Next Billions Blogs

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

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

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

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

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

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

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

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

Our distant ancestors had a biological constitution awfully similar to our own, and, like us, only 24 hours in a day. Arguably the main reason we have so much better lives than them is that we have better ways of doing things (broadly conceived). So it makes a great deal of sense that much of the work in development planning and foreign aid consists in exporting ways of doing things. Technology and scientific know-how are the most easily obvious examples, but we also export methods of organization and governance.

People in poorer nations don’t have the nice things we do, so it must be because their ways of doing things aren’t as effective as our own. If we could just convince them to do things the way we do them then everyone would be rich, and Bill wouldn’t get any reception in Ghana either. So wealthy nations have spent a lot of time trying to export their newest and best makes and models of laws, regulations, and government agencies to the rest of the world.

One problem with this approach–one among many–is that it assumes that our every institutional and organizational innovation is beneficial. We call this “Whig history.” And while it’s hard to argue that wealthy nations don’t have an overall mix of institutions better adapted to producing wealth, it’s quite another to assume that they’re superior (at wealth production) to poor nations’ institutions on every margin. It could be that the evolution of our ways of doing things has taken a wrong turn in one or more spheres of activity.

Two recent articles raise the concern of Whig history, in ways relevant to ongoing debates in development. Eustace Davis writes at African Liberty that:

Governments world-wide are struggling to solve the problem of deficiencies in their schooling systems.  Politicians, teachers, educationists, administrators, employers, parents, politicians, policy analysts and students have differing ideas on how the problem should be solved.  All agree that something is wrong.  All have ideas on the kind of tinkering that is needed to fix the problem. The framework within which schooling functions is seldom or ever questioned; a framework that is little changed since schooling was nationalised in England in the late 19th and in the US in the early 20th centuries…

Schooling systems everywhere have become frozen in time. Schools are configured much as they were, and function in the same way they did, a century ago. A 1910 child would feel very much at home in a ‘modern’ school environment, whereas everything else in the world we live in has changed dramatically over the past 100 years.

Davis is concerned that the whole world copied England’s public educational institutions after they changed for the worse (see also James Tooley’s work on this topic).

And this article reports on the work of historian Eckard Höffner on 19th century Germany’s copyright law, or lack thereof. Höffner argues that the absence of copyright law facilitated the spread of knowledge that was critical to Germany’s industrialization and flowering scientific community. There is certainly no shortage of debate about the role of intellectual property in international development, but most of it assumes that IP law is wealth-enhancing in wealthy nations. Are we sure? How sure should we be before we export our IP laws?

Are these convincing examples of Whig history gone wild? Are there others?

AidWatch received the following statement from CARE regarding Till Bruckner’s AidWatch post on USAID and NGO transparency:

Statement from CARE (Aug. 30, 2010):

Contrary to what Till Bruckner suggested in a recent blog, CARE did not withhold information in response to his FOIA request to USAID regarding certain projects in the Republic of Georgia. Our records indicate that CARE never received the request from USAID to review CARE’s budget information before USAID provided it to Mr. Bruckner. USAID’s email request to CARE went to two inoperative emails; one was for a former employee and one went to a current employee, but the email address was incorrect.  As a result, the CARE document that USAID sent to Mr. Bruckner was redacted without CARE’s knowledge.

We have since reviewed the document and will ask USAID to produce it in full without any redactions, including our indirect cost rate, which was the primary information that had been withheld.