would agree to an interview.

This is the preview; you can see the whole segment here.

UPDATE 12:20 pm: A few commenters and people on Twitter remind us that while the Case Foundation declined to be interviewed for this program, they did write a thoughtful blog post about their experience:

[T]here really is only one appropriate response when things aren't humming along as planned, and it is the same response Bill Gates offered, "So, what do we do next?" Because just like in business ventures, personal undertakings and public sector initiatives, things often go wrong...

It sometimes feels like philanthropic efforts are held to a different standard than in the private or public sectors. All too often there is less tolerance for mistakes, which leads many organizations to become risk-adverse. And when mistakes are made, the tendency is to sweep them under the carpet - thus depriving the sector of important lessons learned. But in reality, the very nature of innovation requires that we try new things and take risks.

Congolese stubbornly insist on celebrating 50th anniversary of their independence...

...despite the extreme negative images by which DR Congo is known exclusively in the Western media.  See also the great video at Texas in Africa.

International Aid Worker Appreciation Day

A big part of what we do on this blog is criticize bad ideas in aid. But in our zeal to get this message across, sometimes other, important messages get lost. Today, we devote the blog to expressing our admiration and respect for aid workers. Aid work can be a tough, grueling, frustrating, even heart-breaking job.

Aid work promises the adventure of foreign travel and the gratification of working for the good of others, but also the monotony of data-crunching and report-writing, the fear of losing funding, and the frustration of fighting bureaucracy.

It demands time spent away from home and loved ones, and is notoriously tough on family life.

Parodies aside, aid work is not all flying business class to stay in luxury hotels. The pace of travel can be punishing, the accommodations uncomfortable, the food unfamiliar. And sometimes conditions are dangerous. Aid workers by profession take risks that range from just inconvenient to lethal: jet lag, homesickness, food poisoning, petty crime, disease, terrorism, war.

Of course these hardships are taken on voluntarily, and small compared to those of the people aid workers are there to help. But many aid workers are highly-educated and come from privileged societies, where they could have easily found jobs that pay more and require less dedication and hardship.

Obviously you will notice that we planned this post months in advance to coincide exactly with the 151^st anniversary of the historic day when French acrobat Jean-Francois Gravelet (pictured above) became the first person to cross Niagara Falls balancing on a tightrope. Likewise aid work, whether in the field or at HQ, requires balancing along a thin and possibly nonexistent line reconciling the irreconciliable demands of your bosses, your evaluators, your funders, your critics, your local government counterparts, your clients, your family, and your own ideals.

Today, we recognize and celebrate aid workers’ commitment and sacrifice.

Is aid stuck using IBM punch cards?

This post was written by Dennis Whittle. Dennis is the CEO of GlobalGiving, an international marketplace for philanthropy.

When I went to college in the late 1970s we used punch cards like the one pictured here to put information into the (mainframe) computer. Over the next thirty years, competition in computer technology led to rapid innovation. Over those same thirty years, the aid industry followed a decidedly different pattern of development.

In the early 1980s, the DOS operating system was a huge leap forward since it allowed people to use PCs on their own desktops. Ten years later, Microsoft released the Windows operating systems, which provided a graphical interface - another big advance.

All along, Apple had been selling its own graphical interface while struggling to avoid bankruptcy. But once Apple released its beautiful Mac OSX operating system, it rapidly gained market share, forcing Microsoft to develop (after several failures) a powerful new release of its Windows system. At the same time, Apple released the iPhone, a real game changer, especially when combined with Apple's App Store, which provided a distribution platform for hundreds of thousands of small, independent developers to release software applications. As a result of its competitive success, Apple's market value overtook Microsoft’s in May 2010. Some people think Apple’s new iPad could revolutionize the industry again.

The competition between Microsoft and Apple was based on what the customer wanted and liked. Both companies experimented with many products, some of which failed and some of which succeeded. They got rid (mostly) of the failed products and continually and incrementally enhanced the successful ones. Every once in a while (as with the graphical interface and the iPhone), they made giant leaps.

Contrast this with the aid industry, which, ironically, is managed in a centrally planned way even as it promotes market-based solutions to developing countries. The big aid agencies get very little feedback from their ultimate beneficiaries - the people they are trying to help. There has even been a recent trend around "partnerships and collaboration," whereby agencies agree to divide up their business and not compete.  For example, the World Bank might agree to concentrate on telecoms in a set of countries, while the ADB handles health.  This further insulates them from competition. The result has been little innovation over the past decades.

The operating system example is a good metaphor in itself. What operating system is the aid industry using right now? Unfortunately, over the past sixty years, it hasn’t progressed much beyond punch cards.  While there have been improvements to the various processes, the aid business is still based largely on a "mainframe" model, with a small number of mainframes such as the World Bank, ADB, UN, and bilaterals such as USAID, MCC, DfiD, and AusAID dominating the market.  What will it take to move toward a distributed "desktop" model of aid, and to stimulate the parallel creation of the DOS, Windows, Mac OSX, and even iPhone operating systems?

What would a competitive distributed operating system for aid look like? Put your ideas in the comments, and I’ll write a follow-up post.

FT: Celebrities urge G8 to make new unkept promises to keep previous unkept promises

Oh how we wish it would be otherwise! What will it take? Alan Beattie writes on the G8 in the FT:

It stretches the most elastic mind to envisage the collective wrath of Scarlett Johansson, Annie Lennox, Bill Nighy, Kristin Davis and Her Majesty Queen Rania of Jordan, but it descended on the heads of the Group of Eight this weekend.

The obsolescence of the G8 has long been discussed during interminable and inconclusive international gatherings. It became increasingly absurd to discuss various issues – the global economy, finance, trade, geopolitics, energy, terrorism – with the behemoths of the emerging market world absent.

One by one, those central issues migrated to the G20. Paradoxically, given its composition, the G8 responded by focusing on development issues affecting the poorest countries.

The G8’s relationship with aid recipients in the developing world is that of a dysfunctional and abusive spouse. It promises good behaviour, reneges and then vows to be better next time.

...the returns to be gained from cajoling and criticising the G8 were increasingly questionable. Intensive lobbying by development advocates and celebrity campaigners extracted plenty of promises but not commitments that reliably bound group members.

At least Alan fulfilled his pre-meeting prediction that he would be able to use the words "interminable and inconclusive" once again in a G8 story, not to mention coming close to his fantasy G8 column that we featured on this blog before the meeting.

A journey through wealth and poverty in New York City

The horizontal axis is moving South to North through adjacent census tracts on the route described.  The vertical axis is median household income in each census tract.

Why are there such extremes of wealth and poverty even inside a "developed" economy like New York City? What does it teach us about economic development and underdevelopment?